PARTY FUNDING AND CAMPAIGN FINANCING IN

INTERNATIONAL PERSPECTIVE
 Columbia-London Law Series

General Editors:

George A Bermann
Walter Gellhorn Professor of Law and Jean Monnet
Professor of European Union Law, Columbia Law School
and
Terence Daintith
Emeritus Professor of Law, University of London,
formerly Director, Institute of Advanced Legal Studies

Volume 1: Party Funding and Campaign Financing in International Perspective

Party Funding and Campaign
Financing in International
Perspective

Edited by
K D EWING AND SAMUEL ISSACHAROFF

OXFORD AND PORTLAND, OREGON

2006
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 Introduction to the Columbia-London Law Series
Several years ago we conceived the notion that the remarkable depth and range of the intel-
lectual interests of our colleagues in the Columbia University School of Law and the law
schools of the different colleges of the University of London might from time to time be
applied collectively to address legal problems of common and pressing concern to both the
United States and the United Kingdom. In furtherance of this idea, and in the spirit of close
international professional collaboration between universities that the world in which we
live requires—the Columbia University School of Law and the Institute of Advanced Legal
Studies—(which provides research services and organisation across the UK and the
University of London in particular)—embarked on a long-term programme of joint
research workshops and publication. We are proud to present here, as the inaugural volume
of the Columbia-London Law Series, the first published fruits of this initiative.
Our role as series editors has been to identify, in consultation with our respective col-
leagues, the most promising common legal themes, and to invite faculty from Columbia,
and from the Law Schools of the colleges of the University of London to develop a research
agenda and organise a joint workshop in which other leading American and British schol-
ars (and indeed scholars from elsewhere) have been encouraged to participate. Each pro-
ject is thus developed and guided jointly by leading specialists from Columbia and London
respectively.
We are deeply indebted to the relevant institutions—Columbia Law School, the
Institute of Advanced Legal Studies, and the Law Schools of the colleges of the University
of London—for the intellectual and material support they have committed to this pro-
gramme. Needless to add, we are also indebted to Richard Hart and Hart Publishing of
Oxford for undertaking publication of the Columbia-London Law Series.
The subject of this initial volume and the underlying workshop—Election Law—was
and is a natural for this style of collaboration. As debates surrounding the fairness, in both
the United States and the United Kingdom—countries which present themselves as demo-
cratic models to other, more troubled parts of the world—the importance of the subject
cannot be exaggerated. We are delighted to have been able to recruit, as leaders of this first
project, two such distinguished specialists in the field as Professors Keith Ewing of King’s
College London and Sam Issacharoff of Columbia Law School. They have ensured that the
Columbia-London Law Series has been appropriately launched in the spirit of joint study,
reflection and problem-solving that is the impetus for the entire Series.

George A Bermann
Walter Gellhorn Professor of Law and Jean
Monnet Professor of European Union Law
Columbia University School of Law

Terence Daintith
Emeritus Professor of Law,
University of London; formerly Director,
Institute ofAdvanced Legal Studies
 Preface

This volume emerges from a two-day workshop held in July 2002 at the
Institute for Advanced Legal Studies (IALS) in the University of London. That
workshop marked the inaugural effort of the joint undertaking between the
IALS and Columbia Law School to explore the international dimensions of con-
temporary legal problems. This particular volume deals with the questions of
party funding and campaign financing—issues of controversy in most parts of
the world. They are also issues that have given rise to a range of different forms
of intervention in response, these providing a fertile base for our deliberations.
The topicality of the issues considered in this volume is reflected not only in the
constant concerns about party funding and campaign financing; but also in the
fact that since our meeting in July 2002, we have witnessed major decisions of
the US Supreme Court and the Supreme Court of Canada, as well as an inves-
tigation and report by the Electoral Commission in the United Kingdom.
Indeed, it was these impending court cases which led us to delay publishing this
volume, and which explains the abnormally long gestation between conception
and delivery of the manuscript. This undertaking simply would not have
occurred, nor would this volume exist, without the painstaking efforts, support
and encouragement of George Bermann of Columbia Law School and Terence
Daintith of the IALS. Through their efforts we were able to draw two dozen
scholars from three continents to begin our common undertaking. We were
also able to draw representatives from the political parties in the United
Kingdom: their contribution was particularly valued. As in all endeavours,
expanding the scope of inquiry requires greater effort, but hopefully rewards
with more ample results.

Samuel Issacharoff
K D Ewing
31 December 2004
 Table of Contents

List of Contributors .................................................................................................xi

1 Introduction ....................................................................................................1
KD EWING AND SAMUEL ISSACHAROFF

Part I ‘Light Touch’ Regulation and its Discontents ............................................11

2 The Regulation of Campaign Funding in New Zealand:
Practices, Problems and Prospects for Change
ANDREW GEDDIS ......................................................................................13

Part II ‘Big Bang’ Regulation of a Private Funding Regime ................................33

3 Expenditure, Donations and Public Funding under the
United Kingdom’s Political Parties, Elections and
Referendums Act 2000—And Beyond?
NAVRAJ SINGH GHALEIGH .....................................................................35
4 The Disclosure of Political Donations in Britain
KD EWING ...................................................................................................57
5 Access to the Airwaves and Equality: The Case against
Political Advertising on the Broadcast Media
JACOB ROWBOTTOM................................................................................77

Part III From State Regulation to State Funding .................................................97

6 Political Finance Law in Australia
GRAEME ORR..............................................................................................99
7 Revisiting Transparency and Disclosure in Japanese
Political Reform
AKIKO EJIMA.............................................................................................123
8 Financing Parties at the Grass-Roots Level: The Québec Experience
LOUIS MASSICOTTE ................................................................................153

Part IV Regulation and Judicial Review..............................................................181

9 Throwing in the Towel: The Constitutional Morass of
Campaign Finance
SAMUEL ISSACHAROFF ..........................................................................183
10 Soft Money, Congress and the Supreme Court
RICHARD BRIFFAULT ..............................................................................191
x Table of Contents

11 The Law of American Party Finance

NATHANIEL PERSILY ..............................................................................213

Part V Regulation and Judicial Review: Divergent Paths ..................................241

12 The Supreme Court of Canada’s Political Theory and the
Constitutionality of the Political Finance Regime
COLIN FEASBY ..........................................................................................243
13 Elections, Democracy and Free Speech: More at Stake than an
Unfettered Right to Advertise
JANET L HIEBERT.....................................................................................269

Part VI Starting from Scratch ..............................................................................291

14 Developing Political Parties in the European Union: Towards a
European Party Statute?
STEPHEN DAY AND JO SHAW ...............................................................293

Index ......................................................................................................................321
 List of Contributors

Richard Briffault is Vice-Dean and Joseph P Chamberlain Professor of

Legislation, Columbia Law School, New York.

Stephen Day is an Associate Professor of European Politics, in the Faculty of

Economics, Oita University, Japan.

Akiko Ejima is a Professor at the Law School, Meiji University, Tokyo, Japan.

K D Ewing is Professor of Public Law at King’s College London, England.

Colin Feasby is a practising lawyer with Osler, Hoskin & Harcourt LLP, Calgary,
Alberta, Canada and JSD Candidate, Columbia University, New York.

Andrew Geddis is a Senior Lecturer, Faculty of Law, Otago University, Dunedin,

New Zealand.

Navraj Singh Ghaleigh is a Lecturer in Public Law at the University of Edinburgh,

Scotland.

Janet L Hiebert is a Professor in the Department of Political Studies, Queen’s

University, Kingston, Ontario, Canada.

Samuel Issacharoff is Harold R Medina Professor in Procedural Jurisprudence,

Columbia Law School, New York.

Louis Massicotte is an Associate Professor of Political Science at the University of

Montréal, Québec, Canada.

Graeme Orr is a Senior Lecturer in the Law School, Griffith University, Brisbane,
Queensland, Australia.

Nathaniel Persily is an Assistant Professor of Law and Political Science, University

of Pennsylvania Law School, Philadelphia.

Jacob Rowbottom is a Fellow of King’s College, Cambridge, England.

Jo Shaw is Salvesen Professor of European Institutions at the University of

Edinburgh, Scotland.
 1
Introduction
KD EWING AND SAMUEL ISSACHAROFF

ELECTIONS ARE BY their nature a difficult undertaking. Partisans must be

mobilised, ideas communicated, materials distributed, and often across ample
territories under terrible constraints of time. Much political theory addresses the
forms of democratic selection. We can learn much about presidential and parlia-
mentary systems, or the tension between direct and representative democracy, or
the conflicting virtues of proportional and districted or geographical systems of
representation. We can learn as well of the importance of communicating ideas
free from the repressive hand of the State and of the critical role of intermediary
institutions, notably political parties, in making effective political speech. Yet there
remains a critical shortcoming in the attention to democratic theory. All the
undertakings necessary to bring democracy to life, certainly a most noble ambi-
tion of human society, turn indispensably on the most base of commodities:
money. Representative democracy is the system of governance of mass societies,
by their nature those that exist beyond the easy negotiation of the family discus-
sion or a small town gathering. No matter how lofty the political ambition,
democracy in mass societies requires resources. And not just resources in the
abstract, but the ability to raise money and spend it to further political aims.

The Core Dilemmas

Turning our attention away from the higher planes of democratic theory and
toward the institutional pathways by which political parties and political cam-
paigns are funded illuminates two constant problems in all democratic societies.
How are the central actors in the political arena supposed to gather the funds nec-
essary to operate effectively on behalf of their chosen political ends? And, how
may they spend money in furtherance of their political objectives? The aim of this
volume is to explore these issues in the specific context of a number of national
settings. We come to this undertaking sceptical of any easy one-size-fits-all solu-
tions. By giving thick descriptive accounts of the struggles over political financing
in discrete national debates, we aim to show that the financing questions cannot
2 KD Ewing and Samuel Issacharoff

be addressed independently of the constitutional conventions of the country, the

nature of the political parties in the country, and the means of access to publica-
tion and the media in any given nation. There are in fact a number of different
factors that determine the form and content of the law relating to party funding
and campaign financing in different countries.
Because of the intensity of debate on political financing in many countries, and
because of the reflective glare of the frequent scandals that attach to money in pol-
itics, there is an easy tendency to focus narrowly from within a particular nation-
al setting and not recognise the range of international mechanisms that have
developed. Even as great a political philosopher as John Rawls succumbed to view-
ing financing exclusively within the liberty framework of American debates and
seeing government regulation of contributions as dependent on deeper philo-
sophical attachments to liberty.1 But surely the regulation of contributions must
depend on the nature of political parties. It may be one matter in the United
States, where the political parties do not have a mass institutional base, to restrict
contributions from any particular source to a few thousand dollars, or even to
prohibit union contributions to political parties altogether. But in a country with
a Labour Party built upon the union structure, that same rule would be an invi-
tation to state assault upon a central political actor. Similarly, the high role of con-
stitutional oversight in the United States and Canada yields surprisingly divergent
results in terms of whether contributions or expenditures may be curtailed.

Laissez Faire and Transparency

The national studies in this volume reveal a rich diversity in the approach to reg-
ulation. But regulation is one of only three options available to policy makers. The
first is to leave political money alone by adopting—consciously or otherwise—a
strategy of laissez faire and self regulation. But certainly in the jurisdictions exam-
ined in this volume—Australia, Canada, the European Union, Japan, New
Zealand, Quebec, the United Kingdom and the United States—that is no longer
seen to be an option. Laissez faire and self regulation may be the most desirable
approach, but it is now the least viable. This is because laissez faire and self regu-
lation can operate only when the political actors accept to be bound by a core set
of values which place a premium on transparency, the avoidance of improper
influence or dependence, and fair electoral competition. Although some systems
operated a largely voluntary system for the best part of the twentieth century, it
has largely broken down and is no longer seen to be acceptable in any major juris-
diction in the world. Paradoxically, the intensity of regulation in more recent years
has coincided with the end of ideological politics in most western democracies.
Parties and candidates are competing more aggressively to manage national polit-
ical systems which in many cases have less control over national policy than
1
J Rawls, Political Liberalism (New York, Columbia University Press, 1993).
 Introduction 3

perhaps at any time since the industrial revolution. The strategies of privatisation
and deregulation pursued by all countries in an increasingly globalised world have
nevertheless provided great opportunities for corporations and individuals seek-
ing to benefit from the delegation of state service provision.
A step beyond laissez faire and self regulation is what might be referred to as
non-regulatory intervention. This takes the form of intervention designed to
require actors to disclose information about their finances. Specifically it may
require information about donors and spending. As such transparency may have
a number of objectives: it may be designed to prevent electoral corruption, reflect-
ing the famous aphorism that sunlight is the best disinfectant. Experience shows,
however, that there are areas of political giving and spending into which the sun
does not shine without a great deal of help. A more realistic objective may be to
equip voters with information about the interests and individuals backing a can-
didate or party, to help the voter have a clearer idea of the interests that the can-
didate or party is likely to identify with or support. But we should not overlook
the ambition that transparency may help to moderate conduct by candidates and
parties. Transparency may be said to be a hybrid between laissez faire and State
regulation—a form of coercive laissez faire and self regulation—in the sense that
it requires information to be placed in the public domain. Once in the public
domain, the media, rival political groups, and ultimately the electors may choose
how to use that information. By requiring transparency the State may indirectly
compel the parties to adapt their practices to a standard of behaviour that has
community approval. In this way political actors may be induced to moderate
their behaviour for fear of adverse electoral consequences. The requirement of
transparency may, however, require a State apparatus to ensure that reporting
obligations are enforced: it may even involve the use of civil, electoral or criminal
sanctions to enforce compliance.

Supply Side and Demand Side Options

Just as few countries now place their faith exclusively in laissez faire, so few coun-
tries place faith in transparency alone. The problem with transparency is that it
reveals problems that then need to be addressed by regulatory measures. Most of
the jurisdictions considered in this volume have moved some way beyond trans-
parency, and have embraced one of a number of regulatory tools. But these regu-
latory tools essentially approach from one of two directions. The first is from the
supply side by regulating the flow of money to the candidates and the political
parties. This may be done by restricting the source of funding on the one hand
and the amount of funding on the other. The aim here is to ensure that parties and
candidates are not seen to be dependent on inappropriate sources of funding and
not dependent on appropriate sources of funding to an inappropriate extent.
Inappropriate sources of funding will vary. For some it may be legal as opposed to
4 KD Ewing and Samuel Issacharoff

natural persons, for others it may be foreign governments, corporations or indi-

viduals, and for others still it may be government contractors or licencees—
whether donations are induced by way of tollgating or kickbacks. An appropriate
source of funding may become inappropriate if it places a party or candidate in a
position of vulnerability to such an extent that it may compromise the obligation
to promote a public rather than a personal private interest. But as already point-
ed out this is an option that is fraught with difficulty in some jurisdictions
because of the nature and structure of their political parties.
The second regulatory approach is from the demand side with initiatives
designed to reduce the need for unlimited sources of funding. This can be done in
a number of ways. The most direct is to limit the amount that parties and candi-
dates may lawfully spend in an election. If this route is chosen, it may be neces-
sary also to limit the spending of third parties—such as corporations, trade
unions and interest groups. This is an option which has been adopted by a num-
ber of countries which are dealt with in this volume, notably Canada and the
United Kingdom. The model was pioneered in the United Kingdom in 1883 with
spending limits by candidates and developed in Canada with the introduction of
national campaign spending limits by the political parties. But this too is a tool
fraught with difficulty, though for different reasons than those relating to contri-
bution limits. If the latter are a threat to freedom of association, spending limits
will be seen by others as a threat to freedom of expression and perhaps as a bar to
the entry of new players on the political scene. Demand side steps may, however,
also be taken indirectly by the use of State funding of various kinds to help the
parties and candidates meet core needs of a wide and varied kind. State funding
for these purposes may take various forms. The practice in many jurisdictions is
to make funds available to the political parties to assist with their operational costs
as well as their election costs. Indeed in the case of South Africa, this practice finds
expression in the constitutional obligation that:

To enhance multi-party democracy, national legislation must provide for the fund-
ing of political parties participating in national and provincial legislatures on an
equitable and proportional basis.2

In other jurisdictions—such as US presidential elections—public money will be avail-

able to those candidates who agree to accept a voluntary ceiling on their cam-
paign expenditure and who agree not to accept private donations for their campaigns.

Public or Private Funding?

The growing interest in State funding is in some respects very paradoxical.

Although various forms of State aid can be identified from the early years of
2
The Constitution of the Republic of South Africa, Article 235.
 Introduction 5

democratic government, the idea that political parties should be funded by the
State is one associated with the north European social democracies which pio-
neered it in the 1950s and 1960s. This was a period of the expanding State, in
terms of budgets and functions, and the idea was widely adopted in all continents
of the world where elections in the liberal tradition take place. But the position is now
very different, with the hollowing out of the State, which is now in retreat in many
parts of the world. If not in retreat, its role is changing—now much less a provider
and increasingly an enabler, if that. How paradoxical it is then that as the State is in
retreat so the organisations managing that retreat should themselves seek its support.
It is all the more paradoxical that the State is being asked to provide for organisations
that are losing members and voters, with recent general elections in Canada and the
United Kingdom producing the lowest turnouts since 1918. Is the State being asked
to provide life support for organisations in terminal decline? Are taxpayers being
conscripted to fund organisations which electors have chosen to desert? It is never-
theless an inescapable fact that in many countries the State is being asked to provide
more and more of the resources of the candidates and parties, whether directly in the
form of cash grants or indirectly in the form of aid in kind.
One compelling reason why the State may feel obliged to step in to fill the
funding gap is simply that the alternative is worse. With a declining membership
base and growing financial demands, political parties are easy prey for the rich
and powerful for whom the political parties offer opportunities for greater wealth
and power. Although there may be resentment about the taxpayer subsidising the
political parties, given the alternative, is this not the least worst option? While
there may be genuine concern about political parties becoming fossilised parts of
the State apparatus, it may also be that political parties are changing throughout
the world, and that we have transcended the mass membership party. The circle
may be turning so that what we see in embryo is the recreation of what Duverger
classified as elitist or traditional parties:

These parties do not aim at recruiting the largest possible membership, but at enlist-
ing the support of notable individuals: they are more concerned with quality than
quantity. These prominent citizens are sought out either because of their prestige,
which endows them with a certain moral influence, or because of their wealth,
which enables them to underwrite the expenditures of election campaigns.3

One way of resolving these dilemmas is to use State funding strategically to encour-
age the parties to recruit members and engage people in the political process. But
there is no country that has ensured that its parties are adequately funded as a result
of tax breaks. By the same token electoral turnout at the last Canadian federal elec-
tion suggests that money for votes may not be the recipe for a secure funding base.

3
M Duverger, Party Politics and Pressure Groups (New York, Thomas Y Crowell, 1972).
6 KD Ewing and Samuel Issacharoff

Shaping Regulatory Choices

As already indicated, in this study we have contributions from Australia, Canada

(including a separate contribution from Quebec), Japan, New Zealand, the
United Kingdom, and the United States, as well as the European Union. A strik-
ing feature of all of these systems is that none has chosen the path of laissez faire
completely, and all have felt impelled to regulate and legislate. However, this is
not to exaggerate the nature and scale of regulation in some countries at least:
some countries (such as New Zealand) are distinguished as ‘light touch’, some
countries (such as Australia) as ‘stalled’, some countries (such as the United
Kingdom) as ‘big bang’, some countries (such as the United States and Japan) as
‘gradualist’, and others still (such as Canada and Quebec) as ‘saturated’, such
being the nature and extent of regulation. Although there is some evidence of
regulatory stalling in Australia, the national studies reveal generally that regula-
tion is a dynamic and continuing process. Regulation creates an appetite for
more regulation, with the appetite appearing near insatiable. Our study reveals
that there is no escape in modern democracies from the regulator’s embrace,
which offers a number of seductions. The real issue which tests our understand-
ing is thus, not why countries regulate political money but why regulation takes
the form that it does in different countries and jurisdictions? What are the fac-
tors that explain the rich diversity of regulatory approach that we encounter in
the chapters that follow?
From the material in the chapters that follow, we tentatively suggest that the
choice of regulatory method will depend on a number of factors, not least the his-
tory and political tradition of the jurisdiction in question. It is important to
emphasise that these are influential not determinative factors and also that the
nature of the influence and its weight may vary from country to country. Among
the more important factors are the following:

● Geographical: the size of the country, in terms of its area and population.
Larger jurisdictions are likely to generate more political money, and present
greater regulatory challenges.
● Historical: the legacy of political development and the consequences of earli-
er regulatory initiatives and regulatory failures. In truth most systems have
evolved and bear the legacies of their pasts.
● Financial: the distribution of money and wealth, and the way in which the
monied classes seek to secure political influence, including the way in which
they seek to influence political parties and candidates.
● Sociological: the distribution of scarce resources—such as media of commu-
nication—needed for electoral purposes, which may invite some intervention
to ensure fair access and to avoid abuse.
● Constitutional: the nature of constitution (written or unwritten), the contents
of the constitution, and the distribution of legally sovereign power under the
constitution—who is the guardian of the constitution?
 Introduction 7

● Judicial: the role of the courts to restrain or influence the content of regula-
tion, the values developed by the courts, and the willingness of the courts to
constrain the autonomy of the rule makers.
● Ideological: the weight attached in a particular jurisdiction to the sometimes
conflicting values of political liberty and political equality. Where is the ideo-
logical centre of gravity in the event of conflict?
● Structural: the nature of the political system, whether it be a parliamentary
democracy or one based upon a strict separation of powers, and the nature of
the electoral system, whether it be proportional representation or first past the
post.
● Organisational: the nature of the party system and the composition, organi-
sation and structure of political parties. Are parties direct parties of individu-
als or indirect parties of other organisations, or both?
● Political: the nature of the problems that arise—although they may be com-
mon across different systems, the symptoms may vary and the regulators may
be responding to different variants on common themes.

The Importance of Supervision and Enforcement

Although these different factors may help to determine regulatory outcomes, it is

clear that they operate in different ways to produce different solutions in different
jurisdictions. But apart from regulatory methods, also important is regulatory
effectiveness. It is one thing to regulate, but something else to ensure that regula-
tion is effective. The key to effectiveness is supervision and enforcement, a matter
which is also addressed in radically different ways in different jurisdictions, again
reflecting different constitutional and political traditions. Most regulatory systems
addressed in this volume have established a separate supervisory body such as the
Australian Electoral Commission or the Federal Election Commission in the
United States. But the composition and powers of these bodies vary enormously.
The main difference is between the American approach of a weak bi partisan
agency with limited function and the broader ranging Australian, British and
Canadian approach based on the principle of an independent and non partisan
agency. It may be argued that in some respects the principle of a bi partisan agency
is a hangover from a laissez faire regime, with the operation of the rules being left
to the parties themselves to determine. It is a form of self regulation of the
enforcement regime if not self-regulation of the substance of the regime.
But it is not only the composition of regulatory agencies that is important. So
too are their powers and the sanctions which the law provides for the violation of
regulatory standards. The need for powers will depend to a large extent on func-
tion and the nature of the regulation the agency has been created to supervise. A
body established in part to administer public funds will need fewer powers than a
body whose duties include ensuring that campaign spending limits have not been
8 KD Ewing and Samuel Issacharoff

violated. Here we encounter a real irony in the sense that effective regulation of
party funding and campaign financing depends on the initiative of elected offi-
cials to create and empower an autonomous institutional structure to supervise
and investigate the very people who have created the scheme. The sceptic might
well question the likelihood of such a step being taken, and it is clear that not
all systems have risen to the challenge. Certainly there are temptations for elect-
ed officials to mould finance rules to cushion themselves from challenge, both
financially and electorally. It is also clear that an agency with powers over elected
officials running for office is likely only to be created at a time of political crisis or
as a result of powerful external pressure, and that it will require cross-party sup-
port to implement. General appeals to fair electoral competition and the need to
constrain the appearance of improper influence are unlikely to be effective. But
even then the obstacles to efficiency may be considerable, with constitutional con-
straints in some countries preventing the adoption of the remarkable powers of
the Electoral Commission in the United Kingdom, which at least formally exceed
those of the police investigating a murder.

The Regulatory Trajectory

The underlying theme uniting this book is the idea of a regulatory trajectory. We
set up three different models of party funding and campaign financing, the effec-
tiveness of each being considered by the authors of the different national studies.
It is important to emphasise that our categories are not watertight, and that there
is considerable leakage between them. Our judgments are therefore relative: rela-
tive to Canada or the United Kingdom, New Zealand has a system of laissez faire,
though not a system wholly without regulation; relative to Australia, Japan or
Quebec, the United Kingdom has a system of private funding; and relative to the
United States (with the possible exception of presidential elections and a few
States), these three jurisdictions have moved to varying degrees in the direction of
public funding for political parties or election campaigns, as indeed most recent-
ly has Canada. But in developing this trajectory from laissez faire or self regula-
tion, to the regulation of private funding, and to the growing role of the State in
the funding of parties, we anticipate the possibility that obstacles will be encoun-
tered. These have arisen most spectacularly in the United States, where the
Supreme Court gutted a major part of the campaign finance legislation of the
1970s made in the aftermath of the Watergate scandal. Problems have been
encountered in the courts in Australia and Canada where Buckley v Valeo4 was ini-
tially persuasive. But as already pointed out the Canadians have broken free with
the result that spending limits remain part and parcel of the Canadian regulatory
model, which is now the most highly developed of all the systems considered here.

4
424 US 1 (1976).
 Introduction 9

In developing our regulatory trajectory, we begin with what is currently the most
primitive regulatory model, which is that now found in New Zealand, also the small-
est jurisdiction dealt with. Here the regulatory load is carried mainly by imperfect
transparency rules, though there are control mechanisms in place which help indi-
rectly to contain the costs of campaigning. From New Zealand we move to a form of
intense direct regulation of a largely private funding system, namely the United
Kingdom where ‘big bang’, reforms saw the introduction of a number of controls on
donations, as well as party spending. It was thus an attempt to address the problem
with both supply side (by controlling donations) and demand side initiatives (by
controlling spending). But as we will also see, a conscious gap in the regulatory
framework (no contribution cap) has been ruthlessly exploited by the party that
authored the legislation, highlighting the failure of the legislation to deal with the
problem that led to its introduction. From the United Kingdom, we move to three
systems that have adopted various forms of public funding, these being Australia,
Japan, and Quebec, all hybrid public/private systems. The nature of the support
varies from system to system, as does the extent to which it operates in conjunction
with different forms of regulation. But in all cases—and to varying degrees—they
provide examples of State intervention to relieve the financial pressure on the parties.
This takes the form of election funding (Australia), annual cash subventions (Japan)
and large scale funding of annual running costs and election campaigns (Quebec).
Of considerable interest are the countries in which strong constitutional over-
sight frames the forms of regulatory intervention. The key example is no doubt
the United States, where the analytic divide between the expressive interests in
expenditures and the regulatory interest in controlling contributions rose to con-
stitutional prominence in Buckley v Valeo. While the Buckley v Valeo divide large-
ly framed the issue for constitutional debate in the United States, constitutional
issues were slower to evolve in Canada which approached regulation with greater
emphasis on the need to regulate expenditures rather than contributions. But
with the adoption of the Charter of Rights and Freedoms in Canada, these consti-
tutional concerns have assumed a prominence in that jurisdiction as well, with
considerable problems encountered not by spending limits generally but by third-
party spending limits particularly. We focus several chapters on the United States
and Canada precisely because their constitutionally-based regulatory models are
in a process of swift overhaul. In Canada, the most recent decision of the Supreme
Court in Harper v Canada5 found in the Charter a commitment to political equal-
ity that allowed government regulation aimed at levelling the political playing
field. In the United States, the Supreme Court upheld most of the newly minted
Bipartisan Campaign Reform Act of 2002 on an expansive view that campaigns
may be regulated to thwart not just corruption, but a weakly defined public per-
ception of the corruption of politics by wealth. The likely effect of both Harper v
Canada and the American McConnell v FEC 6 is to move the regimes of strong con-
stitutional oversight more closely onto the regulatory trajectory as well.

5
[2004] SCC 33.
6
McConnell v Federal Election Commission, 540 US 93 (2003).
10 KD Ewing and Samuel Issacharoff

Conclusion
We do not attempt to catalogue the rules governing party funding and campaign
finance in all countries in the world. Rather we focus on extended analytic assess-
ments of these divergent regulatory regimes. We intend to show the range of reg-
ulatory possibilities and the surprisingly high level of discontent with each. The
regulatory regimes may be distinct, but they seem, per Tolstoy, each to be unhap-
py in its own unique way.
 Part I
‘Light Touch’ Regulation and
its Discontents
 2
The Regulation of Campaign Funding
in New Zealand: Practices, Problems
and Prospects for Change
ANDREW GEDDIS*

Introduction
THE REGULATION OF campaign funding has proven a less fraught topic in New
Zealand than in many other jurisdictions. This fact largely is attributable to a
more general truth; election campaigns in New Zealand remain comparatively
cheap events. The country’s Electoral Commission reports, for example, that
political parties and individual candidates declared spending a total of
$10,123,977 on the 2002 general election campaign. A little over two million bal-
lots were cast in that election, meaning that about NZ$5 (then equivalent to
US$3) was spent by the primary electoral contestants for every voter who partic-
ipated. While comparisons are complicated by the different time periods and
types of expenses covered by disclosure rules in particular countries, this figure
appears lower than the amounts spent on campaigning in many other developed
Western democracies.
A number of structural factors might explain why spending on New Zealand’s
election campaigns has not risen to the levels experienced elsewhere. Its relatively
sparse population reduces the amount of money required for electoral contestants
to communicate with the voters, and may help foster a more direct, less cost-
intensive style of campaigning. Equally, the smaller size of the country’s economy
not only means there are fewer resources available to fund election campaigns,
but also lessens the incentive for large-scale spending aimed at achieving electoral
victory by reducing the potential ‘rent seeking’ rewards for gaining public power.
Government decision-makers are also easily accessed, diminishing the need to
try to ‘buy’ access through campaign donations. Finally, election campaigns are
* My thanks to Amy Annan for her invaluable research help. Elements of this chapter have previ-
ously appeared in A Geddis, ‘Regulating the Funding of Election Campaigns in New Zealand: A
Critical Overview’ (2004) 10 Otago Law Review 575.
14 Andrew Geddis

short—lasting a matter of weeks rather than months—and occur with compara-

tive frequency due to a triennial election cycle.
Alongside these structural features, the Electoral Act 1993 explicitly seeks to
restrict election expenditures by candidates and political parties through impos-
ing a fixed spending cap on their campaigns. Furthermore, strict restrictions on
using the broadcast media for political advertising limit the electoral participants’
spending on this most expensive means of communicating with voters. This reg-
ulatory approach has as its primary focus the creation of a relatively level playing-
field amongst electoral participants. New Zealand has therefore chosen to respond
to the concern that disparities in economic power may undermine the presump-
tive equality of participants in its democratic processes by attempting to restrict
the electoral contestants’ demand for money, rather than by seeking to control the
supply of funds to the electoral contestants via limits on the donations that they
may receive. This regulatory choice helps contain the overall influence of cam-
paign spending in New Zealand by preventing the kind of ‘arms race’ in electoral
expenditures observed in countries without such limits.
Aside from these general structural and regulatory factors, another reason why
the issue of campaign funding has provoked relatively little discussion in New
Zealand is the subsidiary role played by the judiciary when viewed alongside such
countries as Australia,1 Canada,2 and the USA.3 The absence of a written constitu-
tion, and especially of an entrenched Bill of Rights, means New Zealand’s courts
have no constitutional, or ‘higher law’, power to review the impact of campaign
funding regulation on individual rights.4 Therefore, decisions about how to regu-
late the funding of elections remain the sole preserve of Parliament,5 meaning that
the country has escaped the confusion that arises when the legislature and courts
disagree over whether some regulatory measure is constitutionally permissible.
However, notwithstanding the above comments, it is inconceivable that any
democracy could remain completely untroubled by the role that money ought to play
in its electoral processes.6 Despite the relative quietude of New Zealand’s experience,
the issue of campaign funding has arisen in a number of different ways. In particu-
lar, the adoption in the mid-1990s of a Mixed Member Proportional (MMP) voting
system forced a reconsideration of how campaign funding ought to be regulated in
this new electoral environment. This move to MMP is discussed below,7 so for now
1
See eg, Australia Capital Television v Commonwealth (1992) 177 CLR 166.
2
See eg, Libman v Quebec [1997] 151 DLR (4th) 385; Figueroa v Canada (A–G) [2003] 1 SCR 912;
Harper v Canada (A–G) [2004] SCC 33.
3
See eg, Buckley v Valeo 424 US 1 (1976); Nixon v Shrink Missouri Government PAC 528 US 377
(2000); McConnell v FEC 124 SCt 619 (2003).
4
New Zealand Bill of Rights Act 1990, s 4.
5
This is not to say that the courts have played no role in shaping New Zealand’s electoral process;
see J Boston et al, ‘Courting Change: The Role of the Judiciary in Altering and Electoral System’ (1997)
8 Public Law Review 229.
6
See A Geddis, ‘Three Conceptions of the Electoral Moment’ (2003) 27 Australian Journal of Legal
Philosophy 53.
7
See below nn 17–22 and accompanying text. See also A Geddis, ‘Gang Aft A-Gley: New Zealand’s
Attempt to Combat “Party Hopping” By Elected Representatives’ (2002) 1 Election Law Journal 557,
559–61.
 The Regulation of Campaign Funding in New Zealand 15

it is sufficient to note that reform of the voting system ushered in a general change in
New Zealand’s electoral processes. Prior to this watershed event, New Zealand’s elec-
toral system (and the laws governing it) continued to display the imprint of the
nation’s colonial heritage. The system of electoral representation used in the United
Kingdom was adopted wholesale when local representation was first introduced in
1852,8 and even after New Zealand gained full political independence in 1947,9 its
regulatory approach to most electoral issues (including that of campaign funding)
continued to closely mirror that country’s system. Debate about the appropriateness
of this situation gained traction in 1986, when a Royal Commission on the Electoral
Process reported on the issue.10 Another decade then passed before the adoption of
MMP fully moved New Zealand’s electoral processes out of the United Kingdom’s
shadow, and gave the country its own ‘home-grown’ form of representation.
This chapter examines the main features of New Zealand’s system of government
and campaign funding regulation. It then considers in greater depth some particular
problems with this system that have come to the fore in recent years, and critically
evaluates a number of proposals that have been made to deal with these problems.

New Zealand’s System of Government and Campaign

Funding Regulation

Before turning to look in detail at how New Zealand’s legal system regulates cam-
paign funding, a quick summary of its system of governance and its electoral
processes may prove useful for the uninitiated. New Zealand has a Westminster style
government, with a unicameral Parliament (the House of Representatives) consist-
ing of 120 members. Of these, 69 are directly elected from individual constituencies,
while 51 are selected from political party lists according to the MMP voting system,
in the manner outlined below. A general parliamentary election must be held at least
every three years, but may be held earlier if the current government so chooses. The
members of the party—or, as has proven to be the case since the introduction of
MMP, the members of the coalition of parties—that control a majority of the parlia-
mentary seats following such an election then form the government (or executive).
With this background sketch of New Zealand’s processes of representative gov-
ernment in place, this section first reviews the general restrictions on electoral
spending in New Zealand designed to prevent the overt corruption of the politi-
cal process. It then examines restrictions placed on the campaign spending of the
political parties, individual candidates, and ‘third parties’ who may wish to be
involved in the electoral process. Finally, this section considers the special restric-
tions placed on the use of the broadcasting media for electoral purposes.
8
New Zealand Constitution Act 1852 (Imp).
9
Statute of Westminster Adoption Act 1947 (NZ).
10
Report of the Royal Commission on the Electoral System, Towards A Better Democracy
(December, 1986) 5–6, para 1.6–1.7 (hereafter RCES).
16 Andrew Geddis

General Restrictions on Electoral Spending

Since the passage of the Corrupt Practices Prevention Act 1881, various forms of
electoral spending—such as bribing or ‘treating’ voters—have been prohibited so
as to preserve the integrity of the electoral process. These offences still exist, and
it is a ‘corrupt practice’ for anyone to ‘buy’ votes directly from electors through
bribery,11 or to pay for ‘food, drink, entertainment or provision’ for the purpose of
swaying an elector’s vote.12 It is also an ‘illegal practice’ knowingly to provide
money ‘for any purpose which is contrary to the provisions of [the Electoral Act
1993].’13 In addition, a rather odd prohibition on paying an elector to exhibit an
election notice on their house or land remains on the statute books,14 the ration-
ale for which is unclear. However, these provisions are rarely invoked,15 reflecting
the overall fact that New Zealand appears to be relatively free of overt corruption,
both in its electoral system and its general processes of governance.16

Regulation of the Funding of Political Party Campaigns

Right up until the 1990s, virtually no restrictions existed with regards to the fund-
ing of, or spending on, a political party’s election campaign. This laissez faire atti-
tude towards the electoral activities of political parties was the product of two
interlinked, but progressively illusory, assumptions. The first was that the individ-
ual candidate, rather than the political party he or she represented, was the pri-
mary campaigner in the electoral contest. Consequently, political parties were
treated as private unincorporated associations which only incidentally involved
themselves in the public political life of the community.17 There was no require-
ment for them to register, or to file public accounts; and few legal controls were
placed on the parties’ financial activities.
This approach became increasingly untenable as nationwide political parties
developed into the primary actors on the political stage. By the time that the Royal
Commission on the Electoral System issued its wide-ranging report in 1986, it was
able confidently to state that:
It is the political parties inside and outside Parliament that in reality present the
electorate with a choice of Government. They provide the candidates and prepare
the policies between which the voters choose. . . . All these changes mean that the
11
Electoral Act 1993, s 216.
12
Ibid s 217.
13
Ibid s 220.
14
Ibid s 219.
15
The last case in which bribery of a voter was alleged was the Bay of Islands Election Petition (1915)
34 New Zealand LR 578.
16
Transparency International’s Corruption Perceptions Index 2004 ranks New Zealand the third-
equal least corrupt country of all those surveyed; see <http://www.transparency.org/cpi/2004/cpi
2004.en.html#cpi2004>.
17
Peters v Collinge [1993] 2 New Zealand LR 554, 575. See also M Wilson, ‘Political Parties and
Participation’ in A Simpson (ed), The Constitutional Implications of MMP (Wellington, VUW Press,
1998) 169.
 The Regulation of Campaign Funding in New Zealand 17

principal purpose of elections is now in fact to enable the people to decide in

accordance with the electoral law which of the competing political parties will
provide the Government.18

Building on this acknowledgement of the political parties’ central role in the elec-
toral system, the Royal Commission recommended the adoption of the MMP vot-
ing system, based on the (then) West German model.19 Under MMP, each voter
has two votes: one for a local constituency candidate; the other for the voter’s pre-
ferred political party. However, the latter ‘Party Vote’ is crucial, as the overall com-
position of Parliament is (in the final analysis) determined by the share of the
Party Vote received by each political party qua political party.20 The Royal
Commission’s recommendation thus represented a conscious decision to institu-
tionalise the political parties’ role as the primary vehicles through which the pub-
lic’s representatives are selected.21
The Royal Commission’s recommendations were endorsed by the public
through a referendum held in 1993.22 This vote in favour of MMP led to the enact-
ment of the Electoral Act 1993, which in turn requires political parties wishing to
contest the Party Vote to register with a newly created Electoral Commission.23 In
1995, amendments to the Electoral Act 1993 made three further important changes
to the regulatory framework governing political parties. First, a cap was placed on
how much a registered political party can spend on advertising at an election.
Second, each registered political party was required to make a public return setting
out its expenditure on the election contest. Finally, the disclosure of the identity of
some (but as shall be seen, not all) sizeable donors to each political party was man-
dated. These reforms enacted recommendations made by the Royal Commission,
on the grounds that ‘if elections are to be fair and our democracy is to prosper,
it is important that the effects of [economic] inequalities are minimised.’24
The 1995 measures continue to govern the funding of the political parties’ elec-
tion campaigns. Under them, the total ‘election expenses’ of a registered political
party are limited to $1 million, plus an additional $20,000 for each individual con-
stituency seat contested.25 The definition of election expenses incorporates any
expenditure made on an ‘election activity’-defined as all advertising of any kind,
radio or television broadcasting, or published material, which encourages (or
appears to encourage) voters to vote for the party (or not to vote for any other
18
RCES, n 10 at 6.
19
RCES, n 10 at 63–4.
20
The New Zealand Electoral Commission provides a description of how MMP operates at
<http://www.elections.govt.nz/elections/esyst/govt_elect.html>. See also G Palmer and M Palmer,
Bridled Power: New Zealand Government Under MMP (Auckland, Oxford University Press, 2004 (4th
ed)) 22–38.
21
RCES, n 10 at 61–2.
22
See generally, K Jackson and A McRobie New Zealand Adopts Proportional Representation
(Aldershot, Ashgate Publishing, 1998).
23
Electoral Act 1993, s 62(1). In order to register, a political party must show it has at least 500 cur-
rent financial members, and state that it intends contesting future elections; Ibid, ss 63, 71A.
24
RCES, n 10 at 190.
25
Electoral Act 1993, s 214B(2)(a).
18 Andrew Geddis

party).26 The activity must occur in the three months preceding an election,
although if the activity is paid for outside of these three months, it still falls with-
in the spending limits.27 In theory, therefore, a political party contesting all 69 elec-
torates is restricted to spending a maximum of $2.38 million on advertising its
campaign in the three month period leading up to polling day. However, there are
no restrictions on how much a party can spend on advertising outside of this three
month pre-election period. The limits also exclude spending on travel or conduct-
ing opinion polls within the three months.28 What is more, the cost of activities
such as convening focus groups to test reactions to policy positions, or hiring cam-
paign consultants, will also fall outside this limit so long as these activities are kept
separate from the development or conduct of the party’s advertising campaign.
Following an election, the secretary of each registered political party is required
to file a return of the party’s election expenses with the Electoral Commission.29
Although the Electoral Act 1993 does not specify the form this return must take,
the Court of Appeal has ruled that the Electoral Commission can require parties
to provide a breakdown of their election expenses in terms of the various areas in
which these are made.30 Thus, a registered party must publicly reveal how much it
has spent on each of the following categories: advertising; broadcasting; and gen-
eral publication of notices, posters, billboards, etc. In addition, it must list each of
the persons to whom payment was made in respect of each of these categories, as
well as how much was paid to them. This return must also be accompanied by an
independent auditor’s report, stating whether (in the auditor’s opinion) the
party’s return is an accurate reflection of the actual expenses incurred.31
Political parties are also required to disclose the identity of some of the donors
who fund their activities. The secretary of a registered party is required to make
an annual return to the Electoral Commission listing every donation received by
a person or body involved with the administration of the party’s affairs that by
itself, or in the aggregate, exceeds $10,000.32 The return must include the total
value of any such donation and, where the identity of the donor is known, the
name and address of the donor.33 However, where the donor’s identity is not
known to any candidate of the party, or any person involved with the adminis-
tration of the party,34 the contribution need only be listed as coming from an
anonymous source.35 The party’s auditor must also submit a report on the party’s
annual return.36

26
Ibid s 214B(1). The definition excludes spending on advertising which relates exclusively to the
election of any of the party’s individual candidates, Ibid.
27
Electoral Act 1993, s 214B(1) (definition of ‘election activity’).
28
Ibid s 214B(1)(e) (definition of ‘election expense’).
29
Electoral Act 1993, s 214C(1).
30
Electoral Commission v Tate [1999] 3 New Zealand LR 174.
31
Electoral Act 1993, s 214C(1).
32
Ibid, ss 214G(1) 214F.
33
Ibid, s 214G(1)(a)(i).
34
Ibid, s 3(1) (definition of ‘anonymous’); see below nn 79–82 and accompanying text.
35
Electoral Act 1993, s 214G(1)(a)(ii).
36
Ibid s 214H(1) and (2).
 The Regulation of Campaign Funding in New Zealand 19

The shortcomings of these disclosure provisions are discussed in the following

section. But aside from problems with this aspect of the controls on party fund
raising, the rules governing party spending only place an as yet theoretical limit
on the political parties’ activities, for no party has ever reported expending the full
amount allowed under the legislation.37 Therefore, the $2.38 million cap on elec-
tion expenses is apparently more than any party is able to raise to pay for its cam-
paign—or, at the very least, has chosen to spend on its campaign. Here the
structural constraints on campaign spending in New Zealand, discussed in the
introduction to this chapter, seem relevant. Because New Zealand is not a ‘high
cost’ campaigning environment, parties are able to gain electoral success without
necessarily having to spend excessive amounts of money.38 In turn, this may some-
what reduce the perceived need for parties to try to raise and spend sums in excess
of the amount mandated by the Electoral Act 1993.

Regulation of the Funding of Individual Candidate Campaigns

In contrast to the relaxed attitude historically displayed toward political parties,
controls on the campaign funding of individual candidates have existed since
1895. In that year, limits were placed on the amount candidates could spend on
seeking election, and they also were required to file a post-election return setting
out these election expenditures, as well as the sources of their funding.39 These
restrictions have remained in place throughout New Zealand’s subsequent elec-
toral history, and have been carried over into the Election Act 1993.40
A candidate may incur no more than $20,000 in ‘election expenses’, defined as
expenses incurred by or on behalf of a candidate for an ‘election activity’. In rela-
tion to an individual candidate, an ‘election activity’ is defined as any kind of adver-
tising, any radio or television broadcasting, or any publication or distribution of
any notice, poster, or billboard, which is carried out by the candidate’s campaign.41
In addition, the activity must relate solely to the candidate in his or her capacity as
a candidate, must relate exclusively to his or her campaign, and must take place in
the three months before the election is held.42 Therefore, as with the political par-
ties, the Electoral Act 1993 restricts only the amount a candidate may spend on
advertising his or her candidacy during the three months preceding an election.43
37
The most spent by any registered party in the 2002 general election campaign was $1.6 million.
38
For example, the National Party’s declared spending at the 1999 election was almost twice as great
as was the Labour Party’s, yet Labour out-polled National by 38.74 per cent to 30.50 per cent. Similarly,
the ACT Party spent more than five times as much on its campaign in 2002 than did the New Zealand
First Party, only for the latter to receive 10.4% of the vote to ACT’s 7.1%, Electoral Commission, New
Zealand Electoral Compendium, (2nd ed, 2000).
39
See Corrupt Practices Prevention Amendment Act 1895, ss 8, 12.
40
Electoral Act 1993, s 213(1).
41
Ibid (definition of ‘election activity’).
42
Ibid.
43
As with the political parties, the definition of ‘election expense’ is in terms of when the ‘election activ-
ity’ occurs, not when the payment for it is made. See Electoral Act 1993, s 213(1)(b). An amendment
to the Electoral Act in 2002 has also slightly broadened the definition to include spending by a candidate
on ‘negative’ or ‘attack’ advertising aimed against a rival candidate. See, ibid, s 213(1)(c)(ii).
20 Andrew Geddis

However, by contrast with the provisions governing political party spending, the
limits only apply to expenditures on advertising which ‘relates exclusively’ to the
election campaign, rather than to all advertising which broadly ‘encourages’ voters
to vote in a particular way.44
The requirement that spending ‘relate exclusively to the campaign for the
return of the candidate’ before qualifying as an ‘election expenditure’ has pro-
voked some confusion.45 The Electoral Act 1993 tries to clarify the issue by appor-
tioning election expenses incurred on election activity relating to the campaigns
of two or more candidates between all of the candidates concerned.46 However, the
status of activities which have the effect of both encouraging voters to vote for a
candidate, and which also serve some other purpose—such as promoting an issue
in a referendum held concurrently with an election—is still unclear. There is some
suggestion from the courts that the portion of the spending connected with
advertising the candidate’s campaign ought to be counted as an election expendi-
ture,47 but this conclusion is necessarily speculative as the issue has yet to be
addressed head on.
The uncertainty over the sorts of spending that constitute an ‘election expense’
also affects the requirement that candidates file a post-election return listing their
election expenses.48 Because it is often debatable how some spending on a partic-
ular activity should be characterised, candidates have room to be somewhat cre-
ative in the returns that they file so as to ensure that their reported spending falls
beneath the $20,000 maximum. Candidates are also required to list in this post-
election return any ‘election donations’ that they may have received.49 An election
donation is defined as any donation, or series of donations, made to the candi-
date’s campaign that in the aggregate exceeds $1,000.50 Where the identity of the
source of an election donation is known, the return must list the name and
address of the donor, as well as the amount donated.51 However, where this infor-
mation is not known by the candidate, the amount of the election donation need
only be listed as an ‘anonymous donation’.52
While gaps undoubtedly exist in the controls that apply to candidate spending,
overall the rules have worked to restrain candidate spending. The limited amount
of such spending in New Zealand is also attributable to the fact that candidate
advertising does not really have that great an impact on the election outcome.
Most voters endorse an individual candidate based on his or her party affiliation,
so the campaign spending by political parties has long been of greater importance
in the electoral race. The centrality of the party vote under MMP merely cements

44
Compare the provisions for political parties, above n 26.
45
See Re Wairarapa Election Petition [1988] 2 New Zealand LR 74, 107–9.
46
Electoral Act 1993, s 214(1) and (2).
47
See Re Wairarapa Election Petition [1988] 2 New Zealand LR 74, 108.
48
Electoral Act 1993, s 210(1).
49
Ibid, s 210(1)(b), s 210(9).
50
Ibid, s 210(9)(a).
51
Ibid, s 210(1)(b).
52
Ibid, s 210(1)(c).
 The Regulation of Campaign Funding in New Zealand 21

this fact into place. Also, while determined candidates can (and sometimes
undoubtedly do) exceed the $20,000 limit on their election expenses, they run a
real risk if caught. Any candidate found to have knowingly exceeded the spending
limit on his or her campaign commits a ‘corrupt practice’,53 which carries a pun-
ishment of up to one year in prison. In addition, committing a corrupt practice
automatically enters the malefactor into the ‘corrupt practices list’,54 disqualifying
him or her from voting or holding public office for three years.55 This is a heavy
sanction, and makes candidates cautious about too obviously flouting the rules.

Regulation of Campaign Spending by ‘Third Parties’

In addition to individual candidates and political parties, any developed demo-
cratic system also contains a plethora of ‘third parties’ with an interest in the out-
come of the election, who want to take some part in the campaign battle.56
Participation of such third parties in New Zealand’s electoral processes is regulat-
ed by sections 221 and 221A of the Electoral Act 1993. Section 221 prohibits the
publication of any advertisement which ‘is used or appears to be used to promote
or procure the election of a constituency candidate’,57 or ‘encourages or persuades
or appears to encourage or persuade voters to vote for a party’,58 unless it is autho-
rised in writing by the candidate or party concerned, and contains a statement
setting out the ‘true name’ and address of the person for whom, or at whose direc-
tion, it is published.59 Section 221A covers any advertisement ‘relating to an elec-
tion.’ The publication of the latter type of advertisement also requires a statement
identifying the ‘true name’ of the person for whom, or at whose direction, it is
published60; but unlike advertisements advocating support for a particular candi-
date or party, it does not require any formal authorisation.
Section 221 prevents third parties from undertaking unilaterally any advertis-
ing which has the effect of advocating support for a particular primary participant
contesting the election. It also limits such third party spending, even if the way in
which it does so is not immediately apparent. Because the definition of a candi-
date or political party’s ‘election expenses’ covers activities carried out with the
party or candidate’s authority, the authorisation of a third party’s expenditure by
a primary participant causes that spending to become a part of the participant’s
election expenses. Third party advertising which advocates support for a candi-
date or party can therefore never extend, at least in theory, beyond the expendi-
ture limits imposed on the primary participants in the electoral contest.
53
Ibid, s 213(3)(a).
54
Ibid, s 100.
55
Ibid, s 80(e). This was the fate of the Labour Party MP, Reg Boorman, following the case of Re
Wairarapa Election Petition [1988] 2 New Zealand LR 74.
56
See A Geddis, ‘Democratic Visions and Third-Party Independent Expenditures’ (2001) 9 Tulane
Journal of International and Comparative Law 5, 22.
57
Electoral Act 1993, s 221(1)(a).
58
Ibid, s 221(1)(b).
59
Ibid, s 221(2)(a) and (b).
60
Ibid, s 221A(1).
22 Andrew Geddis

This authorisation requirement effectively precludes third parties from run-

ning ‘parallel campaigns’ promoting candidates and parties they wish to see in
office. However, authorisation is only required where an advertisement is ‘used to
promote or procure the election of a constituency candidate’, or ‘encourages or
persuades or appears to encourage or persuade voters to vote for a party’. Clearly,
advertisements which ‘expressly advocate’ the election of a particular candidate or
party—by saying something like ‘Vote for X’—fall within these terms. However,
beyond easy cases such as these, it is very difficult to define in advance the kind of
message that will ‘appear[] to encourage or persuade’ voters to support some
party. In particular, the status of ‘issue advocacy’ advertisements, which do not
refer specifically to any candidate or party but rather promote a position in
respect of a public policy issue which also features in some primary participant’s
election campaign, is problematic.61 Section 221 is generally regarded as excluding
such communications from its ambit, which obviously leaves a wide loophole in
the limits on third party spending. Any third party wishing to influence an elec-
tion can evade the restrictions imposed by section 221 simply by casting its mes-
sage in terms of the ‘issues’ involved, rather than directly exhorting voters to vote
for a particular party or candidate.
However, such advertising will still fall under the ambit of section 221A. This
provision was enacted in 1995 following a recommendation by Parliament’s
Electoral Law Committee that ‘negative’ advertising—advertising which attacks
rather than promotes a party or candidate—should be regulated.62 Previously, it
was assumed that as negative advertising fell outside section 221, it could be
published anonymously.63 Given this lacunae in the law, the Committee was con-
cerned that voters should be able to evaluate the credibility of such advertise-
ments in light of who is paying for them. The Committee also recognised the
problems involved in requiring those wishing to advertise against a candidate or
party to gain the consent of all competing participants, not to mention the diffi-
culty in apportioning the costs between them. It also considered a less burden-
some procedure in respect of negative advertising would help compensate for the
limits that section 221 placed on expressive rights in respect of ‘positive’ express
advocacy. The term ‘relating to an election’ was correspondingly enacted by sec-
tion 221A to cover not only negative advertising, but also issue advocacy aimed at
influencing an election.
Because third parties are under no obligation to disclose the amount spent on
election related advertising, it is difficult to gauge just how much of this type of
expenditure occurs during an election campaign. Certainly, each election has seen
some advertising by third parties—in particular, employer and union groups—on
issues that one or another political party has been closely aligned with, and which

61
See generally, A Geddis, ‘Confronting The “Problem” of Third Party Expenditures in United
Kingdom Election Law’ (2001) 27 Brooklyn Journal of International Law 103.
62
Electoral Law Committee, Inquiry into the 1993 General Election: Report of the Electoral Law
Committee (1994) AJHR I.21A.
63
Compare DPP v Luft [1977] AC 962.
 The Regulation of Campaign Funding in New Zealand 23

may therefore help to promote that party’s election campaign. But that said, such
spending has not appeared to have had any appreciable impact on any recent
election result. This fact may also be due to the lack of any real controls on the
making of donations to political parties, which allows third parties seeking to
influence the electoral process to funnel direct financial aid to the parties, rather
than having to spend their resources independently.
However, if this situation should change-for instance, were the donation
process to be made more transparent (as is discussed in the next section)-the issue
of third party spending might become more pressing. The loopholes in the limits
on these types of expenditure (in particular, the failure of the limits to cover ‘issue
advocacy’) means that, should some electoral participant wish to do so, it could
completely evade the existing limits on campaign spending. That said, it is debat-
able whether the present veto granted to the political parties and individual can-
didates over advertising that appears to support their campaign can be justified.
Requiring authorisation before advertising on behalf of a party or candidate, and
then carving the cost of that advertising out of the party or candidate’s own
expenses, means that the form of the advertisement is likely to be largely dictated
by the party or candidate. Therefore, the existing limits on third party spending
are both too loose (in that they may be easily evaded in their entirety), and too
rigid (in that, where they do apply, they give the primary participants too much
control over the content of a third party’s message).

Broadcasting Regulation64
New Zealand’s regulatory schema places heavy restrictions on the use of the
broadcast media—both radio and television—for political ends. All broadcast
media, whether privately owned or State run, are regulated by the Broadcasting
Act 1989. This legislation prohibits any broadcaster from permitting the broadcast
of any ‘election programme’ at any time. An election programme is defined as one
which encourages or persuades (or appears to encourage or persuade) the voters
to vote for (or not to vote for) some individual candidate or political party, or
which advocates support for or opposes a candidate or political party, or which
notifies that a meeting is to be held in conjunction with an election.65 There are
only a few specific exceptions to this blanket ban on using the broadcast media to
campaign,66 of which the most important for current purposes are those allowing
the political parties and individual candidates limited usage of the broadcast
media during an election campaign.
The State distributes limited access to the broadcasting resource to qualifying
political parties in the period prior to an election, in the form of a grant of money
64
See generally, A Geddis, ‘Reforming New Zealand’s Election Broadcasting Regime’ (2003) 14
Public Law Review 164.
65
Broadcasting Act 1989, s 69(1).
66
The ban does not apply to ‘the broadcasting, in relation to an election, of news or comment or of
current affairs programmes’; Ibid s 70(3). The official bodies charged with overseeing New Zealand’s
electoral process may place an election programme ‘for the purposes of the Electoral Act 1993’, and
broadcasters may carry ‘non-partisan advertisements’ as a community service; see Ibid s 70(2)(b).
24 Andrew Geddis

for the sole purpose of allowing the broadcast of election advertisements.67 Since
1990, this ‘broadcasting allocation’ has amounted to a total of a little over $2 mil-
lion. The Electoral Commission is charged with distributing the broadcasting
allocation between all qualifying political parties requesting a share.68 The alloca-
tion criteria involves such factors as: the number of votes the party attracted at the
last election; the number of votes gained by the party in any by-election held since
the last general election; any other indications of public support for that political
party (such as results of public opinion polls and the number of persons who are
members of that political party); as well as the general ‘need to provide a fair
opportunity for each political party . . . to convey its policies to the public . . .’69
Clearly, the application of such a complex formula will generate disputes, and fol-
lowing every allocation decision there are complaints that some of the parties
have been unfairly treated.70 The fact that the Electoral Act 1993 requires a repre-
sentative of each of the two largest political parties to take part in the allocation
decision,71 while the minor political parties are given no direct voice in the
process,72 only sharpens these complaints.
Irrespective of the fairness of this allocation process (a question considered in
the final part of this chapter), it provides the political parties with virtually their
only means of direct access to the broadcast media.73 A political party may only
broadcast an election programme in the time purchased with money allocated to
it by the Commission. While the costs of producing an election programme may
be paid for from the broadcasting allocation, they do not have to be. Instead, par-
ties may spend their own funds on such production costs, although this expendi-
ture will still count as an ‘election expense’ to be counted towards the total that
party may spend on its general election advertising.74
An additional exception to the blanket ban on using the broadcast media for
electioneering is made for individual candidates. A candidate may purchase time
to broadcast an election programme, so long as it relates solely to the promotion
of their candidacy, and is broadcast in the three months prior to the election.
However, any such spending by a candidate will count as an ‘election expense’, and
must therefore be counted towards the maximum of $20,000 that she may spend
on advertising her campaign.
67
Money provided as a part of the broadcasting allocation may only be used for the purpose of mak-
ing and screening an election program; Ibid s 74(1)(a).
68
Ibid ss 73, 74A. In order to qualify for a share of the allocation, a party must either be registered,
or be deemed to be prepared to run candidates in at least 5 constituency seats, when Parliament is dis-
solved for an election; Ibid s 75(1)(a).
69
Ibid s 75(2).
70
See generally, S Corban, ‘Funding Political Party Broadcasting’ (1997) Auckland University Law
Review 265, 272–82.
71
Electoral Act 1993, s 8(4).
72
Although all qualifying parties have the right to be heard by the Commission before it makes the
allocation decision; Broadcasting Act 1989, s 76.
73
Ibid s 70(2)(a). In addition, the State-owned television and radio network is required to screen the
opening and closing addresses of qualifying political parties; Ibid s 77A(3).
74
However, the value of any broadcasting resources received by a party does not count towards that
party’s maximum election expenses. Ibid s 214B(1).
 The Regulation of Campaign Funding in New Zealand 25

These rules radically restrict the electoral participants’ direct access to the
broadcast media. A political party only may use the sums allocated to it by the
Electoral Commission to purchase air time. While individual candidates remain
free to use the broadcast media to advertise their candidacy (albeit subject to strict
conditions), the $20,000 spending cap on their campaigns effectively limits access
to the purchase of a few spots on local radio stations. Third parties may only use
the broadcast media to run general, issue-focussed ads which do not expressly
advocate support for or opposition to any party, or even appear to encourage vot-
ers to support or not to support a particular party or candidate.75

Problems with New Zealand’s System of Campaign

Funding Regulation—and Proposed Solutions

It should be noted at the outset of this section that the overall regulation of cam-
paign expenditures in New Zealand appears to be operating satisfactorily. Those
competing for election mostly abide by the spending limits, although a few accu-
sations of over-spending by individual candidates arise after each election. It
would be wrong to attribute this success entirely to some intrinsic superiority of
the regulatory scheme, as there are several loopholes in the law that could be taken
advantage of by an electoral participant wishing to avoid the controls on spend-
ing. However, because New Zealand is a ‘low-cost’ campaign environment, and
because the use of the most expensive communication medium largely is put off
limits, there is no great incentive to spend amounts in excess of that allowed by
the legislation.
That being so, the issues of greatest concern centre around how electoral con-
testants gain their election funds, rather than how those funds subsequently are
used. Any person or organisation may give as much money as he, she or it wishes
to any electoral contestant. Contributors need not be citizens, or even residents,
of New Zealand. In this context, concerns have been expressed about the ease with
which large scale donors can fund the campaigns of election participants without
disclosing their identity to the voting public. I term this the problem of ‘faceless’
donations.76 Additionally, there have been complaints that the State does not do
enough to support the political parties’ election campaigns, thus leaving them
overly reliant on private funding sources. These arguments have been raised
75
That said, the enforcement of this ban is not strict. On several occasions before the 2002 election,
for example, the ‘Sensible Sentencing Trust’ broadcast an advertisement highlighting law and order as
an election issue. The screening of this advertisement followed a series of public meetings, jointly
organised by the Trust and the ACT Party, ‘to promote the message of Zero Tolerance for Crime and
Truth-in-Sentencing . . ., As such, it is strongly arguable that even though the Trust’s advertisement did
not explicitly mention the ACT Party, its message on crime had become so connected with that of the
ACT Party that the advertisement did ‘appear[] to encourage or persuade voters to vote for a party’ as
per s 69(1). However, in the event no complaint was laid against the Trust.
76
See generally, A Geddis, ‘Hide Behind the Targets, In Front of All the People We Serve: New
Zealand Election Law and the Problem of “Faceless” Donations’ (2001) 12 Public Law Review 51.
26 Andrew Geddis

specifically in relation to the broadcasting allocation, as well as in the wider con-

text of taxpayer funding for political parties.77
This section considers each of these problems in turn. It also examines a num-
ber of contemporary proposals to deal with the problems outlined. However,
whether these suggestions will be translated into actual reforms is unclear, as
Parliament’s Justice and Electoral Committee recently has recommended a ‘fun-
damental review of the law relating to parliamentary elections and that this review
be completed and any changes be in place for the 2008 general election.’78 Given
this fact, only an overview and evaluation of the different reform proposals is pos-
sible, rather than definite predictions about the shape of future changes.

Donation Disclosure and the Problem of ‘Faceless’ Contributions

The rules requiring the public disclosure of the identity of large-scale donors to
the political parties (and, to a lesser extent, individual candidates) suffer from two
major flaws.79 First of all, the disclosure regime is retroactive in its operation.
While a political party is required annually to file a report detailing all the
reportable donations received in the previous year, it does not have to make any
special disclosure of its funding sources prior to an election. Therefore, voters are
left in the dark during an election campaign as to who is supporting each party
financially in its bid to win public power. Indeed, the public may not learn of the
identities of a party’s donors for some considerable time after the election, as a
political party’s annual financial report is not due until the end of April in the fol-
lowing year. Thus, some nine months had elapsed after the 2002 general election
before the public discovered who the parties’ major financial supporters were. A
more frequent disclosure of the identity of major donors to a political party, espe-
cially in the immediate run-up to an election, would be more desirable.
The second shortcoming of the public disclosure regime is the loophole creat-
ed by allowing candidates and political parties to continue to accept donations
that come from ‘faceless’ sources. The disclosure requirements incorporated into
the Electoral Act 1993 were intended to allay any concerns that political parties
might exchange favourable policy outcomes for political donations. However, the
political parties have taken advantage of gaps in this legislative framework. First
of all, the parties’ continuing ability to receive ‘anonymous’ donations has been
exploited widely, as the return of party donations filed with the Electoral
Commission for the 2002 election year bears out.80 Although the sources of such
donations are not meant to be ‘known’ to the party, the definition calls for actual
77
See generally, A Geddis, ‘Towards a System of Taxpayer Funding for New Zealand Elections?’
(2002) 10 Otago Law Review 181.
78
Justice and Electoral Committee, Inquiry into the 2002 General Election, (March, 2004) AJHR
I.7c, 9.
79
These disclosure requirements are discussed above nn 32–6 and accompanying text. For a more
complete discussion of the issue, see Geddis, n 76, at 54–6.
80
The Labour Party reported receiving $380,000 in ‘anonymous’ donations (out of its total of
$671,719 in reported donations), the National Party $200,050 (out of $529,167.71), the ACT party
$50,000 (out of $88,971), and the Progressive Coalition $40,000 (out of $105,000).
 The Regulation of Campaign Funding in New Zealand 27

knowledge rather than constructive knowledge. Hence, as long as donors takes

steps to disguise their contributions—for instance, by paying it over via a bank
check—the recipient can legitimately list the source as ‘anonymous’, even if well
aware of its likely origin.
In addition, nothing in the legislation prevents the funnelling of donations
through conduit bodies, such as trusts. Thus, for example, the National Party
reported receiving $205,167.71 from three trust entities in 2002,81 while the
Progressive Coalition also reported a donation of $26,000 from the ‘Progressive
Members Fund’. In such a case the law only requires that the party list the conduit
body as the source of the donation, even if the recipient fully knows the trust has
been used to pass along another person’s donation. Finally, the splitting of a dona-
tion amongst several ‘straw donors’, each of whom individually give less than the
reportable amount, remains legal. It has been revealed that some donors have
made use of this stratagem in the past, and there is at least circumstantial evidence
that the practice continues today.82
These forms of faceless donation would not be troubling if the candidates and
political parties genuinely had no idea who was funding their campaigns, as there
would then be no danger that they would feel any resulting obligation to any par-
ticular individual or interest group.83 It is clear, however, that the donations
received generally are not faceless in this sense. Rather, as media reports have
revealed, fundraisers for the parties actively advise potential donors how to avoid
being publicly identified. In so doing the parties and their financial supporters
may trample on the spirit of the law, but they remain within its technical bounds.
Therefore, there is abundant evidence that the donor disclosure regime contained
in the Electoral Act 1993 is hopelessly flawed. It allows any donor who wishes to
avoid publicly disclosing her identity to do so, and even permits the intended
recipient of a political donation to advise a donor on how to achieve this result—a
state of affairs that makes something of a mockery of having any sort of public
disclosure regime for political donations.
It seems likely that any test intended to distinguish between genuinely faceless
donations and faux-anonymous contributions to a candidate or political party
would prove impractical in application, as well as carrying unacceptable costs in
terms of enforcement.84 In light of these problems, New Zealand ought to follow
Australia, Canada, the United States, and (lately) the United Kingdom, and ban
political parties from receiving anonymous donations greater than a certain,
nominal amount. This was the approach recommended in the Royal
Commission’s 1986 report, which also called for preventing the use of ‘front’

81
In 1999, this party reported receiving over $500,000 from a single trust.
82
In 2002, the ACT Party reported spending the most of any political party on ‘election expenses’
(some $1.6 million). However, its financial report for that year showed it received only $89,000 in
reportable donations. This discrepancy creates a strong inference that the remaining $1.5 million in
funding was contributed in ways that kept each donation below the $10,000 disclosure threshold.
83
See I Ayres and J Bulow, ‘The Donation Booth: Mandating Donor Anonymity to Disrupt the
Market for Political Influence’ (1998) 50 Stanford Law Review 837.
84
Geddis, n 76 at 55–6.
28 Andrew Geddis

organisations to avoid the disclosure requirements.85 A majority of the members

of Parliament’s Justice and Electoral Committee also have indicated their ‘support
[for] significant changes to the law governing donations to political parties’,86
while preferring to subject the matter to further study before making concrete re-
commendations for reform. It therefore remains to be seen if these words will be
translated into practice in time for the 2008 general election.

The ‘Fairness’ of the Allocation of Broadcasting Resources

A second, and perennial, problem with the supply of campaign funds to New
Zealand’s political parties is the perceived unfairness of the distribution of broad-
casting allocation amongst the political parties.87 While complaints have been
made ever since the present allocation system was introduced in 1990,88 allega-
tions that the distribution is inequitable have been sharpened by the move to a
more diverse electoral climate under MMP. Two separate, inconsistent complaints
have been raised. First of all, the smaller political parties argue that the major par-
ties (Labour and National) receive a disproportionate amount of the allocation,
given that they already enjoy greater attention from the ‘free’ news media.89
Reinforcing this charge is the fact that representatives of these two parties take an
active decision-making role in the allocation process,90 while other parties only
have a right to be ‘consulted’ on the allocation.91
While the smaller political parties are united in calling for the major party
representatives to be removed from the allocation process,92 it comes as no
shock that these two parties oppose such a move, on the grounds that it is
‘important for there to be political input in the process in order to ensure that
the allocation procedures are fair and to allow the views of the political parties
(which are the “prime users”) to be taken into account.’93 However, the fact that
section 76 of the Broadcasting Act 1989 already requires the Commission to
hear from all qualifying political parties before making any allocation decision
makes it hard to see the continuing presence of major party representatives on
the allocation committee as anything but an entrenchment of their dominant
electoral position. Nevertheless, as Labour and National control 79 of the 120
85
RCES, n 10 at 189–90.
86
Justice and Electoral Committee, Inquiry into the 1999 General Election, (December, 2001) AJHR
I.7C, 104.
87
Ibid at 116–22.
88
Corban, n 70, at 272–82.
89
Corban, n 70 at 273. For the 2002 election, the Labour and National parties were each allocated
$615,000—a combined total of almost 60 per cent of the $2.081 million distributed Electoral
Commission, a Written Decision on Allocation of Time and Money to Political Parties for Broadcasting
of Election Programmes’ 25 July 2002, p 11.
90
Broadcasting Act 1989, s 8(4).
91
Ibid s 76.
92
Report of the MMP Review Committee, Inquiry into the Review of MMP (August, 2001) AJHR
I.3A, 55. The Electoral Commission has also recommended repeatedly to Parliamentary select com-
mittees that the political party representatives be removed from the allocation process.
93
Ibid at 57.
 The Regulation of Campaign Funding in New Zealand 29

seats in Parliament, the minor parties face an uphill battle in their bid to
change the status quo.
In contrast, established political parties complain that the ease with which a
party may qualify for a share of the broadcasting allocation enables fringe organi-
sations to siphon it away from more ‘serious’ electoral contenders. Presently, all that
is required for a party to gain a share of the allocation is that it either be registered,
or deemed to be running candidates in 5 or more seats, at the time Parliament is
dissolved for an election.94 In the wake of the introduction of MMP, the number of
parties meeting this threshold has increased markedly—rising from 7 in 1993, to
22 in 1999, before falling back to 14 in 2002. Yet in this period the amount of the
broadcasting resource to be distributed has remained static,95 even as the costs of
accessing it have increased due to rising advertising rates. Therefore, ‘serious’ elec-
toral contenders have had to share a progressively shrinking pie with an increased
number of fringe parties, whose chance of actual electoral success is negligible.
The call to tighten the qualifying criteria for access to the resource is met with
a claim that the current allocation formula provides a means by which emerging
political movements can have some chance of attracting public support.
Therefore, the underlying problem would seem to be that the current allocation
criteria contained in section 75 of the Broadcasting Act 1989 tries to be all things
to all people. It rewards larger parties for their greater levels of public support,
whilst also seeking to ‘provide a fair opportunity for each political party . . . to con-
vey its policies to the public’. Any distributive decision is thus forced to serve two
contradictory goals. While complaints about the division of the broadcasting allo-
cation will probably never be completely eliminated, they probably could be
reduced if the criteria were more clearly designed to serve one or the other goal,
rather than both simultaneously.
In terms of proposals to increase the overall amount of the parties’ access to the
broadcasting resource, three main ideas have been floated.96 One is to retain the
current restrictions on the parties purchasing broadcast time, with a concomitant
increase in the amount of the broadcasting allocation granted to the parties to buy
this time. The second is to continue with the present levels of allocation, but also
allow the parties to spend their own financial resources on buying air time, up to
a set cap.97 The third proposal is to remove the present restrictions on the purchase
of broadcasting time by the political parties, and instead allow this as another
‘election expense’ within the general spending limit on such activities. The money
currently allocated for purchasing broadcasting time would then be distributed
amongst the political parties as a part of a more general system of taxpayer fund-
ing, to be spent by the parties on whatever election activities they desire.
94
Broadcasting Act 1989, s 75(1)(a).
95
The Broadcasting Act 1989, s 74(2) requires that the same amount of money be appropriated for
the Broadcasting Allocation as was appropriated at the previous election, unless Parliament expressly
legislates for an increase. Parliament has not done so in the past decade.
96
These ideas were considered in greater depth by the MMP Review Committee, n 92 at 61.
97
This model was included in two legislative proposals in the 1990s, neither of which gained final
passage. See Broadcasting Amendment Bill (No 2) 1993; Broadcasting Amendment Bill 1995.
30 Andrew Geddis

The present situation is that the broadcasting allocation is the subject of near
universal condemnation. Even the Electoral Commission, charged with conduct-
ing the allocation process, has stated that it ‘considers the current system of allo-
cating time and funds to the political parties for election broadcasting is unfair
and unsatisfactory, and that the procedures required by the [Broadcasting] Act are
very time-consuming, cumbersome, and expensive.’98 What should be done about
the issue is, of course, a different question, on which there is much less agreement.
Not surprisingly, each party tends to support the proposal most propitious to
their own electoral needs, and so no consensus (or even majority support) has
coalesced behind any one approach. As such, it is difficult to predict with any great
certainty what steps might be taken to fix a system that is widely agreed to be bro-
ken, without any real concordance on what the real problem with the system is,
and therefore how it should be fixed.99

Increased Taxpayer Funding for Election Campaigns

In addition to problems that have emerged with the broadcasting allocation, there
have been more general claims that the State fails to give adequate support to the
election campaigns of the political parties, thereby leaving the parties too reliant
on sources of private funding. It has also been suggested that any move to ban
faceless donations will necessitate the introduction of some form of public (or
taxpayer) funding for the parties’ election campaigns. If donors are forced to dis-
close their identities, this argument goes; they will no longer be prepared to give
substantial political contributions, thus harming the democratic process by
depriving the political parties of the funds they need to run their election cam-
paigns.100
Whether such an outcome would eventuate in New Zealand is not entirely cer-
tain.101 As a prediction, it is belied by the experience of various other
countries—such as Australia, Canada, and the United States—which require the
public disclosure of the identity of donors to political parties, yet have found that
donors are still prepared to give parties significant sums as ‘money contributes to
and flows to power and the monied have learned to live with disclosure.’102
However, even if the predicted decline in donations in a post-disclosure environ-
ment did not eventuate, there are several other arguments that might support a
move towards the provision of greater taxpayer funding for election campaigns in
New Zealand. The broadcasting allocation provides a precedent, so the introduc-
tion of further taxpayer funding for election campaigns simply would involve the
expansion of an existing feature of New Zealand’s election law, rather than
the importation of a completely exogenous concept. Additionally, most of the
98
See MMP Review Committee, n 92 at 60.
99
My own suggestions are canvassed in Geddis, n 64 at 180–2.
100
RCES, n 10 at 217.
101
Geddis n 77 at 182–3.
102
KZ Paltiel, ‘Canadian Election Expense Legislation 1963–1985’, in HE Alexander (ed),
Comparative Political Finance In The 1980s (New York, Cambridge University Press, 1989) 67.
 The Regulation of Campaign Funding in New Zealand 31

Western democracies with which New Zealand compares itself provide some form
of taxpayer assistance to their political parties’ election campaigns. So perhaps the
taxpayer funding of election campaigns forms some kind of international demo-
cratic ‘best practice’ to which New Zealand also should conform.
This position was adopted by the Royal Commission in its 1986 report, where
it supported the introduction of taxpayer funding on the grounds that it would
help to offset any fundraising advantage that ‘rich’ (or established) parties enjoy
over ‘poor’ (or newly emerging) parties.103 To put the point another way, the Royal
Commission believed taxpayer funding would ensure all the parties had access to
adequate resources with which to communicate their policy positions to the elec-
torate, thus helping to create an electoral environment in which voters were able
to cast their ballots in a fully informed manner.104 However, it is debatable whether
this is a problem that really exists in New Zealand. There is little evidence that the
political parties cannot raise enough money to run campaigns that adequately
communicate their messages to the voters. Even though the amounts spent in
each election campaign are quite divergent, there is no indication that this fact has
had any negative impact on the overall competitiveness of the electoral process.105
In addition, any potential benefits to be gained from a taxpayer funding
scheme must be balanced against the risk that such a move will reduce the oppor-
tunities for the supporters or members of a political party to become involved in
the operations of that party. Rather than having to deal with ideologically moti-
vated (and often troublesome and demanding) supporters or party members, a
political party’s hierarchy might prefer to use taxpayer funding to hire others to
accomplish the tasks volunteer participants would usually perform. The possibly
alienating effects of funding the political parties with taxpayer money may pose a
particular risk in New Zealand, where the levels of membership in the political
parties are already reported to be in steep decline.106 Also, public concerns already
have been expressed that the MMP voting system, with its closed ‘party lists’, puts
too much control over the political parties in the hands of the party hierarchy.
These are reasons to be cautious about instituting a form of taxpayer funding that
does not encourage the direct, voluntary participation of party members and sup-
porters, lest such a move exacerbate the perception that the political parties are
becoming increasingly isolated from their grassroots supporters.107
As a matter of public policy, therefore, the issue of wider taxpayer funding for
the political parties’ election campaigns is even more contested than is the issue of
allocating the broadcasting resource.108 To begin with, there is a sharp ideological
103
Above, n 10 at 216–17. The Commission’s recommendation was not included in the Electoral Act
1993. For an account of why this was so see Jackson & McRobie, n 22 at 138–56.
104
D Oliver, ‘Fairness and Political Finance: The Case of Election Campaigns’, in R Blackburn (ed),
Constitutional Studies (London, Mansell, 1992) 132.
105
See Geddis, n 77 at 191–3.
106
R Mulgan, Politics in New Zealand (Auckland, Auckland University Press, 2nd ed, 1997) 248–9.
107
Compare RCES, n 10 at 216–17.
108
Although the two issues fall to be considered together, given that the $2 million already made
available to the political parties through the broadcasting allocation forms a potential ‘seed amount’
for any extended public funding scheme. See Geddis, n 64 at 182.
32 Andrew Geddis

division between the parties as to whether such a step is either necessary or desir-
able. The parties on the ‘right’ all oppose any additional state funding beyond that
currently provided for the purchase of broadcast time.109 Those parties on the ‘left’
support some sort of taxpayer funding for election campaigns, but there is little
consensus on the exact structure of such a scheme.110 About all that seems agreed
upon is that the funding should be distributed in a bulk grant after an election has
been held, with the amount to be given to each party assessed in line with some
dollars-per-vote formula.111
As indicated above, there are reasons in the New Zealand context to be cautious
about too great an extension of the amount of taxpayer funding given to the polit-
ical parties. Certainly, any such funding should be structured so as to ensure it
does not obviate the need for parties to reach out to as wide a base of individual
supporters as possible. One alternative means of achieving this end is through an
indirect system of taxpayer funding via tax rebates on small, individual dona-
tions,112 rather than through relying upon direct funding provided by the central
government. However, the point may be a moot one given the current lack of
agreement amongst the parties as to whether any sort of further taxpayer funding
is a good idea. Further developments must wait for Parliament’s Justice and
Electoral Committee to complete its review of the issue, and for the Government’s
response to any recommendations made by that body.

109
Report of the MMP Review Committee, Inquiry into the Review of MMP (August, 2001) AJHR I.
3A at 62.
110
Ibid.
111
This was also the recommendation of the Royal Commission on the Electoral System. See RCES,
n 10 at 226–8.
112
Geddis, n 77 at 191–3.
 Part II
‘Big Bang’ Regulation of a Private Funding
Regime
 3
Expenditure, Donations and Public
Funding under the United Kingdom’s
Political Parties, Elections and
Referendums Act 2000—And Beyond?
NAVRAJ SINGH GHALEIGH

Introduction
IT IS NO exaggeration to say that the regulatory environment for electoral
campaigning and political parties in the UK has been radically transformed. With
the enactment of the Political Parties, Elections and Referendums Act 2000 (here-
inafter, ‘the Act’ or ‘PPERA’), practically every aspect of the giving to, spending by
and accountability of, political actors has undergone (often significant) revision.
Whilst other contributions to this volume address questions of disclosure1 and
political advertising,2 the focus here is on the impact the Act has had on expendi-
ture and donation capping, and the intimately related question of public funding.
In these areas, whether actively or passively, the presence of the Act looms large.
However, it would be incomplete to stop there. The time of radical reform may be
over, but processes of revision are still in motion.
From the first, it should be recognised that reasons were not wanting for the
enactment of the Political Parties, Elections and Referendums Act, the UK’s first
comprehensive legal intervention into the regulation of party and electoral fund-
ing since the Corrupt and Illegal Practices Act 1883.3 Public confidence in the politi-
cal system had reached a nadir in the mid- and late-1990s, in no small part due to
the perception and actuality of political sleaze which arguably contributed to the
1
See ch 4 by KD Ewing.
2
See ch 5 by J Rowbottom.
3
With the Election Petitions and Corrupt Practices Act 1868 and the Ballot Act 1872, this Act
establishes the statutory foundations (scarcely built upon thereafter) of the pre-2000 regime of party
political funding and campaign finance in the UK.
36 Navraj Singh Ghaleigh

ongoing collapse of voter turnout in the UK.4 The parties themselves complained
(with a degree of credibility) that they operated under such constraints of debt
and uncertainty of income as scarcely to be able to perform their constitutional
functions.5 Among some political commentators was the persistent complaint
that those legal rules that did apply to the funding of political parties were regu-
larly flouted.6 Further, constitutional innovations from within (Scottish and Welsh
Devolution and the Human Rights Act 1998) and political developments from
outwith (European Monetary Union and the prospects of an attendant referen-
dum) placed new demands on a venerable regime. Given also the European Court
of Human Rights’ finding that the UK’s law relating to third party expenditure
limits fell foul of Article 10’s commitment to freedom of expression,7 the time for
reform of a regime rooted in the political configurations of the late Victorian peri-
od was not so much ripe, as very nearly spoiled.

The Case for Reform

When Justice White characterised his own country’s system of campaign finance
as a ‘nonsensical, loophole ridden patchwork’,8 he could as well have been refer-
ring to the pre-PPERA system of party funding. The UK’s approach to the regu-
lation of money and politics has long been both partial and fragmented. Some key
issues of party funding have been subjected to detailed regulation whilst others
have only been constrained by the mores of the relevant actors. The Corrupt and
Illegal Practices Act 18839—which tightly constrained parliamentary candidates’
expenditure after the notorious election of 188010—is a case in point.
In order to combat massive constituency level spending (which had in the 1880
general election approximated to bribery), the 1883 Act placed a severe cap on
constituency level ‘election expenditures’.11 Compliance on the part of candidates
4
Popular ‘trust’ in British political parties nearly halved from 1987 to 1997 and (connectedly?) the
turnout in general elections fell from 77.7% to 59.4% from 1992 to 2001. See respectively, ‘British
Social Attitudes/British Election Surveys and Electoral Commission’ The General Election 2001
(London, Politicos, 2001).
5
See P Webb, The Modern British Party System (Thousand Oaks, Sage, 2000) 238–9.
6
Michael Crick, Committee on Standards in Public Life (CSPL), The Funding of Political Parties in
the United Kingdom (Cm 4057-I, 1998) 184 (‘Opening Statement’).
7
Bowman v United Kingdom (1998) EHRR 1.
8
FEC v National Conservative Political Action Committee 470 US 480, 518 (1985).
9
The relevant provisions of that Act had been repeatedly re-enacted, most recently in the
Representation of the People Act 1983. The fullest account of the pre-PPERA regime is to be found in
KD Ewing, The Funding of Political Parties in Britain (Cambridge, Cambridge University Press, 1987).
10
Spending in that election was generally agreed to be ‘excessive [and] contrary to the public inter-
est’, see HC Deb, col 597 (16 August 1883). For an account of the background to the 1883 Act, see C
O’Leary, Elimination of Corrupt Practices in British Elections 1868–1911 (Oxford, Oxford University
Press, 1961).
11
Latterly reproduced in the Representation of the People Act 1983, ss 76(1) and 118. Based on the
number of electors in a constituency and whether it was a county or borough seat (that is, a rural or
urban seat), the level of these caps averaged about £8,300 in the 1997 general election.
 The UK’s Political Parties, Elections and Referendums Act 2000 37

(and their agents) was ensured by the requirement that parliamentary candidates
submit, to the Returning Officer, returns of all campaign expenditures. The fail-
ure to make a valid return and evidence of overspending could prompt the void-
ing of a result by an election court.12 Such tight controls on candidate expenditure
would of course be rendered nugatory if third parties could incur expenses for or
against a particular candidate, party or position with impunity.13 That loophole
was closed by section 34 of the Representation of the People Act 1918 which effec-
tively prohibited non-candidates from incurring expenditure ‘with a view to pro-
moting or procuring the election of a candidate at an election’ above the level of
£5 (at 1983 prices) without the consent of a candidate or her agent.14 The failure
to comply invited criminal sanctions.15
Superficially, the foregoing amounts to an effective control on constituency
level spending during general elections. Election expenditure was tightly con-
trolled and the participatory primacy of political parties assured. This regime
sprang of course from the experience of high, distortive, expenditure in the late
Victorian electoral process. But it was this very rootedness in the political experi-
ence of the 1880s that also served to undermine the effectiveness of the regulatory
regime.
A particularly damaging loophole arose from the fact that although the
amount that candidates could expend during the campaigning period at general
elections was closely regulated and constrained at the constituency level, there were
no spending limits at the national level. In a sense, such an absence is hardly sur-
prising given that in the 1880s the primary locus of electoral competition was very
much the local, not the national, stage—in the general election of 1880 a mere 2
per cent of total expenditure was incurred by the central parties.16 But the shift to
national campaigning has long since been a feature of political campaigns, such
that the constituency level campaigns are only exceptionally something other than
‘sideshows’.17 Accordingly, constituency limits not operating in tandem with
national spending limits were substantially meaningless. The death knell for
the effectiveness of constituency limits was marked by the decision in R v
Tronoh Mines Ltd18 which revolved around the question of whether campaign

12
Ibid, ss 120–6. However, such outcomes were extremely rare—see Ewing at n 9 above, 73ff.
13
As the Canadian Supreme Court noted in the case of Libman v Quebec (1997) 151 DLR. (4th) 385
at 413.
14
Successively re-enacted, most recently in s 75, Representation of the People Act 1983.
15
These provisions were challenged successfully in Bowman v United Kingdom (1998) EHRR 1.
16
£2,500,000 – £106m at 1997 prices. See, Committee on Standards in Public Life, The Funding of
Political Parties in the United Kingdom (Cm 4057-I, 1998), para 2.3.
17
The phrase is David Butler’s, as quoted in M Linton, ‘The Funding of Political Parties’, in R
Blackburn(ed), The Electoral System in Britain (London, Longmans, 1999) at 55–6. Further, in the 1997
general election, 90% of the £60 million spent by the Conservative and Labour Parties collectively was
expended at the national level, see D Butler and D Kavanagh, The Election of 1997 (Basingstoke,
Macmillan, 1997) at 205, 223. This is not to deny however the high levels of political energy (and cash)
directed at a small number of marginal seats at all general elections.
18
[1951] 1 All ER 697.
38 Navraj Singh Ghaleigh

expenditures of parties and interest groups at the national level were constrained
by the limits discussed above. The court held that the Representation of the People
Act 1918 simply did not extend to the prohibition of expenditure for ‘general
propaganda, even though the general political propaganda does incidentally assist
a particular candidate amongst others.’19 Accordingly, expenditure incurred on
advertisements designed to support one party generally in all constituencies but
not specifically supporting any particular candidate in any particular constituen-
cy was not contrary to limits on constituency spending, thereby allowing for
expenditure at the national level without legal constraint and opening the way for
national election campaigns.20
If the controls on what political parties could expend were partial, in the sense
of incompleteness, those concerning the sources of their income were transpar-
ently so in the sense of bias. Both major British political parties have traditional-
ly been overwhelmingly dependent on institutional donations—corporations and
affiliated trade unions bankrolling the Conservative Party and Labour Party
respectively21—but the regulatory impositions upon those donors have differed
greatly in their degree of burdensomeness.
The financial relationship between trade unions and the Labour Party has long
been the subject of interest for judicial and parliamentary legislators and indeed
one of the seminal cases in the early history of the British labour movement—
Amalgamated Society of Railway Servants v Osborne22—was intimately bound up
with the concerns of party funding. In that case, the House of Lords enjoined
trade unions from engaging in political activities by invalidating their political
funds, on the basis that it was,

unjust and oppressive [and] illegal to compel . . . a member of a trade union . . .

either to contribute to the promotion of a political policy of which he might possi-
bly disapprove, or be expelled from the union to which he belonged for so many
years and forfeit all benefits from the money he had subscribed.23

The Trade Union Act 1913 substantially reversed the effect of Osborne, establishing
a framework that has been the basis for successive regimes of trade union gover-
nance. Unions have since been required to ballot their members on a resolution
for the adoption of political objects, which if successful allows the establishment
of separate political funds from which donations to parties could be made.24

19
Ibid, at 700, per McNair J.
20
See DE Butler, ‘Elections: Legislation and Litigation’, in DE Butler (ed), The Law, Politics and the
Constitution (Oxford, Oxford University Press, 1999) 175–7, and also CR Munro, ‘Elections and
Expenditure’ [1976] Public Law 300, commenting on DPP v Luft [1976] 2 All ER 569.
21
It is however noteworthy that in the course of the 1990s both major parties succeeded in weaning
themselves off their reliance on institutional benefactors. See P Webb, The Modern British Party System
(Thousand Oaks, Sage, 2000) 236–7.
22
[1910] AC 87.
23
Ibid, at 105, per Lord Atkinson.
24
Trade Union Act 1913, s 3.
 The UK’s Political Parties, Elections and Referendums Act 2000 39

Individual members must be entitled to seek exemption from paying into the
fund without prejudice (denial of benefits etc).25 The Trade Union Act 1984 further
required that ballots be undertaken every 10 years for the continuance of the
political fund.26
There is no suggestion that this is anything other than appropriate—on the
contrary, the requirements of consulting members, obtaining their (majority)
support and allowing exemptions seems to be a fine model for donor accounta-
bility and transparency. But what was objectionable was the absence of compara-
ble burdens regarding donations by companies which were in fact free to donate
as much as they wished, subject only to the de minimis requirement of having to
declare the fact of a contribution in their director’s annual report and the identi-
ty of the recipient, where that largess exceeded £200.27 In addition to the princi-
pled objection to such an absence of accountability and transparency, the risk of
conflicts of interest on the part of directors also arises, as does that of sharehold-
er opposition. The murky link between corporate donations and political parties
was described as ‘unsatisfactory’ by the important report of the Committee on
Standards in Public Life in 1998.28 Likewise unsatisfactory was the absence of any
prohibition on donations from foreign individuals or corporations—a matter
which arose in various party funding scandals in the 1990s.29
Turning to the question of public or state funding for political parties, the
approach taken in the UK has very much been of the ‘lonely furrow’ variety.
Granting state aid to parties based on electoral success, whether based on votes or
seats gained, has never in the UK garnered the support it has in France, Sweden
and Norway (and elsewhere), despite advocacy by the Houghton Committee.30 A
second approach, operating through the fiscal system and giving tax relief or tax
credits to donors (subject to limits), with the goal encouraging donations to

25
Ibid, s 5. The question of members’ participation in the ‘political levy’ subsequently became a
favourite political football, revolving around the question of whether members should be required to
‘contract in’ or ‘contract out’.
26
Trade Union Act 1984, s 12.
27
Introduced by Companies Act 1967, updated by Companies Act 1985, sch 7, paras 3–5. The figure
of £200 was last updated in 1980. Searches at Companies House only revealed a list of donating com-
panies, not how much they gave for which details, laborious cross-referencing to companies’ annual
reports was required. Finally, the declaration requirement extended only to monetary gifts, not to ‘in
kind’ donations (such as staffing or know-how) or soft loans.
28
Committee on Standards in Public Life, The Funding of Political Parties in the United Kingdom
(Cm 4057-I, 1998), paras 6.24–6.37, recommending prior authorisation by shareholders.
29
See Ewing at ch 4 in this volume.
30
Houghton Committee on Financial Aid to Political Parties (Cmhd 6601, 1976), recommended
state subventions to political parties on the basis of specified sums per vote gained at the previous elec-
tion, in three forms: (1) annual grants to political parties nationally which passed a low threshold of
electoral support; (2) support to candidates at the constituency level (so as to counterbalance the extra
power that (1) may give to the national party through reimbursement of election expenses and; (3) a
scheme similar to (2) but to candidates for local government elections.
40 Navraj Singh Ghaleigh

political parties has remained similarly unpopular, despite its widespread usage in
the USA (at Federal31 and State32 level) and Canada.33 Nor has a system combining
both of those methods ever caught on, as it has in Germany. Rather, the provision
of public funding in Britain has been patchy but wide reaching, ranging from the
humdrum—granting free access to public building for meetings during cam-
paigning periods34 and providing one free postal election address to candidates in
general election campaigns35—to the highly strategic—the Short/Cranborne
schemes36 which fund the parliamentary work of the opposition parties37 and the
provision of free broadcasting time.38
From the perspective of transparency however, the pre-PPERA system was not
so much curious as straightforwardly neglectful in its complete absence of any
legal requirements for parties to disclose publicly their finances, whether expen-
ditures or receipts. Although since its formation in 1906, the Labour Party has
always voluntarily published its accounts annually, such records have been short
on detail. For instance, it was not until 1983 that breakdowns of the donations
from each affiliated trade union to the party’s general election fund were given.
Having said that, this position was significantly more defensible than that of the
Conservative Party which remained hostile to transparency until as recently as
1998 when its Treasurer, Cecil Parkinson, giving evidence to the Committee on

31
Presidential Campaign Election Fund.
32
See generally, MJ Malbin and TL Gais, The Day After Reform:Sobering Campaign Finance Lessons
From the American States (Albany, NY; Rockefeller Institute Press, 1998).
33
A scheme of tax relief on donations was favoured by the Neill Committee’s report, The Funding of
Political Parties in Britain (Cm 4057, 1998) recommendations 38 and 39.
34
Representation of the People Act 1983, s 95.
35
Ibid, s 91. Not to be underestimated, 134 million such mailings were delivered during the 2001
general election—amounting in global terms to a significant free facility. See Report of the Electoral
Commission, Election 2001:Official Results, (2002), ((http://www.electoralcommission.gov.uk/about-
us/election01results.cfm (last accessed 23 April 2005) at 44.
36
The former scheme, pertaining to the funding of opposition work in the House of Commons was
introduced in 1975, see HC Deb col 1869, 20 March 1975. The extension to like work in the House of
Lords came about by Resolution on 27 November 1996.
37
Including research assistance to front bench spokespersons and the leaders’ offices. The quantum
of ‘Short money’ was nearly tripled by government with effect from 1 April 1999—see Secretary of
State for the Home Department, ‘The Funding of Political Parties in the UK: the Goverment’s Proposals
for Legislation in Response to the Fifth Report of the Committee on Standards in Public Life’, July 1999.
Cm 4413, para 6.8.—and has almost certainly been misused by the Conservative Party, see Fourth
Report of the Public Administration Select Committee (HC (2000–1) No 264) para 40ff, esp para 50.
38
The purchase of broadcast political advertising has traditionally been prohibited by the
Broadcasting Act 1981, sch 2 (‘Rules as to Advertisements’). From 1947 until 1997 (when it was dis-
banded), the allocation of free party political broadcasts (‘PPB’) and party election broadcasts (‘PEB’)
was determined by the Committee on Political Party Broadcasting which consisted of representatives
from the political parties and broadcasters. Although an efficient procedure from the perspective of
major parties, the potential unfairness to minor or new parties has caused concern—see R v BBC
[1997] EMLR 605. See also J Rowbottom in chp 5 this volume.
 The UK’s Political Parties, Elections and Referendums Act 2000 41

Standards in Public Life, manfully argued the case for de facto anonymity in
donations.39
Given this ragbag of rules, of disparate provenance and varying degrees of utility
and partiality, it is unsurprising that enforcement was not the responsibility of a
single, dedicated body but left to the collective alertness of returning officers, the
police and the ordinary courts. It has been suggested that together they proved to
be a less than effective monitor.40 But it is nonetheless striking that the ‘tradition-
al’ approach to party funding in UK had been strangely effective for a very long
time, at least in the sense of there being an absence of large scale corruption41 and
public disgruntlement with political process.42 A particular political culture, a cer-
tain ‘way of doing things’ is clearly at play. But whilst this long immunised the
United Kingdom from the major party funding scandals that dogged comparable
democracies, towards the end of the Major era (1992–97) a telling series of appar-
ent quid pro quos revealed the fragility of the system and its reliance on social
norms. And once those previously solid social norms had melted into air, there
was precious little law to take their place. An ‘arms race’ had emerged between the
major parties involving an unseemly dash for cash followed by the regular cam-
paigning binges which not only disproportionately disadvantaged the less well
financed parties, but also created the impression (however inaccurate) of parties
and governments being in hock to their wealthy benefactors (whether trade
unions or off-shore potentates). As it stood, legal regulation could supply scant
remedy. The need for reform was well appreciated by the Labour Party in opposi-
tion43 and upon taking office it referred the matter of party funding to the inde-
pendent investigatory Committee on Standards in Public Life, which delivered
a series of comprehensive recommendations in November 1998.44 Preceded

39
Committee on Standards in Public Life, The Funding of Political Parties in the United Kingdom
(Cm 4057, 1998) para 1375. For an (in)famous variant of this argument from Alastair McAlpine, see
Ewing at ch 4 in this volume. It should be noted that there are sophisticated and democracy promo-
tive arguments in favour of secrecy in political donations—see I Ayres and J Bulow, ‘The Donation
Booth: Mandating Donor Anonymity to Disrupt the Market for Political Influence’ (1998) 50 Stanford
Law Review, 837–891—but they remain nonetheless perfectly politically unacceptable.
40
Committee on Standards in Public Life, The Funding of Political Parties in the United Kingdom
(Cm 4057, 1998) para 1908–85 (oral evidence); 184–5 (written evidence). See also KD Ewing, The
Funding of Political Parties in Britain (Cambridge, Cambridge University Press, 1987) 77–80.
41
Compare the scale and impact of party funding/campaign finance scandals in the USA
(‘Watergate’), Germany (‘Kohlgate’), Italy (‘Tangentopoli’), Japan (‘Recruit’) or France (the ‘Dumas
affair’).
42
As disappointing as the turnout at the 2001 general election was, it is unlikely that a turnout of
only 60.7% will ever be hailed as a triumphant result, as in the recent US election.
43
See the Labour Party’s evidence to the Home Affairs Committee of 1993, Report on Funding of
Political Parties, (HC (1993–94) 301) and the Election Manifesto of 1997, Labour Party, Because Britain
Deserves Better (London, Labour Party, 1997) which promised to ban ‘foreign funding’, oblige parties
‘to declare the source of all donations above a minimum figure’ and ‘ask the Nolan Committee
[Committee on Standards in Public Life] to consider how the funding of political parties should be
regulated and reformed’. See also Ewing in chp 4 this volume.
44
The Funding of Political Parties in the United Kingdom (Cm 4057, 1998); for my comments, see
NS Ghaleigh, ‘The Funding of Political Parties in the United Kingdom: the Case for Cherry Picking’
(1999) Public Law 43–50. Lord Neill’s own account of the Committee’s work was given during the
Lords debates on PPERA, at HL Deb, vol 403, col 1124 (3 April 2000).
42 Navraj Singh Ghaleigh

by a White Paper which closely tracked the Committee’s recommendations,45 the

government’s Bill was introduced to the House of Commons on 10 January 2000.

Pressure Points and PPERA

‘The conduct of elections will never be quite the same again’46

This claim from the (then) Home Secretary’s introduction of the Political Parties,
Elections and Referendums Bill to Parliament was likely as aspirational as predictive.
And given the Act’s engagement with almost all the pressure points discussed
above, it is unlikely to be a mere boast. That being said, it is inevitably the case that
given the charged and critical arena that it seeks to regulate, the successes of PPERA
have not been regarded as complete and there remain numerous questions regard-
ing the architecture of the regime. This may be merely an inevitable consequence of
attempting a novel and ambitious structure. Alternatively, the flaws may be such
that mere ‘snagging’ will not suffice. A new round of construction may be necessary.

The Electoral Commission

It will be clear from the discussion below that the Electoral Commission is the
keystone in the new Act’s architecture.47 From the distribution of state aid,48 to
maintaining that political parties are financially accountable,49 the Commission’s
tasks are diverse. And, the responsibilities conferred by the Act go even further to
include reporting on elections and referendums,50 keeping electoral matters under
review51 and even limited legislative powers.52
Nonetheless, enforcement is the Electoral Commission’s primary task—
according to section 145, the Commission will have the ‘general function of moni-
toring compliance’ with the provisions pertaining to accounting requirements,
contributions, expenditure (of political parties and third parties), disclosure and
45
CSPL The Funding of Political Parties in the United Kingdom (Cm 4413, 1999).
46
‘The conduct of elections will never be quite the same again … The time has come to get down
to the business of restoring public confidence in our political institutions.’ HC Deb vol 343, col 45
(10 Jan 2000) (Straw).
47
Calls for such a body are not especially new and were frequent in 1990s—C Chataway, Agenda for
Change: Report of the Hansard Society Commission on Electoral Campaigns (London, Hansard Society,
1991); P Nairn, Report of the Commission on the Conduct of Referendums (London, Constitution Unit,
1996); Constitutional Commission, Establishing an Electoral Commission (London, Constitution Unit,
1997); DE Butler, Keeping Election Law Up-to-Date: The Case for an Electoral Commission (London,
Hansard Society, 1998).
48
Political Parties, Elections and Referendums Act (PPERA), s 12—policy development grants; Ibid
s 11—broadcasting allocation.
49
Through the disclosure/reporting processes—see generally parts III and IV of the Act.
50
PPERA, s 5. For the Electoral Commission’s first report on the general election 2001, see
http://www.electoralcommission.gov.uk/ last accessed 23 April 2005.
51
PPERA, s 6.
52
PPERA, sch 8(3).
 The UK’s Political Parties, Elections and Referendums Act 2000 43

reporting and the conduct of referendums. The broad range of duties can only be
meaningfully undertaken if the Commission is provided with a similarly full
range of supervisory powers, which are duly conferred.53 Given this range of
responsibilities, it would not be unreasonable to fear the risk of overburdening—
not least because any future problem in the field will elicit demands for the
Electoral Commission to ‘look at it’.54 Indeed, a key aspect of the ‘revision process’
referred to above is the Commission’s review of 2003/4, ‘The Funding of Political
Parties’,55 which revisited many of the issues that so concerned the Neill
Committee’s 1998 report, including expenditure and donation limits, and the
question of public funding.
What is perhaps most notable about the Electoral Commission is its composi-
tion. Modelled on the National Audit Office, the Act seeks not to regulate the polit-
ical valency of the Commission, but rather to ensure that it has none whatsoever.
Unlike the bipartisan Federal Election Commission (USA) or the ‘neutral’
Bundestag President (Germany), the members of the Commission are selected on
the basis of their near total absence of political experience. In order to be seen to be
above the party political fray, appointees to the Commission should be non-politi-
cal figures who have not previously been involved in a substantial way in the party
political process. Individuals who have within the past 10 years held senior office in
a party, been elected or been a major donor to a political party are viewed as par-
tial. Naturally therefore, once appointed, electoral commissioners are excluded
from such activity.56 Thus, the current Chair of the Electoral Commission was pre-
viously the Chief Executive of British Red Cross, and other current commissioners
include senior figures in local and city administration and a former BBC journalist
and executive. This absence of direct political know-how potentially raises the
problem of appointees having insufficient experience of and insight into their reg-
ulated community to undertake their responsibilities successfully—although one
may perhaps overestimate the sophistication of contemporary party politics.

Disclosure
The shortcomings of the pre-PPERA regime as regards the disclosure of donations
and expenditure is alluded to above.56a For present purposes, suffice it to say that
53
These powers—including that to compel production of records, demand explanations of the
same and even the power to authorise the entering of the premises of a ‘supervised organisation or
individual’, PPERA, s 146(3)—are arguably over-full from the perspectives of Arts 6 and 8 ECHR.
54
An early occurrence of this was with regard to ‘e-campaigning’—see ‘2001: Cyber Space Odyssey.
The internet in the UK election’, edited by S Coleman at http://www.hansard–society.org.uk/
cyberodyssey.pdf, last accessed 23 April 2005. For a treatment of the demands created by the internet
on (US) campaign finance law, see T Potter, The Internet and Federal Election Law, http://www.
brook.edu/gs/cf/headlines/internet.htm last accessed 23 April 2005.
55
Available at: http://www.electoralcommission.gov.uk/templates/search/document.cfm/11394 last
accessed 23 April 2005.
56
PPERA, s 3. For extended discussion of the merits of absolute impartiality, see Lord Goodhart, HL
Deb, vol 511, col 1760–1 (11 May 2000).
56a
For a full account of these insufficiencies and of the solutions offered by PPERA, see Ewing, chap-
ter four in this collection.
44 Navraj Singh Ghaleigh

the measures adopted in the Act are certainly comprehensive in their response
to the questions of principle raised, and pay no shortage of attention to prac-
tical problems of loopholing and circumvention. To the extent that inade-
quacies are nonetheless perceived, it may not be unreasonable to await the
conclusion of a full electoral cycle, at the very least, before drawing strongly crit-
ical conclusions.

Expenditure Limits
Although expenditure limits have long been a feature of British party political
funding, their stunted scope—that is, their restriction to constituency level expen-
diture only—has been problematic. The absence of national expenditure limits
has contributed to the oft-remarked upon ‘arms race’ between the major parties
in which each seeks to trump the electoral expenditure of the other, inexorably
driving up the cost of campaigns. Quite apart from the opportunity costs incurred
by accumulating such war chests,57 and the certainty that parties less attractive to
moneyed interests will be left at the starting gates in this contest, the chase for
unlimited funds leaves open the very real possibility of parties gravitating not to
their broader membership or support base for funding, but towards a small num-
ber of large donors. If our model of democracy includes a notion of participato-
ry, inclusive politics in which the grassroots has a meaningful input, this is an
unsavoury outcome. Moreover, not unreasonably, reliance on substantial donors
raises questions of parties’ independence from their paymasters—the Labour
Party’s former reliance on trade union funding, and the Tories’ on corporate
donations being only the best known examples. After all, what is the purpose of
the democratic process if expressed electoral preferences are to be trumped by the
debts accumulated by political parties to discrete, insular and wealthy minorities?
Responding to these concerns,58 PPERA has squarely addressed these issues by
introducing two key innovations—national expenditure limits for direct partici-
pants and third parties—and retaining two key features of the previous regime—
local expenditure limits, for both candidates and third parties.
National expenditure limits were perhaps the single most necessary reform
identified by the Neill Committee,59 and PPERA responds straightforwardly.
Schedule 9 of the Act establishes a cap of roughly £20m on the ‘campaign expendi-
ture’ of political parties, based on the number of candidates they field in a general

57
For an American perspective, see D Morris, Behind the Oval Office: Winning the Presidency in the
Nineties (New York, Random House, 1997), who reports Clinton to have anguished, ‘I can’t think. I
can’t act. I can’t do anything but go to fund-raisers and shake hands. You want me to issue executive
orders; I can’t focus on a thing but the next fund-raiser. Hilary can’t, Al can’t, we’re all getting sick and
crazy because of it.’ At 100–1.
58
Many of which found articulation in the Labour Party’s submission to Home Affairs Committee
of 1993, Report on Funding of Political Parties, (HC (1993–94) 301), and the CSPL.
59
Committee on Standards in Public Life, The Funding of Political Parties in the United Kingdom
(Cm 4057-I, 1998) ch 10.
 The UK’s Political Parties, Elections and Referendums Act 2000 45

election.60 ‘Campaign expenditure’ is defined to mean those items which are (a)
included in schedule 8 of the Act61 and, (b) are incurred ‘with a view to promot-
ing or procuring the electoral success’ of the party.62 Indicative of the scrupulous-
ness which characterises much of the Act, a series of potential loopholes in relation
to these limits have been foreclosed. Soft loans, the free or discounted use of pro-
perty, services or facilities are to count as campaign expenditures at their market, not
given, rate.63 And this applies equally to local as to national party expenditure
(where it is directed towards promoting the success of the party, not a candi-
date)64—so long as it is incurred with the authorisation of the treasurer of the rel-
evant accounting unit.65 Finally, the failure to comply with these limits attracts a
criminal sanction.66 As noted above, local expenditure limits are futile without like
support at the national level, and vice versa. Accordingly, the traditional tight con-
straints on constituency spending have been retained by PPERA and updated
somewhat—encompassing ‘in kind’ support for candidates within the definition
of election expenses67 and taking a realistic approach to the limits on by-election
expenditure and increasing them.68
The second innovation of the Act in respect of expenditure limits also relates
to spending at the national level, but not by parties or candidates, but rather by
non-participants, or third parties. The importance of the need to regulate their
activity was pointedly noted in the important Canadian case, Libman v Quebec
(AG),69 in which the Supreme Court stated that ‘the spending limit system would
lose all its effectiveness if independent spending were not also limited.’70
Similarly challenging issues of third party spending were posed in the case of
Bowman v UK 71 in which the severe constraint on third parties’ spending imposed
by section 75 of Representation of the People Act 1983 was successfully challenged
in Strasbourg. PPERA’s response to this challenge is an interesting microcosm of
many of the battles in constitutional law that lie ahead, in its attempt to render
compatible a traditionally British approach to the substance of constitutional
regulation and the exogenous demands of the ECHR system.

60
The number of seats contested by a party is multiplied by £30,000. There are 641 contestable con-
stituencies at a general election, assuming that the British parties do not contest the Northern Irish
seats.
61
Such as advertising, market research, the costs of rallies and meetings etc. The schedule also notes
items which are not to be counted for these purposes, such as staff salaries and certain overhead costs.
62
PPERA, s 72.
63
PPERA, s 73. The section does apply to seconded staff, but not to volunteers.
64
PPERA, s 72(8).
65
PPERA, s 75. The act of incurring expenditure on behalf of a political parties without the author-
ity of its treasurer is an offence pursuant to s 75(2).
66
PPERA, s 79(2).
67
PPERA, s 134.
68
PPERA, s 132.
69
(1997) 151 DLR (4th) 385.
70
Ibid, 413. Although this case dealt with referendum, not ordinary electoral, expenditure limits, it
was accepted that for present purposes, identical issues arise, Ibid, 409.
71
26 EHRR 1 (1998).
46 Navraj Singh Ghaleigh

The Court’s primary concern in Bowman was that the £5 restriction on third
parties expenditure imposed by the Representation of the People Act 1983 amount-
ed to a complete barrier to such parties publishing information with a view to
influencing the electorate in favour of a particular view. This was adjudged con-
trary to Article 10 ECHR, which when read together with Article 3 of the First
Protocol to the Convention, amounts to an understanding that ‘free elections and
freedom of expression, particularly freedom of political debate, together form the
bedrock of any democratic system.’ And this was notwithstanding the permissible
state interest of legislating for the promotion of candidate equality.
PPERA’s introduction of third parties expenditure limits will work in harness
with those already in existence at the local level. In respect of the latter, the Act has
closely followed the recommendations of the Neill Committee and extended the
old limit imposed by section 75 of £5 to £500.72 Given the Court’s sympathy with
the old provision’s purpose, but objecting to its stifling of practically all speech,
this threshold (which would facilitate, say, a full page advertisement in a local
newspaper) would appear to satisfy the Bowman judgment’s strictures. But it is at
the national level that the innovation has occurred, with the Act creating a new
category of political participants—’recognised third parties’73—which must noti-
fy the Electoral Commission of their intention to spend substantial sums in a gen-
eral election.74 These actors are restricted (‘controlled’, in the language of the Act)75
in their expenditures which are ‘incurred by or on behalf of the third party in con-
nection with the production or publication of election material ¼ which can rea-
sonably be regarded as intended to (a) promote or procure electoral success’ for a
candidate or party, or ‘otherwise enhance the standing’ of such a party or candi-
date.76 Third parties’ ‘controlled expenditure’ is limited to £793,500 for those
expenses incurred in relation to England, £108,000, £60,000 and £27,000 for
Scotland, Wales and N Ireland respectively.77
The Bowman judgment required that third parties have a greater freedom to
disseminate materials during an election. An initial reluctance to permit such an
extension of authority issues perhaps from the American experience which
demonstrates that unless these activities are carefully and effectively regulated,
electoral campaigns will be hijacked by formally non-contesting organisations,
either on behalf of political parties or single interest groups. The impact of such
an experience is negative in that the electorate’s attention is diverted from common

72
PPERA, s 131. See Lord Bassam, HL Deb, vol 403, col 1124 (3 April 2000) and Lord Bach, HL Deb,
vol 1024, col 220 (24 October 2000).
73
PPERA, s 88.
74
It is an offence for third parties not to notify the Electoral Commission if they knew, or ought to
know, that they would spend £10,000 at a general election in England, or £5,000 each for Scotland,
Wales or N Ireland—PPERA, s 94(4), (5).
75
PPERA, s 85(2).
76
PPERA, ss 85(2), (3).
77
PPERA, sch 10(3)(2).
 The UK’s Political Parties, Elections and Referendums Act 2000 47

issues to those of sectarian, monied interests.78 Given the Strasbourg Court’s

judgment, a balance will have to be struck between the candidates to an election
whilst allowing for a wider debate on issues considered important by the public,
or sections thereof. The legislative judgment evidenced by PPERA is of a clear
hierarchy of participatory rights, with third parties assuming a lowly position.
A feature of the expenditure limit scheme unmentioned so far, is that notion
of the ‘regulated period’—the 12 months prior to the calling to the general elec-
tion within which all expenses must be incurred.79 The curiousness of this provi-
sion is immediately apparent in a regime where elections occur not on fixed dates
but are announced a mere four to six weeks prior to polling day.80 It is impossible
for those intending to incur expenditure to accurately ‘time their run’. A possible
exception to that dilemma is of course, the party in government. Since it effective-
ly determines that date of polling day, it alone will be able to manage its electoral
expenditure in the knowledge of the quantative and temporal constraints
imposed by the Act and although it may be the case that expenditure by parties is
invariably end-loaded, that justification is premised upon a particular strategy of
electoral campaigning and militates against parties adopting other approaches. An
alternative technique—equally unappealing—is for participants to accept the for-
mula for what they can spend in the year before the election campaign and spend
it every year. Alternatively they may take a risk in the hope that the courts will find
in their favour when they plead that they acted in good faith and spent in the nor-
mal way, not knowing when the election would be.
Ultimately, the question is, given the retrospective character of the provision,
whether it is appropriate to put people who may incur substantial liabilities in the
position of not knowing when they embark on a particular course of action
whether it will be within the framework of the law. Political parties and also third
party campaigners cannot know when elections will occur. That is scarcely a fair
footing on which to set up a system given that the last two years of a Parliament
can often be regarded as an election period. At such times, there is a constant
awareness that there might be an election and it would be difficult for an organi-
sation to plan its expenditure when it is so uncertain as to what period the 365-
day-rule refers. Thus the rule gives the incumbent party singular tactical advantage
because it does at least have an idea of when the election campaign will start. It
can time its spending to maximum effect in advance of announcement of general
election, whereas all others must wait until announcement. Given such hesitations,
criticisms are not best directed at the notion of expenditure limits themselves, or
of the ‘regulated period’, but rather the absence of fixed parliamentary terms. A
better embedded constitutional arrangement one could scarcely imagine, but its

78
For one such critique, see R Dworkin, The Curse of American Politics, The New York Review of
Books, 17 October 1996.
79
The regulated period for ‘registered parties’ is at PPERA, sch 9(3)(7); Ibid, at sch 10(3)(3)(b) for
third parties. Essentially, the clock runs retrospectively from the date of the general election.
80
Representation of the People Act 1983 sets a minimum period of 17 working days between the calling
of a general election and the poll taking place.
48 Navraj Singh Ghaleigh

principled defences are limited, and the manifest unfairness that it introduces
when combined with the eminently sensible provisions of PPERA ought to put
pressure on an antiquated and largely purposeless constitutional anomaly.
In its inquiry into the Funding of Political Parties of 2003/4, and subsequent
Report,81 the Electoral Commission has recently revisited the question of expen-
diture caps. Like the CSPL in 1998, the Electoral Commission has moved off from
the recognition that political parties perform a vital role in democratic life and
require adequate funding in order to undertake that task. Adequacy in this respect
refers not only to the proper funding of electoral campaigning, but also to the full
range of inter-election activities, such as party building and developing policy.
Notwithstanding these facts, and the newness of the PPERA structure, the EC has
recommended significant changes to the scheme of expenditure limits as they cur-
rently stand. In its evidence taking processes, the Commission was clearly much
impressed by claims that the electorate found local campaigning significantly
more informative and engaging than the centrally run campaigns of the national
parties—even to the extent of expressing outright hostility to the omnipresent
billboard campaigns which are run at such great cost by the parties. Accordingly,
their approach is to revisit the relationship between national and local expendi-
ture limits, recommending a doubling of candidate expenditure limits (to approx-
imately £16,000) and a simultaneous lowering of national expenditure limits to
around £15m. These findings are somewhat tentative, couched as they are in the
caveat that they ought to be subject to an analysis of the 2005 general election.
The question of national spending caps, and their level, was dealt with at length
by the Neill Commission. The levels of expenditure therein recommended were
subsequently adopted in PPERA. The current figure of national expenditure of
£20m for a party contesting all UK seats balances out to about 50p spent per party
per elector in the 12 months prior to a general election. And that 50p is to cover
all communications (whether electronic, paper or personal), all administration
and other costs. It scarcely seems extravagant and might be argued that that the
real distaste from the public comes from the irregular announcements that this or
that potentate has donated £Xm to such and such party. It is that the engenders
disquiet and attempts to constrain what are, by international standards, relatively
modest levels of expenditure may be misplaced. Attempts to lower spending caps
will severely constrain the capacity of parties to effectively campaign. Given that
the UK’s is not a regime of paid broadcasting which swallows vast sums from
party coffers, it will not be that aspect of campaigning (possibly the least popular)
that will be cut, but the meet-and-greets, and other costly activities.82 In such cir-
cumstances it is likely not only that such spending limits will severely impinge
upon the quality of political communication between parties and the electorate,
but that it will generate challenges to the slashed expenditure ceilings under the
free speech provision of the Human Rights Act.

81
Above n 55. See that Report at 1.8 ff for the Commission’s process and methods in this enquiry.
82
See M Pinto-Duschinsky, ‘Financing Politics: A Global View’ (2002)13:4 Journal of Democracy 69–86.
 The UK’s Political Parties, Elections and Referendums Act 2000 49

As regards the recommendation that constituency level expenditure limits be

doubled, this too is somewhat vulnerable to criticism. Whatever else the failings
of the pre-PPERA scheme, its jewel in the crown was the tight expenditure con-
straints under which local campaigns operated. Low limits ensured that no one
party could substantially out-gun its opponents, that most candidates could actu-
ally raise such an amount and above all that local candidates were able to adequate-
ly fund their campaigns without being beholden to either local grandees or the
national party. And these virtues have persisted through to the present day. A local
expenditure limit of circa £8,000 (which, like a speed limit, is best viewed as a max-
imum, not a target) is within the fundraising capacities of most major party can-
didates, without resort to mechanisms beyond raffles and dinners. The Electoral
Commission’s suggestion that such a limit should be doubled will place a degree
of stress on each of the desirable features. The elevated fund raising capacities of
major parties and incumbents will be significantly more telling when local
campaigns will actually be entitled to spend all (or at least, much more) that they
can raise. The threat is not so much of ‘arms races’ as of unipolar local campaigns.
Yet, even for those campaigns that are better able to exploit the new higher
limits, the risk is that a culture of dependence, hitherto absent at the local level, will
creep into existence. Being responsible for their own funding has given individual
candidates a considerable degree of freedom so far as the conduct of their cam-
paigning is concerned. Of course, central parties insist on a degree of ‘singing from
the same hymn sheet’, but this is substantially of mutual benefit in that local cam-
paigns are able to purchase and utilise centrally produced campaigning materials,
the themes of which are reinforced by the national campaigns. But once candidates
are required to seek funds from wealthy individuals in the area or redistributed
funds via the central party, that degree of autonomy would be rapidly eroded. The
marginal cost of raising an additional £8,000 or so should not be underestimated
in the context of most British constituencies and candidates will have only limited
options when seeking to fill their coffers. Optimistic forecasting may take the view
that central parties would benevolently fund local campaigns on a no-strings-
attached basis, especially if lowered national expenditure limits were to leave them
with an additional £5m swilling about. It is doubtful whether a similar approach
could be applied to local benefactors. The idea that donors within constituencies
would be willing to part with thousands of pounds and seek no assurances is
fanciful. This is not so much a criticism of such persons, but of a (proposed) sys-
tem that would give them undue leverage over the campaigning process.

Donation Limits
Regulating the supply side of party funding has two main aspects: controlling how
much comes into a party’s coffers and where those funds originate from. The lat-
ter issue exercised particular controversy prior to PPERA, especially with respect
to the permissibility of foreign donations and the laissez faire regime governing
corporate donations. The phenomenon of donations from abroad was a contentious
50 Navraj Singh Ghaleigh

matter in the 1990s as a string of foreign businessmen of sometimes dubious

propriety made significant contributions to Conservative Party funds.83 The prin-
cipled objection is however to those who have no vote in the UK having an influ-
ence on its politics, albeit through the indirect means of contributing to a
political party. A formal residency requirement would obviously be unsatisfacto-
ry as it would exclude all those citizens who happen to reside abroad, even if only
temporarily. A more functional approach was taken by PPERA, focussing on the
legitimate interests of potential contributors, as measured by their electoral con-
nection with the UK. Accordingly, section 54 of the Act creates the notion of a
‘permissible donor’ which for individuals means anyone on the electoral roll
whilst section 141 shortens the period that the right to vote may be retained by a
non-resident from 20 to 15 years. Although this provision is ostensibly desirable,
it has the potential effect of depriving relatively poor national groups of campaign
resources from abroad, in particular those groups representing racial and/or
ethnic minorities who may rely on foreign resourcing.84
For institutional donors, the test of permissibility is not ownership (in the case
of businesses) but the place of registration. Thus only companies registered to
conduct business in the UK under the Companies Act 1985 may make political
donations and trade unions must be on the list kept under the Trade Union and
Labour Relations (Consolidation) Act 1992.85 For institutional donors however, the
story does not end there. We have already noted that trade unions have long been
subjected to fairly onerous conditions in order to make valid political donations
whilst private corporations have been relatively unencumbered. This asymmetry
was attacked by the Neill Committee which recommended that corporate dona-
tions be subjected to a regime similar to that imposed upon unions.86 Section 139
of PPERA has enacted that recommendation by introducing to the Companies Act
1985 a new Part XA, as set out in schedule 19 of PPERA, which incorporates the
principle of shareholder consent, in the form of prohibiting corporate donations
or expenditures unless authorised by an approval resolution passed at the com-
pany’s AGM. These resolutions are valid for four years (unlike those for trade
unions which are valid for ten years).87
None of this however addresses one of the main concerns of reformers of party
funding regulation—the fear that contributions can engender a reliance of polit-
ical parties on large donors, leading to the preferences of the ordinary electorate

83
Most famously in relation to the Cypriot fugitive Asil Nadir, the Greek shipper John Latsis and the
Hong Kong-Chinese businessman CK Ma. Controversy has also attached to largess of the Belize’s
Ambassador to the United Nations, Michael (now Lord) Ashcroft.
84
Although not presently a live issue in the UK, it has been elsewhere, see BE Cain, ‘Moralism and
Realism in Campaign Finance Reform’ (1995) University of Chicago Legal Forum, 111 and BD Brown,
‘Alien Donors: The Participation of Non-Citizens in the US Campaign Finance System’ (1997) 15 Yale
Law and Policy Review 530.
85
PPERA, s 54(2).
86
Committee on Standards in Public Life, The Funding of Political Parties in the United Kingdom
(Cm 4057-I, 1998) paras 6.24–6.37.
87
See J Gray, Politics and Companies (1999) 20 The Company Lawyer 275–6.
 The UK’s Political Parties, Elections and Referendums Act 2000 51

and grassroots members being ignored in favour of quid pro quos. The solution
to this problem of corruption, or its appearance, has been dealt with in the USA
by the imposition of limits on contributions as low as $1,000 which have been
upheld by the Supreme Court on the basis that the limits protected a ‘sufficiently
important interest [anti-corruption] and employ[ed] means closely drawn to
avoid unnecessary abridgment’ of associational rights.88 By contrast, PPERA has
imposed no limits at all on the quantum of contributions, instead relying on
transparency to purge quid pro quos from the system. This reliance is premised
on the notion that the public will question what ‘millionaire donors’ are getting in
return for their generosity—that the suspicion will always remain that such large
sums are not given out of the goodness of their hearts but in expectation of future
reward. However, the argument that transparency and its generation of public dis-
taste for large donations will create a disincentive for political parties to solicit and
accept such donations is simply not borne out by experience, viz the flurry of mil-
lionaires’ donations disclosed in the first few days of January 2001.89 If transparen-
cy continues to fail to limit contributions, and parties continue to rely on large
individual donations, it is not unlikely that they will feel beholden to these
donors, fearful of offending them, and anxious not to jeopardise repeat donations.
Even if not in the mind of party treasurers (unlikely), these considerations will
inevitably compromise the party’s integrity in the public’s perception. The reality
or appearance that parties’ freedom of action is restricted by large donations can
only be undercut by limits on what they can accept. In imposing any such limit,
care must be taken to ensure that the political parties are not starved such that
they cannot perform those duties we expect of them—will they allow parties and
candidates to raise sufficient money for effective advocacy? Even if the limits are
set at a relatively high level—say £100,000—that permits large donors to make
very substantial donations, these limits create a real problem that impacts dispro-
portionately on the Labour Party, namely, how can contributions from trade
unions be accommodated? Imposing a limitation on individual but not institu-
tional donations would be arbitrary from the perspective of corruption avoid-
ance, but we have already noted that PPERA purports to meet that challenge by
other means. Nonetheless, a principled defence of the continuation of unrestrict-
ed institutional donations can be fashioned from the notion that donations ought
to represent the desire of individuals to support a political actor of their choice.
Trade unions being representative, voluntary, members’ organisations, can readily
function as the vehicle for transferring the cumulative preferences of their mem-
berships. And under the new regime of shareholder consent, a similar argument
can be fashioned for public companies’ contributions. This being so, the limits

88
Buckley v Valeo 424 US 1 (1976) at 25. Although limits on contributions were supported by three
governmental interests—preventing corruption and its appearance; equalising the ability of citizens to
affect elections; and opening the electoral process to more candidates—the court did not need to dis-
cuss that latter two, having decided the matter on the basis of the first. More recent cases have been
less compliant on this issue, see Nixon v Shrink Missouri Government PAC 528 US 337, 926 (2000).
89
For a different analysis, see Ewing in chp 4 of this volume.
52 Navraj Singh Ghaleigh

which apply to the contributions of private individuals need not properly apply to
institutional donors.
Notwithstanding the anxious scrutiny to which the Neill Committee subjected
this issue, the recent Report of the Electoral Commission has looked at the pos-
sibility of a donation cap once again. Somewhat in line with the remarks above,
the Commission is of the view that transparency has not served to ameliorate all
public concerns regarding very large donations. In particular, the suspicion that
major donors are able to buy access has been particularly hard to shift. Given then
that we are dealing with the appearance of corruption, any donations to be intro-
duced would have to lie at a particularly low level. A public mind that is concerned
about a £1m donation from Mr Eccleston will not be set at ease by a cap of
£500,000, or even £50,000. To the ordinary voter, says the Electoral Commission,
that remains a suspicious sum. On that basis, the view taken in the report is
that if a cap is to be introduced, and if it is to be effective in assuaging the public’s
fears of elite quid pro quos, it would have to stand at a level of around £10,000.
Were such a measure to be enacted, a raft of new problems, possibly greater
problems than those currently faced, would have to be addressed. Firstly, there would
inevitably be constitutional rights challenges to such restrictions on an associational
basis. As in Buckley, a future court deciding this matter may draw the conclusion that
one can effectively exercise one’s right of association with a political party or candi-
date from the moment of contributing one’s first pound. In such an event, the limit
drawn at the £10,000 would not encounter any difficulties on this basis, but such an
outcome is far from certain and in any case not explored in any detail by the Report.
Secondly, as discussed above, and in chapter 4 of this volume, any such limit would
have a devastating effect on the constitutional structure of the Labour Party.
Founded as it is on an intimate relationship with organised labour, and the aggre-
gated subs of members, the Labour Party would be stripped of its most stable and
single largest source of income in the event of the imposition of any contribution
limit of such a level. Such an outcome would clearly sit ill with the Commission’s
opening gambit as to the vital role of political parties in our constitutional appara-
tus. Relatedly, a contribution cap of £10,000 would engender a dramatic shortfall in
party incomes. None of the major national parties would be able to withstand such
a crippling blow to their finances, and if the much vaunted centrality of the political
parties to our system of government is to be taken seriously, then the state would be
obliged to step into this financial breach and provide substantial state funding. And
here’s the rub. While the Commission’s research, both qualitative and quantative, has
indicated that there is much anxiety surrounding large donations, that same research
has revealed even greater hostility to extending public support for politics. Taken
together with the delicate situation as regards associational rights and the dispropor-
tionate impact a low donation cap would have on the Labour Party, the Commission
has found itself in a double bind. This is explored further below, as regards public
funding, but the upshot for the purposes of a £10,000 cap is that the Commission has
decided that in the absence of satisfactory resolution of the three issues raised, no
case can presently be made for recommending any such cap.
 The UK’s Political Parties, Elections and Referendums Act 2000 53

Public Funding
The degree of affirmative state action taken to facilitate electoral and party activity
in the UK is certainly on the low side when compared with most countries in
Europe and North America.90 Moreover, public funding is, as noted above, organ-
ised in a most disorganised fashion. Both of the most common devices of state
support—direct subventions to political parties and tax relief on donations—are
eschewed in favour of a disparate range of discrete mechanisms including fund-
ing the parliamentary work of opposition parties, the provision of free broadcast-
ing airtime, free (though limited) use of the postal system and access to public
meeting rooms. Ad hoccery in the finest British tradition is clearly at play here, but
the relevant issue is not so much the elegance of the architecture but whether it
can support the weight it carries. Public funding exists to ensure that parties have
the funds they need to operate—to recruit and support candidates; to develop and
advance policy; to mobilise voters; and to convey their message to the electorate
in a distinctive fashion. If parties are starved of funds and so constrained in their
operational capacities (because of restrictive regulations and/or the unwillingness
of private donors to finance politics), a presumptive basis for state intervention
arises.
The view that such a basis existed was taken by the CSPL, although only in a
limited sense. The CSPL rejected suggestions that a ‘new system should be intro-
duced whereby the state is obliged for the indefinite future to provide financial
support for the political parties’,91 in favour of more directed action against the
paucity of resources available to parties for long term policy development.
According to the Committee this afflicted both government and oppositional
parties, either through the day to day demands of the political melee, or a concen-
tration on campaigning and routine administration. Either way, ‘[T]he political
parties themselves should be one of the major sources of ideas in British politics.
They are not always so at present.’92
The government’s response was the innovation of the ‘Policy Development
Grant’, a global annual fund of £2m to be distributed by the Electoral Commission
to political parties for the sole purpose of policy development.93 Admittedly a
modest sum, this ring-fenced sum should provide a significant boost to parties’
ability to engage in long term research without fear of diverting scarce resources

90
Public funding, for example, plays a major role in elections in the USA. Four states—Arizona,
Maine, Massachusetts and Vermont—provide for full public financing for those candidates that accept
spending limits. Some 22 states (and many more localities) provide public financing for political cam-
paigns and organisations. See MJ Malbin and TL Gais, The Day After Reform:Sobering Campaign
Finance Lessons From the American States (Albany, NY; Rockefeller Institute Press, 1998). These
schemes are separate from the Presidential Election Campaign Fund which, set up in 1976, supports
candidates to the presidency who accept certain spending limits.
91
Committee on Standards of Public Life, the Funding of Political Parties in the United Kingdom
(Cm 4067, 1998) rec 36. Such a scheme was supported most strongly by the Liberal Democrats, see
Ibid at appendix V, p 247, para 23.
92
Ibid at para 7.25.
93
PPERA, s 12.
54 Navraj Singh Ghaleigh

away from quotidian demands.94 Given that the Electoral Commission has felt
unable to recommend donation caps and correlative public funding in its latest
report, it is perhaps no surprise that any increases in public funding that it has
endorsed are designed to act as incentives to parties to better engage with the elec-
torate. The view has been taken therefore that the Policy Development Grant
scheme has been of benefit to the parties and should be extended beyond its pres-
ent limits of operating only in Westminster to the Holyrood Parliament, the
Northern Irish Assembly, the Welsh Assembly and the European Parliament. This
seems perfectly sensible but the proposal to increase the current dispensation
from £2m per annum to only £3m seems remarkably frugal.
It should also be noted that the CSPL recommended the introduction of a
system of tax relief on donations as a means of boosting parties’ incomes and civic
participation. The government declined to include such a provision on a number
of bases, including that it was inappropriate to compel tax payers to contribute to
parties they potentially object to; that it would be costly to administer and that it
would effectively operate as a subsidy to the Conservative Party alone.95 Whilst the
former two arguments are not strong (tax payers are frequently asked to support
causes they disagree with and the administrative costs are surely worth paying if
the scheme were meritorious on its own terms),96 the latter one at least recognis-
es the reality that tax relief on donations will disproportionately benefit those par-
ties whose members are from higher income brackets. Accordingly, the objection
is not to public subventions as such but as to the mode of distribution. By com-
parison, linking state support to a form of electoral success (as recommended by
Houghton, see above) or the level of party membership might be seen as less
objectionable. The view of the Electoral Commission however has been similar to
that taken by the CSPL in 1998. The latter body argued that small donations
would be incentivised by granting tax relief on donations up to £500—a sum that
was criticised along the lines stated above, and ultimately rejected by the govern-
ment. The Commission’s latest Report is at one with the CSPL insofar as it seeks
to create incentives for small donors, but appreciates the class/party bias of a £500
upper limit and so has settled for one of £200.97 Whether this adequately meets the
objection is an open question, but what is certainly welcome is the extension of
any tax relief benefits to non-taxpayers—a previously well aired concern.98

Conclusion
In comparison with the old regime, PPERA’s greatest virtue is its comprehensive
scope. The Act has ensured that political actors are capable of fulfilling their
94
For argument that £2m is too small a sum, see HC Deb, col 82, 10 Jan 2000 (MacShane).
95
For opposition support of tax relief, see Lord Goodhart, HL Deb, vol 624, col 1136-8, 3 April 2000
and Lord Mackay, HL Deb, Vol 619, col 1143, 27 Nov 2000.
96
HC Deb, vol 342, col 53, 10 Jan 2000 (Young).
97
Above n 44 at 6.44ff.
98
See Ewing, ch 4 in this volume.
 The UK’s Political Parties, Elections and Referendums Act 2000 55

constitutional functions both within and outside of Parliament, whether in election

periods or not. They will continue to be supported almost entirely by private
means with only limited support from the state but where once that may have
been a cause for concern, with the new provisions regarding the disclosure and
reporting of income and expenditure, as well as new constraints on expenditure
itself, those fears ought to be assuaged.
It would be somewhat Panglossian to end there, however. As the Electoral
Commission’s Report has highlighted, there remain serious concerns, emanating
substantially from public anxiety, as regards the present expenditure limits and
the modes of campaigning that these engender and the absence of donation caps
and the occasionally unseemly contributions that are thus sometimes made. Now,
the second of these seems the more intractable of the problems since the very
same popular hostility to public vice that objects to millionaire donations is the
self same attitude that rejects the public purse making an ever greater contribu-
tion to the political process. Nor can this be dismissed as an irrational response.
Given that public esteem for politicians is not high at present, diverting money
away from other spending priorities so that politicians can spend it in contentious
ways is likely to be counterproductive—unless controversy is the purpose of the
exercise. Estimates indicate that the current system of public funding, in its myr-
iad operations, costs the taxpayer some £100 m in an election year, and £25 m in
other years.99 That is a major expenditure by popular reckoning and more exten-
sive provision would be tendentious in the extreme. The Electoral Commission’s
background paper (at 4.10) tentatively puts forward the figure of an extra £50m
in state funding per annum. Even without index linking, that would amount to
over £1/4 bn for the (five year) life of a Parliament. It is inconceivable that that will
be received as a ‘relatively small addition’. How many schools, hospitals, nurses,
teachers . . .
There is certainly virtue in such a parsimonious approach. The tried-and-test-
ed nature of the system—substantially in operation since the War; large parts of
it since the Represention of the People Act 1918—has its own attractions. British
elections have operated under that regime without either significant scandal or
public disaffection at electoral conduct in a manner that is unprecedented in com-
parable western democracies. More significantly, the current system is consistent
with maintaining and strengthening the link between voters and parties, is in
accordance with British population’s belief that further state funding of politics
is not a priority; and a counter to the oft repeated claim that public funding some-
how ‘cleanses’ the politic process. Indeed, the notion that public money somehow
cleanses the political processes is one of the great canards of party funding.
Empirical evidence is wanting. In fact, the evidence suggests that if anything,
regimes in which large public funding of the political process features are those
very regimes most afflicted by corruption. Germany is one example (and not only
in the most recent bout of scandals), Italy another, and the USA a third. The fact

99
The Funding of Political Parties—Issues Paper (London, Electoral Commission, 2003).
56 Navraj Singh Ghaleigh

is that public funding merely contributes to the quantum of money in a system,

creating opportunity structures for malfeasance. The only possibility for state
money driving out private contributions (which would include members’ dues,
small donations, bean feast revenues etc) would be to proscribe completely such
donations. Not only would this be contrary to a central pillar of British voluntary
politics, it would comprehensively destroy the associational rights that individu-
als hold in every democratic regime. Compliance with Article 11 of the ECHR and
thus the Human Rights Act would be a pipedream.
The traditions of politics in Britain have always maintained that political par-
ties are the primary players in democratic politics and that they are voluntary
associations, prospering or declining according to those members. More extensive
state provision to parties threatens that link as parties move into the care of the
state rather than being responsive to members and the membership. It is true that
not all mechanisms of state support would entail this outcome but the danger is
real (and is one that has afflicted German debates on state support since the
1960s). Any reforms in this area should therefore follow the broad scheme of the
Houghton Committee,100 which was mindful of this risk. It recommended state
subventions to political parties on the basis of specified sums per vote gained at
the previous election, in three forms: (1) annual grants to political parties nation-
ally which passed a low threshold of electoral support; (2) support to candidates
at the constituency level (so as to counterbalance the extra power that (1) may
give to the national party) through reimbursement of election expenses and; (3)
a scheme similar to (2) but to candidates for local government elections. An alter-
native system might pay sums on the basis of membership rather than votes
gained. Indeed, this system would provide parties with a strong incentive to bol-
ster their ranks with the dual benefits of broadening political participation among
the electorate and increasing its own capacity to search out and effectuate the pol-
icy wishes of that electorate.
Like the Houghton scheme, any extensions to party funding should be atten-
tive to the reality of voter and/or member support, and the more profound issue
of the link between them and the political process. To this end, there may be an
argument for extending the current level of support available to parties for essen-
tial infrastructural purposes (ie non-campaigning activities). In this way, state
money would go towards enabling parties to do their essential tasks, and strength-
ening the dialogue between grassroots and parties.

100
Houghton Committee on Financial Aid to Political Parties (Cmnd 6601, 1976).
 4
The Disclosure of Political Donations
in Britain
KD EWING

Introduction
BY 1997 IT was the practice of almost every democratic country in the world
that the political parties should be required to reveal the sources of their
income. Not in Britain. The parties voluntarily published annual income and
expenditure accounts, but they were under no legal obligation to provide even
this basic information and there was no one to vouch for the accuracy of the
information that was provided. The Labour Party since 1995 published annu-
ally the names of those who donated more than £5,000 but did not publish the
amount.1 The Conservative Party refused to publish even the names of donors,
with donors’ names being said to be ‘one of the Party’s most closely guarded
secrets’, locked in the Treasury Department at Conservative Central Office.2
The information was concealed even from party members who complained
about the inadequacy of membership rights, especially in the area of financial
accountability.3 The secrecy was justified—by the then treasurer of the party—
on the ground that ‘Conservative Central Office is not a charity dedicated to
helping the sick and suffering’, and that it would be ‘the height of folly to
expose how such a machine manages its resources or, indeed, how large, or how
small these resources are at any one time’.4

1
It was also the case that the information was reported 10 months after the end of the year in which
the donation was made. A donation made in January would thus not be disclosed until the October in
the following year.
2
The Sunday Times, 27 September 1992.
3
HC 726 (1992–93), pp 164–5.
4
L McAlpine, Once a Jolly Bagman (London, Weidenfeld and Nicolson, 1997) p 229.
58 KD Ewing

The Road from Secrecy to Transparency

The secrecy of party funding was one of the issues addressed by the House of
Commons Home Affairs Committee which conducted an inquiry into The Funding
of Political Parties in 1993. But in a feeble report, the Conservative dominated
Committee concluded that the case had not been made out ‘for requiring disclosure
of the identity of donors; where donations are made from identifiable and legitimate
sources known to the party they should be allowed to remain private’.5 In so conclud-
ing the Committee hid in a fog of arguments based on considerations of principle
and overwhelming practical objections. The argument of principle had been provid-
ed in oral evidence to the Committee by Sir Norman Fowler, the Chairman of the
Conservative Party. Drawing on Sir Norman the Committee was of the view that,

Privacy in donations was as fundamental a right when giving to political parties as

when giving to any other charitable organisation. What individuals did with their
own money was entirely a matter for them and was not of legitimate interest to
either inquisitive journalists, political opponents, or even the State. To reveal a name
would be a breach of a donor’s right to privacy, although of course if he wished to
disclose his identity, he was at liberty to do so.6

So far as the ‘particular and substantial difficulties’ are concerned,7 these related to
the threshold at which any donation would be subject to disclosure, in view of the
widely different proposals made by the range of witnesses to the Committee.
There was also concern about the administrative machinery that would be need-
ed to ensure compliance with any such obligation, and reference was made to the
experience in Germany where it was said, citing an academic witness to the
Committee, that ‘the main parties had simply colluded to break the law’.8
Unpersuaded and undeterred, the Labour Party included a commitment in its
election manifesto of 1997 to require the parties to ‘declare the source of all dona-
tions above a minimum figure’, as well as ‘consider how the funding of political par-
ties should be regulated and reformed’.9 The implementation of that commitment
was to become a matter of some urgency when shortly after the election the Labour
Party was involved in a sleaze scandal from which it has never really recovered. The
story dominated the news in a three week period in November 1997, and started
with a disclosure on 5 November that the government was planning to push the
European Commission to exempt Formula One from a proposed directive banning
tobacco advertising.10 Accused of ‘bowing to intense lobbying from Formula One’,
and supported by only one other EC Member State, the government ‘remained
committed to a ban on tobacco advertising but said it should be done in a sensible
5
Home Affairs Committee, The Funding of Political Parties (HC 726 (1992–93) above) para 80.
6
Ibid at para 73.
7
Ibid at para 74.
8
Ibid at para 79, referring to Dr Michael Pinto Duschinsky.
9
New Labour, Because Britain Deserves Better (1997).
10
Guardian, 5 November 1997.
 The Disclosure of Political Donations in Britain 59

and pragmatic way’.11 It was subsequently revealed that the Formula One boss—Mr
Bernie Ecclestone—had made a substantial donation to the Labour Party before the
election, but worse was to follow when it was eventually disclosed that the sum
involved was a £1 m and that the Labour Party was negotiating with Mr Ecclestone
for another £1 m. A new word entered the vernacular, with a million pounds now
being referred to in less reverential circles as a ‘Bernie’. But the affair had other
consequences, not the least of which was to persuade the Prime Minister of the need
to implement with some alacrity his manifesto commitment relating to political
parties. The first step in this direction was taken when the matter of public funding
was referred to the Committee on Standards in Public Life for examination (in line
with the manifesto proposal). After a thorough investigation, the Committee
reported in the autumn of 1998, with its 100 recommendations for reform consti-
tuting the backbone of the Political Parties, Elections and Referendums Act 2000.12

Reporting and Disclosure: The New Statutory Regime

The Political Parties, Elections and Referendums Act 2000 is a wide ranging measure
which addresses the problem of party funding in a number of ways.13 In contrast
to the position elsewhere in Europe, it eschews the option of public funding and
instead seeks better to regulate what was to remain in essence a system of predomi-
nantly private funding. Neither of the two main parties was in favour of public
funding, though the Opposition parties were handed a substantial increase in the
amount of money provided by the State to assist with their parliamentary activi-
ties. This is a scheme—the so called Short Scheme—that had been introduced in
1975 in recognition of the fact that the Opposition parties in Parliament have
research and other needs. So far as the new regulatory regime is concerned, the
starting point is the introduction of the concept of the permissible donor, defined
in such a way as to exclude foreign donations.14 This is followed by an obligation by
the parties to report to the Electoral Commission on a quarterly basis all donations
in excess of £5,000.15 The information is then published on the website of the
Commission (itself created by the 2000 Act).16 Before considering these provisions
in detail, it is to be noted that despite the large donation by Ecclestone that precipi-
tated the legislation, there is no limit on the size of a donation from a permissible
donor. The Act did, however, introduce a requirement that companies may make

11
Guardian, 6 November 1997.
12
Fifth Report of the Committee on Standards in Public Life (CSPL), The Funding of Political Parties in
the United Kingdom (Cm 4057–I, 1998). See L Klein, ‘On the Brink of Reform: Political Party Funding in
Britain’ (1999) 31 Case Western Reserve Journal of International Law 1, and N Ghaleigh [1999] PL 43.
13
For a fuller account, see KD Ewing, ‘Transparency, Accountability and Equality: The Political
Parties, Elections and Referendums Act 2000’ [2001] PL 542.
14
Political Parties, Elections and Referendums Act 2000, s 54.
15
Ibid, s 62.
16
Ibid, s 1.
60 KD Ewing

donations only if they have shareholder approval, though this is an obligation

enforceable under company law rather than electoral law.17

The Purpose and Scope of Disclosure

The reporting and disclosure provisions have thus been left to bear a heavy load.
The issue of contribution limits was considered only briefly by the Neill
Committee, and was not supported by either the Labour or Conservative parties.
Arguments from other witnesses that parties receiving large donations allowed
wealthy individuals to buy elections were met by the response that ‘individuals
should have the freedom to contribute to political parties, and the parties should
be free to compete for donations’.18 Arguments that limits should be imposed to
prevent the parties being subject to improper pressures were met by the response
that disclosure would ‘remove illegitimate pressure, whether apparent or real’. In
any event, if a party ‘becomes over—dependent on a particular source, that is its
own affair, provided its dependence is a matter of public knowledge’.19 And argu-
ments that large corporate donations allowed corporations to exercise influence
over public policy were met by the response that the Committee’s proposals to
reform corporate giving would ‘sufficiently address the concerns over such dona-
tions’.20 These were the proposals for shareholder approval, which strictly were
about the accountability of a company to its members rather than to the elec-
torate. But the Neill Committee did not place its faith exclusively on the reporting
and disclosure regime that it proposed. Also important were the recommenda-
tions for electoral spending limits which would ‘tend to lessen the need for large
donations’.21
Following the recommendations of the Neill Committee, the treasurer of a
registered party must submit a quarterly donation report to the Electoral
Commission, the report to record all donations in excess of £5,000.22 For this pur-
pose a donation is widely defined to include donations of money as well as dona-
tions in kind. It also includes donations from the State in the form of Short money
and policy development grants. The latter were introduced by the 2000 Act and
are administered by the Electoral Commission which was given an annual budg-
et of £2m for the purpose, to be distributed between eligible parties. Donation
reports must be submitted within 30 days of the end of the reporting period to
which it relates.23 Anything of £5,000 or less need not be reported, though if in a
subsequent quarter there is another donation of £5,000 or less which together
with donations in the previous period exceed £5,000, the combined amount must
17
Ibid, s 139.
18
Fifth Report of the Committee on Standards in Public Life (CSPL), The Funding of Political Parties
in the United Kingdom (Cm 4057–I, 1998) at para 6.7.
19
Ibid.
20
Ibid.
21
Ibid. See 2000 Act, note n 14 at ss 72–84.
22
Political Parties, Elections and Referendums Act 2000, s 62.
23
Ibid, s 65.
 The Disclosure of Political Donations in Britain 61

be disclosed.24 Once the £5,000 limit has been reached for any one year—whether
by way of a single donation or an aggregation of smaller donations—any subse-
quent donations of more than £1,000 must be recorded and reported. For this
purpose there must be a reporting not only of any donation of more than £1,000,
but also a reporting of a number of donations which in aggregate exceed £1,000.25
At the time of a general election, more frequent reports must be made.26

The Scope of Disclosure and Party Structure

At first blush, it would appear to be easy enough to evade these obligations, com-
mendable though they are. Just to remind ourselves: all donations over £5,000
(and at £1,000 thresholds thereafter) to the national party—including donations
in kind—must be reported and disclosed. Surely it would be easy enough for the
donor to give the money to the regional or constituency parties which could
spend the money on their own activities or channel it to the national party. This
was a loophole in the Canadian system of reporting, so that donations to local
organisations might appear somewhere as an internal party transfer without the
identity of the donor ever being revealed. The elimination of this risk therefore
suggests the need for measures designed to ensure the transparency of donations
made to all parts of a party organisation. There is a need not only for transparen-
cy to relate party policy nationally to donor activity, but also to relate local party
policy and conduct to donor activity. There are a number of ways by which this
could be done: each unit of party organisation (constituency party or association)
could be required to report donations to the Electoral Commission (as recom-
mended by the Labour Party in its evidence to the Neill Committee); or each
national party could be made responsible for reporting all donations to all units
of party organisation (as is the case in Germany).
The Political Parties, Elections and Referendums Act 2000 follows the German
example. But it does so in very complex and impenetrable terms. The effect is that
the party treasurer is responsible not only for reporting donations to the central
organisation of the party, but also to the accounting units of the party (in the case
of those parties which have accounting units—which includes all the large par-
ties). There are however modifications, to reflect the fact that a donation in excess
of £5,000 annually to a local party would be unusual. So there is an obligation on
the part of the Party treasurer to report quarterly any donation of more than
£1,000 to any unit of party organisation, or any donations which in aggregate
amount to more than £1,000 in any quarter, or which in aggregate amount to
more than £1,000 when added to other donations from the same source in previ-
ous quarters in the reporting year in question.27 But what happens if a donation

24
Ibid, s 62(4)(5).
25
Ibid, s 62(6)(7).
26
Ibid, s 63.
27
Ibid, s 62(11).
62 KD Ewing

of £1,000 is made locally and £5,000 nationally? In neither case would the indi-
vidual donation have to be reported, because in both cases it falls below the
reporting obligation. Here the Act provides that any donation to a unit of party
organisation which does not have to be reported (because it falls below the more
than £1,000 limit) is to be treated as a donation to the central organisation of the
party.28 This means that it would have to be aggregated with donations made to
the central party organisation, so that if in aggregate all these donations exceed
£5,000, they will have to be reported.29

‘Sleaze’: The Continuing Problem of Political Donations

Although donations are thus widely defined, it is nevertheless quite clear that the
Political Parties, Elections and Referendums Act 2000 has not resolved the problem of
political funding. Indeed the ink was barely dry before a series of other scandals
erupted in quick succession. Two problems have emerged, as a cloud of sleaze
appeared to descend on British politics, providing an opportunity for the media to
attack the government and the Labour Party, which was soon to learn about the
down-side of disclosure. The first problem is that some extremely large donations
were made to the parties just before the Act was introduced on 16 February 2001.
These include donations of £2m from each of Christopher Ondaatje (a retired fin-
ancier), Lord Hamlyn (a publisher) and Lord Sainsbury (a government minister).30
There was no obligation to disclose these donations which had been raised before
the Act was due to come into force, and the reluctance of Labour to identify the
donors added to the unease about the donations, which were said to make the party
‘unhealthily dependent on a few large gifts from a few rich men’.31 The Conservative
Party also reported a large donation of £5 m from the spread betting tycoon, Stuart
Wheeler, making him the biggest one-off donor in British political history.32

28
Ibid, s 62(12).
29
In some countries (such as Australia) reportable donations must be reported by donors as well as
political parties. That is not the case in the United Kingdom, with one exception. This arises where a
donor makes a large number of small donations to a registered party which in aggregate exceed more
than £5000. A small donation for this purpose is a donation of £200 or less. This is another anti-eva-
sion device, designed to deal with the possibility that someone may donate more than £5000 to a party
in a series of small parcels of money deposited at different parts of the party organisation. This could
arise where an individual makes a small cash donation to a party nationally, and a series of small cash
donations to constituency or regional parties. It is perhaps unlikely that anyone would want to go to
the trouble of, say, making 25 donations of £200 to 25 local party organisations, as well as a donation
of £200 to a party nationally. If they do, none of this would have to be reported by the Party. But it
would have to be reported by the donor, by the 31 January after the calendar year in which the dona-
tions were made. It is necessary to specify only the aggregate value of the donations, but not to list each
of them.
30
Guardian, 5 January 2001. This was said to be a ‘troublesome’ donation, on the ground that ‘it
could be read as a form of insurance against dismissal; Guardian, 3 January 2001. But the point is
unconvincing.
31
Guardian, 3 January 2001.
32
The Times, 18 January 2001.
 The Disclosure of Political Donations in Britain 63

Although the large donations have dwindled since the Act was brought into force,
they have not dried up altogether, as Lord Sainsbury’s donation of £2 m to the
Labour Party in 2003 made clear. The other problem is a rather different one which
erupted in a frenzy of press excitement and indignation in the Spring of 2002,
though it has since abated. This relates to allegations that a number of donors to the
Labour Party (not those referred to) appeared to benefit from government decisions
in their favour, though it should be stressed that there is no evidence to link the
decisions with the donations or vice versa. These latter donations were not huge,
being in the region of £50,000 to £125,000. Three donations were particularly con-
troversial.
The first was the donation of £100,000 by Richard Desmond at the beginning
of 2001, again before the legislation came into force, escaping the new disclosure
rules by ‘a hair’s breadth’.33 Apart from the timing of this donation, there were two
reasons why it was controversial. The first was its source. Mr Desmond was
reported in the press as a man who made his money trading in pornography.34
This was thought by many to make him an improper person from whom the
Labour Party should not accept a donation:35 the Guardian was satisfied that
‘Labour’s latest donor demeans the party’.36 But that is a matter for the Labour
Party, its members and supporters. Following the Political Parties, Elections and
Referendums Act 2000, electors now have the information to make up their own
minds about Labour and the company it keeps. A more serious allegation was that
the donation was made around the time when Mr Desmond was seeking to buy
the Daily Express and its stablemate the Daily Star. Added to the government’s dis-
comfiture is the fact that Mr Desmond had taken tea with Mr Blair in Downing
Street. This meeting had taken place on 26 November 2000, four days after Mr
Desmond’s Northern and Shell media company had paid £125 m for the Express
Newspaper group. On 7 February 2001 the Secretary of State for Trade and
Industry announced that he would not refer Mr Desmond’s purchase of the
Express to the Competition Commission, a few days before the Labour Party
banked Mr Desmond’s £100,000 donation. In deciding not to refer the purchase
to the Competition Commission, Mr Byers was acting in accordance with his pol-
icy announced on 26 October 2000 to accept the advice of the Office of Fair
Trading on takeovers ‘save in exceptional circumstances’. In this case the minister
followed the advice of the Director-General. Despite the obvious lack of impro-
priety, unfavourable comparisons were nevertheless made between this case and
the case of Mr David Sullivan, also a businessman with adult interests. His
attempt to acquire regional newspapers in Bristol in 1990 was blocked on the
ground that he was not a fit and proper person to own a national newspaper.37
33
Evening Standard, 13 May 2002, accusing Labour of ‘losing the moral high ground’.
34
‘Porn magnate Desmond gives £100,000 to New Labour’ (The Independent, 12 May 2002); ‘Labour
defends porn baron’s donation’ (Guardian, 13 May 2002); ‘How Blair’s tea-time friend ran his porn
empire’ (Guardian, 30 May 2002).
35
See The Times, 13 May 2002; Guardian, 13 May 2002.
36
Guardian, 13 May 2002.
37
The Times, 13 May 2002.
64 KD Ewing

The second controversial donation was the donation by Lakshmi Mittal in June
2001. Mr Mittal gave the Labour Party £125,000 in June 2001. Concerns were
raised about the fact that on 23 July 2001 the Prime Minister wrote to the
Romanian Prime Minister in the following terms:

I am delighted by the news that you are to sign the contract for the privatisation of
your biggest steel plant Sidex, with the LNM Group. This represents an important step
forward in the efforts you and your government are making to restructure and mod-
ernise your country’s economy. I am particularly pleased that it is a British company
that is your partner. This should send a very positive signal to investors and business-
men in Britain and more widely. Together with the other measures you are taking, I
hope it will stimulate renewed interest by British business in Romania. And it will, I
hope, set Romania even more firmly on the road to membership of the European
Union, an objective of which the British government remains a staunch supporter.38

Not everyone was troubled by this letter, though claims were made that Mr
Mittal’s name had been deleted as had a reference to him as a friend of the Prime
Minister. Hugo Young took the view that ‘the alleged service performed, writing a
letter after a deal was done, was nugatory’,39 while others claimed that it was the
attempt to cover up an embarrassment that caused more difficulty than the Prime
Minister’s actions themselves.40 Guardian reporters, however, were not so san-
guine, pointing out that ‘the letter was sent at a crucial moment when the French
had intervened, and Mittal had been forced to return to London empty-handed
after a postponement of the deal on July 20’.41 It was also claimed that although
Mr Mittal was resident in the United Kingdom, his company was registered in the
Netherlands.42 He had only a small administrative staff based in the United
Kingdom, and it was also claimed in the press that the deal would ‘bring no jobs
and no profits into Britain’.43 So far as the Romanian plant is concerned, it was said
to have been sold to an offshore registered Dutch Antilles firm, LNM Holdings
NV, a company said to have been privately owned by Mr Mittal. This called into
question claims that Mr Blair was intervening on behalf of British business. A cru-
cial question was whether Mr Blair knew that Mr Mittal was a Labour Party
donor. According to The Independent, Mr Blair was ‘adamant that he did not
know’, and insisted that it would not have made any difference if he did.44 On the
other hand, it was reported by the Guardian that,

Blair went to a thank-you party for big donors at the house of Lord Levy, his chief
fundraiser, in June 2001, the Guardian has established. Acquaintances of Mittal say
he was one of only three Asians present. The donation was also publicly announced

38
Guardian, 14 February 2002.
39
Guardian, 12 February 2002.
40
The Independent, 14 February 2002.
41
Guardian, 14 February 2002.
42
The Independent, 13 May 2002.
43
Guardian, 14 February 2002.
44
The Independent, 14 February 2002.
 The Disclosure of Political Donations in Britain 65

on June 14 in a list compiled by the Electoral Commission. Mittal had also donated
a large sum for the 1997 election. Blair no longer repeated the claim of ignorance of
Mittal’s donor status in Parliament yesterday, conceding instead: ‘it was a matter of
public record that he was a donor to the Labour Party.45

The third donation to give rise to concern was in fact one of a number of dona-
tions from Dr (now Lord) Paul Drayson, the owner of a company called
Powderject Pharmaceuticals. The reason why these donations (two of £50,000
each) gave rise to concern was that the company was awarded a £32m government
contract to supply smallpox vaccine ‘to protect Britain against a bioterrorist
attack’.46 The second of these donations was said to have been given ‘while the gov-
ernment was deciding who should be awarded the contract’.47 Concerns were
raised when it was suggested that the normal procurement procedures had been
waived in the interests of national security. According to press reports, the govern-
ment claimed that it was not in the public interest to draw attention to the prepa-
rations for terrorist attacks by the use of biological weapons. Also according to
press reports, the government claimed that Powderject was ‘the only company that
could quickly produce the millions of doses needed to protect the UK population’,
though it was also reported that ‘other manufacturers say they could have met the
requirements if they had been given the details’. For its part, the government
claimed that Powderject was the only company that could supply the strain of the
vaccine which had been recommended by the security and intelligence services.48
An investigation by the Guardian tends to suggest that there was no impropriety
in awarding the contract to Powderject. According to the Guardian, John Hutton
the health minister ‘appears to have been subsequently embarrassed’ by the dis-
covery that Drayson ‘had been making party donations’.49 But his request that the
matter be reconsidered was overruled at the insistence of the Ministry of Defence
which wanted the strain that only Drayson could provide.50 Any lingering doubts
about impropriety were subsequently scotched by a National Audit Office investi-
gation.50a
Although these proved to be the most serious cases, allegations and innuendos
were made in the press about other donations. Apart from money from Enron, these
included claims about donations from individuals and companies linked to the gam-
bling industry who stood to gain from the government’s policy of liberalisation.51

45
Guardian, 14 February 2002. In the Guardian on the following day, Ewan MacAskill and Patrick
Wintour reported that ‘Mr Blair has admitted that he knew Mr Mittal was a donor, but did not make
the connection with his company, LNM, which was bidding for the steelworks.’
46
Sunday Times, 14 April 2002.
47
Guardian, 29 June 2004.
48
Guardian, 13 April 2002.
49
Guardian, 29 June 2004.
50
Other attempts have been made to link Drayson’s donations to government benefits. But they too
seem thin and rather spurious; Observer, 28 April 2002.
50a
Comptroller and Auditor General, Procurement of Vaccines by the Department of Health, HC
625(2002–2003)(9 April 2003).
51
Sunday Times, 31 March 2002; The Times, 8 August 2002.
66 KD Ewing

This was followed by a claim that the Prime Minister used a trip to the Czech
Republic ‘to promote the sale of jet fighters made by a company [BAE systems]
that donated money to Labour’, in an affair that was said to have ‘uncanny echoes’
of Mittal.52 The currency of claims that donations brought Prime Ministerial
influence was, however, beginning to devalue with overuse. Thus,

Tony Blair used his personal authority to save a £1bn deal to sell Hawk
fighter-bombers to the Indian government. The company involved in the deal is
British Aerospace Systems which is listed among companies who gave more than
£5,000 in sponsorship in both 1998 and 2000.53

Nevertheless, other allegations about ‘cash for favours’ were also made. These
included a claim that a law firm that had donated £6,100 was paid more than
£8 m by the government to look after miners’ compensation claims.54 But hav-
ing made the claim under a ‘cash for favours’ headline, the newspaper also report-
ed that there was ‘no suggestion the donation was made in expectation
of Government favours’. Several months later a new ‘contracts for donors row’
erupted following claims by a haulage company that ‘it had lost government work
during the foot and mouth crisis to a rival that had made a donation to the
Labour Party’.55 Drawing parallels with the Drayson donation, in this case normal
public procurement procedures were allegedly not applied, though in this case the
£5,000 donation was made after the haulage contract had been awarded. But this
was not the end of it. A millionaire Indian food entrepreneur had to insist that
there was no connection between his £100,000 donation to Labour and his
knighthood in the Golden Jubilee Birthday Honours’ List.56 More recently further
concern has been expressed about some of the nominations made by the
Conservative Party to the House of Lords: the coincidence between nominations
and donations to party funds had not gone unnoticed.57

The Labour Party’s Response

The introduction of the Political Parties, Elections and Referendums Act 2000 ought
to have been a genuine cause for celebration. Instead the Labour Party was mired
in controversy because of donations and the circumstances surrounding these
donations. It was thus to discover that transparency comes at a price: it is not
enough to report and disclose if what is reported and disclosed causes offence.
Reporting and disclosure also require the parties to adapt to the new legal regime

52
The Independent, 15 April 2002.
53
The Independent, 2 June 2002.
54
Daily Telegraph, 25 May 2002.
55
Sunday Times, 4 August 2002.
56
Independent on Sunday, 16 June 2002.
57
The Times, 5 December 2003.
 The Disclosure of Political Donations in Britain 67

unless they are prepared to be mocked and embarrassed by what is revealed. The
Labour Party was particularly stung by the donation from Mr Richard Desmond,
the proprietor of a number of ‘adult’ publications. Apart from the concerns raised
about the coincidence between the donation and Mr Desmond’s acquisition of
the Daily Express, concerns were also expressed about the Labour Party’s judg-
ment in accepting money from such sources. Those concerned about the latter
were hardly impressed by the response of the then Chairman of the Labour Party
(Dr John Reid) who is reported as having said that the party would not sit in
moral judgment of those who want to make gifts.58 In this febrile atmosphere Dr
Reid was himself to be the target of allegations that he ‘had set up a trust fund
which concealed the identity of supporters’: it was alleged that his election return
revealed that 70 per cent of his total election spending (£5,326.07) had been pro-
vided by ‘John Reid Electoral Expenses Fund, c/o Atkinson Donnelly, Chartered
Accountants’.59 The concerns expressed in the Spring of 2002 led to a number of
calls for a fresh round of controls on the funding of the parties, as well as the
introduction of State funding. These are matters to which we return. They also
induced the Labour Party to take some precautionary measures to deflect further
allegations of sleaze by which it was engulfed.

Adapting to the New Regime

The Labour Party was sufficiently chastened by the increasingly adverse publicity
surrounding its donations that it moved to introduce a number of safeguards to
avoid any repetition of such controversies. Transparency thus does help to alter
behaviour, though it is perhaps surprising that the Labour Party should not have
been prepared for this. Nevertheless the party in the recent past has a good record
on self regulation: before there was any obligation to do so, the party published
the names of donors of more than £5,000 and refused foreign donations. That
legacy finds more contemporary expression with the announcement in May 2002
of changes in the way that the Labour Party would deal with donations and
donors.60 One of the key features of the new arrangements is the adoption of a
Statement for Donors, whereby it is declared that donors to the Labour Party pro-
vide support because they are broadly committed to the aims and values of the
Labour Party, and accept that they provide this support ‘without seeking person-
al or commercial advancement or advantage for themselves or others’. Quite how
this will operate in practice will be revealing, given that the Statement reproduces
clause IV of the party constitution which makes clear that the Labour Party ‘is a

58
Guardian, 13 May 2002; Tribune, 17 May 2002. Fiona McTaggart—described as ‘one of Labour’s
leading feminist MPs’ is also reported as rejecting criticism: “If society thinks making money from
pornography is legitimate, I think it is legitimate for a political party to take money from pornogra-
phers, so long as there is no evidence of influence over policy”. ’
59
Scotland on Sunday, 10 November 2002. But this did not breach electoral law, though the arrange-
ment was criticised for not complying with the spirit of the law ‘to allow transparency and let people
see if there were significant donations.’
60
See C Clarke, ‘Committed to a Funding Re-Think’, Tribune, 31 May 2002.
68 KD Ewing

democratic socialist party’. The Statement also makes clear that ‘by supporting the
Labour Party with donations, it is understood that this should not of itself disad-
vantage anyone, whether personally or in terms of business activities’.
In addition to this Statement, another important initiative is the setting up of a
new fund-raising committee to ‘have oversight in the area of major donors’. This has
been referred to in the press as an ethics committee, and is expressly stated by Labour
to be designed to build on the legislation. But despite winning plaudits from the right
wing press,61 two problems have been identified with this initiative. One is the com-
position of the Committee, with difficulty caused in particular by the fact that it
includes the Labour Party’s chief fund-raiser. Although his influence is likely to be
diluted by the presence of five others, it is criticised by some as a text book illustra-
tion of conflict of interest: he who raises the money is also judging on whether to
receive it. For his part Lord Levy is reported at a press conference announcing these
initiatives as being amazed that ‘people cannot understand that you can put various
areas of your life into different boxes and deal with them accordingly’.62 The more
sceptical, however, saw Lord Levy’s presence as raising doubts about whether the
Committee will take tough choices.63 The other problem is the concern that the
Committee has no published ethical principles to guide its proceedings and by which
it can be held to account. Apart from an alertness to ‘potential conflicts of interest’,
each case it seems is to be judged on its merits, and it remains to be seen whether
money would be accepted in the future from people like Mr Desmond.

The Response of Donors

But it is not only the parties which are adapting to the new regime. Donors have
gone cold, as the press has become interested in who they are and questions their
motives for making donations. The press interest can be sustained and intrusive,
and indeed one of the issues raised in the Labour Party’s self-regulatory initiative
is to condemn much of this coverage and to assert ‘the democratic right of indi-
viduals and organisations to make political donations’, said to be ‘vital to the exis-
tence and quality of our democracy’, while accepting that ‘donors should not be
treated differently, positively or negatively, because they are donors’. But it may be
too late. According to the Labour Party’s fund-raiser, ‘the big donors are running
scared, and it is becoming increasingly difficult to raise money’.64 Big donors have
become quasi-public figures whose conduct is newsworthy on matters quite unre-
lated to their donation, as in the report that ‘Labour donor cuts workers’ pensions’.
The story was reported in April 2002: the donation referred to in the article was
made in 1997.65 All of which is to suggest that the need for contribution limits may
have passed: transparency may be beginning to operate at both the demand and

61
Daily Telegraph, 22 May 2002.
62
The Times, 22 May 2002.
63
The Guardian, 23 May 2002.
64
Daily Telegraph, 25 May 2002.
65
The Guardian, 22 April 2002.
 The Disclosure of Political Donations in Britain 69

the supply sides to provide an effective form of regulation as the Neill Committee
anticipated it would.
But although some may lament the shyness of the donors, it is not necessarily to
be deprecated. Indeed it might be argued that there are certain kinds of donor to a
governing party who should be actively discouraged, and that the Labour Party pro-
cedures do not go far enough in this regard. It is not enough that the donor accepts
the aims and values of the party to which he or she is donating, nor is it enough for
the Party to be alert to potential conflicts of interest: it ought to be clear beyond
argument that donations from certain sources are simply not acceptable by a party
of government. In other words, there is a case for developing the idea of the imper-
missible donor, to complement the existing statutory concept of the permissible
donor. This would mean that within the context of the permissible donor, there are
some donations which would not be acceptable. It is already the case that donations
may not be accepted as an inducement for a political honour, or for a political hon-
our to be given as an inducement for a donation. In the absence of legislation, it
ought also to be accepted by the governing party that a donation ought not to be
accepted from a government contractor or anyone who may be bidding for a gov-
ernment contract or who is on a list of approved bidders. There are some countries
where such donations are unlawful, notably the United States,66 and there would be
a case for similar legislation here. This would eliminate any suspicion—however
unfounded—that donations are a prequisite to the granting of a contract and that
donations are given as some kind of kickback for favours granted.

Donation Trends: The Labour Party

Some four and half years have passed since the Political Parties, Elections and
Referendums Act 2000 came into force. The donations made before and just after
it came into force provided great sport and excited a great media frenzy. But now that
the dust has settled, it is timely to reflect on what the information is yielding about
the state of political funding in Britain. In the first three years of the new legal regime
(February 2001–March 2004) the Electoral Commission reveals that a total of £89 m
was donated to political parties. The principal beneficiary was the Labour Party
which received more donations and more money, though the average Labour Party
donation appears to be smaller than the average donation to either the Conservatives
or the Liberal Democrats. Thus we find that 2864 donations to the Labour Party
yielded a total of £40,745,680.71; that 1649 donations to the Conservative Party
yielded £36,406,491.69; and that 1007 donations to the Liberal Democrats yielded
£6,375,993.14. This suggests that the average donation to the Labour Party is
£14,226, the Conservatives £22,077, and the Liberal Democrats £6,331.
A striking feature of donations to the Labour Party is the heavy reliance on
trade unions. For the moment it is enough to record that of the £40,745,680.71
66
Federal Election Campaign Finance Act 1971, s 441c.
70 KD Ewing

donated to the Labour Party, some £26,455,840.89 was supplied by trade unions.
This accounted for 1793 of the Labour Party’s 2864 donations. Of these the bulk
was provided by the so called ‘big four’ unions, as follows:

Donor Cash Non Cash

UNISON 4,836,018 13,956
GMB 4,355,359 22,648
TGWU 2,979,635 6,669
AMICUS67 5,254,569 506,495
Total 17,425,581 549,768
Total Cash and Non Cash Donations 17,975,349

The total number of donations from each of these unions was 230, 229, 159, and
303 respectively, many of these from union branches to constituency Labour
Parties, as well as head office affiliation fees and election donations. Other large
union donors included the CWU and USDAW. But between them the four large
unions accounted for 44 per cent of the Labour Party’s donation income.
The other striking feature of donations to the Labour Party relates to large per-
sonal donations. In the period from 2001 to 2004, Labour received six donations
in excess of £250,000 from four people:

Donor Date Donation

Lord Sainsbury 25.01.02 2,000,000
Lord Paul Hamlyn 20.12.02 500,000
Lord Sainsbury 01.03.03 2,500,000
William Haughey 05.12.03 330,000
Lord Paul Hamlyn 19.12.03 500,000
Sir Christopher Ondaatje 19.12.03 1,000,000
Total 6,830,000

In addition to the above, another five individuals gave six donations of between
£100,001 and £250,000 each. These were as follows:

Donor Date Donation

Alan Sugar 09.06.01 200,000
Lakshmi Mittal 28.06.01 125,000
Sir Richard Cohen 14.02.02 200,000
Bill Kenwright 13.06.02 200,000
Sir Richard Cohen 17.02.03 250,000
Sir David Garrard 23.05.03 200,000
Total 1,175.000

67
This includes donations by the two constituent unions (AEEU and MSF) prior to the amalgama-
tion to create AMICUS in 2002.
 The Disclosure of Political Donations in Britain 71

The combined effect of the foregoing is that the Labour Party relied on only
nine people for about a fifth of its donation income. These nine people accounted
for more than a half of donation income if trade union donations are removed
from the equation. The other issue relating to the funding of the Labour Party is
the extent to which it relies on corporate funding. Here the evidence suggests that
reports of Labour dependence on corporate money are greatly exaggerated, though
many of the individuals who fund the party have made their money in business.
But support by businessmen (there are no female ‘high value’ donors) does not
mean support by businesses. According to the Electoral Commission, the Labour
Party received 160 donations from companies, these yielding only £948,569.75,
which represents c 2.5 per cent of the value of donations to the Labour Party.
The average business donation to Labour is in fact under £6,000. All but three
donations were £25,000 or less, and the three largest donations were £30,000. Of
these one was by the Political Animal Lobby, a company but not a commercial
enterprise. The other two were donations of £30,000 from Manchester Airport.
These latter had to be returned because the donor had no authority to make them.
As we shall see the position relating to the Conservative Party is very different.

Donation Trends: Opposition Parties

Donations to the Opposition parties are unlikely to be as controversial as dona-

tions to the governing party, though the questions raised about the Conservative
nominated peers in 2004 indicates that the Opposition parties are not immune
from scrutiny and criticism. But the current problem with the Opposition parties
is the extent to which they have fallen badly behind Labour in fund-raising and
badly behind Labour in terms of financial security. The trade union base has been
seen to be a remarkably stabilising force for Labour and a remarkable source of
financial security. Attempts to erode this in the 1980s have largely failed, and the
other parties have no comparable sources of alternative funding. It is a remark-
able and paradoxical feature of the financial position of both the main Opposition
parties that they are now heavily dependent on the State for their financial secu-
rity. This is despite the fact that the Conservative Party is opposed to State fund-
ing.

The Conservative Party

Between 2001 and 2004 the Conservative Party received 1649 donations, which
is significantly less than Labour’s 2864, though more than Labour’s 1071 dona-
tions if trade union donations are deducted from the total. The first striking
feature of Conservative funding is the party’s heavy reliance on the State. Of
the £36 m in donations reported by the Conservative Party, some £11.9 m were
in the form of public funds, such as the Short money and policy development
72 KD Ewing

grants. That is to say that the party most strongly opposed to State funding
depends on public funds for a third of its donation income. A second striking
feature of Conservative Party funding is that it is more heavily dependent on
large donations than the Labour Party. In the period 2001 to 2004, the
Conservatives received four donations in excess of £250,000, as follows:

Donor Date Donation

John Wheeler 03.05.01 2,450,000
Sir Paul Getty 11.06.01 5,000,000
John Wheeler 27.11.03 504,000
George Maugham 24.02.04 400,000
Total 8,354,000

So although there are fewer very large donations than Labour, their combined
value is higher. The Conservatives also received five cash donations of between
£100,001 and £250,000, the donors in question being Robert Fleming (£206,000),
Roderick Fleming (£200,000), Leonard Steinberg (£110,000), and Sir Stanley
Kalms £120,000 and £160,000). These come to a total of £796,500 with two dona-
tions in kind (travel) by Corin Graeff (£128,353) and Edward Haughey
(£119,816) accounting for another £248,169. Total donations from these six peo-
ple thus accounted for £1,044,669.
The Conservatives thus relied on just nine people for just under £10,000,000,
this representing just under 40 per cent of all donations from private sources.
Apart from the heavy reliance of the Conservative Party on the State and the heavy
dependence on large personal donations, the Conservative Party also receives
more donations from companies than does the Labour Party, and these donations
are of a higher average value than the donations to Labour. 456 companies have
given £7,052,069, with two of these being over £250,000:

Donor Date Donation

Norbrook Laboratories 02.04.01 1,000,000
IIR Ltd 26.03.02 520,000
Total 1,520,000

In addition to the foregoing, another 10 companies gave the Conservative Party

donations between £100,001 and £250,000, the combined value of which was
£1,588,615. High value (in excess of £100,000) company donations thus account
for £3,108,615, and the Conservatives rely on companies for just under a third (£7
m) of their private donations (£24 m). If company and personal donations are
combined, we find that the Conservatives relied on 23 such donations in excess of
£100,000 for more than half (c £13 m) of their donations from private sources.
Without public funding and donations in excess of £100,000, the Conservatives
 The Disclosure of Political Donations in Britain 73

would have been required to finance their operations (including a general election
and a European election) since 2001 with donations of little more than £12 m,
which would be in the region of £4 m annually.

The Liberal Democrats and the Nationalist Parties

The Liberal Democrats received 1007 donations in the period under review, rais-
ing £6,375,993.14. Over a third of these took the form of donations from public
funds, these donations amounting to £2,421,527.79. A total of £3,468,463.20 was
provided by 806 cash donations, with another 131 donations in kind providing
£389,625.47. The average cash donation to the Liberal Democrats was thus a rel-
atively modest £4303. The party received no private cash donations in excess of
£50,000, and only 11 cash donations in excess of £25,000. These were as follows:

Donor Date Donation

Lord Jacobs 31.03.01 31,000
Lord Jacobs 10.05.01 30,000
Lord Jacobs 15.06.01 30,000
P Yeldon 01.12.01 40,000
Liberal Democrat Ball 2001 12.12.01 38,000
D Laxton 16.05.02 40,000
G M Lewis (bequest) 05.09.02 32,730
UNISON 10.04.03 29,000
UNISON 05.08.03 32,730.50
E Lakeman 09.01.04 50,000
Liberal Democrat Ball 2003 18.02.04 45,712.15
Total 399,172.65

In terms of company donations, the Electoral Commission records that £1.3 m

was provided by companies,68 though most of these were Liberal Democrat con-
stituency bodies or clubs which are registered as companies. But they do include
sponsorship from McDonalds and significant non cash donations from KPMG
totalling £108,500.
So far as the SNP is concerned, the Electoral Commission reveals that it received
110 donations in the period under review, these amounting to £1,214,924.45 in
total. The bulk of this (£828,916.53) is accounted for as public funds (such as Short
money and policy development grants). The SNP received only 32 cash and 13 non
cash contributions: the former amounted to £291,714.08, and the latter to
£23,806.29. Significant features of SNP fundraising is that it received only 12 cash
donations of £5,000 or more, three of which were bequests (£80,234.46; £62,945.16;
and £10,000). Apart from bequests, only four donations were for £10,000 or more,

68
Another £201, 600 was provided by way of donations in kind.
74 KD Ewing

with the highest being £25,000 (A J Tulloch). Otherwise, there was little evidence of
corporate funding of the SNP except the 13 non cash contributions of £23,806.29
which were all donated by South of Scotland Power Ltd in the form of staff second-
ment and accommodation costs. Although modest compared with the other parlia-
mentary parties, the SNP is still more generously funded than Plaid Cymru which
has reported 47 donations of £283,045.86. Of these 31 have been provided by public
funds (Short money and policy development grants), these accounting for
£175,079.05. This means that only £100,000 is provided by private donors, of which
£29,450.00 was provided as a non cash donation by a company (Splitside Ltd) in the
form of a computer software system. Plaid Cymru received two cash donations of
£10,000 and another of £7,000. Otherwise all donations were less than £5,000, with
the exception of a bequest of £33,342.47.

Conclusion

The funding of political parties has been transformed by the Political Parties,
Elections and Referendums Act 2000. Foreign donations are now forbidden, corpo-
rate donations are highly regulated and much diminished, and the political parties
are subject to tough accountability measures in relation to donations. But the prob-
lems of funding have not been fully resolved, as political practice develops some
steps ahead of the regulators. There is the question of large donations and the ques-
tion of allegations (all unsubstantiated) about cash for access, cash for favours, and
cash for honours which have not been completely driven from the system. So far as
the latter question (access, favours and honours) is concerned, the Labour Party has
taken steps to minimise problems by way of self-regulatory internal reforms, but the
government may need to do more. The investigation of the Drayson donations by
the National Audit Office was a good example of how questions raised by political
donations cannot be resolved by legislation or party funding law alone. With this in
mind:

● So far as access is concerned, civil service guidance regulates the relationship

between civil servants and lobbyists.69 But there is no corresponding provision
of the Ministerial Code dealing with access to ministers by lobbyists, party
donors or newspaper proprietors.70
● So far as political honours are concerned, this problem will not be resolved
while party leaders have a monopoly on who is to be nominated to represent
the parties in the House of Lords.71 This is a problem which is inextricably
bound up with another festering sore, namely Lords’ reform.
69
See Cabinet Office, Guidance for Civil Servants—Contact with Lobbyists, www.cabinet
office.gov.uk
70
For the Ministerial Code, see www.cabinetoffice.gov.uk
71
This is despite legislation that makes it unlawful to offer money for a peerage or to offer a peer-
age for money: Honours (Prevention of Abuses) Act 1925.
 The Disclosure of Political Donations in Britain 75

So far as the large donations are concerned, this is a problem which needs to
be addressed for a number of reasons. There are two ways by which this might be
done. The first is by further regulation which bans such donations. This could be
done by introducing a limit on the amount which any donor may give to a polit-
ical party in any one year.72 But as we have seen this option was rejected by the
Neill Committee as recently as 1998. In addition to the reasons already consid-
ered, the Committee cited the problem of compliance, observing that ‘the United
States of America strikes us as an example of a well-developed system which none
the less suffers from frequent incidents of evasion’.73 The Committee was unwill-
ing ‘to propose arrangements which could prove disproportionately cumbersome
to enforce’.74 Contribution caps of this kind nevertheless operate in many countries
other than the United States (though by no means all comparable democracies
have adopted this form of regulation), and such limits have just been introduced
into Canada with personal donors now limited to $5,000 annually. But as we have
seen there are problems in terms of enforcing such legislation, and it remains to be
seen whether these problems are overcome in Canada. There is also the question of
the impact on the parties of banning such donations in the United Kingdom, at a
time when they are already stretched as more obligations are piled upon them. It
would be difficult for the State to contemplate banning large donations without
providing alternative sources of revenue, as in Canada where large scale public
funding will replace the private money lost by the contribution cap.
But even if this was model was followed in the United Kingdom, a more diffi-
cult question relates to the impact which a limit on donations would have on
party structure and autonomy. The problem arises because of the diverse nature
of party organisation. It is a particular problem for the Labour Party which is an
association of individuals and organisations. The latter include affiliated trade
unions and socialist societies (such as the Fabian Society and the Society of
Labour Lawyers) which are not only donors to the party but are actually members
of the party in their organisational capacity.75 Indeed the party was founded by
trade unions and socialist societies and it was not until 1918 that it became pos-
sible to be an individual member of the party. As members of the party, trade
unions and socialist societies are integral parts of its constitution—with rights of
participation in the election of party leader and rights of representation on the
National Executive Committee, at Conference (which meets annually) and on the
National Policy Forum. These rights of participation and representation are
weighted according to the size of the affiliated organisation, with larger unions
enjoying more formal influence than smaller unions.76 A limit on contributions
72
For an elegant argument for such an initiative, see J Rowbottom, ‘Political Donations and the
Democratic Process: Rationales for Reform’ [2002] PL 758.
73
Committee on Standards in Public Life, The Funding of Political Parties in the United Kingdom
(Cm 4057–I, 1998) para 6.9.
74
Ibid.
75
Membership of the Party is vested in the union not its members, who may also be individual
members of the party.
76
See L Minkin, The Contentious Alliance (Edinburgh, Edinburgh University Press, 1992) for a full
account.
76 KD Ewing

would undermine this arrangement and would render unlawful the existing con-
stitutional structure of the Labour Party.77 That would be a step too far: it is not
the business of the State to tell political parties how they are to be organised or
who their members may be. Ultimately that is a responsibility of the electorate. It
would be possible to limit large personal donations while leaving the current
arrangements relating to the Labour Party unchanged. But that would create
other problems and inequities, and is not a response that it likely to be attractive
to the other parties.78 The structural realities of the British party system suggest
that the solution to the donations problem may have to be subtle and indirect: self
restraint encouraged by greater State support for core party activities and further
reductions of the electoral spending limits, in both cases to reduce the need for
the sugar daddies.

77
For further consideration of this issue, see KD Ewing, Trade Unions, the Labour Party and Political
Funding (London, Catalyst, 2002).
78
Contrast G Orr and JC Tham, Submission to the Joint Standing Committee on Electoral Matters,
Inquiry into Electoral Funding and Disclosure (2004).
 5
Access to the Airwaves and Equality:
The Case against Political Advertising
on the Broadcast Media
JACOB ROWBOTTOM

Introduction
COMMERCIALLY PURCHASED POLITICAL advertisements have never been
permitted on the UK broadcast media. While the ban may shock lawyers in other
jurisdictions, it is a longstanding feature of UK politics central to limiting the cost
of elections and widely accepted by politicians and broadcasters. However, a recent
decision by the European Court of Human Rights has suggested the ban may vio-
late Article 10 of the ECHR and called its justifications into question.1 This chapter
will defend the ban on the grounds of political equality, that wealthy groups and
individuals should not have disproportionate opportunity to advance their views on
the broadcast media. The Strasbourg Court’s decision and the justifications for the
ban will be examined. While a case can be made for some direct access to television
and radio by political groups, commercially purchased advertisements would do lit-
tle to bring new points of view into the public domain or include new participants
in political deliberation. While lifting the ban may seem to permit greater freedom
of expression, this chapter will argue that lifting the ban would not provide equal
opportunities for expression and could be more harmful to the democratic process.
The ban on advertising does not mean direct unmediated access is prohibited.
Political parties are granted direct access through party political and election
broadcasts that are distinct from advertisements in length and frequency, are pre-
ceded by an announcement and listed like a television programme. The party
broadcasts began as part of the BBC’s commitment to public service broadcast-
ing, at a time when all advertisements were prohibited on television and radio.2
1
VgT Verein gegen Tierfabriken v Switzerland (2002) 34 EHRR 4.
2
For a more detailed background on political and election broadcasting, see Electoral Commission
Discussion Paper, Party Political Broadcasting Review 2001–2 (2001).
78 Jacob Rowbottom

When commercial television was launched in 1956, the distinction was drawn
between commercial and political advertisements.3 Since then, the party political
and election broadcasts have been seen to reduce the harsh impact of the ban on
political advertising. The broadcasts no longer resemble current affairs pro-
grammes running to 20 or 30 minutes as they did in the 1950s and 1960s.4 While
still distinct from advertisements, the two have come closer in format and length
with no party broadcast running to more than 5 minutes in the 2001 general elec-
tion.5
The major political parties and broadcasters have largely accepted the ban on
advertisements and the provision of time to the parties.6 On the most recent
enactment of the ban, the Secretary of State for Culture, Media and Sport, Tessa
Jowell, explained that it aims to protect political equality:

By denying powerful interests the chance to skew political debate, the current ban
safeguards the public and democratic debate, and protects the impartiality of broad-
casters.7

Broadcasters are under a duty of balance and impartiality in political coverage.

While this does not mean all political parties or points of view receive equal time,
the lifting of the ban would undermine the balance by tilting political coverage in
favour of those able and willing to pay. By outspending the campaigns with a com-
peting point of view, an interest group with a wealthy backer could ensure their
message is aired more frequently and to a wider range of people. For example, if an
interest group wished to broadcast an advert highlighting the need for stronger reg-
ulations against pollution, those industries with a commercial interest against such
regulations could simply respond with a flood of advertisements promoting their
interest. Those industries would undoubtedly have a greater pool of resources for
such advertising. While the interest group may have the opportunity to broadcast its
view, it will often be in a weaker position to do so. However, it is not just that polit-
ical debate would become unbalanced, some groups would remain excluded due to
the high cost of television advertising. A single 30-second advert in the middle of
Coronation Street costs over £80,000.8 The opportunities for expression generated
by lifting the ban would therefore be limited to those with sufficient resources.
Despite strong support for the ban, its future is uncertain. Following a
2001 decision of the European Court of Human Rights that a similar ban in
Switzerland violates Article 10, the Minister introducing the Communications Act
3
Television Act 1954, sch 2.
4
For an account of the techniques of political broadcasting on television and radio, see M
Rosenbaum, From Soapbox to Soundbite (Basingstoke, Macmillan, 1997) ch 3.
5
M Harrison, ‘Politics on the Air’ in D Butler and D Kavanagh (eds), The British General Election
of 2001 (Basingstoke, Palgrave, 2002).
6
The Fifth Report of the Committee on Standards in Public Life, The Funding of Political Parties in
the United Kingdom (Cm 4057, 1998) (the Neill Report) para 13.5.
7
HC Deb, vol 395, col 788 (3 December 2002).
8
How to Advertise with ITV, p20 <http://www.itvsales.com/itv/export/download/pdf/1380v5_
ITV_AdvertGuideFINI.pdf >, last accessed 20 April 2005.
 The Case against Political Advertising on the Broadcast Media 79

2003, which maintains the ban, was unable to make a statement of compatibility
with the Human Rights Act and made a statement under section 19(1)(b) instead.9
However, the government does not accept the ban is a violation of Article 10 and
promises to make a robust defence of the ban if it is challenged in either the
domestic or Strasbourg Court.

Political Advertising and Article 10

Supporting the government’s position, earlier Strasbourg decisions on similar issues

suggest the ban stands a good chance of surviving an Article 10 challenge.10 In 1971,
an individual challenged the ban after the BBC and independent broadcasters
refused to grant an organisation access to television to broadcast its views.11 The
European Commission on Human Rights held that Article 10 does not require every
individual or organisation to have access to the television to advance a point of
view.12 The Commission relied on the provision in Article 10(1) that permits the
licensing of broadcasting,13 so long as any interference with expression rights
advances a legitimate aim under Article 10(2).14 In contrast to the US and Australian
courts,15 the Strasbourg Court has held that expression can be restricted for the pur-
pose of furthering political equality and preventing any person or group gaining a
political advantage through wealth.16 So assuming that the ban serves a legitimate
aim, the remaining question is whether the ban is proportionate to that aim. The
decision in X and Association of Z that Article 10 does not require universal access
to television does not mean a ban on all political advertisements will necessarily be
consistent with Article 10. However, European jurisprudence has previously been
tolerant of bans on advertising limited to particular types of media, for example as
part of maintaining professional standards.17 When political expression has been
banned in one forum, the presence of alternative forums or media, no matter how
qualitatively different, has led to the Strasbourg Court finding the restriction to be
proportionate.18 The ban involves a difficult balance of interests on which different
countries in Europe take different approaches, which would also suggest a wide
margin of appreciation. For all these reasons, one would expect the Strasbourg
Court to find the ban on political adverts to be consistent with Article 10.
9
HC Deb, vol 395, col 787 (3 December 2002).
10
For a similar view see Neill Report, above n 6, paras 13.8–13.11.
11
X and Association of Z v United Kingdom (1971) 38 CD 86. See also Huggett v United Kingdom
(1995) 20 EHRR CD104.
12
X and Association of L v United Kingdom (1971) 38 CD 86 at 88.
13
Ibid at 89.
14
Groppera Radio v Switzerland (1990) 12 EHRR 321.
15
See Buckley v Valeo (1976) 424 US 1 and Australian Capital Television Pty Co Ltd v Commonwealth
(1992) 177 CLR 106. The distinct approaches are noted in Joint Committee on Human Rights, 19th
Report of Session 2001–02, HL Paper 149, HC 1102, para 63.
16
Bowman v United Kingdom (1998) 26 EHRR 1.
17
Casado Coca v Spain (1994) 18 EHRR 1; Colman v United Kingdom (1993) 18 EHRR 119.
18
Appleby v United Kingdom (2003) 37 EHRR 38.
80 Jacob Rowbottom

With this background, the decision of the Strasbourg Court in Tierfabriken is

surprising. The court rejected the argument that in refusing the advertisement the
broadcaster was merely exercising its contractual freedom, and accepted that pos-
itive protection may sometimes be required by the Convention. However, this
was not decisive as the statutory ban on political adverts clearly engaged the
Convention right. The Court followed the earlier cases in finding the statute pur-
sued a legitimate aim, accepting the danger of wealthy groups gaining control of
the media. However, as political speech was at stake, the Court found the margin
of appreciation to be reduced.19 That the ban was applied to broadcasting and not
to other types of media was taken to suggest that the goal of the ban is not partic-
ularly pressing.20 The Court also noted that the association wishing to advertise
was not a powerful financial group.21 Although alternative means were available to
broadcast the message, national TV was the only way to reach the whole country.
Consequently, the ban was found to be a violation of Article 10.
The decision in Tierfabriken contrasts with two recent decisions of the
Strasbourg Court. In Murphy v Ireland, a ban on religious advertising was held not
to be in breach of Article 10.22 On the issue of proportionality, the Court granted
a wider margin of appreciation to Member States on personal or moral questions
such as religion.23 Even though the ban was complete, the Court found that the
interference was limited as religious groups could advertise in other media and
advance their views on ordinary television programmes.24 While the advert in
question was to publicise a meeting and would not cause much offence itself, the
Court found it would be impracticable to filter adverts on a case-by-case basis.25
As Geddis has argued, the reasons given by the Court in Murphy can be applied to
Tierfabriken with equal force.26 In the political speech case of Appleby v UK, the
Strasbourg Court found that Article 10 did not require a group of leafleters to be
granted access to a private shopping mall. A positive obligation on the state to
provide the resources for expression only arises where the opportunities for
expression are otherwise destroyed.27 The impact on the expression right was held
to be limited as the applicants could distribute leaflets outside the shopping
mall and had access to newspapers and other media.28 Again, the willingness to
rely on alternative means to find the restriction proportionate contrasts with
Tierfabriken. Appleby and Tierfabriken are not directly analogous. Appleby is clos-
er to a refusal by a privately owned broadcaster or newspaper to carry a political
advertisement or point of view. However, both Tierfabriken and Appleby have the
19
VgT Verein gegen Tierfabriken, above n 1 at para 71.
20
Ibid at para 74.
21
Ibid.
22
Murphy v Ireland (2004) 38 EHRR 13.
23
Ibid at para 67.
24
Ibid at para 74.
25
Ibid at para 77.
26
A Geddis, ‘You Can’t Say “God” on the Radio: Freedom of Expression, Religious Advertising and
Broadcast Media After Murphy v Ireland’ [2004] European Human Rights Law Review 181.
27
Appleby, above n 18 at para 47.
28
Ibid at para 48.
 The Case against Political Advertising on the Broadcast Media 81

effect of restricting the opportunities for political expression to those with suffi-
cient property or wealth. Member States can redress this by providing airtime or
access to property for speakers without sufficient resources, but this is not
required by the ECHR.
The decision in Tierfabriken does not mean the UK ban is automatically a
violation of Article 10. The Strasbourg Court noted that a prohibition of political
advertising might be compatible with the requirements of Article 10 in other cir-
cumstances.29 This caveat gives some scope for the UK courts and the government
to distinguish the UK system from that in Switzerland. Some members of the House
of Lords have hinted at a reluctance to follow the approach taken in Tierfabriken. In
Prolife Alliance, Lord Walker stated that the Strasbourg Court’s decision ‘does not,
with respect, give full or clear reasons for what seems to be a far-reaching conclu-
sion’, and that the principle of X and Association of Z, that no one has an unfettered
right of access to broadcasting, still holds.30 While the UK courts do not recognise
any ‘right to antenna’, where access is granted to one group but denied to others
without justification the courts will intervene.31 That the UK courts have taken an
approach that recognises the need to regulate political broadcasting could be an
influential factor in any future litigation in Strasbourg. The European Court has in
the past been responsive to criticisms of decisions from the UK courts and has mod-
ified its approach to accommodate the objections.32 Such a dialogue between the
courts suggests that even if Tierfabriken cannot be distinguished from the UK ban,
the Strasbourg Court may limit the reach or modify their own jurisprudence in
accordance with the UK practice. With this possibility in mind, the remainder of
this chapter will examine the justifications for the ban and any alternative measures.

Political Ends and Objects

The ban applies to advertisements ‘by or on behalf of a body whose objects are
wholly or mainly of a political nature’ or ‘directed towards a political end’.33
Consequently, it appears that greater freedom is granted to commercial as
opposed to political expression. Given that both the UK and Strasbourg Courts
have repeatedly affirmed the importance of political expression, it may seem
strange to subject the political to stricter controls. The answer lies in what Lord
Walker has described as a ‘paradox’:

On the one hand, political discussion or debate is, of all forms of communication
protected by Article 10, accorded particular importance . . . But on the other hand,
29
VgT Verein Tierfabriken, above n 1 at para 75.
30
Prolife Alliance v BBC [2003] UKHL 23 at paras 128–9. See also Lord Hoffmann at para 64.
31
Ibid. See also the Privy Council decisions Benjamin v Minister of Information [2001] UKPC 8 and
Observer v Matthew [2001] UKPC 11.
32
See D Anderson, ‘The Law Lords and the European Courts’ in A Le Sueur (ed), Building the UK’s
New Supreme Court (Oxford, Oxford University Press, 2004) 208–12.
33
Communications Act 2003, s 321(2).
82 Jacob Rowbottom

there may be good reasons for imposing special restrictions, especially to prevent
those with the deepest pockets from exercising too much influence through the most
powerful and intrusive means of communication.34

However, this is not a paradox at all. The special restrictions imposed on political
speech reflect its importance. The regulation of political expression is not so much
to reduce political freedom, but to ensure political freedom is secured and shared
equally among participants. The importance of political speech means that it
should not be treated like a commodity that can be sold to those with sufficient
resources. The weight accorded to that form of expression therefore explains the
need for restrictions that further other democratic values. The importance of
political expression is based on self-government justifications that invoke values
that do not apply to commercial expression. In the marketplace for goods and
services, economic inequalities are accepted. However, even commercial advertis-
ers are not completely free, as the content and timing of commercial adverts are
regulated. With the distinct values underlying the political system, preserving
freedom of political expression requires regulation of a different kind.
Political campaigns are already subject to regulations not found in other
spheres. The goal of equality in the opportunities for political participation is
recognised by the spending limits imposed on political parties, referendum cam-
paigns and third parties. Consequently, even if the ban on political advertising is
lifted, political parties cannot spend unlimited amounts of money on advertise-
ments. The ban may therefore look like an unnecessary restriction devised at a
time when national political expenditures were unregulated. However, the ban on
political advertisements is what makes the system of political funding workable. If
political parties were expected to pay for broadcast advertisements, claims would
soon arise that the expenditure limits are set too low for an effective campaign.
The limits on expenditures could be challenged as a breach of Article 10, where
the European Court assesses funding restrictions in its context, including the cost
of advertising.35 Without raising the current expenditure limits, political parties
would not be able to purchase much airtime. However, even if the expenditure
limits remained in place, lifting the ban would create a demand among the parties
to buy the adverts, while restricting the supply of funds. The combination would
provide the parties with a strong incentive to find loopholes in the funding laws.
The party funding legislation also limits the potential for third parties to spend
money in support of a political party or candidate.36 While a third party may be
able to spend some funds on independent advertising, the expenditure limits
would prevent this occurring on a large scale on the broadcast media. However, if
the ban on political advertising were lifted, third parties would be able to spend
unlimited amounts on political advertisements that do not directly refer to a party
or politician. Andrew Scott, however, makes a distinction between advocacy

34
Prolife, above n 30, para 130.
35
Bowman, above n 16.
36
Political Parties, Elections and Referendum Act 2000, s 85.
 The Case against Political Advertising on the Broadcast Media 83

advertising that is issue centred and electoral advocacy that aims to influence the
outcome of an election.37 According to Scott, the concern of the party funding leg-
islation is limited to the latter, and the breadth of the current ban is not justified
by this concern.38 The ban clearly goes beyond party politics and election issues.
The Communications Act 2003 defines political objects and ends as: influencing
the outcome of elections or referendums; bringing about changes in the law;
influencing the policies or decisions of local or national governments, or any
other body whose public functions are conferred by law or international agree-
ment; influencing public opinion on a matter of public controversy, or promoting
the interests of any group or party organised for political ends.39 Scott proposes a
narrower definition that prohibits only party political but not issue advertise-
ments. While the boundary between the two can become blurred, Scott argues
that such a line could be drawn, for example prohibiting advertisements only
where it aligns with the proposals of a political party.40 This may still permit some
blurring, especially if the issue advertised is associated with a political party. For
example, an issue advert on the NHS may not be directly aligned with a specific
line in a party’s election manifesto, but such advertising on the issue may direct
the political agenda onto what is perceived to be a Labour strength. Similarly, the
position taken may be associated with a political party even though there is no
official party line. For example, a political party may allow a free vote on a moral
issue, but it is well known how the two parties are likely to divide. Rather than
attempting to draw a line between those types of advert that are permissible and
those that are not, it would be easier and clearer to maintain the ban on political
advertisements. This at least eliminates the risk of limits on electoral advocacy
being evaded through a blurred boundary.
A more important objection to the division between party and issue advocacy,
is that the values of political equality are not just present in electoral politics.
Debate outside the formal political process should not be influenced by money
either. This is not to suggest that political equality requires expenditure limits on
the activities of interest groups, but rather that the opportunities to persuade the
public on political issues through the broadcast media should not depend on
wealth. The problem with lifting the ban on political advertisements would be to
allow those groups with the most money to gain greater coverage than their oppo-
nents.
The difficulty with this argument is that party politics enjoys a privileged posi-
tion, compared with political groups operating outside the parliamentary model
of politics.41 Party politics enjoys more coverage in the news and major parties
have direct access through political and election broadcasts, all of which mitigate
37
A Scott, ‘A Monstrous and Unjustifiable Infringement?: Political Expression and the Broadcasting
Ban on Advocacy Advertising’ (2003) 66 Modern Law Review 224 at 241.
38
Ibid.
39
Communications Act 2003 s 321(3).
40
Scott, above n 37.
41
A Boyle, ‘Political Broadcasting, Fairness and Administrative Law’ [1986] Public Law 562 at 574
and 581–2.
84 Jacob Rowbottom

the harshness of the ban. Critics of the ban have therefore argued that it effective-
ly excludes many interest groups and good causes from advancing their case on
the broadcast media at all.42 When the ban was discussed in Parliament in 1990,
two amendments were proposed to allow groups such as Friends of the Earth and
Greenpeace to advertise.43 The issue came before the courts when the Radio
Authority refused an advert by Amnesty International on the grounds that its
objects were political. While the Court of Appeal upheld the Radio Authority’s
decision, the formula devised to determine whether an organisation is ‘wholly or
mainly’ political has since been relied on to permit Amnesty advertising after re-
assessing the objectives of the organisation.44 While the decision has been criti-
cised for failing to narrowly construe the provision,45 the broader definition of
political has since been confirmed and clarified in the Communications Act.
However, the objection that this definition still stops some good causes advertis-
ing merely isolates one particular consequence of the ban. As Kennedy LJ
explained in the Divisional Court in Bull:

Many people, particularly lawyers, admire the work of British Amnesty, and the ded-
ication of those who work for it. But it is worth recognising that something that may
appear to be an unnecessary restriction upon a good cause could also usefully
restrain something manifestly less worthy.46

For example, the broad definition of political stopped Brian Souter, the owner of
Stagecoach buses and at that time Scotland’s richest man, broadcasting an advert
as part of his ‘Keep the Clause’ campaign in 2000.47 Without the ban, the campaign
would have gained access to the airwaves solely as a result of the estimated
£500,000 that Mr Souter was willing to spend. The example of Mr Souter high-
lights the danger of one extremely wealthy individual being able to pick his or her
pet issues and force them onto the political agenda. Even with the ban on broad-
cast advertising he was able to generate a great deal of publicity. However, the ban
at least acted as a restraint on this activity. That the broad reach of the ban applies
to well-established groups such as Greenpeace is merely the other side of the ban.
If access for such groups is thought to be necessary, then channels other than pur-
chased advertisements should be considered.
Even if political expression in the broad sense requires some regulation for
political equality, Professor Barendt argues measures short of an outright ban are
42
Paul Foot, ‘Tortuous Drivel from Ministry of Truth’, The Guardian, 1 August 1994; G Monbiot,
Captive State (Basingstoke, Macmillan, 2000) 337–42.
43
Robin Corbett MP and Robert Maclennan MP proposed the amendments, The Official Report of
Standing Committee F, The Broadcasting Bill, 30 January 1990, cols 425–9.
44
R v Radio Authority, Ex parte Bull [1998] QB 294 (CA), Brooke LJ at 319–22.
45
D Feldman and J Stevens, ‘Broadcasting advertisements by bodies with political objects, judicial
review, and the influence of charities law’ [1997] Public Law 615.
46
R v Radio Authority, Ex parte Bull [1996] 1 QB 169 (DC) at 187.
47
‘Keep the Clause advert banned by TV watchdog’ The Sunday Times, 6 February 2000. The cam-
paign sought to persuade the Scottish Assembly to keep Clause 28 that bans the promotion of homo-
sexuality in schools. The campaign continued with adverts on other media and even held its own
private referendum on the issue.
 The Case against Political Advertising on the Broadcast Media 85

sufficient. On the argument that the ban is necessary to stop a wealthy group
dominating the airwaves, Barendt responds:

This is unconvincing. It is perfectly possible to impose limits on the duration and

frequency of, and on the charges for, such advertisements, so that some time could
be afforded by less well-off groups.48

In order to allow access by less well off groups, the charges for broadcast advertis-
ing, especially television, would need to be severely limited. If not, minor groups
and parties would only be able to purchase advertisements on stations with a
smaller audience and not at peak times. In Germany, while political advertise-
ments in the 1998 elections were sold for 45 per cent of the commercial rate, only
the major political parties had the resources to take up this offer.49 If the cost of
political advertisements is set considerably lower than commercial advertise-
ments, broadcasters will be less willing to accept such adverts. Broadcasters’ would
lose revenue from advertising due to the cut price, and consequently would pre-
fer to limit the time allocated to such adverts or receive compensation from the
state. If this is the case then it may be just as easy to take wealth out of the equa-
tion and require free access time.
If the price of advertisements were to be lowered to make broadcasts accessible
to more groups, the demand for time would be far greater than the supply. In
order to fulfil the duty of impartiality and balance, Barendt states, advertisements
could not be allocated on a first come first served basis. The regulation of this type
of advertisement would require broadcasters to decide issues of allocation to pre-
serve balance and impartiality, as they do with party election broadcasts. This
could be difficult where one group produces an advert, but those advocating an
opposing point of view cannot afford to meet these reduced costs. Even where
various points of view are able to advertise, it would still have to be decided
whether balance is to be achieved by giving equality to points of view on both
sides of an issue or by giving equal time to different organisations. Such questions
are not clear cut, especially when most issues do not simply have two sides.
If rates for advertising were cut, effectively to subsidise political speech, and if
issues of allocation were to be decided, then it would not be so far from giving free
airtime. This could be done by requiring the provision of free access to short
broadcasts as a condition of granting broadcasting licences. The administrative
difficulties and cost to the broadcaster would not be much greater than with the
regulated advertisements Barendt proposes. The difficult issue with free access
would be deciding how to allocate the broadcasting time. This could be done if a
group presents a sufficient number of signatures, has a large membership, or has
a substantial level of expertise. All of these methods are not perfect, but are at least

48
E Barendt, Broadcasting Law: A Comparative Study (Oxford, Oxford University Press, 1993) 169.
See also the evidence of Professor Barendt to the Joint Committee on the Draft Communications Bill,
HL Paper 169-II HC Paper 876-II, 17 June 2002.
49
Electoral Commission Discussion Paper, above n 2, paras 6.14–6.16.
86 Jacob Rowbottom

preferable to wealth determining access. If the ban on political advertising is

thought to be so unjustifiable a restriction on expression, then these questions will
need to be addressed. If it is thought to be too great an imposition on broadcast-
ers or raises too many problematic issues, then the ban should remain in place.

Do Political Advertisements Generate

an Advantage?

The argument advanced so far has assumed that lifting the ban would give an
unfair advantage to wealthy groups and individuals. However, Andrew Scott
challenges this assumption and argues that political adverts do not automati-
cally convert people’s opinions.50 The message broadcast has to be persuasive to
have any influence. Invoking the marketplace of ideas, Scott argues that the vast
range of alternative sources of information will ensure that any misleading or
weak arguments will be unmasked.51 However, while advertising does not guar-
antee persuasion and some campaigns can backfire, in this marketplace of ideas
the different sources of information are hardly on a level playing field. This
comes back to the qualitative differences that make the broadcast media so
powerful and influential. A newspaper commentary criticising an advertise-
ment is hardly likely to reach the same audience as an advert broadcast on
prime time television. In the US, most major newspapers scrutinise the content
of political advertisements, but this has not curbed the influence of those
advertisements or raised the quality of the content. In so far as the effectiveness
of advertising depends on the content and message, this again will give some
advantage to the wealthiest groups. Those groups will have the resources not
only to employ the most skilled advertisers, but also to employ the pollsters and
market research to ensure that the advertisement reaches the target audience.
Again, this does not work as a guarantee, but it does give those with greater
resources an advantage.
Whether advertisements influence the public is difficult to assess. One obvious
point is that if it did not have any effect at all, then no one would bother to invest
so much in advertising. The influence is difficult to assess as an advert can have
different effects and work in subtle ways. A political advocacy advert would not
simply list the facts of an argument and respond to counterarguments. This can
be seen with the development of party election broadcasts. Where once a Minister
would sit at a desk explaining policies and delivering facts and figures, a political
broadcast is now more likely to feature ordinary people (played by actors) indi-
cating their sympathy for a particular policy or party. Similarly, political adverts
would rely on anecdotes or imagery, which are harder to test in the marketplace
of ideas.
50
Scott, above n 37 at 237.
51
Scott, above n 37 at 239.
 The Case against Political Advertising on the Broadcast Media 87

Empirical studies have suggested that television has at best a limited role in
influencing voting behaviour, but that it provides voters with information.52
However, a study of the 1997 election has suggested that the ‘direction’ of the tele-
vision coverage, whether a party is portrayed favourably or unfavourably, has
some impact on voter preferences.53 Such empirical research on the effect of the
media will always be problematic, as the media is just one factor that impacts on
voting decisions, its influence may develop over a long period of time and will
vary according to the audience and type of programme. However, even if the
broadcast media has had limited influence so far, this is a product of the regula-
tory environment that requires balance and impartiality. Lifting the ban on polit-
ical advertising would alter this environment and potentially alter the influence of
the broadcast media. The coverage of politics in the advertisements will not be
governed by rules of impartiality and each advertisement would advocate one
point of view. Television would therefore play a greater role in the direct persua-
sion, rather than informing, of voters.54
Apart from studies of the impact of overall political coverage on television, sev-
eral studies have attempted to examine whether party election broadcasts influ-
ence voters, which is probably the closest type of broadcast comparable to the
political and issue adverts that would be available if the ban were lifted. Some
studies have suggested that election broadcasts help smaller parties, such as the
Liberal Democrats.55 This may be as the free airtime helps to overcome the lack of
attention in the ordinary media coverage. However, research studying party polit-
ical broadcasts in the mid-1980s suggests the SDP/Liberal Alliance broadcasts had
less impact on voter attitude.56 This finding is consistent with the argument that
with fewer resources, smaller parties will find it harder to resort to the slick adver-
tising that has become the norm for the major political parties.57 The research
seems inconclusive on the effect of these broadcasts. This is partly because at
election times voters are provided with information from broadcast and non-
broadcast media alike, and the participants are already well known to the elec-
torate with their strengths and weaknesses defined. If the ban on political adverts

52
See W Miller, Media and Voters (Oxford, Clarendon, 1991). For a general discussion of the
research see, J Street, Mass Media, Politics and Democracy (Basingstoke, Palgrave, 2001) 88–93, and R
Negrine, Politics and the Mass Media in Britain (London, Routledge, 1994) 156–78.
53
P Norris, J Curtice, D Sanders, M Scammell and H Semetko, On Message, Communicating the
Campaign (London, SAGE, 1999).
54
In his study of the 1987 election, Miller, above n 52, found newspapers to have greater influence
on the preferences of the electorate. Political advertisements would be similar to the more partisan
coverage currently found in newspapers and potentially influential. See also Norris et al, above n 53 on
the influence of ‘directional’ coverage on television.
55
CJ Pattie and RJ Johnston ‘Assessing the Television Campaign: The Impact of Party Election
Broadcasting on Voters’ Opinions in the 1997 British General Election’ (2002) 19 Political
Communications 333 at 350; JG Blumler and D McQuail, Television in politics: Its uses and influence
(London, Faber and Faber, 1968).
56
M Wober, ‘Party political and election broadcasts, 1985–87: Their perceived attributes and impact
on upon voters’ in I Crewe and M Harrop (eds), Political Communications: The General Election cam-
paign of 1987 (Cambridge, Cambridge University Press, 1989).
57
Rosenbaum, above n 4 at 68.
88 Jacob Rowbottom

was lifted, then such adverts could become more influential for those groups and
issues that are less well known, just as political adverts are used in the US to gain
name recognition for the challenging candidates. The use of adverts may have a
role to play in bringing less well-known groups and issues to the public’s atten-
tion. However, these smaller groups would be the most likely to be excluded by the
cost of advertising.
The research also indicates that advertisements become more influential if not
balanced with broadcasts on the opposing point of view. A study based on statis-
tics from the 1997 election showed that party election broadcasts had an impact
on the perceptions of which party would be stronger in government. However,
when viewers saw an opposing party’s broadcast, this influence was cancelled
out.58 Such a finding suggests that the balance in the allocation of party election
broadcasts helps to limit the influence of the broadcasts. If political adverts could
be purchased, then a danger exists that this balance would be lost, where those
groups without sufficient resources could not counteract the advantage gained by
their opponents in advertising. As above, a change in the regulatory environment
could change the scope for the media to influence voters.
A further way in which political adverts could be used to buy influence is not
directly through persuading the public, but by agenda setting. Buying more adver-
tisements for one point of view will create an advantage by bringing a political
issue to the public and media attention. Partisan groups would be able to purchase
adverts that ensure the issues on the media agenda are associated with a strength
or weakness of a particular party. Similarly, an interest group would focus on an
aspect of an issue that advances their case best and frames the debate on their own
terms. According to this argument, the impact of a political advertisement can go
beyond the 30 or 60 seconds of broadcast time. The capacity of political parties to
set the media’s agenda and the impact of the media’s agenda on voter attitudes in
the UK has been the subject of empirical research.59 While the findings of the
studies are not conclusive, the lifting of a ban will at least give greater opportuni-
ties to set both the media and the public agenda. In the past, attempts have been
made by political parties and interest groups to set the political agenda through
press conferences or staged events. In election campaigns, the significance of a
new billboard poster campaign is not the number of posters that will actually be
seen, but the launch of the poster being covered on television news and having the
political message repeated into thousands of homes. While the media views such
promotions and events sceptically, direct advertising on political issues will
be harder to ignore. This can be seen in the US where some controversial broad-
casts become a news story and are repeated on current affairs programmes and

58
Pattie and Johnston, above n 55 at 350.
59
On the role of parties setting the media agenda, compare H Brandenburg, ‘Who Follows Whom?
The Impact of Parties on Media Agenda Formation in the 1997 British General Election Campaign’
(2002) 7 Harvard International Journal of Press/Politics 34, with Norris et al, above n 53. On the role
of the media setting the agenda of the electorate, see Norris et al, above n 53 and Miller, above n 52,
ch 7.
 The Case against Political Advertising on the Broadcast Media 89

discussed at length. Giving more opportunities to set the political agenda to

groups other than politicians and the media may have benefits and will be dis-
cussed below, but the potential to influence the political agenda should not be
based on purchasing power.
Political advertisements may be influential in attempting to persuade elected
officials and policy makers. If a policy is likely to trigger a negative response in the
form of advertisements, the legislature or executive may be discouraged from pur-
suing that policy. If the effect of the advert is to bring unpopular policies to the
public’s attention or require the office holder to justify the existing policy, this is
no bad thing. Such an impact reflects a pluralist view in which advertisements
made by interest groups represent the views of citizens outside the formal politi-
cal channels. If a group such as Greenpeace advertises against a policy, it does not
just provide information, it shows that interest group’s strength of feeling against
that particular policy. Such an advertisement would register the unpopularity of
that policy with a section of society, and the policy maker targeted would take this
into account. The advertisement can therefore serve a broader purpose as part of
a lobbying campaign. The difficulty with this arises when the opportunities to
engage in such lobbying are dependent on wealth. It is similar to the objection of
using cash to get access to ministers, that politicians should not be responsive only
to wealthy groups. However, in this case the access is not from a meeting with the
policy maker, but through a direct appeal on television.
The value of expression through advertising outlined above is not solely instru-
mental in informing and shaping the opinions of voters and policy makers. Political
expression has an intrinsic value as an act of participation. Giving people the chance
to voice their opinions and know that they are being heard enhances the sense of
inclusion in the democratic process. Even if this does not lead to a change in public
opinion or government policy, it allows people to feel that their side of the argument
has been put across. If, however, the avenue of expression is open only to those with
sufficient funds, those without the money to buy the advertisements will feel exclud-
ed from participating in the political process. If lifting the ban would permit wealthy
individuals and businesses to advertise for policy changes that serve their self-inter-
est, only an elite would be able to participate fully in the political process. Looking at
the problem from this perspective takes attention away from the question of whether
the money buys actual influence, and focuses on the distribution of opportunities for
participation. None of this is to say that every individual has a right to access the air-
waves, but that the opportunities to put forward the best case for a particular point
of view should not be based on the ability to pay.

Why the Broadcast Media?

In Tierfabriken, the ECtHR was influenced by the absence of a similar ban on the
non-broadcast media in Switzerland. The same is true in the UK. The reasoning
90 Jacob Rowbottom

of the Strasbourg Court suggests that the ban should be applied across all media
or not applied at all. The problem with the Court’s reasoning is that if the ban is
applied across all media, and therefore consistent in principle, fewer alternative
outlets for expression would be available. Such a universal ban would thereby
constitute greater interference and potentially violate Article 10. The Neill
Committee looked at the historical context to justify the current distinction
between broadcast and print media.60 Billboard advertisements have long been a
part of UK elections, whereas political advertisements have never been allowed
on the broadcast media. The Committee also found that a ban on newspaper
advertisements would force parties to rely on direct mailing or the mediated
newspaper coverage. One solution would be to extend the ban to other forms of
media, but allow free access to the print media for parties and interest groups.
The Committee considered this in relation to billboard advertising and conclud-
ed that it would be too costly for a state subsidy to compensate the billboard
owners for lost revenue as a result of the free access. The Committee’s conclu-
sions reflect a pragmatic compromise. Permitting paid adverts on billboards and
in newspapers offsets some of the harsher consequences of the ban on the broad-
cast media. The possibility of buying advertisements elsewhere provides some
alternative means for the expression. The distinction drawn by the Committee
may not seem consistent in principle, but preserves the working of the system
that avoids an all or nothing approach.
The absence of a ban on newspaper or billboard advertisements may mitigate,
but does not balance, the lack of direct access to the broadcast media. The quali-
tative difference of the broadcast media suggests that the two types of media are
not alternatives to one another. This qualitative difference provides one justifica-
tion for the different regulatory regimes, in particular the intrusive nature of the
broadcast media. McCullough J in the Divisional Court in Ex parte Bull explained:

The spoken word is both more compelling and more intrusive than the written. The
newspaper reader can immediately turn the page. If the listener switches off he
might miss the resumption of his programme, and meanwhile he has to wait.61

This argument recognises that messages carried on the broadcast media are much
harder to avoid. This is reflected in the current system for political broadcasts that
are preceded by an announcement and are listed in the television schedules. A
compelling argument against the concern with intrusiveness is that television
already allows commercial and other news items to be broadcast into a person’s
home.62 As explained above, different considerations may apply to political
expression where the need for a level playing field is recognised. Furthermore,
commercial advertisements are strictly regulated to ensure the potent media is not
abused. The restrictions on commercial advertisements would be hard to apply to

60
Neill Report, above n 6, paras 13.23–13.33.
61
Ex parte Bull, above n 46 at 192.
62
Scott, above n 37.
 The Case against Political Advertising on the Broadcast Media 91

political advertisements.63 The ban avoids the difficult question of how the con-
tent and timing of political advertisements should be regulated to meet the con-
cerns of intrusiveness.
When discussing the intrusiveness of the broadcast media, McCullough J stat-
ed that there is no right to subject the listener to opinions they are unwilling to
hear. The difficulty with this argument is that a democracy requires that people
hear opinions including those they do not agree with. Political debate must go
beyond merely preaching to the converted. This does not mean the speakers have
free reign to broadcast whatever they like whenever they like. The mediated news
coverage may therefore go some way to meeting the need to disseminate diverse
viewpoints. However, the stricter regulation of the broadcast media may be due
to its broader reach and its capacity to advance a message through sophisticated
and subtle techniques. As stated earlier, the effects of the broadcast media on the
audience are uncertain, and it is equally unclear if it is more effective than news-
papers in persuading people. Lifting the ban may alter the regulatory environ-
ment to permit television to play an even more influential role. While paying
for advertisements in newspapers and posters may not be ideal for reasons of
political equality, it has less potential to distort the democratic process than
broadcasts.
A major difference between the types of media is the cost. A 30 second advert
on national television is far more expensive than an advert in the national press.
Furthermore, broadcast media has much higher production costs than print
media. The consequence is that the economic barriers to the broadcast media are
far greater. If the ban is lifted the opportunities for expression will be open only
to the wealthiest groups. By contrast, in the print media, the lower cost of adver-
tising at least allows more groups to use this channel of expression. This is not to
say that unregulated advertising in print is unproblematic, it still means that
wealthier individuals and groups can advertise more frequently and more widely,
but that the problems of inequality are not as great as broadcast advertising.

Political Advertising as a Check on Inequality

The ban can be criticised from a different perspective, that rather than preserving
political equality it merely reinforces the inequalities in the existing system of
broadcasting. This section looks at the argument that political advertisements can
check the advantages granted to business, the media and government under the
current system.
Businesses are allowed to broadcast advertisements encouraging people to buy
their products. However, interest groups may be prevented from advertising to
63
The Electoral Commission recommended that the Code of Practice applied to commercial adver-
tisements should not be applied to newspaper and billboard advertisements, see Electoral
Commission, Political Advertising: Report and Recommendations (2004).
92 Jacob Rowbottom

advise the public not to buy products that, for example, have been manufactured
in sweatshops, if such an object comes under the broad definition of political.64
This highlights that the actions of businesses can have political consequences,
blurring the division between the economic and the political. While different val-
ues underlie each sphere, it is not clear when the application of those values is
appropriate. However, allowing commercially purchased political adverts would
not provide a remedy. The business would always be in a better position to ensure
their case is broadcast more frequently and to a wider audience. Furthermore,
those businesses could be more aggressive in pursuing their political agenda.
Going beyond advertisements solely for products, such businesses could begin to
use their adverts as part of a strategy in lobbying for changes in government pol-
icy. For example, it is easy to imagine an advert for alcoholic drinks that also hints
at the potential benefits of liberalising licensing laws. By dismantling the existing
framework of regulation, the interest groups that seek to put the case against big
business will be forced into a weaker position that will potentially harm their own
cause. This is not to say that such interest groups should be denied a place to voice
these concerns on the broadcast media, but that permitting commercially pur-
chased political advertisements is not the way.
An even broader argument may be made, that allowing commercial adverts has
a political effect in reinforcing people’s acceptance of the market economy and the
tendency to view the world as consumers. However, for as long as the economy is
organised through the market, the institutions of that system will inevitably have
such a reinforcing effect. This also has an effect on television programmes. In
order to secure the highest ratings, the broadcasters will need to develop pro-
grammes that not only get the largest audience, but whose audience consists of the
advertisers’ target. The broadcaster will have an incentive not to broadcast pro-
grammes that lose the target audience nor upset a regular advertiser. However,
such criticisms seem targeted at commercial television in general, rather than the
ban on political advertising. The tension between commercial television and the
public service rationale is not new, and no easy solution exists. Lifting the ban on
political advertisements does not provide a solution. While pressure groups would
broadcast the occasional advertisement, the airwaves would still be dominated by
businesses placing the same pressures on the broadcaster.65
A further consequence of the present system of regulation is that the broad-
caster’s editorial choices determine the political output on television. The ban on
political advertising maintains the broadcasters’ power by preventing political
material outside their editorial control being aired. While this power is held by a
small number of broadcasters, the coverage is dominated by a small number of
personalities. The opinions of journalists such as Andrew Marr seem to get more
airtime than those of politicians or interest group spokesmen.66 At a time when

64
Monbiot, above n 42.
65
In criticising the ban, Andrew Scott notes that political advertising would not give interest groups
a structural power over broadcasters, above n 37 at 237.
66
Harrison, above n 5 at 144.
 The Case against Political Advertising on the Broadcast Media 93

the influence of journalists is being increasingly questioned, direct and unmedi-

ated access to the airwaves by other sections of society may provide a remedy. On
this view, the public service broadcasting rationale is served not only through the
presentation of issues edited and mediated for impartiality, but also by allowing
multiple partisan opinions to be aired. How broadcasting can best provide cover-
age is still being debated and it is not conclusive that such direct access is the solu-
tion. However, even if direct access can offset the slant given by edited coverage by
broadcasters, it would be necessary to ensure that diverse views are represented
through such access rather than granting access only to those with the money to
buy the time.
The ban arguably creates an advantage for the party in government. During
election campaigns, broadcasters strain themselves to ensure the fair allocation of
time between parties, but even then the party in government will get a fraction
more coverage.67 Outside an election, the party in government inevitably gets
more time in current affairs coverage, as its actions are central to the issues and
events being reported. In addition to this, the government can use their resources
to provide public information about a policy or development. The line between
information and persuasion is hard to draw, and both Labour and Conservative
governments have been accused of abusing this avenue for partisan advantage.
While in Opposition, Tony Blair complained that government advertisements on
economic issues and privatisation were being used to promote policies ‘in a most
partisan and one-sided fashion’.68 At the same time, the Conservatives made sim-
ilar allegations about local government and prohibited local authorities from
publishing information designed to support a political party.69 Since gaining
power, Labour has been subject to similar allegations by the Conservatives.70
While this is not the place to consider which party is the worst offender, it seems
that information about government policies is required, but can potentially be
abused. Such information on new initiatives, even when not partisan, will put the
spotlight on the government’s latest policies. Furthermore, the capacity of the
government to use their central position to influence the media agenda is increas-
ingly sensitive. Much media coverage has focused on the rise of spin in which
politicians and their advisors develop close relationships with journalists and
offer privileged access in return for favourable coverage. The government is
increasingly aggressive in pushing favourable stories and ensuring negative issues
receive minimal coverage. The other side to this is that the government tends to
complain of media bias against them, with reporters focusing on failures or divi-
sions in the party. These issues may, however, point to the need for some direct
access to balance the media coverage, so groups outside of government can influ-
ence the media agenda and put across their point of view. This argument suggests

67
Harrison, above n 5 at 133–4.
68
‘Publicity or just propaganda?’ The Times, 25 April 1988.
69
Local Government Act 1986, s 2.
70
‘Taxpayer “footing Labour propaganda bill”’, The Daily Telegraph, 26 April 2001; ‘Labour is UK’s
biggest spender on ads’, The Independent, 13 August 2000.
94 Jacob Rowbottom

that if we are to be subjected to political advertisement in the form of government

‘infomercials’, then at least extend that opportunity to others.
If direct access to the broadcast media can offset the power of business, media
and government, it will take more than a simple lifting of the ban on political
advertisements. If the direct access has to be purchased, the political adverts may
reinforce rather than check the other sources of power. The danger is that if only
the wealthy groups can afford the access to the airwaves, the views in those adverts
may not conflict with those of the government. This is especially the case where
government policy already caters to the interests of the wealthy. Where this is the
case, those policies will be supported by a powerful combination of the govern-
ment’s advantage of incumbency, coverage by commercial broadcasters and
adverts purchased by wealthy groups. If access to the airwaves is open only to
those with sufficient resources, it is unlikely to provide a check.
The experience in Italy highlights such dangers when access to media, owner-
ship and government become aligned. Silvio Berlusconi is Italy’s richest man and
at the time of writing is Prime Minister. Berlusconi’s television company Mediaset
has a near monopoly on national commercial television, controlling three chan-
nels, Italia 1, Rete 4 and Canale 5. While Berlusconi emphasises that Mediaset
channels carry left-wing viewpoints and those critical of his government, the cov-
erage of politics on those channels nevertheless has a pro-Berlusconi slant. It is
hard to estimate what impact the use of the media had on the election campaigns,
but it has clearly been a major factor facilitating Berlusconi’s political successes
and political advertisements were central to the launch of his political career
in 1994. Just over two months before the elections in March 1994, Berlusconi
announced his entry into politics under his new political party Forza Italia. While
political advertisements could not be broadcast in the 30 days before the election,
before this ban took effect, Berlusconi bombarded viewers of his three commer-
cial channels with short advertisements promoting himself and his party.71 For the
general and European elections in 1994 combined, Forza Italia spent almost 70
per cent of television advertising expenditures by political parties.72 The use of the
media and resources would have been crucial at that early stage in Berlusconi’s
political career in defining his political identity and message to the electorate. The
use of his own media outlets coupled with advertising enabled him to step
into the political arena and capitalise on the disillusionment with the established
political parties that followed a number of corruption scandals. In the 2001
election, campaign regulations restricted the use of campaign advertisements,
forcing greater reliance on mediated coverage and on other types of media.73 The
71
G Mazzoleni, ‘Patterns and Effects of Recent Changes in Electoral Campaigning in Italy’ in D
Swanson and Paolo Mancini (eds), Politics, Media and Modern Democracy (London, Praeger, 1996)
198–201.
72
P Statham, ‘Berlusconi, the Media and the New Right in Italy’ (1996) 1 Harvard International
Journal of Press/Politics 87 at 94–5.
73
F Roncarolo, ‘Virtual clashes and political games: the campaign in the print and broadcast media’
in J Newell (ed), The Italian General Election of 2001: Berlusconi’s Victory (Manchester, Manchester
University Press, 2002) 150.
 The Case against Political Advertising on the Broadcast Media 95

restriction of political advertising does not create a level playing field, but it at
least closes off another opportunity for favourable coverage to be bought. While
the extent of this problem is specific to Italy, this example illustrates that far from
checking the broadcaster’s influence, political advertisements can reinforce that
influence where the broadcaster and advertiser share the same interests and view.
Since coming into power, Berlusconi has also gained the advantages of incum-
bency, extending his control of media to the state owned RAI television channels.
In the mid-1970s, the three public television channels were divided between the
parties so that one channel each was effectively allocated to the Christian
Democrats, the Socialists and the Communists. Under this system, the balance on
the public channels meant that whoever could gain the most favourable exposure
on the private channels through advertising or general coverage, would have an
advantage in the overall television coverage of politics. However, this system of
pluralism has since broken down, with the governing party attempting to assert
greater control over political coverage on the state owned channels. By appointing
allies onto the RAI board of administrators, Berlusconi has exerted indirect con-
trol over the presenters and programmes that appear on state television, which has
in some instances led to the removal of his major detractors from television.74
With the ownership of the Mediaset channels and the indirect control of RAI
channels, Berlusconi is able to influence the political coverage on channels with a
combined 90 per cent share of the audience. This concentration of power raises a
number of issues, but it is clear that political advertisements would not offset
Berlusconi’s advantage. Permitting political advertisements creates the danger of
a party backed by wealthy interests gaining power in a system where access to
political communications is determined partly by wealth. Once in power, the
advantages of incumbency and the advantages of wealth combine to help main-
tain the grip on office, placing challenging parties in a weaker position. The polit-
ical advertisements work to reinforce rather than check that power.

The Future of Political Broadcasting

With the proliferation of cable and satellite channels and the advance of other
forms of media, some have suggested that the current system of political broad-
casting will soon become outdated.75 So far the approach to these developments
has been to extend the ban on political advertisements to new channels. However,
due to the fragmentation of audiences fewer people see election broadcasts and
viewers can avoid news coverage altogether. That the existing forms of direct
access are becoming outdated does not mean the ban on political advertisements

74
P Ginsborg, Silvio Berlusconi: Television Power and Patrimony (London, Verso, 2004) 112–14; MJ
Bull, ‘Parliamentary Democracy in Italy’ (2004) 57 Parliamentary Affairs 550 at 562–3.
75
For a discussion of the ways to develop political broadcasts in the light of these changes, see The
Department of Culture, Media and Sport, Party Political Broadcasting: Public Consultation (2004).
96 Jacob Rowbottom

should be lifted. Other approaches could be taken to adapt the regulation to the
changing structure of the media. Extending the free political broadcasts to all chan-
nels may help solve this problem, although it would no doubt be unpopular with
those broadcasters.76 Alternatively, shorter but more frequently repeated political
broadcasts may help parties reach the voters.77 However, the difficulty with such a
proposal is that the line between political broadcasts and commercial advertisements
will be blurred. Shorter broadcasts may also take politics further down the road of
the soundbite and promote style over content.78 Strong arguments exist either way
and are beyond the scope of this chapter. It is, however, clear that as the media con-
tinues to change, the arrangements for political broadcasting must be continuously
reviewed. Any reforms should not be used to provide new opportunities for wealth
to disproportionately influence political debate and deliberation.

Conclusion

Following the decision in Tierfabriken, it is a matter of time before the ban on

political advertisements in the UK is challenged. However, this chapter has
attempted to show that the justification for the ban remains as strong as ever. Much
of this chapter has acknowledged the importance and power of the broadcast
media. Its qualities are distinct from other forms of communication and access can
be crucial to a point a view. At the same time, it is a limited resource. It is impos-
sible for every speaker to gain access to this media, especially for times when audi-
ence levels are high. Consequently, access to broadcasting can only ever be granted
to a limited number of viewpoints on a limited number of issues. The issue is how
to determine who will gain access. The argument in this chapter is simply that
wealth should not be the determining factor. Attempts to limit the role of wealth
by imposing time or expenditure limits are unlikely to be effective. The limits
would either still be so high that the least wealthy groups would remain excluded
or so low that too many groups could afford access. In the latter case, broadcasting
time would have to be allocated on some other basis. If limits are imposed on
the cost of advertising and such allocations are to be made, this will be little differ-
ent to establishing a system of free political access time to parties and interest
groups. The problem with this approach is that the basis for allocation will be con-
troversial and if the losses of the broadcaster are to be subsidised, it will be costly.
However, if the ban on political advertising really is thought to be an unjustifiable
restriction on freedom of expression, this will be the price of a system that opens
up the opportunities to broadcast to all sections of society regardless of wealth.
76
See Electoral Commission, Party Political Broadcasting: Report and Recommendations (2003) at
25–7.
77
Ibid at 31–3.
78
For an argument against such concerns, see M Scammell, ‘Political Advertising and the
Broadcasting Revolution’ [1990] Political Quarterly 200. See also, B Franklin, Packaging Politics
(London, Edward Arnold, 1994) 139–41.
 Part III
From State Regulation to
State Funding
 6
Political Finance Law in Australia
GRAEME ORR

The Spectre of Money Politics

Background
In common with other English-speaking polities, Australia has experienced a long
period of political stability. Although disaffection with the major parties has
increased over the past two decades, such that ‘minor’ parties and independents
routinely attract 15–20 per cent of the vote, a two-party system of government is
entrenched. But a predictable oscillation between the ‘major’ parties of govern-
ment—the Australian Labor Party (ALP) and the Liberal-National Coalition—
does not guarantee modesty. In common with most western democracies, electoral
politics in Australia has become unshackled from ideology and addicted to expen-
sive habits, including heavy reliance on television advertising, direct-mail strategies
and market research. In short, the usual features of the ‘permanent campaign’.
Major party politics has thus become big business. In the financial year encom-
passing the 2001 federal election, the conservative Coalition and the ALP report-
ed receipts of A$71.5 m and A$60.9 m respectively.1 It is in this context that the
spectre of money controlling politics excites concern and debate.
The view of Australia as a pioneer in the implementation and development of
electoral reforms is now something of an historical conceit.2 Parties for most of the
20th century hid beneath the radar of the common law. They typically remain
unincorporated associations, but in registering to control public funding and
secure ballot labels, both common and statutory law now treats them as justiciable

1
These figures cover monies raised for administration and policy development as well as electoral
campaigning; but do not necessarily include monies raised independently by local candidacies.
2
See A Brooks, ‘A Paragon of Democratic Virtues? The Development of the Commonwealth
Franchise’ (1993) 12 University of Tasmania Law Review 208 at 208–9 on the ‘myth’ of seamless enfran-
chisement. Compare M Sawer, ‘Pacemakers for the World?’ in M Sawer (ed), Elections: Full, Free and
Fair (Annandale, Federation Press, 2001).
100 Graeme Orr

and regulable entities.3 Political finance law in Australia, by international standards,

however, is decidedly laissez faire. Post-election there are disclosure obligations
covering donations and public funding. But the enforcement mechanisms for dis-
closure are flaccid and there are no limits on either the amounts or sources of polit-
ical donations or expenditure.
This chapter focuses on parliamentary politics, especially the national system.
Unsurprisingly, in a federation of six states and two internal, self-governing terri-
tories, political finance laws are a patchwork of difference and varied develop-
ment.4 For ease of reference, the key features of each parliamentary jurisdiction
are plotted in the appendicised table. It will be seen that, as well as the federal
regime, six of the eight states and territories have donation disclosure regimes,
and five have public funding.5
Outside the political elites, funding and disclosure laws attracted curiously
little scrutiny until recent times. There were occasional voices from the right
complaining about public funding,6 and dissident voices, usually from the left,
complaining of loopholes in the disclosure laws.7 Yet in 1995, a parliamentary
library report felt able to conclude ‘that the intent of the funding disclosure legis-
lation is being marginally vitiated by current practices but this is not a matter for
serious public concern (although the situation will have to be continuously moni-
tored)’ (emphasis added).8
In more recent years, however, even the chief authority, the Australian Electoral
Commission (the AEC, an independent and non-partisan agency) has anxiously
signalled such concern, even alarm, at the efficacy of the disclosure regime:

[I]f the disclosure provisions in the Electoral Act are to deliver transparency in the
financial relationships of political parties, candidates and others associated with
them, then a comprehensive review of the legislation and principles underpinning
the legislation is required.9

Academic researchers, too, are laying the groundwork for informed critique. For
some time, published work in the field was left largely to a single political scientist.10
3
S Tully, ‘Party Registration and Preselection: A Minefield for Electoral Administrators?’ in G Orr
et al (eds), Realising Democracy: Electoral Law in Australia (Annandale, Federation Press, 2003).
4
Even more so when local government is considered. Referenda finance law is also under-devel-
oped: G Orr, ‘The Conduct of Referenda and Plebiscites in Australia: A Legal Perspective’ (2000) 11
Public Law Review 117 at 123–4.
5
Victoria (2002) and the Northern Territory (2004) are the most recent. Western Australia and the
Northern Territory are unusual in imposing the stick of disclosure without the carrot of public fund-
ing.
6
Eg, I Farrow, ‘Politicians Inc’ (1995) 47(4) IPA Review 8.
7
Eg, D Meadows, ‘Open Election Funding or Hide and Seek’ (1988) 13 Legal Services Bulletin 65.
8
R Gerritsen, Election Funding Disclosure and Australian Politics: Debunking Some Myths,
(Parliamentary Research Service Paper No 21, 1995) 1.
9
AEC, ‘Submission to Joint Standing Committee on Electoral Matters Inquiry into Disclosure of
Donations to Political Parties and Candidates’, 26 April 2004, para 3.0, <http://www.aph.gov.au/house/
committee/em/donations/sub11.pdf> URL current as of 14 April 2005, a call it first made in 2001.
10
E Chaples, ‘Public Funding of Elections in Australia’ in HA Alexander (ed), Comparative Political
Finance in the 1980s (Cambridge, Cambridge University Press, 1989) 76.
 Political Finance Law in Australia 101

Since 2000, however, diverse works have appeared tracing the roots of the law,11 and
critiquing the disclosure regime and calling for limitations on political donations.12
A major research report into corporate donations has also been published.13
The field has not, however, been the subject of much litigation,14 and prosecu-
tions are exceedingly rare, with none on record since the mid 1990s. In part this
reflects a cooperative approach to enforcement and reporting by authorities. The
AEC, for resource and cultural reasons, considers itself more an administrator of
the law than an auditing or policing body: ‘The AEC believes that the major
responsibility for ensuring the timeliness and accuracy of disclosure returns lies
with [whoever completes] the return.’15 This also reflects difficulties in proving
intent in those instances of missing or misleading returns, given that some parties’
record keeping is sub-standard.
Nor, with the occasional exception, have trends in donations and expenditure
received serious empirical attention,16 although the media has begun to treat disclo-
sure more seriously. Investigators and researchers alike complain about the presen-
tation and transparency of the data in disclosure reports. For example, annual
returns of parties and associated entities only become available on 1 February each
year—six months after the reporting year. Further, these returns do not require
donations and other receipts to be separately identified, although some parties
choose to do so. And despite calls for it, there is still no obligation to give pre-elec-
tion disclosure, let alone instant disclosure of large donations. The complexity of the
law, as evidenced in its bulk, is a further hurdle to interested onlookers. The federal
statutory provisions on funding and disclosure alone extend across 60 pages.17

Chapter Scope
This chapter outlines the essential federal provisions covering political finance. It
also canvasses notable differences in state law. Whilst federal Parliament has limited
power over state elections, its influence over political finance is significant, for two
reasons. First, whilst the wave of contemporary regulation began at state level—in

11
D Cass and S Burrows, ‘Commonwealth Regulation of Campaign Finance: Public Funding,
Disclosure and Expenditure Limits’ (2000) 22 Sydney Law Review 447.
12
J Tham, ‘Legal Regulation of Political Donations in Australia: Time for Change’ in G Patmore
(ed), The Big Makeover: A New Australian Constitution (Annandale, Pluto Press, 2000) 72; J Tham,
‘Campaign Finance Reform in Australia: Some Reasons for Reform’ in Orr et al, above n 3; G Orr, ‘The
Currency of Democracy: Campaign Finance Law in Australia’ (2003) 26 University of New South Wales
Law Journal 1. (This chapter is a reworking of the latter piece.)
13
I Ramsay et al, Political Donations by Australian Companies (Melbourne, Centre for Corporate
Law and Securities Regulation, University of Melbourne, 2001); I Ramsay et al, ‘Political Donations by
Australian Companies’ (2001) 29 Federal Law Review 177.
14
An exception is Hare v Gladwin (1988) 82 ALR 307, where the AEC successfully asserted the right
to demand the production of documents from a trust used by the Country Liberal Party.
15
AEC, above n 9, para 4.1.
16
Exceptions are Ramsay et al, above n 13 and the NSW Greens Donations Project, <www.demo
cracy4sale.org.au> current at 14 April 2005.
17
The bulk of this is in the disclosure regime. This figure does not include regulations containing
operational detail nor party registration.
102 Graeme Orr

New South Wales in 198118—the federal regime has come to provide the regulatory
model and setting for normative debates. Second, although federal and state elec-
tions are not held at the same time,19 the federal system of disclosure serves as a
backstop. This is because most state and territory branches of parties register feder-
ally, to control public funding earned at federal elections, and in accounting terms
these branches do not distinguish between their state and federal activities. (State
disclosure law remains necessary to cover candidates at state elections.)
The chapter falls into two sections: a description of the legal position, followed
by a discussion of areas of concern and potential reform. Tham has argued that
the regulation of donations in Australia has been ‘ineffectual by design’.20 Whether
by design or neglect, the general consensus is that the entire regime needs signif-
icant tightening and constant vigilance. I highlight three areas.
First, the disclosure system is a leaky sieve, and in some respects it is misdirected.
Second, the regime has not served its founders’ purposes of discouraging reliance on
corporate donations. It needs to be strengthened by the (re)introduction of expendi-
ture limits. Despite these arguments, there is unlikely to be meaningful reform for
some time: the conservative Coalition won control of both houses of federal
Parliament at the 2004 election and, as described below, its reform inclinations are, if
anything, to relax political finance regulations rather than to tighten them.
The third issue I highlight is that political finance law ought not obsess over
party finances at the expense of tangible incumbency benefits. Both are relevant
to the ultimate goals of political equality, fair electoral competition, and limiting
the corruption of public power. The vast public resources available to incumbent
parliamentarians for self-promotion and to governments for puff advertising
threaten to outflank direct regulation of party finances.
In closing, I question the conditions in which a funding and disclosure regime
might become so ineffectual as to be worse than none at all. Public choice theorists
or post-modernists should not interpret this cautionary note as a call to inaction.
Disparities in wealth, and their exploitation to distort democracy, will always be with
us; the fluid power of money over politics will always pose sharp regulatory issues.
But we are more in danger of underestimating the corrupting influence of the spec-
tre of money politics as we are of becoming paranoid about its apparition.

The Current Legal Regime

The Reform Pendulum: A Brief History of Regulation in Australia

The law’s evolution in Australia has been chronicled by Cass and Burrows.21 Prior to
the 1980s, the Australian approach to electoral finance had become dilapidated. Its
18
Election Funding Act 1981 (NSW).
19
Federal law mandates distinct polling days, Commonwealth Electoral Act 1918 (Cth) s 394 (CEA).
20
Tham in Patmore (ed), above n 12, 78–80.
21
Above n 11.
 Political Finance Law in Australia 103

schema was inherited from the Victorian English model of deterring ‘corrupt and
illegal practices’, whose genesis lay in the crackdown on corruption in the form of
politicians buying votes. The modern concern however is not with politicians buying
support (pork-barrelling being another story). On the contrary, the contemporary
problem is with businesses and sectional groups buying influence over politicians.
Aside from such direct corruptions, the law has always needed to concern itself
with the cost of elections, since political equality is diluted when elections become
too costly for all but wealthy interests and the politicians willing to serve them. In
that regard little has changed in 150 years. The cost of electoral politics in
Australia remains unbounded, by regulation at least. Australian law continues,
in effect, to trust, or rather hope, that modesty will prevail.
The contemporary Australian model of public funding, allied to broad disclo-
sure obligations, was first hatched in the 1980s. Whilst it can be understood on its
own terms, some history is necessary. This is not mere context, for the history
continues to shape assumptions about what is, and is not, possible in the field. It
also reveals the resistance of the political caste to regulation.
For most of the 20th century, federal electoral law imposed ostensibly strict
limitations on expenses, but they only applied to candidates.22 The system was
fatally flawed for two practical reasons. First, its focus on the promotion of
individual candidatures ignored the rise of parties as ‘brand labels’, the
Presidentialisation of politics, and the role of the mass media in a country that
despite its geographic size, has little media diversity, regional or otherwise.
Following UK case law,23 these factors outflanked a legal regime focussing on con-
stituency expenditure, which duly fell into disrepair, if not disrepute.
The original expenditure limits of A$500 for Senate candidates (who campaign
in multi-member state-wide electorates) and A$200 for House of Representatives
candidates (who campaign in single-member constituencies) were revised just
once in almost 80 years.24 This was in 1946, when they were increased to A$1000
and A$500 respectively.25
Partly as a result, enforcement was far from stringent.26 When Tasmania’s
Supreme Court took more strict state election limits seriously in 1979,27 apoplexy
gripped politicians. Rather than leading to a return to the rule of law, in the form of
a crackdown on the cost of electioneering generally, the episode merely led to fed-
eral expenditure limits being abandoned altogether. Within a year, a conservative

22
Cass and Burrows, above n 11, 454–5.
23
R v Tronoh Mines Ltd [1952] 1 All ER 697 (interpreting laws restricting expenditure and ‘pro-
moting the election of a candidate’ as inapplicable to advertising promoting or denigrating parties
generally).
24
The original limits were set in the inaugural Commonwealth Electoral Act 1902 (Cth), s 169.
25
Commonwealth Electoral Act 1946 (Cth), s 4.
26
Early on, the Chief Electoral Officer adopted a practice of not prosecuting candidates who made
no return, if they happened to be unsuccessful at the polls: P Brazil (ed), Opinions of the Attorneys-
General of the Commonwealth of Australia: Vo11, 1901–14 (Canberra, Australian Government
Publishing Service, 1981) 500–1.
27
Re Electoral Act 1907 [1979] Tas R 282 (new elections ordered when several members committed
the ‘illegal practice’ of expenditure in excess of the then constituency limit of A$1500).
104 Graeme Orr

federal government had seized the moment to repeal the restrictions on federal can-
didate expenditures.28 This ushered in a brief period of total laissez-faire federally.
Undaunted, the Tasmanian Supreme Court struck again, strictly interpreting
Tasmanian law according to its original intent, so as to outlaw third party expendi-
ture—including any expenditure by parties promoting their ‘teams’—unless the
expenditure was accommodated within the candidate’s limit.29 But this purgation
lasted just one election. The incoming Tasmanian Government watered down that
State’s expenditure restrictions in 1985.30
The period of total federal deregulation also proved short-lived. The ALP won
office in 1983 and, central to its overhaul of federal electoral laws,31 it introduced
a public funding and disclosure regime, now found in Part XX of the
Commonwealth Electoral Act 1918 (Cth) (‘CEA’).32 Most states/territories have fol-
lowed in whole or part. It is notable that all these regimes have been ushered in by
ALP administrations, where necessary with support from other social democrat-
ic parties, the Australian Democrats and the Greens.
In 1991, a more radical attempt was made by the federal ALP to introduce a
British-style ban on broadcast advertising during elections, in tandem with
mandatory free radio and television air-time for party broadcasts.33 This attempt
foundered on an activist, liberalist High Court, which ‘discovered’ an implied free-
dom of political communication in the Constitution.34 Free air-time, limited to
the election period, is now only provided by the two public broadcasters.

Current Law: Public Funding and Taxation

In legislating for direct public funding of parties, the ALP relied on three main
arguments. One was that elections should be decided on the quality of party pol-
icy, not the size of party coffers. A second was that public funding would narrow
the difference in financial resources to ensure reasonably fair electoral competi-
tion. The third was that it should reduce reliance on private donations, minimis-
ing potential corruption.
28
Commonwealth Electoral Amendment Act 1980 (Cth).
29
Attorney-General v Liberal Party of Australia, Tasmanian Division [1982] Tas R 60.
30
Expenditure limits now only apply to the rather ‘gentlemanly’ Tasmanian upper house, a legislature
not dominated by party politics. Exceeding the limit by A$1000 is prima facie grounds for unseating.
31
Commonwealth Electoral Legislation Amendment Act 1983 (Cth). The reform was preceded by a
wide-ranging inquiry: Joint Select Committee on Electoral Reform, First Report (Parliament of
Australia, 1983).
32
For other jurisdictions, see: Election Funding Act 1981 (NSW); Electoral Act 1992 (Qld), s 126A,
sch; Electoral Act 2002 (Vic), pt XII; Electoral Act 1992 (ACT), pt XIV; Electoral Act 1907 (WA), pt VI;
Electoral Act 2004 (NT), pt X.
33
Political Broadcasts and Political Disclosures Act 1991 (Cth). The reasons for the ban are argued in
Joint Standing Committee on Electoral Matters (‘JSCEM’), Who Pays the Piper Calls the Tune:
Minimising the Risks of Funding Political Campaigns (Canberra, Parliament of Australia, 1989).
34
ACTV v Commonwealth (1992) 177 CLR 106. Critiquing the case, see KD Ewing, ‘The Legal
Regulation of Electoral Campaign Financing in Australia: A Preliminary Study’ (1992) 22 University of
Western Australia Law Review 239; E Barendt, ‘Importing United States Free Speech Jurisprudence’ in
T Campbell and W Sadurski (eds), Freedom of Communication (Dartmouth, Aldershot, 1994) 57; S
Joseph, ‘Political Advertising and the Constitution’ in Patmore (ed), above n 12, 48.
 Political Finance Law in Australia 105

The federal system provides for post-election payments, according to the num-
ber of first preference votes received at both Senate and House of Representatives
elections.35 Registered parties appoint an agent to receive the funding generated by
their candidates. Candidates running as independents or endorsed by unregis-
tered parties receive any funding directly.
The amount per vote is indexed and stood at just over A$1.94 for the 2004 elec-
tion. With well over 12,500,000 enrolments and a compulsory voting system in
both Houses, the amount of public funding potentially exceeds A$50 m per trien-
nial federal electoral cycle. The amount, however, is never paid in full since,
despite compulsory voting, voter turnout is closer to 95 than 100 per cent.
Further, public funding is only earned where candidates poll over four per cent of
the formal vote, so that minor parties and independents are under-funded.36
Federal funding is as of right, however, rather than by way of reimbursement, so
that claimants are not required to prove actual campaign expenditure.37 This has
raised fears that a group running under little more than a slogan could profit from
an election.
The older New South Wales (NSW) funding model features several notable dif-
ferences. First, entitlements are capped, so that no one party or candidate can
receive more than half of the funding. Secondly, registered parties are entitled to
claim partial payments in advance of the poll.38 Thirdly, the threshold of four per
cent does not apply to a candidate who is actually elected (which can easily occur
at NSW upper house elections, where the quota is low). Fourthly, an extra tier of
payments is made via a ‘Political Education Fund’.39 This gives registered parties
an annual entitlement equal to the cost of a stamp for every vote received at the
last lower house election, for seminars and disseminating information about the
party and its policies to members or the public. It cannot be used for electoral
campaigning or conventions.40 Finally, a specialist Election Funding Authority,
notionally distinct from the State Electoral Office, administers the law.
The Liberal Party proposed tax deductibility of donations, to encourage pri-
vate funding of parties, instead of public funding. The ALP insisted tax
deductibility be limited, and now opposes it altogether.41 In 1991, federal tax laws
were amended to permit income tax deductions of up to A$100 pa for contribu-
tions to or membership of registered parties.42 The Liberal Party has also recently
pushed to substantially increase the deductible amount and extend it to corporate
donations. Parties also enjoy tax-free status, and candidates can deduct campaign
35
Commonwealth Electoral Act 1918 (Cth), pt XX, div 3.
36
The actual total paid after the 2001 federal election was A$38.6m.
37
Compare the states, where expenditure must be receipted. The federal system began on a reim-
bursement basis, but the AEC and the parties found it administratively burdensome.
38
Election Funding Act 1981 (NSW), pt 5, div 5.
39
Election Funding Act 1981 (NSW), pt 6A.
40
Election Funding Authority of NSW, Political Education Fund Determinations.
41
JSCEM, Who Pays the Piper Calls the Tune, above n 33, 91. ALP, National Platform and
Constitution (2004), para 16.37.
42
Income Tax Assessment Act 1997 (Cth), s 30–15 (table, item 3). Australian Taxation Office,
Determination 92/114.
106 Graeme Orr

expenditure privately incurred—the latter is a significant subsidy, claims after the

2001 election averaging A$28,500 per federal MP.43 However such deductions
accord with general taxation principles (being expenses incurred in holding down
a job) and for electoral fairness extend to all candidates, regardless of success.

Broadcast Air-Time
A ‘blackout’ on broadcast (but not press) advertising remains in force for the three
days prior to and including polling day at all parliamentary elections.44 Otherwise,
as earlier mentioned, political advertising is open slather. There is no constitu-
tional impediment to requiring broadcasters to provide free air-time,45 but only
the two public broadcasters—the Australian Broadcasting Corporation (ABC)
and the multicultural Special Broadcasting Service (SBS)—do so, as an aspect of
their public information charters.46 The impact of these public allocations is lim-
ited. The ABC and SBS achieve combined ratings equivalent to around one-sixth
of the viewing audience. During federal campaigns, one or two staged debates are
televised between the Prime Minister and Opposition Leader. But these are not
regulated: their number, nature and very existence are matters of convention and
haggling, despite calls for a guaranteed and structured system of debates.47

Disclosure of Political Donations and Expenditure

Disclosure laws were a quid pro quo for public funding, designed to achieve trans-
parency and accountability. The reach of these laws has become an ongoing issue
and the detail has been amended on various occasions. Here I give a snapshot of
the federal position as at the end of 2004.48 The most important observation is
that there are no restrictions on the amount or source of private donations.
The disclosure obligations broadly seek to ensure post-election revelation of cer-
tain details of donations and expenditure by candidates and donors. They also
require annual disclosure by registered parties and their associated entities, including
returns of totals of receipts, expenses and indebtedness.49 (‘Associated entities’ are
bodies controlled by, or operating substantially for the benefit of, registered parties.50)
43
Income Tax Assessment Act 1997 (Cth), s 25–60 (deductibility of expenditure in excess of public
funding); S Maiden, ‘MPs Take Double Dip of Poll Cash’, The Australian, 17 July 2004, 3.
44
Broadcasting Services Act 1992 (Cth), sch 2, pt 2, c13A; Special Broadcasting Service Act 1991(Cth),
s 70C.
45
They were only struck down in ACTV v Commonwealth (1992) 177 CLR 106 because they were
an inseparable part of a particular invalid scheme banning all paid broadcasts.
46
ABC, Editorial Policies (2002) ch 11, <http://abc.net.au/corp/edpol02.pdf>; SBS, Codes of Practice
(2002) 16, <http://www.sbs.com.au/sbsi/cop.pdf>.
47
Eg, Editorial, ‘Stop the Spin and Start the Great Debates’, The Australian, 4 October 2001, 10.
48
A joint parliamentary committee was due to report on the disclosure regime, but that inquiry
lapsed with the 2004 election: <http://www.aph.gov.au/house/committee/em/index.htm>.
49
Commonwealth Electoral Act 1918 (Cth) (CEA), pt XX, div 4 (‘Disclosure of donations’), div 5
(‘Disclosure of electoral expenditure’) and div 6 (‘Annual returns by registered parties and associated
entities’).
50
CEA, s 287 (definition).
 Political Finance Law in Australia 107

Disclosure also extends to third parties who incur expenditure on matter intended or
likely to affect voting.51
The disclosure scheme is practically reliant on a system of agents. Registered or
not, political parties (ie, organisations whose objects include promoting its
endorsed candidates for federal election)52 must appoint party agents. Candidates
in turn may appoint agents to handle their personal obligations.53 Disclosure
works on a ‘cash accounting basis’. That is, only completed transactions are dis-
closable. (By delaying banking a cheque, a donation could thus fall outside a
reporting period.)
In legal terms, donations are ‘gifts’, defined to include any disposition of prop-
erty for inadequate consideration, excluding bequests. In theory, donations
include the provision of services other than volunteer labour.54 Within 15 weeks
of polling day, all federal candidates must lodge returns disclosing details of cer-
tain gifts received during the ‘disclosure period’, other than private gifts used for
non-electoral purposes. If the candidate stood at the prior election, the period
dates back to the previous candidature; for new candidates it only dates back to
their announcement of candidature.55 Disclosure encompasses donor names,
addresses and amounts. However, whilst the return must specify the total number
of donors and the sum of all gifts received, donor details are not disclosable if the
total of that donor’s gifts was under A$200.56 Donors to candidates have a mirror
obligation.57 Every person or organisation that incurs ‘political’ expenditure in
excess of A$1,000 at an election must also furnish a post-election return of dona-
tions received.58 This applies to lobby groups as well as unregistered parties, and is
drafted to attempt to capture conduits of donations, since ‘political expenditure’
here includes the channelling of gifts as well as the cost of promoting views on any
election issue.59
Registered political parties must submit returns each financial year. These are
to include total receipts, plus names and addresses in relation to amounts (includ-
ing any gifts, loans or bequests) of over A$1,500 received from any individual
source in that financial year.60 However, as a salve to party administrators of par-
ties—but at the expense of transparency—in calculating the amount received
from a single source, individual receipts of less than A$1,500 from that source
need not be counted or disclosed by the party.61 Similar annual returns must be
made by entities ‘associated’ with registered parties.
51
CEA, s 4 (definition). This applies to definitions of both ‘political expenditure’ (s 305(3)—attract-
ing an obligation for ‘third party’ donation disclosure) and ‘electoral expenditure’ (s 308—attracting
an obligation of post-election expenditure return).
52
CEA, s 4 (definition).
53
CEA, pt XX, div 2 (‘Agents’).
54
CEA, s 287 (definition).
55
CEA, s 287 (definition).
56
See CEA, s 304 generally for candidate returns.
57
CEA, s 305A.
58
CEA, s 305.
59
CEA, s 305(3).
60
CEA, ss 314AB(2)(a), 314AC.
61
CEA, s 314AC(2).
108 Graeme Orr

Annual reporting requirements also apply to donors who make annual gifts
totalling A$1,500 or more to any registered party or branch, whether the total was
achieved through several small donations, or a single large donation. Gifts via an
intermediary are also meant to be disclosed; similarly, an organisation that chan-
nels contributions must disclose details of any individual gifts over A$1,000 that
helped form a gift of A$1,500 or more to a party.62 The obligation on donors to
make annual disclosure, although not always widely understood, is meant as an
auditing ‘check’ on the accuracy of party returns. A proposal to increase the min-
imum disclosable amount to A$3,000 pa may soon be enacted.63
It is unlawful to receive anonymous donations in circumstances that might
undermine disclosure obligations. Thus, parties are not to receive gifts of A$1,000
or more, nor candidates gifts of A$200 or more, unless the true details of the
donor are known at the time.64 Reflecting a similar tenderness over non-commer-
cial loans, the law now also renders it unlawful for parties or candidates to receive
loans of A$1,500 or more unless they keep a record of the loan’s terms and con-
ditions, and the lender’s name and address. Yet there are no restrictions on foreign
donations.
Expenditure disclosure is also governed by a two-phase system: partly post-
election, partly annual. As with donations, there are no limits to the amount that
can be spent. Candidates must make post-election returns of electoral expendi-
ture incurred with their authority, not including expenditure made or authorised
by a registered party or branch. ‘Third parties’ that incur total electoral expendi-
ture in excess of A$200 are also required to detail that expenditure after polling
day.65 In this context, ‘electoral expenditure’ means the cost of disseminating mat-
ter intended or likely to influence voting, including opinion polling.66
Annual expenditure returns are required of registered parties and their associ-
ated entities. However, to ease the accounting burden, these returns only require
total expenditure and not its detail.67 Total indebtedness must also be declared,
including the source and amount of outstanding debts of A$1,500 or more from
particular sources.68
Media outlets are also required to make post-election returns of electoral
advertising carried by them during the campaign.69 The Coalition government is
seeking their abolition.70 Such returns should be retained: in disclosing the charges
for advertising, they may act as a check on media profiteering, a distinct possibil-
ity since parties are captive consumers of advertising space during campaigns.
62
CEA, s 305B.
63
Electoral and Referendum Amendment (Enrolment Integrity and Other Measures) Bill 2004 (Cth).
An A$3,000 threshold was the majority recommendation of JSCEM, The 1998 Federal Election,
(Parliament of Australia, 2000) 128. The ALP minority report opposed it at 158–9.
64
Commonwealth Electoral Act 1918 (Cth) (CEA), s 306.
65
CEA, s 309.
66
CEA, s 308(1), incorporating reference to ‘electoral matter’, defined in CEA s 4.
67
CEA, ss 314AB(2)(b), 314AEA(I)(b).
68
CEA, ss 314AB(2)(c), 314AEA(I)(c), 314AE.
69
CEA, ss 310–11.
70
Electoral and Referendum Amendment (Enrolment Integrity and Other Measures), Bill 2004 (Cth).
 Political Finance Law in Australia 109

Some of the loopholes in this labyrinthine disclosure regime are discussed

below. At this point, it suffices to note that whilst the AEC is given potentially
broad investigatory powers,71 the consequences of breaching the disclosure laws
are far from draconian. Indeed maximum fines are risibly low:72

(1) for failure to make timely returns, A$5,000 for party agents, A$1,000 for
others;
(2) for incomplete returns or record-keeping, A$1,000;
(3) for knowingly misleading returns, A$10,000 for party agents A$5,000 for
others.

Similarly, politico-legal consequences of disclosure breaches are virtually non-

existent. Breaches of disclosure obligations do not taint an offender’s political
rights, and non-compliance is not grounds for invalidating an election.73

Reform Debates

Disclosure Law Under Challenge—Some Illustrations

Before detailing reform proposals, it is worth crystallising the issues by outlining
several recent examples of activities that have revealed flaws in the disclosure
regime.
One concerns the Liberal Party and its Greenfields Foundation Trust. The
Party’s treasurer discharged a multi-million dollar bank loan to the Liberal Party,
in his personal capacity as a wealthy businessman. The debt was then assigned to
the Foundation, with the Party repaying it on an interest-free basis. Disclosure of
these arrangements only occurred (and then by the Party, not the businessman)
after an AEC investigation.74 Since then, provisions relating to associated entities,
and in particular to the disclosure of indebtedness and the recording of loans
from non-financial institutions have been enacted. But broader questions were
raised about why guarantees were not treated as ‘gifts’, and how to identify and
enforce the law against associated entities, in particular trusts.
The problem of identifying associated entities surfaced again when it was
revealed a Liberal Party Minister had organised a trust fund to help fund
legal action against a rival, nationalist party, whose registration was in doubt. The
fund had trustees of different political backgrounds. The AEC initially took
the Minister’s assertion that the fund was not an associated entity at face value,

71
See especially Commonwealth Electoral Act 1918 (Cth) (CEA), s 316.
72
See CEA, s 315 for offences.
73
CEA, s 319.
74
AEC, Funding and Disclosure Report Following the Federal Election Held on 3 October 1998 (AEC,
2000) pt 5.
110 Graeme Orr

without seeking its own legal advice or even sighting the trust deed. Five years
later, its status has still not been resolved. The fund, ironically, was called
‘Australians for Honest Politics’.75 Aside from being an example of unrigorous
policing of disclosure law, the case also highlights conceptual problems in a
regime hatched to cover ‘campaign’ finance rather than ‘political’ finance.76
Both major parties have attracted criticism over general fundraising techniques
that muddy disclosure. The ALP’s use of a professional fundraising firm called
Markson Sparks is a case in point.77 The firm organises events including auctions
of memorabilia associated with Party icons, which can raise hundreds of thou-
sands of dollars. Generally the fundraiser only need disclose the total amount, and
the donors and purchasers of items neglect to make disclosure. If a party—or even
an associated entity—ran such auctions, donations of auctionable items worth
A$1,500 or more would be disclosable, as would have the winning bids (allowing
for difficulties in determining the fair market price, and hence the ‘gifted’ consid-
eration).
Revenue through the sale of memorabilia, however, pales by comparison with
the sums that firms will pay for tables at fundraising dinners and privileged status
at party conventions and so-called policy ‘round-tables’ and ‘forums’. Disclosure
of such payments is lax, with parties sometimes treating payments as ordinary
receipts, and the payers often treating them as business expenses rather than
donations.78
There is real danger in swallowing the corporate view that such payments are
valuable consideration, shelled out as part of doing business. Indeed one AEC
handbook states that ‘value [ie, consideration] includes gaining access to lobby
government ministers’.79 On that reasoning, even large-scale donations ought to
be tax deductible as a kind of sponsorship to gain attention! (As of 2004, the
AEC now advocates that all payments at fundraisers be deemed to be dona-
tions.) No matter how perfect the disclosure law, if the sale of political favours
is accepted as part of the ‘commerce’ of politics, then politics collapses into a
business, not a public endeavour. That is, accountability concerns aside, the
prostitution of political access is a corruption of political equality. This issue
comes on top of the perception of the sale of governmental favours, raised

75
For a detailed account, see M Kingston, ‘Not Happy, John! Defending Our Democracy’
(Camberwell, Penguin, 2004) ch 15.
76
Similarly, the law’s application to party pre-selections is unclear. Historically these have been low-
key, branch affairs, but high profile, even millionaire candidacies have recently occurred. Also, at least
one party, the Australian Democrats, runs leadership ballots of its entire membership, and questions
were raised about why a consultant donating his time to one of its leadership contenders generated no
disclosure obligation: AEC, ‘Submission to the Joint Standing Committee on Electoral Matters
Inquiry into Electoral Funding and Disclosure’, Submission No 15, 3 August 2001, para 2.1.5
<http://www.aph.gov.au/house/committee/em/f_d/subfifteen.pdf> URL current as of 14 April 2005.
77
L Oakes, ‘Labor’s Soft Money Loophole’, The Bulletin, 5 September 2000, 24. The ALP now accepts
that all fundraising bodies should make full disclosure.
78
For examples, see Tham in Patmore (ed), above n 12, 74–5, and Orr, above n 12, 18–19.
79
AEC, Funding and Disclosure Handbook for Third Parties (2000) pt 2, 1.
 Political Finance Law in Australia 111

recently over the exercise of discretion by an Immigration Minister in relation

to Liberal Party donors.80

Specific Reform Proposals—the Official View

Institutional scrutiny of federal finance law is guaranteed, each electoral cycle,
through two mechanisms. The AEC is required to produce a Funding and
Disclosure Report after each election.81 Then, the federal Parliament’s Joint
Standing Committee on Electoral Matters (‘JSCEM’) investigates and reports on
the overall conduct of the election.
A host of AEC recommendations about funding and disclosure remain on the
table, some dating back over seven years. In 2000, the JSCEM was specifically
briefed to conduct a ‘Funding and Disclosure Inquiry’. But that inquiry has twice
been left to lapse by the conservative Coalition.82 The AEC made several detailed
submissions to those inquiries, calling for urgent amendments to redress a host of
‘the most pressing problems’ in disclosure law, its second submission written in a
mixture of frustration and resolve.
Some of these recommendations would represent a considerable tightening of
the disclosure regime. They include nullifying any arrangements entered into to
obviate disclosure obligations, with significant penalties for such contrivances.
Undisclosed donations would be subject to forfeiture; anonymous donations to
double forfeiture. Overseas donations would also be liable to forfeiture, at least
where the donor failed to declare them. Party returns would be clarified so that
donations were clearly distinct from other receipts, and accompanied by an inde-
pendent audit report. Continued failure to lodge proper returns would be
grounds for party deregistration. And the definition of associated entities would
be clarified and broadened so, eg, that a right to appoint a majority of direc-
tors/trustees would explicitly amount to party control of the entity, and a signifi-
cant link in membership would be an alternative test for ‘associatedness’.

Specific Reform Proposals—Parties and Observers

The parties, of course, have their own agendas for reform, some resembling ambit
claims. The organisational wing of the Liberal Party, whose approach to campaign
finance has always been libertarian, wanted disclosure thresholds raised to
A$10,000 pa. Recalling that parties register their state/territory as well as national
branches, if such a large threshold applied one could donate at just below the

80
L Tingle and T O’Loughlin, ‘Ruddock is a Man of Discretion’, The Weekend Australian Financial
Review, 14–15 June 2003, 22–3; Senate Select Committee on Ministerial Discretion in Migration
Matters, Report (Parliament of Australia, 2004). This echoes a similar recent controversy involving the
British Labour government.
81
Commonwealth Electoral Act 1918 (Cth) (CEA), s 17(2).
82
<http://www.aph.gov.au/house/committee/em/f_d/index.htm> (original inquiry), <http://www.
aph.gov.au/house/committee/em/donations/index.htm> (reconvened inquiry).
112 Graeme Orr

threshold to each branch, and contribute nearly A$90,000 pa to a party without

proper disclosure. The parliamentary Liberal Party removed some of the ambit
from that claim, when it sought, unsuccessfully, to legislate an A$5,000 thresh-
old.83 It is likely now to pass that increased threshold.
It is hard to see why the disclosure threshold needs to be significantly raised.
Currently, a donor can donate up to nine lots of A$1,499 pa to each registered ele-
ment of a federally-organised party, and no specific disclosure by either party or
donor is required. Indeed it is lawful to make standing donations of, say, A$1,499
per month to the same party branch and the party as recipient is not required to
disclose the details: only the donor must disclose. Given that donors are much less
likely to know the law, and are harder to police than parties, this inverts the natu-
ral order. Parties solicit donations. They are in the best position to know and
enforce the law (thus, in the ACT for example, it is an offence for parties and MPs
to fail to advise donors of their reporting obligations). The status quo is defend-
ed as administratively easier, but in a computerised age why should parties not
disclose all donations with a low cap, set to say average weekly earnings?
Relatedly, it is unclear why the disclosure provisions in this regard are tighter
for candidates than parties. This is unfair to independents. Further, the federal
disclosure laws should require national party secretariats to amalgamate donation
disclosures to include totals received from the same source, regardless of which
branch received the donation (just as branches currently must report on all
receipts of their sub-branches and campaign committees.)
A second cause célèbre for the Liberal Party is increased tax deductibility. It
unsuccessfully promoted a Bill to extend deductibility to corporations. Its organi-
sational wing called for a hundred-fold increase in deductibility of donations,84
though its parliamentary wing proposed a more modest figure, mirroring the dis-
closure threshold.85 In the standoff over these issues, the most pressing tax reform,
for political equality, fell by the wayside: there is no deductibility for supporters of
independent candidates or unregistered parties.
In contrast to the Liberal Party, others have sought a considerable tightening of
disclosure and donation law. The Australian Democrats want instant publicisation
of donations exceeding A$10,000, and a ceiling on donations from any single cor-
poration or organisation.86 The Democrats, supported by the ALP, succeeded in
gaining mandator AEC auditing of donations over A$25,000.
A leading author in the field, Tham, joins the Democrats in advocating caps on
donations, if not outright bans.87 He argues, quite persuasively, that sizeable cor-
porate donations, at least from certain industries, have become ‘normalised’
(banking and finance federally, and the pub/club industries at state level are
83
Electoral and Referendum Amendment Bill (No 2) 1998 (Cth).
84
To A$10,000 pa. JSCEM, Parliament of Australia, The 1996 Federal Election (Canberra, Parliament
of Australia, 1997) paras 8.28–8.30.
85
Taxation Laws (Political Donations) Bill 1999 (Cth).
86
JSCEM, The 1998 Federal Election, above n 63, 174, 176. See also A Murray and M Rock, ‘The
Dangerous Art of Giving’ (2000) 72(3) Australian Quarterly 29.
87
Tham in Patmore (ed), above n 12, 81–6 and Tham in Orr (ed), above n 12, 128.
 Political Finance Law in Australia 113

noteworthy). That is, far from encouraging a general modesty in donations across
the board, the ‘sunshine’ of disclosure has perversely created an atmosphere where
significant donations are par for the course—perhaps unsurprisingly in an age
where corporations rival governments in terms of power.88 Disclosure may have
exacerbated the tendency of corporations to donate roughly equal sums to both
major parties. This may create a more level playing field between those parties, but
it only reinforces concerns about selling access to power and the creation of ‘car-
tel’ parties to the exclusion of other electoral competitors.
The AEC, however, recommends against donation limits, citing problems of
definition and enforcement.89 The definitional questions raise issues of equal
treatment. For instance, since the ALP receives significant ‘affiliation’ fees from
unions, caps on donations would have to include all ‘contributions’. Further, to
rework an argument of one conservative US scholar, should caps not also apply to
the time individual activists commit to, or the number of words polemicists write
in support of, political causes?90 The answer to this objection is not to descend into
arid debates about what is ‘speech’, but to accept that there is a legitimate aesthet-
ic aversion to an excess of money in politics that does not apply to self-expression.
Being active and generating ideas about public affairs, after all, is the core curren-
cy of politics, not geld.91
The larger concern with caps on donations, however, is their workability. It is
generally assumed that ruses would be adopted to avoid caps. Given the Australian
experience with the use of associated entities and fundraising agencies to place
donations at a formal remove from the parties,92 this seems a real possibility.
Nonetheless, albeit partly at a symbolic level, limits on donations are being
mooted. The ALP legislated in Victoria to cap donations from casinos,93 and has
renounced contributions from the tobacco industry. The NSW Greens promoted
a Bill to forbid donations by major developers.94
The Democrats have also led calls for shareholder control and accountability
over corporate donations. Their policy includes requiring shareholder approval of
‘donation policies’ of public companies, and full donation disclosure in company
annual reports. Ramsay et al, in their study on corporate donating, support
this proposal.95 Such a reform would be commendable, but may prove a leaden
88
Tham in Patmore (ed), above n 12. See also J Tham and D Grove, ‘Public Funding and
Expenditure Regulation of Australian Political Parties: Some Reflections’ (2004) 32 Federal Law Review
forthcoming, table 2 and discussion.
89
AEC, ‘Submission to the Joint Standing Committee on Electoral Matters Inquiry into Funding
and Disclosure’, Submission No 7, 17 October 2000, paras 8.8–8.13 <http://www.aph.gov.au/house/
committee/em/f_d/subseven.pdf>, URL current as of 14 April 2005.
90
JO McGinnis, ‘Against the Scribes: Campaign Finance Reform Revisited’ (2000) 24 Harvard
Journal of Law and Public Policy 25.
91
I develop this in ‘The Ritual and Aesthetic in Electoral Law’ (2004) 32 Federal Law Review forth-
coming.
92
Eg, L McIlveen and S Morris, ‘Fronts Obscure Political Handouts’, The Australian, 4 February
2003, 3.
93
Electoral Act 2002 (Vic), pt 12, div 3.
94
Developer Donations (Anti-Corruption) Bill 2003 (NSW).
95
Above n 13.
114 Graeme Orr

political football. The ALP might not oppose reforming corporate donating per
se, but this would implicate ALP sensitivities about the freedom of unions to con-
tribute affiliation fees and donations—although unions, unlike companies, are
democratically organised, and lack the ‘corporate veil’ that renders the true source
of many donations impervious to onlookers.96

Expenditure Limits Reprised?

The model I advocate involves retaining public funding but with campaign expen-
diture limits and expenditure accountability.97
Critics of public funding allege that it accelerates the atrophying of ‘grassroots’
political activity. It is far from clear that this is a product of public funding. Public
funding defrays campaign debts after an election, but it hardly covers all the expens-
es of a party’s administration or policy generation. The financial, as well as intellec-
tual and moral health of parties will always require an engaged membership.
The real problem is that, in the absence of expenditure limits, parties have every
reason to rely as much as possible on large private donations. Naturally, the affec-
tion and attention of party apparatchiks turns away from party membership, when
grassroots fundraising inevitably pales in comparison to corporate donations. If
donation caps were feasible, this would be a strong argument in their favour.
In any event, public funding is a significant boost to electoral competition. It
forms a much more significant share of the revenue of popular minor parties,
who do not attract corporate or union largesse: on Tham’s figures, the parties of
government receive between two and four times the amount of private funding
per vote than the minor parties.98
Admittedly, the original conception of public funding as a means of weaning
parties off private donations proved overly ambitious. Who can be surprised?
The Achilles’ heel of the project was the failure to link public funding to expen-
diture limits. Strongly audited expenditure limits, now a feature of comparable
democracies such as the UK and Canada, are essential to sustaining a modest
campaign culture. Otherwise, like sporting clubs competing without a salary cap,
the parties are locked into an escalating war. And as Cass and Burrows argue,
there is no reason why well-tailored expenditure limits, including limits on non-
party campaigning, should fall foul of constitutional liberalism.99 After all, can-
didate limits existed for almost 80 years federally and remain in place in the
Tasmanian Upper House.
It will be objected that, like pressing down on the proverbial waterbed, expen-
diture limits may only cause a flow of money away from parties and candidates to
96
For examples, see M Bachelard, ‘Loopholes that Keep Donors in the Shadows’, The Australian, 7
February 2004, 1.
97
Compare D Tucker and S Young, who, whilst arguing that funding levels are not ungenerous, sug-
gest restricting private fundraising as a prerequisite for public funding, ‘Public Financing of Election
Campaigns in Australia—a Solution or a Problem?’ in Patmore (ed), above n 12.
98
Tham, above n 12, tables 1–3 and discussion.
99
Cass and Burrows, above n 11, 457–60.
 Political Finance Law in Australia 115

third parties. Or that political elites will simply invent ways of circumventing
expenditure limits, such as creating ‘front’ groups to engage in electoral advertis-
ing? In Issacharoff and Karlan’s famous metaphor, regulation confronts the
‘hydraulics’ of campaign finance: money is fluid and seeks its own level.100
But to assume that money is an uncontainable acid is to take an odd view of
electoral culture in Australia. Australia is not the US. It lacks a deeply-rooted his-
tory of expression through civic associations, behind which a proliferation of elec-
toral speech, sham or otherwise, can manifest. In Australia, a more statist culture
has prevailed, creating a preference for a more ordered approach to electoral lob-
bying, generally limited to a few well-known and peak union, environmental, pro-
fessional and business groups. In short, there is no cacophony of political speech
into which mouthpieces for party interests, active only around election time, could
easily blend. Culture, though, is admittedly mutable—recently an apparently pro-
fessional website appeared, conducting anonymous negative campaigning.101
Unlike donations, which occur in private, electoral expenditure—particularly
advertising and general canvassing—is inherently public. Controls on expendi-
ture are thus more susceptible to enforcement, not least since rival parties are in a
position to monitor one another.

Abuses of Incumbency
Incumbents, for better or worse, attract the lion share of public attention. But this
is not a ‘benefit’ of concern to political finance law. Rather, it is the differential
access to—and misuse of—public resources that threatens fair electoral competi-
tion and political equality.
Parliamentarians and governments alike, of course, need to communicate their
work and public service information. Without that, including access to modern
methods of grabbing attention, public affairs will be relegated to secondary status,
subordinate to consumerist capitalism’s saturation of the media, indeed the phys-
ical landscape.
But as Young has argued, executive governments and parliamentarians have
indulgently overseen a blowout in expenditure and blurring of the line between
information and self-promotion for electoral gain.102 Federal parliamentarians, for
instance, enjoy an A$125,000 annual printing allowance, much of which is devot-
ed to puffery such as electorate ‘newspapers’ adorned with flattering images of the
member and promotion of her party’s policies, and mail-outs luring electors to
give information about issues of concern to them—information then fed into
databases for personalised targeting of direct mail around election time. None of
this amounts to real communication between governor and governed.
100
S Issacharoff and PS Karlan, ‘The Hydraulics of Campaign Finance Reform’ (1999) 77 Texas Law
Review 1705. No less pithy is DH Lowenstein, ‘On Campaign Finance Reform: The Root of All Evil is
Deeply Rooted’ (1989) 18 Hofstra Law Review 301.
101
Eg, <www.johnhowardlies.com>.
102
S Young, ‘Killing Competition: Restricting Access to Political Communication Channels in
Australia’ (2003) AQ (May–June) 9.
116 Graeme Orr

Even more insidious is the misuse of tens of millions of dollars of unrestrained

government advertising, which floods the airwaves prior to elections. The cost of
advertising promoting federal government policies or positions alone, in the run-
up to the 2004 election is estimated to exceed A$150 m.103 The federal government
has failed to enact Auditor-General guidelines aimed at separating ‘political’ from
unexceptional government advertising, even though a parliamentary committee
on which government members formed a majority endorsed those guidelines, and
even though they are far from onerous.104 Admittedly, it is not easy to determine if
a single advertisement, on its face, is ‘political’, although governments admit as
much by nugatorily ‘tagging’ all issue advertising, eg, ‘Authorised by the
Commonwealth Government, Canberra’. But taken as a whole, the size and tenor
of most of these campaigns are clearly disproportional to their effectiveness or
stated aims. Many contain almost no information but plenty of debatable spin
about contentious policies and programmes. That these campaigns are co-ordi-
nated to boost governmental stocks is revealed by the fact that spending on them
spikes dramatically in election years.105 The ALP, risking charges of hypocrisy since
the trend began in its previous administration, has pledged to establish an inde-
pendent body to review government advertising campaigns, to claw-back, from
party entitlements to public funding, the cost of any found to be political. A
bright-line solution would be to cap the cost of government advertising and per-
mit no more in election years than other times.
The federal government is easily the biggest spender on advertising in
Australia: A$665 m alone in the first eight years of the present Coalition adminis-
tration. A secondary concern with abuse of government advertising is that it cre-
ates a dependency in the private media on government largesse. Normally such
media is loud in its opposition to public sector waste.
Abuse of incumbency benefits wreaks a hierarchical distortion of electoral
equality. Governing parties benefit more than the Opposition, who benefit more
than minor parties. And all inside the tent benefit over challengers.

Conclusion—The Limits of Regulation

It is almost universally accepted that elections require some level of disclosure law.
It is also understood that the fierce competition for power militates against polit-
ical culture spontaneously developing a self-enforcing ethic about its own financ-
ing. The sub-text of the specialist literature on political finance is that the law is
enmeshed in a continuing ‘cat and mouse’ game. But we commit to the game
because of an implicit belief that despite—or perhaps through—this struggle,
103
M Schubert, ‘Howard’s $151 m Ad Blitz’, The Age, 22 June 2004, 4.
104
Joint Committee of Public Accounts and Audit, Report 377: Guidelines for Government Advertising
(Canberra, Parliament of Australia, 2000).
105
Australian National Audit Office, Taxation Reform: Community Education and Information
Programme (Auditor-General, Audit Report No 12, 1998) 28–30.
 Political Finance Law in Australia 117

incremental progress is achieved, given vigilance and regulatory courage in the

face of vested interests and creative lawyering. At the root of this rationalist faith
is an unstated assumption that some regulation is better than none, and that, other
things being equal, more regulation, rather than less, is necessary.
It may, however, be possible to reach a point in a funding or disclosure system
where the imperfections are such that some law becomes worse than none. At first
this might seem paradoxical. General regulatory theory also deals with systems of
benefits and penalties, and ‘need’ and ‘wrongdoing’. Yet no one argues that, simply
because the law cannot be perfectly policed, or an equal distribution of benefits
achieved, the law must give up the regulatory game. It is better to catch a few
wrongdoers than none; it is better to pay some welfare even if other deserving
cases miss out.
But this theory is based on a simple, linear idea. If we remove dirt then
hygiene is advanced; if we give welfare then poverty is mitigated. But adminis-
tering and policing electoral politics is more complex. If some types of political
actors are more likely to get caught in the disclosure net, or to have their
fundraising or campaign finance position affected than others, then the law
may distort more than it equalises. Such distortion may affect core values like
fair electoral competition and improving the diversity and strength of political
culture.
This may happen when certain restrictions and benefits apply differentially. A
classic illustration is the threshold to ‘earn’ public funding, which affects the abil-
ity of small parties to establish themselves. For example, a party that achieves
exactly four per cent of the Senate vote evenly across Australia will receive close to
A$1 m. Such a sum would maintain a national office and fund a modest campaign
at the next election. A party receiving three per cent of the vote can expect noth-
ing. This situation historically advantaged the Democrats who, to take the 1998
Senate election as an example, received more than 11 times the funding of the
Greens, its rival for the progressive vote and the balance of Senate power, although
it polled only three times their vote.
Of course any cut-off will have arbitrary effects. Some may even see the fund-
ing threshold as desirable, to encourage minor parties of a similar hue to amalga-
mate.106 So consider a more subtle distortion. A minor party that can launch with
a ‘bang’ and garner over four per cent will secure the funding it needs to perpet-
uate and grow. The eruption of the nationalist and racialist One Nation Party
(‘ONP’) is salutary. It benefited from its own controversy and its charismatic
leader. The resultant splash earned it very substantial sums of public funding at
elections in its first years. This is not to say that the ONP did not ‘deserve’ the
funding: populism is rewarded because the system ties funding to individual voter
choices. Rather, the lesson is that minor parties with less attention-grabbing posi-
tions but more comprehensive policies, face two obstacles: media occlusion, since
106
A Democrat-Greens alliance was once suggested given their policy sympathies. The financial
argument must have been enticing. Even if it did not increase their combined vote, it would have been
worth approximately A$380,000 in public funding for Senate votes alone (1998 figures).
118 Graeme Orr

what is less scandalous is less newsworthy and a discriminatory funding appara-

tus that is not truly pro-rated.
One could multiply similar examples. They are just instances of a well-recog-
nised general phenomenon. The differential receipt of public subsidies can distort
a competitive environment. What is perhaps less well considered is whether dis-
closure laws might operate in a similar way.
This might seem paradoxical. Disclosure is knowledge. Science tells us that any
knowledge is a good thing, assuming its veracity. From this point of view, partial
disclosure is better than none, since it at least sheds some light. But since electoral
politics is competitive by nature, the disclosure process itself is inherently politi-
cal in the sense that media attention to disclosure can have political ramifications.
This insight is not new at the margins: radical political groups have long feared
that disclosure may deter their supporters, who may risk retribution or social
sanctions.
The imperfect policing of complex disclosure may create two problems. Parties
or candidates who are less well organised or advised are more likely to fall foul of
the law through ignorance, or slavishly follow official guidelines. Conversely, par-
ties and donors who are well resourced are better placed, as the ‘Australians for
Honest Politics Trust’ proved, to obtain professional advice in designing their
structures and negotiating with the authorities, to avoid disclosure.
Second, the electorate may receive a distorted picture. Donors who are open
about their activities may receive attention more fairly directed at secretive
donors. Similarly, scrupulous parties open themselves to greater public scrutiny
than others. Such openness may be used to advantage (eg through the virtuous
refrain, ‘We are open; are our opponents?’). But there is also a danger that public
impressions will be tilted against those who are most open. If that is the case,
imperfect disclosure laws may be less valuable than other kinds of informational
regimes, such as an anonymous survey of business donations, or ‘clean politics’
systems, such as channelling donations through an official ‘clearing house’.
There is also a danger that unintentionally selective enforcement, or selective
promotion, will create false impressions of the nature of the overall problem. The
issue of political finance reform receives secondary attention in both parliament
and the media, compared to crude electoral offences such as personation and
multiple-voting, which occur on quite limited scales. Crude electoral fraud is to
money politics as blue-collar crime is to white-collar crime.
In the end, the question for the Australian funding and disclosure regime is
whether its manifold imperfections are fatally flawed or remediable. The range
and tone of recommendations for reform raise the question of whether disclosure
is more a labour of Sisyphus than a ‘cat and mouse’ game, and whether the equiv-
ocal benefits of disclosure justify the effort. There is probably the institutional
energy in Australia for one more round of disclosure law reform. But as I have
argued here, ‘comprehensive review’ must embrace not just root and branch tight-
ening of disclosure, but both expenditure limits and a crackdown on the milking
of incumbency benefits.
 Political Finance Law in Australia 119

Appendix: Australian Political Finance Laws—Key Features

Jurisdic- Public Party Donation Expendi- Expendi- Tax Relief
tion (by Funding Registration Disclosure ture ture
size) Returns Limits
Federal Post-elec- 500 mem- Post-elec- Post-elec- None Deductibil
tion, as of bers or fed- tion by tion by ity of
right. eral candi- candidates donations
Four per Member of dates, and media up to
cent vote Parliament donors (advertis- A$100pa
thres- required.107 and politi- ing). (corpora-
hold. cal expen- Annual tions
ders. returns by excluded).
Annual parties Candidate
returns by and asso- expendi-
parties, ciated ture
associated entities deductible.
entities (sum-
and party maries
donors. only).

New South Post-elec- Register of Post-elec- Post-elec- None As above

Wales tion, parties and tion by tion by
capped candidates. registered registered
by actual 750 mem- parties, parties,
expendi- bers candidates candidates
ture.108 required. and other and other
Four per political political
cent vote expenders. expenders.
thresh-
old.
General
and con-
stituency
funds:
no-one
entitled
to more
than half
of fund.

continued over

107
The federal registration requirements survived constitutional challenge in Mulholland v AEC
[2004] HCA 41; (2004) 209 ALR 582.
108
NSW alone also allows for a limited advance (ie pre-election) payment of anticipated public fund-
ing. It also provides a ‘political education’ fund to assist internal party communication.
120 Graeme Orr

Victoria Post-elec- 500 mem- Registered Post-elec- None As above

tion, bers. parties tion, audit-
capped merely to ed state-
by actual file copy of ment of
expendi- annual fed- total
ture. Four eral return expendi-
per cent with State ture only
vote Commis- (to claim
threshold sion. public
funding)

Queens- Post-elec- 500 mem- Post-elec- Post-elec- None As above

land tion, bers or tion by tion by
capped Queensland candi- candidates
by actual Member of dates, and other
expendi- Parliament donors political
ture. Four required. and politi- expenders.
per cent cal expen- Annual
vote ders. returns by
threshold Annual parties or
returns by associated
parties entities
and asso- (sum-
ciated maries
entities. only)

Western None 500 mem- Post-elec- Post-elec- None As above

Australia bers. tion by tion by
candi- parties,
dates, candi-
non-party dates,
groups non-party
and politi- groups
cal expen- and other
ders. political
Annual expenders.
returns by
parties
and asso-
ciated
entities.

continued over
 Political Finance Law in Australia 121

South None 150 mem- None None None As above

Australia bers or any
Australian
Member of
Parliament.

Tasmania None 100 mem- None Post-elec- Legislative As above

bers. tion Council
returns by (Upper
Legislative House)
Council only: can-
candidates didate
(including expenses
receipts limited
for to A$
expenses 10,000.109
over Expendi-
A$20). ture by
others
prohibited.

Australian Post elec- 100 mem- Post-elec- Post-elec- None As above

Capital tion as of bers. tion by tion by
Territory right. candi- candi-
Four per dates, dates, par-
cent non-party ties, non-
thresh- groups, party
old. donors groups,
and politi- political
cal expen- expenders
ders. and media
Annual (advertis-
returns by ing).
parties, Annual
associated returns by
entities, parties,
MPs and associated
donors to entities
parties/ and MPs.
MPs.

continued over

109
2005 figure. The amount increases by increments of A$500 annually.
122 Graeme Orr

Northern None 200 mem- Post-elec- Post-elec- None As above

Territory bers or fed- tion by tion by
eral regis- candi- candidates
tration. dates, and media
donors (advertis-
and politi- ing).
cal expen- Annual
ders. returns by
Annual registered
returns by parties
registered and asso-
parties ciated
and asso- entities.
ciated
entities.

Postscript: In mid-2005 the Australian government announced plans to signifi-

cantly liberalise the law. It is anticipated that the disclosure threshold will rise to
A$5,000 and individuals will be able to claim tax deductibility of party donations
at a similar level.
 7
Revisiting Transparency and Disclosure
in Japanese Political Reform1
AKIKO EJIMA

Introduction
IN JULY 2004 the Japanese press reported that, three years prior in July 2001, Japan’s
Prime Minister at the time, Ryutaro Hashimoto, had received a ¥100 million cheque
(approximately $1 million) from a former chairman of the Japan Dental
Association (JDA)—the lobbying arm of the Japan Dentists Federation—at a
ryotei—a very expensive and private type of Japanese restaurant often used by
politicians to have confidential conversations and negotiations among themselves
and/or business leaders—in the presence of two other Liberal Democratic Party
(LDP) heavyweights. Even though Japan’s Political Fund Control Law (PFCL)
requires political organisations to disclose all income in an annual balance report,
the LDP made no record of this contribution. Prime Minister Hashimoto, who until
recently headed the LDP’s largest faction, the Heisei Kenkyukai, told reporters that
he did not remember receiving the cheque and denied his involvement in the affair,
although subsequently the Heisei Kenkyukai itself acknowledged the donation and
re-filed its 2001 political funds report. On 29 August 2004, prosecutors indicted
Toshiyuki Takigawa, former LDP treasurer, on suspicion of violating the PFCL with
the omission, and subsequently indicted Kanezo Muraoka, former Chief Cabinet
Secretary, on whose advice Takigawa stated he had been acting. However, it is very
unlikely that prosecutors will charge Mr Hashimoto himself, even though the donor
stated that he had handed the cheque directly to the former Prime Minister.
This scandal revealed the existence of a common practice at the LDP: the
party receives donations from other political organisations—donations which
1
The initial draft of this chapter appeared in the Bulletin of the Institute of Social Sciences, Meiji
University, vol 26, no 24 (March 2004). The author has updated her facts and analysis to incorporate
recent events, particularly the 2004 scandal involving the former Prime Minister and a new proposal
for amendment to the Political Fund Control Law.
124 Akiko Ejima

individual politicians could never take due to legal regulations in the PFCL—and
issues receipts to the donors, after which the LDP distributes the money to its politi-
cians. This practice obviously functions as a loophole in the PFCL, and raises the
question of whether the PFCL effectively keeps political funding clean enough for the
public to continue trusting political parties and politicians. To deal with the problem,
the Japanese government is currently proposing a Bill which would set a ¥50 million
ceiling on donations among political groups, but while this is a very typical reaction
by the LDP to political scandal, as is explained in the next section, the author does
not think that it is an effective solution. The explanation of this opinion requires an
analysis of the history and present situation of political funding in Japan.
Japanese politics are notorious for the huge cost of electoral and political activ-
ities and for incessant political corruption.2 But this does not mean that the gov-
ernment has never done anything to cope with problems. On the contrary, the
cyclical exposure of major political scandals, accompanied by strong anger and
distrust on the part of the public, has been a powerful stimulus toward amending
regulations of party funding and election finance. However, all attempts to curb
political and electoral expenditures and thereby to prevent political corruption
have failed so far. It is time to examine not only solutions but also the process
through which these solutions are chosen and implemented. Structural factors
may prevent the taking of more appropriate and effective measures.
The latest example of this cycle of scandal and attempt at a solution is
the Political Reform of 1994. This reform was triggered by the Recruit Scandal in
1988, after which the degree of disgust with existing politics and the desire for
change were so overwhelming among the public—and even among politicians
themselves—that the LDP lost power for the first time in four decades. In 1993 a
coalition government of opposition parties was established, and to it fell the task of
political reform. This complete reform not only adopted severer regulations
(tightening upper limits on donations, prohibiting certain types of donations and
requiring more transparency and disclosure), but also introduced direct public
funding to political parties for the first time in Japanese political history. Moreover,
the reform succeeded in including changes in the electoral system, on the premise
that such change may contribute to the transformation of politician-centred poli-
tics into party-centred politics. However, it is doubtful that the reform was success-
ful in curbing the expenditures of politicians and political parties—and thereby
lessening the possibility of political corruption—since new problems are now
emerging. It is still too early to say that Japanese politics is party-and policy-centred.
The main purpose of this article is to analyse and evaluate the Political Reform
of 1994 in order to shed light on what advantages and limitations legal regulations
and structural reforms have in the control of political funding. Moreover, the
effect of public money is examined by looking at the effects of newly introduced
direct public funding regulations on Japan’s political parties. In this article the
author utilises a classification of three different reform models: the regulation
2
J Bouissou, ‘Gifts, Networks and Clienteles: Corruption in Japan as a Redistributive System’ in D
Della Porta and Y Meny (eds), Democracy and Corruption in Europe (London, Pinter, 1997).
 Transparency and Disclosure in Japanese Political Reform 125

model, the self-regulation model and the structural reform model.3 The first sec-
tion of this article explains the history of legal control of political funding in
Japan. Specifically, the major political corruption scandals which triggered the
legislation in question are examined in order to evaluate how effective the partic-
ular regulation model is. The second section examines the present system (after
the 1994 Political Reform) in order to clarify the fundamental problem of the
Japanese system. For five decades Japan has incorporated various measures that
together constitute every factor of the above three models. Therefore, it is useful
to classify all the measures that the Japanese government has taken according to
the said three models. Thereby, each characteristic of these measures will be
analysed and clearly understood. The third section proposes a possible alternative
that would be helpful in improving the present situation, taking into account cur-
rent problems, amendments and nascent awareness among the public.

The History of Legal Control of Political Funding and

Election Finance in Japan

Overview: Various Solutions

Presently legal control of Japanese political funding and election finance compris-
es three major pieces of legislation. First is the PFCL,4 which regulates the income
and expenditures of political activities of politicians, political parties and political
organisations. Secondly, the Public Offices Election Law (POEL)5 regulates
income and expenditures during elections. Lastly, the Political Party Subsidies
Law (PPSL)6 introduces state funding and requires political parties to submit a
report on how the subsidies are used. These laws were not instituted at once. They
have been amended and augmented over five decades, mostly in response to polit-
ical scandals. They can be classified according to three models.7
The first is the ‘legal regulation’ model, by which laws aim to curb the income
and expenditures of politicians and political parties directly by limiting donations
and electoral expenditures, by restricting some political activities that are likely to
entail bribery and by setting penalties for violations. While this is the most direct
approach in terms of restraining political finance, there is also the danger of
restricting political freedom more than is necessary. Furthermore, an effective and
efficient mechanism of enforcing the law is necessary for this model to function
properly. The experiences of various countries8 have proven that it is difficult to
3
A Ejima, ‘Three Models for Tackling Political Corruption: An Appraisal of the Japanese Political
Reform of 1994’ (2001) 69 The Women’s College Journal, Meiji University 1.
4
Seiji Shikin Kisei Ho (in Japanese).
5
Koshoku Senkyo Ho (in Japanese).
6
Seito Josei Ho (in Japanese).
7
The following derives from A Ejima, above n 3.
8
Japan is certainly one of the appropriate examples as explained later.
126 Akiko Ejima

implement such a model and that, even if it is possible to implement it, there are
often loopholes which allow politicians to get around regulations when they feel
they really must raise money. Under stricter regulations, financial activities to
gather political funds tend to take place behind the scenes where corruption is
likely to occur and where it is more difficult to discover. In order to cope with
these more secretive activities, still stricter laws and more resources for adminis-
tration are required. Compounding this problem, these severer regulations make
the general public feel that political activities are more dubious and immoral than
they actually are. Moreover, there is a danger that the law itself, useless and inef-
fective, becomes a mockery. Loopholes in, and violations of, regulations encour-
age politicians to feel that avoidance is not a serious crime and that everybody
does it if there is a chance.
The second model is the ‘self-regulation’ model, which requires transparency
and disclosure of political finance. The PFCL, POEL and PPSL require political
parties, political organisations and politicians to submit reports to the govern-
ment. Theoretically under the supervision and criticism of the public who are
well-informed by the reports, the parties and politicians have to self-regulate in
order to gain public trust and support. This model’s merit is that it can avoid
direct interference into politics by the state so that fundamental freedoms, such as
the freedom of expression, are maintained. Moreover if politicians can regulate
themselves, their regulations should reflect reality and administrative costs might
thus be saved. However, in reality, most people in Japan are not interested in such
reports, neither is it easy to become interested in them.
The third and last model is the ‘structural reform’ model. It focuses on the
structural element of the problem of political finance and political corruption.
Under this model, changing the electoral system itself and introducing a public
funding system are hoped to be helpful in establishing a more frugal and corrup-
tion-free political system. Japan, following this model, adopted both measures in
1994 for the first time.
It is noteworthy that in Japan the original legal controls followed the second
model, and then included the first one, ie more direct regulations. Only when this
did not work was the third one introduced, in the 1990s. It can be argued that
because the original reform was triggered by political corruption scandals, the
solutions tended to focus on harsher regulation, which was backed by public
opinion until the 1990s. Only when, at the end of 1980s, the ineffectiveness of this
approach was proven did the argument for structural reform become more
persuasive and plausible. However, now it is necessary to examine whether struc-
tural reform is effective in controlling political finance. Therefore, it is time to
examine the present system, namely the amalgam of regulations, from the view-
point of controlling political finance.9

9
Y Yoshida, ‘Seiji Shikin no Kisei to sono Rekisiteki Igi’ in Seiji Shikin Kenkyukai (ed), Seiji Shikin
to Hoseido (Political Finance and Legal System) (Tokyo, Nihon Hyouronsha, 1998).
 Transparency and Disclosure in Japanese Political Reform 127

Origin: Enactment of the Political Fund Control Law 1948

It should be noted that the original Japanese system had its origins in the United
States Federal Corrupt Practices Act of 1925, as it was the outcome of cooperation
between the US occupation authorities (GHQ) and the Japanese government dur-
ing the occupation period after World War II. Because of this, the primary focus
of the system was on transparency and disclosure in the first place, rather than on
direct restrictions of the income and expenses. The basic principle was that politi-
cians and political parties should regulate themselves under public supervision
that is equipped with the necessary information (the self-regulation model).
However, incessant emergence of political corruption proved that self-regulation
is not enough, nor is it effective in coping with the reality of political finance, as
will be explained later.
After World War II, Japan returned to parliamentary democracy under the
supervision and with the support of GHQ, for whom the democratisation and lib-
eralisation of Japan had priority over everything else. GHQ’s General MacArthur
demanded women’s suffrage, promotion of the establishment of unions, liberali-
sation of school education, democratisation of the economic system by banning
monopolies, and the protection of the freedom of the individual by abolishing the
abusive and arbitrary police system. With GHQ’s support in promoting liberalisa-
tion and democratisation, numerous political parties were established. However,
as many of them were simply groups of several individuals or operated only local-
ly, they often could hardly be described as political parties in the modern sense.
The great confusion of party politics in the post-war situation of social and
political upheaval brought about an outstanding result in the first post-war elec-
tion for the House of Representatives (hereinafter HR)10 in April 1946. The voting
age limit was lowered to 20 and women’s suffrage was allowed for the first time.
Moreover a multi-seat large-sized constituency system for the HR (Daisenkyokiu
Seigen Renkisei)11 was introduced which facilitated the participation of small par-
ties in the election. There were 1364 candidates for 466 seats and 267 parties
joined in the election. Three hundred and seventy seven new MPs (81% of total
seats) occupied these seats since the GHQ had purged many of the MPs from the
pre-war parties.12 Seventy-nine female candidates ran in the election and 39
(8.4%) won.13 None of the parties could form a majority: There were 140 seats for

10
Shugiin (the Lower House of the Diet).
11
Each Todohuken (Tokyo, Hokkaido, Kyoto, Osaka and other prefectures) forms a constituency and
each voter has two votes. This system was used only once and was replaced by the medium-sized con-
stituency system in 1947. The conservative parties had initially supported the single-seat constituency
system. Therefore, the adoption of the medium-sized constituency system is the product of compro-
mise between the conservative parties such as the Liberal Party and GHQ.
12
R Hrebenar, ‘The Changing Postwar Party System’ in R Hrebenar (ed), Japan’s New Party System
(Boulder, Westview Press, 2000). Of the incumbent Diet members of the Progressive Party, 260 out of
274 were purged; in addition, 30 of the 43 Liberal Party Diet members, 21 of 23 Cooperative Diet
members, and even 10 of the 17 Socialist Diet members were prevented from running for public office.
13
It was the highest record up to now. Presently there are 36 female MPs (7.5%) in the HR (February
2002). There are 18 female MPs (15%) in the House of Councilors (February 2002).
128 Akiko Ejima

the Liberal Party (Jiyu-to), 94 for the Progressive Party (Shinpo-to), 97 for the
Japan Socialist Party (JSP, Shakai-to), 14 for the Cooperative Party (Kyodo-to), 5
for the Japanese Communist Party (JCP, Kyosan-to), 38 for other parties and 81
for Independents. Consequently, the mergers and regrouping of political parties
were repeated and there was a suspicion that money had been used in order to
form a majority in the Diet by unifying several political parties artificially.
Therefore, the control of political parties and the prevention of corrupt practices
rose to the top of the political agenda. The Home Ministry (Naimu-sho) under-
took this task with the help of GHQ. In October 1946, GHQ and the Home
Ministry held a preparatory meeting to discuss the drafting of legislation for
political parties in order to cope with the rapid increase in fringe political parties
and to prevent political corruption.
After some futile attempts to draft a Political Party Bill, GHQ suggested that it
would be better to concentrate on the issue of preventing political corruption
first. In 1948 the PFCL passed through the Diet. Because of the significant role of
GHQ in this reform, the Federal Corrupt Practices Act of 1925 was used as a
model. Thus, the concept of transparency and disclosure played a vital role in the
PFCL. The law itself did not ban particular donations but the public could know
who received how much money from whom and thereby judge whether such
receipts were appropriate. Political parties and political organisations were
required to submit income and expenditures reports. However, these ideas did not
work well in practice. Japanese politics remained tainted by corruption, without
any serious effort to cope with it,14 until one of the biggest scandals blew up in
1966. Incessant political corruption and many violations of electoral law persuad-
ed the government to establish the First Electoral System Council (Dai 1-ji Senkyo
Seido Shingikai). The Council’s report suggested that corporate donations should
be banned. However, it also suggested that an immediate ban was not appropriate
and the timing for the ban had to be considered carefully.
Simultaneously, the courts considered the illegality and constitutionality of
corporate donations. In the Yahata Seitetsu case, the Tokyo District Court held
that donations made by its Director violated corporate law.15 In the court’s view a
corporation is an organisation whose purpose is to generate profits, and its non-
profit activities—other than social philanthropy—are violations of its bylaws.
Moreover donations to political parties and religious organisations could not be
considered philanthropic activities. This decision was criticised by those who
claimed broader rights for companies16 but was supported by those who argued
for the cleanup of politics.17 The Third Electoral System Council (Dai 3-ji Senkyo
Seido Shingikai) also discussed the prohibition of corporate donations, and one of

14
A few minor efforts, such as the 1950 Amendment and the 1962 Amendment, were made.
15
The judgment of 5 April 1963, 14–4 Kaminshu 657.
16
See T Omori, Shinpan Kaishaho Kogi (Tokyo, Yushindo, 1971) 18 and T Suzuki, Shoho Kenkyu III
(Toyo, Yuhikaku, 1971) 292. In general, see K Saegusa, ‘Seiji Shikin no Shihouteki Approach’, in NZ
Gakkai (ed), Seiji Shikin (Tokyo, Gakuyo Shobo, 1991).
17
N Kobayashi, Nihon niokeru Kenpou no Doutai Bunseki (Tokyo, Iwanami, 1963) 174.
 Transparency and Disclosure in Japanese Political Reform 129

the Council members even proposed such a ban, to take effect within five years.
However, the Japanese Supreme Court, upholding a decision of the Tokyo High
Court, overruled the judgement of the Tokyo District Court. The Supreme Court
held that political parties were indispensable elements of parliamentary democra-
cy and that therefore it was acceptable for companies to make political donations
in their socially-acceptable role of supporting the healthy development of govern-
ment. It should be pointed out that the Court interestingly included corporate
donations as one of the political freedoms protected by the Constitution of
Japan.18 This had the effect of reinforcing the argument that companies have the
freedom to carry out political activities, including political donations.

The 1975 Amendment of the Political Fund Control Law:

Restriction on Donations
The Black Fog (Kuroi-kiri) Scandal in 1966, accompanied by the dissolution of the
HR, necessitated a complete reform of the PFCL. The Fifth Electoral System
Council (Dai 5-ji Senkyo Seido Shingikai) urgently set up a special committee in
order to discuss the problem of political finance. In 1967 it submitted a report
proposing restraints on donations and a further increase of transparency and dis-
closure accompanied by severer penalties. Thus, at this stage, the necessity for
more direct regulations was clearly recognised because of the realities of money
politics. Interestingly, the report indicated that the sources of political funding
should be limited to individual donations and party membership fees. However,
it also argued that it was not realistic to ban corporate donations as most political
parties depended heavily on them and if they were banned, the parties’ financial
difficulties would lead to political disorder. The report added that corporate
donations could be banned after the modernisation and restructuring of political
parties. After this, political parties would be able to survive on individual dona-
tions and membership fees alone.
The Sato government immediately undertook to draft an amendment based on
the report. It was submitted, in vain, to the 55th Diet in June 1967. Several simi-
lar attempts by the government failed in 1968, 1969 and 1972.19 These, however,
were followed by the 10th election of the House of Councilors (hereinafter HC).20
This election reflected the reality of contemporary political finance: its electoral
expenses were so high that it was called the Money-Tainted Election (Kinken
Senkyo). The Miki government was formed in December 1974, after the Tanaka
government resigned in the wake of criticism of the election and Tanaka’s own
money scandals. Prime Minister Miki himself argued for the prohibition of cor-
porate donations but the LDP, then the ruling party, was strongly opposed to it.
Finally the government submitted the amended PFCL in 1975, made possible by
postponing a review of corporate donations to some future date. After passing the
18
The view of the Supreme Court has been heavily criticised by constitutional law experts.
19
Opposition parties also submitted their own Bills to the Diet.
20
Sangiin (the Upper House of the Diet).
130 Akiko Ejima

HR, the Bill passed the HC with 117 votes for and 117 against, and the support-
ing vote of the Speaker of the HC.
The principles of self-regulation—of the control through transparency and
disclosure—had had to be critically reconsidered, and more direct regulations
were introduced. The primary amendment was the introduction of a limit on
donations. However, it must be noted that the limit was on the total amount only.
Specifically, the total amount of donations that any one company can give annu-
ally depends on its capital, which means that the biggest companies in Japan can
donate a maximum of ¥100 million (approximately $900,000) to parties and
political organisations (fundraising organisations for politicians).21 In addition to
this cap, there were improvements in disclosure and tax deductions for individual
donations, and the definitions of political parties and political organisations as
recipients of donations were clarified in the PFCL for the first time.

The 1980 Amendment of the Political Fund Control Law

The exposure of the Lockheed Scandal in 1976 instigated further political finance
reform. This scandal greatly shocked and angered the public; there were aggres-
sive debates in the Diet and former Prime Minister Tanaka and the former
Minister of Transport were both arrested. Tanaka had received bribes from
Lockheed for his influence in establishing a contract between Lockheed and
Japanese airline companies. Therefore, this reform focused on transparency and
disclosure of each individual politician’s finances. However, neither the Miki gov-
ernment nor the Hukuda government could enact specific measures for the pre-
vention of political corruption.22 Then the US Securities and Exchange
Commission disclosed another suspicious payment by McDonnell Douglass and
Grumman concerning the purchase of airplanes. This convinced the public that
factors of corruption were structural and inherent in Japanese politics,23 and that
it was necessary to implement more fundamental measures to improve the situa-
tion and to prevent corruption. Succeeding Hukuda, the Ohira government felt
that the establishment of political ethics was one of the most important items on
the political agenda. Ohira set up a private consultative body for this purpose. It
submitted a proposal emphasising that the cleanup of politics had to be achieved
by the efforts of politicians themselves. Particularly it put emphasis on the follow-
ing four points. First, it is necessary to shift from politician-centred politics
to party-centred politics that will lead to less expensive elections. Secondly, a dis-
tinction had to be made between the income and expenditures of the political
activities of politicians and the income and expenditures of politicians as private
individuals, and for this purpose more transparency and a reporting system are
21
US $1 is approximately equal to ¥133 on 1 March 2002.
22
Only the amendment of penalty for the crime of bribery was submitted to the Diet in 1977 and
passed in 1980 after carrying over for several sessions of the Diet.
23
Those corruptions were described as a structural corruption (kozo-oshoku). The thorough
research on Tanaka done by journalist Takashi Tachibana had a strong impact. See T Tachibana,
Tanaka Kakuei Kenkyu (Tokyo, Koudansha, 1976).
 Transparency and Disclosure in Japanese Political Reform 131

necessary. Thirdly, an ethics committee in the Diet and an ethical code of conduct
should be established. Fourthly and finally, in order to promote better political
ethics, public awareness should be heightened. On receiving the proposal, govern-
ment and the LDP discussed specific measures and an amendment Bill was
submitted to the Diet in April 1980, although it did not succeed. The Suzuki gov-
ernment also made efforts to establish ethical politics and submitted a similar Bill
in the same year which finally passed the Diet. The main point of the amendment
was that it required an individual politician to submit a report of income and
expenditure. For this purpose individual politicians have to specify one of their
supporting organisations (koenkai) as a specified organisation that can receive
political donations on behalf of the politician and submit a report on income and
expenditure. Further, the Diet Act was amended in order to add a new chapter on
political ethics. Each House set up principles of political ethics and a code of prac-
tice according to this chapter and established a review committee for political
ethics. However, these amendments proved to be useless in curbing political
expenses24 and in preventing political corruption. There continued to be incessant
political corruption scandals, including the Recruit Scandal in 1988.

The Political Reform of 1994 and Beyond

The Recruit Scandal in 1988 and other successive political corruption scandals25
shocked and enraged the public. These scandals had modern and unique features
compared with older scandals, which could be described as individual crimes.
Contrastingly, the Recruit company distributed bribes not only to influential and
senior LDP members of both Houses, ministers and high public officials related
to Recruit’s business (traditional recipients of bribes), but also to less influential
or much younger LDP members and opposition members, the journalists and
even to some academics.26 The bribe itself was symbolic of the period of the
‘Bubble’ boom economy. Recruit offered recipients an opportunity to purchase
new shares in Recruit that were not yet being sold on the stock market but which
were strongly expected to sell at a premium in the economic boom of that period.
The fact that many recipients actually gained a huge profit from selling them after
purchase without feeling any shame or the slightest hesitation disgusted the pub-
lic, whose trust in politics and politicians again plummeted. The approval rate of
the LDP Takeshita government was only 15 per cent (March 1989)—having fall-
en from 41 per cent (October 1988)—and the disapproval rating was 68 per cent,
increasing from 31 per cent. In 1989 the LDP lost its majority in the HC, after
which the Takeshita government resigned. The recovery of public trust was a high
priority. It was thought that the previous method, ie adding or reinforcing regu-
lations concerning political finance, couldn’t solve the problem fundamentally.
24
See Figure 6 below.
25
The most important are the Kyowa Scandal (1991), the Tokyo Sagawa Scandal (1991), the
Kanamaru Scandal (1993) and the Construction Firm (Zenekon) Scandal (1993).
26
About 70 people in total allegedly received bribes.
132 Akiko Ejima

The emphasis was put on the structural aspect of politics. Therefore, not only
more restrictions on donations and more transparency, but also electoral reform
and public funding were proposed.
Succeeding Takeshita, the Uno government established the Eighth Electoral
System Council (Dai 8-ji Senkyo Seido Shingikai). The Council pointed out fun-
damental principles of the reform in its reports; in order to achieve party and pol-
icy-centred politics, it suggested not only additional political finance regulations,
but also structural reform of the electoral system and the introduction of public
funding. After Uno’s resignation, triggered by a scandal of his own making, the
Kaifu government submitted Political Reform Bills in vain. The Miyazawa govern-
ment, succeeding Kaifu, only succeeded in adding minor amendments to the
PFCL (Emergency Political Reform) in 1992. After the LDP government’s succes-
sive failure to carry out political reforms, a coalition government of opposition
parties was established following the 1993 general election. The LDP lost its
majority in the HR for the first time in almost four decades.
This Hosokawa coalition government gave priority to political reform and sub-
mitted its own political reform Bills. These Bills—the 1994 Amendment of the
PFCL, the 1994 Amendment of the POEL, The Political Parties Subsides Law of
1994 and the Constituency Boundary Council Law of 1994—passed the Diet in
1994 after many twists and turns. The previous PFCL had been heavily criticised
as ineffective because of its many loopholes (it was described as a ‘strainer’ law
because it could not stop illegal money from going in and out of politicians’ pock-
ets). Therefore, the 1994 Reform had to be capable of effectively dealing with
loopholes. The 1994 Amendment increased transparency of income and expendi-
tures and reinforced penalties (tightening the guilt-by-association system); it for-
bade companies and other bodies (such as trade unions) from making donations
directly to members of either House and also to politicians. Donations could not
be made other than to political parties, political fund organisations (PFOs)27 and
fundraising organisations (FROs).28 In both cases the party or the politician must
file a report concerning their political organisation to the Home Affairs Minister29
or the relevant Election Administration Committee. Although total prohibition of
corporate donations was strongly advocated during the legislative debate, it did not
happen. Rather, it was agreed that donations by companies and trade unions to
fundraising organisations would be banned five years after the date when the
reform went into force and that donations by companies and trade unions to polit-
ical fund organisations would be reconsidered at the same time. This agreement
was incorporated in the 1994 Amendment (sections 9 and 10 of the Appendix).

27
A political party can specify only one political organisation as its political fund organisation (seiji
shikin dantai) whose purpose is to offer financial support to the political party and receive donations
for the party from individuals, corporations and other political organisations.
28
A politician can specify only one political organisation as his or her fundraising organisation
(shikin kanri dantai) whose purpose is to receive political funding for the politician.
29
The General Affairs Minister replaced the Home Affairs Minister in 2001. The Ministry of Public
Management, Home Affairs, Posts and Telecommunications replaced the Ministry of Home Affairs
when the governmental system was overhauled and restructured in 2001.
 Transparency and Disclosure in Japanese Political Reform 133

Just a few months before January 2000—the deadline for this reconsidera-
tion—the Prime Minister announced a ban on donations by companies and trade
unions to FROs. However, a clause stipulating a future reconsideration of dona-
tions by companies and trade unions to PFOs was eliminated without serious
reconsideration. This means that the total ban on corporate donations that had
been initially aimed at was not accomplished. This is in contrast with the views of
many companies, which had hoped that political finance would be provided by
public funding and individual donations.30
As far as structural reform is concerned, the 1994 Reform took steps to incor-
porate two epoch-making measures to encourage the transition from politician-
centred politics to party and policy-centred politics. First, the previous multi-seat
medium-sized constituency system of the HR, which had lasted for almost four
decades, was replaced by combination of the single-seat constituency system
(first-past-the-post system) and the proportional representative system (1994
Amendment of POEL). Secondly, the PPSL of 1994 adopted a comprehensive
public funding system for the first time.
It is important to keep in mind that successive governments appeared to be
eager for reform but in reality hesitated to introduce effective measures to prevent
political corruption because money is a matter of life and death for political par-
ties and politicians. This has always resulted in a compromise among influential
political parties and politicians. Therefore, the real aim of reform was always per-
verted by the real politics of power. Many similar examples have appeared since
then, and the 1994 Reform was no exception.

The Current Regulatory System of Political Finance:

An Evaluation of the Political Reform of 1994

Legal Status of Political Parties

Before explaining the current regulatory system, it is helpful to describe the post-
war development of political parties in Japan. The Japanese Constitution does not
stipulate that political parties should exist. However, it is understood that the
Constitution admits their existence as the most powerful medium for stimulating
political awareness among the people and for allowing the smooth development
of parliamentary democracy. 31 There is no particular independent statute dedicat-
ed to political parties in Japan, although there was an attempt to establish one just
after the war as has already been explained. However, several laws exist to regulate
political parties, such as the PFCL and the PPSL, and the PPSL was accomp-
anied by the Political Party’s Legal Person Status Law of 1994 (PPLPSL, Seitou
Houjinkaku Huyo Ho), which granted legal entity status to political parties so that
30
Asahi Shimbun, 17 November 1999.
31
Judgment of the Supreme Court, 24 June 1970, 24–6 Minshu 625.
134 Akiko Ejima

they could receive public subsidies. It follows that when political parties wish to
accept a subsidy, they have to apply for legal entity status. A Japanese political
party, as defined by the PFCL, is a political organisation which (a) has more than
five members in the HR or the HC, or (b) has obtained more than two per cent of
the total votes of the previous election for the HR or the HC. The PPSL and LPSP-
PL adopt the same definition of a political party.
In 1955 the LDP was established, integrating a group of conservative parties
after intense power struggles. It became the most powerful political party in Japan,
and this one-party-predominant system lasted from then until 1993. This fact
should be borne in mind when the reasons for the failure of Japanese political
reform are examined. The LDP has received more corporate contributions than
any other Japanese political party while at the same time, as the ruling party, it has
been under pressure to prohibit such donations. It is too optimistic to believe that
the LDP would take effective action against corporate contributions when so
doing would cut away its own sources of money. Therefore outside pressure was
necessary. However, none of the major post-war opposition parties—the Japan
Socialist Party (JSP, Shakai-to), the Democratic Socialist Party (DSP, Minsha-to),
the Komei Party (KP, Komei-to) or the Japanese Communist Party (JCP, Nihon
Kyosan-to)—nor any opposition coalition had succeeded in displacing the LDP.
The LDP’s power was broken in the great political upheaval of the early 1990s,
triggered by successive political scandals and public distrust and anger. During the
ensuing process of political reforms, power struggles within the LDP fractured
the party, leading to the birth of several new ones, and the LDP lost its majority in
the 1993 general election. A coalition government consisting of the JSP, the KP, the
DSP, the United Social Democratic Party (Shaminren), the Shinsei Party (Shinsei-
to), the Japan New Party (Nihon Shinto), and the New Party Sakigake (NPS, Shinto
Sakigake) took power. The LDP’s fall into the role of opposition party was recog-
nised as a landmark in the history of Japanese politics, described as the end of the
1955 system.32 However, the LDP’s fall was not permanent, and it returned as the
ruling party by forming a coalition government of its own with the JSP and NPS.33
This movement brought about the further creation, division and integration of
political parties, and the Japanese political scene changed completely.
Presently (February 2002), the LDP, New Komei Party (NKP, Koumei-to)34 and
the New Conservative Party (NCP, Hoshu-to) form a coalition government that
has ruled since October 1999. The current opposition parties are the Democratic
Party of Japan (DPJ, Minshu-to),35 The Liberal Party (LP, Jiyu-to), the Social
32
1955 was the year when the LDP was established and since then it had occupied the status of the
ruling party.
33
The JSP had to make many compromises to remain in the coalition government, including
recognition of the constitutionality of the Self-Defense Force. The JSP had previously argued for the
abolition of the SDF by claiming that it was against Article 9 of the Japanese Constitution. These com-
promises lessened the JSP’s identity and hence its support.
34
The majority of the KP was incorporated into the New Frontier Party (NFP, Shinshin-to) in
December 1994. However, in November 1998 the NKP was established after the dissolution of the NFP.
35
The DPJ became the biggest opposition party by absorbing several newly created parties, which
appeared after the dissolution of the NFP.
 Transparency and Disclosure in Japanese Political Reform 135

Democratic Party (SDP, Shakai Minshu-to),36 the JCP and the Association of
Independents (AI, Mushozokunokai).37 The fact that none of the opposition par-
ties other than the JCP existed before 1993 eloquently demonstrates how dramat-
ically the political scene has changed since that year.

Present Legal Control of Political Funding and Election Finance

and Attendant Problems
The current regulatory system is mostly based on the system established by the
1994 Political Reform, which targets political organisations—including political
parties, political fundraising organisations and other political organisations38—
and politicians. Through an evaluation of the 1994 Reform, this section tries to
describe how well the present system is working, what kinds of problems still
remain and what kinds of new problems are emerging.

Transparency and Disclosure

The present system requires three kinds of reports, which can provide information
to help understand the finances of political parties. First, the PFCL requires all polit-
ical organisations, including political parties, to submit a report disclosing all
income and expenditures to the General Affairs Minister39 or to the relevant Election
Administration Committee.40 Secondly, the POEL requires an electoral candidate to
keep an account book and submit a report of all income, including donations41 and
expenditures, on electoral campaign activities to the relevant Election
Administration Committee. Thirdly, the PPSL requires a political party to submit a
report detailing how public subsidies are used to the General Affairs Minister.42
36
The JSP numbers dwindled as some members seceded from it in order to join other new parties.
It finally changed its name to the SDP.
37
The allocation of seats in the HR (7 February 2002) were: 242 (10) seats for the LDP, 31 (3) for
the NKP, 13 (1) for the NCP, 125 (6) for the DPS, 22 (1) for the LP, 20 (4) for the JCP, 19 (10) for the
SDP and 13 (1) for the AI. The allocation of the seats in the HC (22 February 2002) were: 116 (11) for
the LDP, 24 (4) for the NKP, 60 (8) for the DPS, 20 (9) for the JCP, 15 (2) for the LP, 7 (4) for the SDP
and 4 Independents. The number in the parentheses shows the number of female MPs.
38
See Figure 1 below.
39
The General Affairs Minister took over the work of the Home Affairs Minister after the reform of
the governmental system in 2001. See n 29, above.
40
There are various Election Administration Committees according to the type of election: the
Central Election Administration Committees for the general election of the HR based on the propor-
tional representative system and the election of the HC based on the proportional representative sys-
tem; the Election Administration Committees of Prefectures for the election of the HR based on the
single-seat constituency system (first-past-the-post system), the election of the HC based on the
multi-seat prefectural constituency, the election of the prefectural and metropolitan (Tokyo) assem-
blies and the election of the head of the local government; the Election Administration Committee of
Municipalities for the election of the municipal assemblies and the election of the head of municipal-
ities.
41
The name, address and employment description of the donor, and the amount and the date of the
donation should be reported.
42
Particularly, when a certain expense from the subsidy exceeds more than ¥50,000 ($455), the
name of the recipient, the amount, the date and the purpose of this expense shall be detailed in the
report.
136 Akiko Ejima

The General Affairs Minister or the relevant Election Administration

Committee must make a public summary of all the reports in the official daily
gazette or the public bulletin. The original report is available for public in-
spection at the Ministry of Public Management, Home Affairs, Posts and
Telecommunications or the relevant Election Administration Committee for
three years after its submission. As far as the report required by the PFCL is con-
cerned, 82.8 per cent of Japanese political organisations (4325 of 5221 organisa-
tions) submitted annual reports to the relevant authorities in the year 2000. All
the major political organisations have submitted reports regularly.
The 1994 Amendment of the PFCL promoted transparency of political
finances by requiring recipients of donations to disclose the names of donors and
the amount of the donation whenever a donation exceeded ¥50,000 ($454) or a
particular donor had contributed more than ¥200,000 ($1818) on fundraising
party tickets. This tightened the previous standard, which was ¥1 million ($9091)
in the case of donations to political organisations other than political parties and
political fundraising organisations and ¥1 million in the case of party tickets, but
¥10,000 ($91) in the case of the donations to political parties and political fund
organisations.43 This made reports more transparent. In the 1995 report, which
was the first report after the amendments, each donor’s name and the amount
donated can be traced for 82.2 per cent of all donations.44 In the previous year only
3.8 per cent donor’s names and contribution amounts were identifiable.45
Moreover, it can be argued that disclosure of the names discouraged many com-
panies from making donations: In 1995 corporate donations were ¥16.5 billion
($15 million), an immense drop of 39 per cent from the previous year. However,
it is too early to judge whether the heightened disclosure requirements truly con-
tributed to the curbing of corporate donations. There are two reasons for caution.
First, it is true that companies hesitated to make political donations immedi-
ately after notorious political scandals such as those of the early 1990s, but that
effect may not be permanent. For a while companies even stopped gathering
donations through the Federation of Economic Organisations (Keidanren), where
donations were collected by a quota system according to the size of the capital of
each company, but now they have resumed. Corporate donations increased again
to ¥17.8 billion ($162 million) in 1996.46 After that they declined slightly (¥16.1
billion in 1997, ¥15.3 billion in 1998, ¥14.6 billion in 1999) until 2000, when cor-
porate donations to political organisations other than political parties and their
political fund organisations was finally prohibited by the amendment.47
43
On this point the PFCL was eased to encourage donations to political parties by the 1994 Reform.
44
This increase of transparency made it possible to obtain meaningful data for the first time, and
thus enabled research concerning members of the Lower House by a group of researchers and jour-
nalists funded by the Ministry of Education (Monbusho). See T Sasaki et al, Daigishi to Kane (MPs and
Money: The Report of National Survey of Political Finance) (Tokyo, Asahi Shimbun-sha, 1999).
45
Asahi Shimbun, 13 September 1996.
46
The 1996 general election also helped to push up corporate donations.
47
During January, February and March 2000 companies were still allowed to make donations to
fundraising organisations and corporate donations amounted to ¥5.4 billion. It was reported that
some MPs urged companies to give larger donations during this period to cover yearly donations.
 Transparency and Disclosure in Japanese Political Reform 137

Secondly, it is possible for companies to make donations through different

channels, such as fundraising party tickets and making donations to local branch-
es of political parties (many of which are in reality the offices of politicians). The
income from fundraising party tickets was ¥9.1 billion ($83 million) in 1995, an
increase of nearly 50 per cent over the year before. Moreover, this income contin-
ued to increase year by year thereafter: ¥10.1 billion in 1996, ¥12.2 billion in 1997,
¥12 billion in 1998, ¥13.4 billion in 1999 and ¥13.1 billion in 2000.48 This occurred
because of the differences in disclosure limits between donations (¥50,000) and
fundraising party ticket fees (¥200,000). This is a good example of how politicians
can effectively find a loophole in the system.
Although disclosure is supposed to be a key factor in regulating political
finance and it is described in the regulatory system as such, there are difficult
problems concerning the disclosure of party finances from the viewpoint of effec-
tive self-regulation. Firstly, to what extent do the reports reflect reality? Who can
check the reports effectively and efficiently? In the Japanese system there is no
inspection body49 with the authority to check whether the figures in the reports
show the truth or not. Instead, false reports are sometimes discovered by accident.
One such case was the Kanemaru Scandal, in which a donation by the Sagawa
Company of ¥500 million to Shin Kanemaru, the then Deputy Prime Minister of
the LDP, was disclosed through the investigation of another political scandal, the
Sagawa Scandal. Under the PFCL, it is illegal for politicians to receive donations
of more than ¥1.5 million ($13,636) from the same organisation in any one year,
so Kanemaru received a summary penalty of ¥200,000 ($1818). This showed not
only that politicians but also the regulatory body of the government did not take
the accuracy of the report seriously. It can be argued that there must be many
reports which are false but are unknown. Furthermore, the penalty for violation
of the PFCL is so trivial that politicians do not mind violating it. Hence, it is very
doubtful that all income and expenditures are properly and fully reported.50
Several prosecutions of MPs for false reporting, just after the Reform, revealed
how problematic the real situation was.51

Restrictions on Donations
The PFCL comprises various kinds of restrictions on donations (see Figure 1).
First, the PFCL prohibits political parties from receiving donations from certain
persons or organisations: any company subsidised by or invested in by the govern-
ment or local government, any company who has had an operating deficit for

48
The Reports of the Political Fund 1996, 1997, 1998, 1999 and 2000. Asahi Shimbun, 8 September
2000.
49
In the case of reports of electoral income and expenditure, the Election Administration
Committee can require the candidate to report or submit related materials to investigate the report.
50
It is argued that the income and expenditure disclosed by reports (particularly the LDP) are just
the tip of the iceberg. It is a well-known saying among LDP candidates that the winner of the general
election spent ¥500 million, while the loser spent ¥400 million (gotou shiraku).
51
The most resent case was the indictment of Yamamoto, a former Democratic Party MP. Asahi
Shimbun, 23 September 2000.
138 Akiko Ejima

three years, any foreigner or foreign corporation, and any corporation whose
major members are foreigners. Moreover, political parties must not accept a pseu-
donymous or anonymous donation. Secondly, the PFCL caps the total amount of
donations both of the donor and of the recipient. Thirdly, the PFCL prohibits
companies and other bodies such as trade unions from making donations to MPs
and politicians (since 1995) and to fundraising organisations (since 2000).
The PFCL adopts two kinds of upper limits on donations: a total limit and
an individual limit (again, see Figure 1). An individual cannot donate annually
more than ¥20 m ($181,818) total to political parties and political fund
organisations, or more than ¥10 m total to other bodies (fundraising organ-
isations and other political organisations). Moreover, an individual contri-
butor cannot donate more than ¥1.5 m ($13,636) annually to the same

*1 There is no upper limit of donations to political parties or its local branches unless this exceeds
the upper limit for the total donations from the same donor.
*2 The upper limit of donations to the same organisation is ¥1.5 million ($13,636).
➝

: The arrows show the flow of political funds. There are no limits on circulation of
money among political parties, political fund organisations and political organisations

FIGURE 1: The Flow of Political Funds under the Political Fund Control Law.
 Transparency and Disclosure in Japanese Political Reform 139

fundraising organisation or political organisation. In the case of donations by a

company or trade union, the upper limit depends respectively on the capital of the
company or the number of members of the trade union. The upper limits of the
total donations to political parties and political fund organisations vary from ¥7.5
million ($68,181) to ¥100 million ($909,909), which is the maximum. The upper
limits of total donations to fundraising organisations also vary from ¥3.75 million
($34,091) to ¥50 million ($454,455), which is the maximum. A company or a
trade union used to be able to donate less than ¥500,000 a year to the same
fundraising organisation, but this was banned by the 2000 Amendment to the
PFCL. Furthermore, an organiser of a political fundraising party cannot receive
more than ¥1.5 million in ticket fees for fundraising parties from the same person
or organisation.
The 1994 Amendment’s prohibition of donations from corporations and other
bodies such as trade unions to members of both Houses and also to politicians
directly, and the 2000 Amendment’s prohibition of the same parties from making
donations to fundraising organisations should not be underestimated. Because of
these, companies can donate only to political parties (headquarters and local
branches) through the political fund organisations. The problem of the 1994 sys-
tem, however, is that it cannot avoid loopholes, such as the abuse of the local
branches as receivers of corporate donations and the purchase of fundraising
party tickets, which makes the other regulations meaningless.52 One of the serious
loopholes of this reform is that local branches of political parties have been used
as another way of funding candidates. It is often the case that a local branch of a
political party is in fact a particular MP’s office. A politician’s fundraising organ-
isation cannot receive more than ¥500,000 from the same company whereas there
is no such limit on the donations to a political party. There is significant evidence
that political funding of local branches of political parties tripled in 1995 and
doubled in 1996.53 Moreover it was reported that politicians would ask companies
which donated more than ¥500,000 to donate this amount to a local branch of the
political party rather than to a politician’s FRO, after which the local branch
would transfer the funds to the FRO instead.54 In 2000, 122 MP’s fundraising
organisations received donations from the local branches of their parties. This
amounted to about ¥1.8 billion ($16 million) in total. In the previous year only 53
fundraising organisations received ¥630 million ($5.7 million). Therefore, it is
obvious that this loophole is becoming ever more utilised.55 Figure 2 shows that
presently companies donate to the local branches of the political party. The aver-
age income of these MPs is made up of the income from the local branch of the
political party and the income from the FRO of the MP. From Figure 2, LDP MPs
are clearly much better off than MPs from other parties because companies main-
ly donate money to the LDP.

52
This will be discussed later.
53
Asahi Shimbun, 28 November 1997.
54
Asahi Shimbun, 11 September 1998. This kind of donation is banned under the 2000 Amendment.
55
Asahi Shimbun, 21 December 2001.
140 Akiko Ejima

FIGURE 2

Apart from the above direct restrictions on donations by the PFCL, the POEL pro-
vides several indirect regulations, such as an upper limit on electoral expenditure
for each candidate. This limit depends on the numbers of the electorate in the rel-
evant constituency. For example, in the case of a single-seat constituency of the
House of Representatives, the upper limit is obtained by multiplying the numbers
of the electorate by ¥15 ($0.14) and adding a fixed amount (¥19,010,000 =
$172,818). This comes to between ¥23 million ($209,091) and ¥28 million
($254,545). Moreover, the law imposes very severe restrictions on electoral cam-
paigns: a total ban on canvassing, a restriction on the number and size of posters
and leaflets, a total ban on electoral campaign broadcasts except free public elec-
toral campaign broadcasts, a restriction on the period of the campaign and a total
ban on campaign activities by public officials.56 On the whole, the regulation of
electoral finance in Japan is quite strict. However, politicians often get round the
upper limit of electoral expenditure by counting electoral expenses as part of
political activity expenses. Moreover, many candidates begin their campaigns
before the start of the legal period for the electoral campaign.57 It is illegal to cam-
paign before this period but it is very difficult to distinguish in practice between
electoral campaign activity and political activity.

56
Sarufutsu case, judgement of the Supreme Court, 6 November 1974, Keishu 28–9–393. It was held
that the prohibition of allocating and advertising of the posters of a candidate of the HR by a lower-
level post office official does not violate of Article 21 of the Constitution (freedom of expression).
57
Eg, 12 days for the election of the House of Representatives.
 Transparency and Disclosure in Japanese Political Reform 141

Public Funding
Although 1994 was the first time that comprehensive direct public funding had
been adopted in the political history of Japan, it should be recalled that before the
introduction of political party subsidies, other various forms of state aid to polit-
ical parties (through candidates) had already existed under the guise of ‘official
elections’ (kouei senkyo). Many measures relating to electoral campaigns are pro-
vided for by the government: free electoral campaign broadcasts on behalf of
political parties,58 free mailing, free posters, free poster advertising, free press
advertising, free meeting rooms for campaign speeches, official bulletins concern-
ing campaign pledges, free public transportation, free use of campaign cars etc.
These subsidies were based on the idea that severe restrictions on electoral activ-
ities and highly government-subsidised elections could diminish the possibilities
of political corruption. However, considering the incessant political scandals,
most of the above measures do not seem to have curbed political corruption or
prevented electoral offences. Therefore, it is doubtful that more general public
funding like that adopted in the 1994 Reform can curb political and electoral
expenses or prevent political corruption. Therefore re-examination of the existing
quasi-state subsidy must occur before adopting more general state subsidy.
The total amount of political party subsidies is about ¥30 billion ($272 mil-
lion), which is the population of Japan (125 million) multiplied by ¥250 ($2.27).
This figure is based on the argument that state subsidy must cover one third of the
total expenses of political activities by political parties. From the past political
expenses, total expenses have been estimated as ¥90 billion ($818 million). But
there are questions about the appropriateness of the amount of the present state
subsidy. First, the past political expenses had been reproached as too high and the
curtailment of the political expenses was the priority of the reform. Therefore, it
is not appropriate to decide the necessary amount of state subsidy by using the
past figure. Secondly, why state subsidy has to cover one third of the total politi-
cal expenses is not clear.59
Political parties eligible to receive subsidy are defined as follows: (i) a political
party which has more than five members of the HR or the HC, or (ii) a political
party which has more than one member in the HR or the HC and has obtained
more than two per cent of the valid votes in the election for the HR or the HC.60
State subsidy is allocated according to numbers of the members of each House
(50%) and the number of the votes cast in elections (50%). There is no upper
limit, although originally a cap at two thirds of total income had been discussed.
While it was assumed that an upper limit might encourage political parties to
raise more donations in order to receive more subsidies, this regulation was abol-
ished before being enforced because of strong opposition by all parties.
58
Broadcasts by individual candidates of HR elections for single-seat constituencies were prohibit-
ed by the 1994 Amendment.
59
During the deliberation in the Diet it was suggested that the price of a cup of coffee would be
acceptable for the public.
60
It has been argued that it is inappropriate to qualify political parties according to past results of
elections and that the above qualifications are too severe for minor parties and new parties.
142 Akiko Ejima

Nevertheless, considering the present situation, it can be argued that by abolish-

ing the upper limit, parties’ dependency on subsidy has increased (see Figures 9
and 10). Political parties or their regional branches are obliged to keep accounts,
have them audited and submit an annual report with an audit report to the Home
Affairs Minister or the relevant Election Administration Committee. The summa-
ry of the report is published in the official daily gazette. If a political party does
not submit a report, the subsidy grant will be suspended.

FIGURE 3

In 2000 the LDP received 46 per cent (¥14.5 billion, or $132 million) of total pub-
lic subsidies. When the balance carried forward from the year 1999 is added to the
2000 subsidy, the LDP’s financial predominance is strikingly clear (see Figure 3).
It is not surprising if one takes into account that the present electoral system
selects 300 MPs (out of a total of 480 MPs for the HR) by the first-past-the-post
system, which is advantageous to a bigger, nationwide party like the LDP.
Moreover, Figures 4 and 5 show that many parties retained public subsidies with-
out using them.
The present law does not regulate the usage of public subsidies; how the subsi-
dies are used is totally up to the political parties. The only requirement is that
when a particular expenditure of subsidy money exceeds ¥50,000, the name of the
recipient, the amount, the date and the purpose of this expense shall be particu-
larised in the report. In practice major items are running costs, political activity
costs (mainly printing costs) and the reserve fund for elections (see Figure 4). In
1995 the LDP formed an internal code of practice for subsidies and specified
inadmissible items (eg, a ban on food expenses). This is a good example of self-
regulation. By contrast other parties did not set up any policy and therefore vari-
ous items, such as donations to candidates and koenkai, food, hairdressing costs,
alumni association fees and the purchase of a building for the headquarters of
the party, can be allowed. Moreover, it is noteworthy that many parties reserve a
 Transparency and Disclosure in Japanese Political Reform 143

certain amount of the subsidy for their electoral fund. For example, the New
Frontier Party (NFP, Shinshin-to)61 reserved half of the subsidy for its electoral
fund in 1995. Several cases of misuse of subsidies were reported. One of the most
striking cases was that of Yojiro Nakajima, a former MP. He misused public
subsidy for his private expenses and submitted false reports to disguise his mis-
conduct. He was sentenced to two years and nine months in prison (without a
suspended sentence) for this act and other criminal acts including bribery.
Despite the fact that it does not seem appropriate to pay some expenses with
public money, legal regulation of such usage could be considered a state infringe-
ment on political freedom. It is more desirable to leave the parties to make their
own rules under public supervision. Thus disclosure and accessibility of the
necessary financial information are crucial. Additionally if the subsidy is paid with

*PAO: Organisational Political Activities

FIGURE 4
61
The NFP came out of the integration of the Shinsei Party, the KP, the Japan New Party and the
DSP. It was dissolved in December 1997 and split into seven new parties.
144 Akiko Ejima

public taxes it is proposed that the party should spend more money on making
policy, for research activities and for better communication between the party and
the electors. Figure 5 shows that few parties spent subsidies on research activities.
On the contrary, some opposition parties, such as the DJP and LP used the subsi-
dies for electoral expenses. It should be remembered that this political reform of
1994 was replaced by electoral reform. Public funding to political parties and
politicians was the bait for those who had hesitated to accept severer regulations
for their financial problems.

FIGURE 5

Evaluation of the 1994 System: Present Situation of Political

Funding
Now it is time to question whether the 1994 system succeeded in curbing politi-
cal income and expenditures. According to the 2000 Report of the Political Fund,
political parties, political fund organisations, fundraising organisations and other
political groups raised ¥156.9 billion ($1.43 billion) in political funds in 2000, an
increase of 3.4 per cent from the previous year. Although this number plummet-
ed to ¥148.5 billion (the lowest since 1978) in 1994, it has fluctuated since then.
Nineteen ninety–eight marked the highest level of political funding (¥186.5 bil-
lion) because of the 1998 general election for the HR. Therefore, it is difficult to
say that the 1994 Amendment contributed to the restraint of political funding (see
Figure 6).
In 2000 political parties and political fund organisations (including local
branches of the political parties) raised ¥110.4 billion ($909 million), an increase
of 12.4 per cent from the previous year and making up 70.4 per cent of all polit-
ical funds. On the other hand, other political organisations raised ¥46.5 billion
(29.6%), a decrease of 14.2 per cent from the previous year. The major sources of
income were commercial income, public subsidies and donations. The details of
 Transparency and Disclosure in Japanese Political Reform 145

FIGURE 6

income are as follows: commercial income ¥55.3 billion (35%, mainly for issues
of the political bulletin), others include ¥37.4 billion (24%, mostly public subsi-
dies), donations ¥35.5 billion (23%), membership fees ¥14.3 billion (9%), loans
¥9.7 billion (6%) and internal grants ¥4.6 billion (3%).
Donations are obviously declining (see Figure 7). The 2000 Amendment pro-
hibited corporate donations to FROs, which caused overall corporate donations
to decline. On the other hand individual donations have been slightly increasing.
However, the final effect of the 2000 Amendment remains to be seen since organ-
isational donations are increasing and the function of local branches as loopholes
is revealed. Therefore, it is difficult to say that the 1994 system is encouraging indi-
viduals to take part in politics. Furthermore, the increase of individual donations
cannot cover the decrease of corporate donations. It is still too early to say that
party-centred politics is achieved.

FIGURE 7

Total political party income reported in 2000 is as follows: the JCP ¥32.8 billion
($298 million), the LDP ¥27.1 billion, the NKP ¥15.9 billion, the DPJ ¥11 billion,
146 Akiko Ejima

the SDP ¥4.4 billion, the LP ¥3.8 billion, the Liberal Association ¥2.8 billion, NCP
¥0.7 billion, the Independents ¥0.3 billion, the Sakigake ¥0.3 billion and the Dai-
niin Club ¥0.1 billion. Figure 8 shows that well-organised parties such as the JCP
and NKP manage to balance income and expenditures. The JCP’s main income is
the commercial profit (86% of its total income in 2000) made by the issue of the
party bulletin. The JCP refuses to accept public subsidy by arguing that it is
against the Constitution. On the other hand the income and expenditures of the
LDP fluctuated dramatically because of the financial requirements of general elec-
tions which make it difficult to keep a balanced budget.

FIGURE 8
It is clear that political parties are now hugely dependent on public subsidies.
Figure 10 shows that more than half of the income of the major parties, including
the LDP (53%), DPJ (70%) and LP (65%), comes from public subsidy.
Furthermore most of the income of the small parties is in the form of public sub-
sidies: Dai-niin (99%), Sakigake (76%) and the Independents (75%). The signifi-
cance of membership or affiliation fees among major parties is low: JCP ¥1.3
billion (4.5% of its total income), LDP ¥1.8 billion (6.8%), NKP ¥1.1 billion (7%),
LP ¥3 million (0.1%), SDP ¥0.4 billion (8.6%). Smaller new parties did not gain
membership fee income.
The 2000 Report declared that the expenditures of the parties and other polit-
ical groups during 2000 totalled ¥174.5 billion, an increase of 24 per cent from the
previous year. The political parties spent ¥112.2 billion in total. The itemised
expenses of the party are as follows: ¥16 billion (14% of the total expense) for
the operating expenses, ¥12.6 billion (11%) for political activity expenses, ¥12 bil-
lion (10%) for electoral expenses, ¥36 billion (32%) for publishing (business),
¥27 billion (24%) for donations and ¥6.9 billion (6%) for others. The average
expenditures of LDP members is ¥72 million while the DPJ’s ¥43 million.62 It is
62
Asahi Shimbun, 21 December 2001.
Transparency and Disclosure in Japanese Political Reform 147

FIGURE 9

FIGURE 10
148 Akiko Ejima

interesting that many parties not only receive donation but also give donations (see
Figure 11). It can be argued that parties began to play a role to receive donations for
politicians and afterwards redistribute to them because corporate donations to
politicians was prohibited in 1995 and corporate donations to politician’s fundrais-
ing organisations also was prohibited in 2000. More organised parties such as the CJP
and NKP spent their funds on business expenses (mainly the issue of the party bul-
letin). On the other hand the newly established parties such as the DPJ, LP, SDP and
NCP spent quite a proportion of their funds on elections (see Figure 12).
These results lead to the conclusion that the 1994 system has not succeeded in
curbing income and expenditures or preventing political corruption. Conversely,
several problems, such as loopholes in the system and the dependency of political
parties on public subsidies, have been highlighted.

FIGURE 11

FIGURE 12
 Transparency and Disclosure in Japanese Political Reform 149

Conclusions: Revisiting Transparency and Disclosure

So far as one aspect of the regulation model in the 1994 Reform is concerned, it is
difficult to say that the 1994 Reform played a fundamental role in changing the
structure of political funding: The current scandal of former Prime Minister
Hashimoto clearly revealed that the mindset of LDP politicians has not changed,
and that they continue to try to find loopholes in the law instead of reforming the
funding system. The acceptance of such a huge amount of money as ¥100 million
without declaring it can be interpreted by the general public as an indication that
the LDP and/or politicians are working only for organisations with money. It
should be noted that the revelation was accidental and that the PFCL system itself
does not have any authority to check whether funding reports submitted by polit-
ical parties are accurate or not.
More clear evidence of this lack of change is the current abuse of the local
branches of the political parties. Although corporate donations to FROs were pro-
hibited in 2000, it has been revealed that this prohibition is ineffective because
politicians can receive the same donations through the local branch of their polit-
ical party. In 2000 local branches of the LDP received corporate donations six
times as large as the previous year’s.63 It can also be argued that the exchange of
political funding among FROs and their supporting organisations can bypass the
donations limits. This circulation of money among the three types of organisa-
tions is tantamount to money laundering.64 Politicians skilfully juggle these three
purses according to the nature and amount of the donations. To cope with this
loophole, a restriction on the number of local branches would be effective. The
DPJ limits the number of its local branches voluntarily, currently to about 480. On
the other hand, the LDP has established 6931 branches up to now. It is said that
the LDP accepted the prohibition on corporate donations to FROs only because
it understood that local branches could be used to raise the same money.65
Even though closing loopholes by tightening regulations and introducing new
regulations is effective, it should be noted that there are already an enormous
number of regulations in the Japanese electoral and political systems. Depending
on the nature of the violations, the law imposes fines, imprisonment, suspension
of the right to vote and stand for election, and the invalidation of a politician’s
election. It is true also that the 1994 Reform reduced electoral violations by tight-
ening up the guilt-by-association system, increasing fines and adopting the sus-
pension of civil rights in cases of bribery. Nevertheless, several political scandals
were reported even after the 1994 Reform.66 Current suspicions concerning the

63
Asahi Shimbun, 21 December 2001.
64
Sasaki, n 44 above at 45.
65
Asahi Shimbun, 21 December 2001.
66
The KSD Scandal (2001) involving leading LDP MPs Koyama and Murakami. Currently LDP MP
Suzuki is alleged to have been involved in rigging bids for government-funded projects, including the
construction of a ‘House of Friendship’ on Kunashiri Island, off the northeastern coast of Hokkaido,
which is part of Suzuki’s constituency.
150 Akiko Ejima

mediation of MP’s private secretaries for example led to a suggestion to amend

the Law for Punishment of Public Officials’ Mediation,67 which would prohibit the
mediation by the people in public office and MP’s public secretaries, so as to
include private secretaries. The history of Japanese politics teaches us that stricter
regulations either do not work or work only for a limited period. Severer regula-
tions cannot change the mindset and customs of politicians and companies. On
the contrary, if politicians need money, they will always find loopholes. Therefore,
tightening regulations for political finance and adding restrictions on electoral
campaign activities in Japan can only do so much to curb expenditures and there-
by prevent political corruption. Moreover, it has a negative effect on the public
because stricter regulations lead to more loopholes, and this makes the public feel
that political activities are more dubious and disgusting, leading in turn to polit-
ical apathy.
So far as structural reform is concerned, there is no evidence that electoral and
public funding reform have realised the goal of party and policy-centred politics,
the fundamental aim of the 1994 Reform. Contrastingly, some minor reforms that
seemed to be inconsistent with the above aim of the 1994 Reform were added
afterward. First, the reduction of seats for the HR was proposed and seats for the
HR selected from the proportional representative system were curtailed from 200
to 180 but the seats selected from the single-seat constituency system (first-
past-the-post system) were intact. Taking into account that the proportional
representative system is supposed to encourage party-centred politics, this curtail-
ment cannot be considered as favourable to the aim of the 1994 Reform. Secondly,
the reform of proportional representative system in the election for the HC
enables the electorate to write the name of a candidate in a ballot instead of the
name of a political party to which the candidate belongs. This brought about an
unusual electoral offence perpetuated by high-ranking public officials in the
postal service.68 They asked the post office heads in official meetings to campaign
for Koso, an LDP candidate who used to be a high official in the Ministry of Posts
and Telecommunications. Koso was elected by a huge majority but resigned after-
ward because this offence was disclosed. This incident tells us that the reform
encouraged a move toward politician-centred rather than party and policy-cen-
tred politics. Furthermore, negotiations have taken place among the ruling parties
to return to the previous multi-seat medium-sized constituency election system
because the present system is not advantageous to the NKP whose cooperation the
LDP wishes to retain. It is doubtful that the ruling parties support the aims of the
reform. They utilise it when it is useful (for example, the introduction of political
funding) and ignore it when it is not advantageous to them. In fact, newly intro-
duced public funding is not effective in curbing expenses but merely makes polit-
ical parties dependent on it and they tend to take it for granted and make fewer
efforts to appeal to the general public.

67
It was established in 2000.
68
Judgment of Osaka District Court, reported in Asahi Shimbun, 17 January 2002.
 Transparency and Disclosure in Japanese Political Reform 151

Thus, it is worthwhile to return to the initial principle of the system of control

of political finance: transparency and disclosure. These are the keys to encourag-
ing political parties and politicians to self-regulate under public scrutiny. The
1994 Political Reform should not be dismissed from the perspective of trans-
parency and disclosure although these aims have not been fully realised yet. The
legacy of the 1994 Reform is the promotion of transparency. Recipients are
required to disclose the name of the donor and the amount of donations when
these are more than ¥50,000 (the previous threshold was ¥1 million).69 Thereby a
more accurate and detailed statement of political finance has been revealed to the
public for the first time. It means that the public can now evaluate the political
activities of political parties and politicians more precisely and appropriately
through the presentation of concrete figures,70 not by anecdotal or superficial evi-
dence.
Yet, the more fundamental problem concerning transparency and disclosure is
the gap between principle and practice. The present system of disclosure premis-
es that the influence of donations and the propriety of the use of public subsidy
are assessed by the electorate who are provided with the appropriate information
from the annual reports through the official daily gazette or the press. In reality
very few people read and understand the official gazette, which enumerates only
names and amounts of donations and expenditures but does not show important
details or information helpful for a full understanding. Most people do not know
which political fund organisation is related to which political party and which
fundraising organisation is related to which politician (the name of the organisa-
tion does not often suggest their relation). The press usually reports on the results
of the annual report of political funding only when the report is published (ie
once a year). People are surprised at the huge amount of money reported and
deplore it. Yet it seems to be difficult to maintain their feelings until the next gen-
eral election. Moreover, very few journalists or experts go to view the original
reports at public offices. Furthermore, copying original reports is prohibited, one
can only read them and take notes.71 The website of the General Affairs Ministry
now shows the outline of the PFCL report and PPSL report (since 1998) and its
more detailed summery (since 2000).72 It is a significant step, compared with pre-
vious practice. However, it is urgently proposed that the content of the reports
must be sorted, analysed and published so as to enable ordinary people to easily
understand them. The introduction of data processing and online searching is

69
The current argument for relaxation of this threshold from the LDP shows their reluctance to
transparency and disclosure.
70
Sasaki, n 44 above. This is the first overall survey of political finance in Japan as a result of coop-
eration between academics and journalists. The improvement of transparency through the 1994
Reform enabled it to take place.
71
The Osaka Election Administration Committee has just started to allow the copying of reports in
August 2000.
72
<http://www.soumu.go.jp/senkyo/2001/010914.html>, <http://www.soumu.go.jp/senkyo/kanpo/
shikin.html, http://www.soumu.go.jp/senkyo/2001/0912.html>, and <http://www.soumu.go.jp/senkyo/
kanpo/kohukin.html>.
152 Akiko Ejima

desirable to attain this end.73 On this point, the US disclosure system of the Federal
Election Commission is extremely suggestive. It provides not only the electroni-
cally filed reports but also the actual financial reports scanned on its website, and
the public can search the data by words.74 Moreover, voluntary efforts on the side
of the political parties to disclose at least the detailed use of the subsidy should be
encouraged since the subsidy is paid through public taxes.75 It is time to establish
an accessible and easy system to analyse a huge bulk of financial information.
Otherwise, this information is just numbers on paper. Also, there is a new aggres-
sive tendency on the part of the public. For example, recently 72 policyholders
sued the presidents of insurance companies to claim for the return of political
donations of ¥170 million which were paid to the LDP by companies.76 The 1994
Reform is a starting point towards more meaningful and lasting reform.

73
Therefore, the current decision of the Ministry of Public Management, Home Affairs, Posts and
Telecommunications not to upload the details of the reports on its website is retrogressive.
74
<http://www.fec.gov/disclosure.shtml>.
75
The New Party Sakigake started to disclose its income and expenditures on its internet homepage
five years ago. Now Niin Club has followed this example. See Asahi Shimbun, 8 September 2000.
76
The Osaka District Court (18 July 2001 1120 Hanrei-times 115) and the Osaka High Court (11
April 2002 1120 Hanrei-Times 119) dismissed their claim. They appealed to the Supreme Court which
dismissed their claim, saying that there was no constitutional issue, on 27 February 2003 (Asahi
Shimbun 28 February 2003).
 8
Financing Parties at the Grass-Roots
Level: The Québec Experience
LOUIS MASSICOTTE

FEDERATIONS HAVE OFTEN been described as political laboratories, because

the multiplication of sub-national units and the autonomy they enjoy increase the
likelihood that new policies be tested and later be emulated on a wider scale if they
prove successful. This is true not only for substantive policies, but also for institu-
tional arrangements. Though in mature federations the basic design of regional
governments and parliaments tends to be patterned on the national one, there is
plenty of room for experiment.
The regulation of political finance in the Province of Québec, Canada, tends to
support that view. Prior to the so called Quiet Revolution of the 1960s, Québec
was far less prone to institutional and electoral innovation than, say, the Western
provinces of Canada. Indeed, the distinctiveness of Québec in these days found its
expression in a tendency to lag behind the rest of the country: Québec was the last
province to abolish its unelected upper house and to enfranchise women, while
even in the late 1960s its electoral boundary delimitation was one of the most
unfair of the whole continent.
Yet, in the field of political finance, Québec’s existing arrangements are origi-
nal, they have inspired other jurisdictions, and they have been claimed to be a
model for emerging as well as mature democracies. These are good reasons for
providing a critical overview of this topic.

Origins and Contents of the Québec

System for Regulating Party Funding
and Election Finance

It is not unfair to say that prior to the Quiet Revolution in the 1960s, political
finance was unregulated, and the way electoral campaigns were conducted in the
Province was a cause of shame for many. Two attempts at cleaning up electoral
154 Louis Massicotte

corruption were made in the 19th century. Both followed scandals that had led to
the downfall of a Premier. In 1875, in the wake of the Scandale des Tanneries, pro-
vision was made for candidates to appoint election agents, and for detailed
returns of election expenses to be made and published in the Official Gazette.1
The latter requirement was abolished in 1892 but re-established in 1895, follow-
ing the Railway Scandal. At the same time, the legislature went further by impos-
ing a ceiling on candidates’ election expenses.2 This was repealed in 1903, while
the publication of returns of election expenses was abolished in 1926 and official
agents were dispensed with from 1932. From then on, and until 1963, election
expenses were entirely unregulated.3 There was never any legislative attempt to
control the way political parties operated and raised funds: Québec’s legislation
followed the (then) common practice in Commonwealth countries to regulate
political activity as if political parties did not exist.
Electoral politics in Québec have been traditionally considered quite corrupt,
though anyone familiar with the way political machines operated in American
cities prior to the New Deal can hardly be impressed by the extent of the corrup-
tion that prevailed in Québec at the same time. However, such practices survived
well into the 1950s, under Premier Duplessis, giving the Province an embarrassing
reputation. Francophones were then much poorer than the Canadian average and
many were inclined to see the electoral process as an opportunity for improving
their lot rather than to express their will. Following the 1956 election, the extent of
corruption was documented in detail and widely condemned.4 The defeat of
Duplessis’ party, the Union Nationale, in 1960 opened the way for reform.
The existing political finance regime in Québec is composed of two layers. The
election spending side is still regulated by provisions first enacted in 1963 at the
initiative of the Liberal Party. The second layer, fundraising (ie political contribu-
tions) is covered by provisions adopted in 1977 at the initiative of the other major
provincial party, the Parti Québécois (PQ). Several amendments, mostly technical
in scope, have been brought to these legislations thereafter, the latest in 2001.

Election Expenses
When they reached office in 1960 after 16 years on opposition benches, Québec
Liberals were highly motivated to reform electoral legislation and practices.
Throughout its long tenure in office, the Union Nationale had gathered a
huge warchest, and was able to outspend opponents at the 1956 election by as
much as eight to one, according to one source.5 Further, provincial Liberals were
1
Statutes of Québec (hereafter cited as SQ) 1875, ss 278–88.
2
SQ 1895, c 9, ss 289–309.
3
On Québec’s earlier legislation, see A Bernard and D Laforte, La législation électorale au Québec
1792–1967 (Montréal, Cahiers Sainte-Marie, 1969) 166–8.
4
Standard sources are Pierre Laporte’s series of articles, ‘Les élections ne se font pas avec des prières’
in Le Devoir, 1956, and L O’Neill, Le Chrétien et les élections, (Montréal, Éditions de l’Homme, 1960).
5
HM Angell, ‘The Evolution and Application of Québec Election Expense Legislation’, Committee
on Election Expenses Report (Ottawa, Queen’s Printer, 1966) 284.
 Financing Parties at the Grass-Root Level: The Québec Experience 155

handicapped by the tendency of some of their more wealthy federal cousins to

reach local deals of non-aggression with sitting Union Nationale Members or
Deputies, and badly needed sources of money of their own. As they were commit-
ted to the eradication of patronage, they had every interest in creating a level play-
ing field when it came to election spending.
In 1963, the Liberal government headed by Jean Lesage introduced a sweeping
reform package dealing with election expenses.6 From the British Corrupt Practices
Prevention Act of 1883, they borrowed three basic principles: (1) election expens-
es would be made through agents only; (2) election expenses would be disclosed;
and (3) their amount in constituencies would be limited. No comparable scheme
then existed elsewhere in Canada.
However, the 1963 election expenses legislation went beyond the original
British model in three ways.
First, while it did not provide for the recognition of political parties as public
bodies that could be sued in the courts, the legislation at least acknowledged their
existence, provided they fielded at least 10 candidates (there were then 95 electoral
districts), and requested the leaders thereof to appoint also an election agent, who
would fulfil on behalf of the party the role performed for candidates by their
agents. Likewise, party spending had to be reported and was to be limited. The
electorate was thus provided, if post facto, with a full picture of political spending
during election campaigns. This was a marked improvement over the British
model, which at that time dealt with candidate expenses, but did overlook party
spending.
Second, provision was made for the reimbursement by the government of a
portion of the election expenses of the most preferred candidates, though party
expenses were initially not eligible for reimbursement. This was the first step
towards public funding of parties.
Third, the 1963 law established that only agents could spend money for the
purpose of supporting or opposing, directly or indirectly, a candidate. The law
also provided, if implicitly, that those who did not stand as candidates, be they
corporations, labour unions or other interest groups, may not incur election
expenses. In other words, the law prohibited US style independent campaign
spending.
Following the most recent amendments,7 election expenses in Québec are
defined as the cost of any goods or services used during an election period to pro-
mote or oppose, directly or indirectly, the election of a candidate or the candidates
of a party; to propagate or oppose the program or policies of a candidate or party;
to approve or disapprove courses of action advocated or opposed by a candidate
or party; or to approve or disapprove any act done or proposed by a party, a can-
didate or their supporters. Fourteen items are specifically excluded from the ambit
of that definition. They include articles and editorials in the media, public affairs
broadcasts, the costs of nomination meetings (not to exceed $4,000), personal
6
For a detailed description, Ibid at 279–320.
7
Election Act, Revised Statutes of Québec (hereafter cited as RSQ), c E-3.3, ss 401 to 457.210.
156 Louis Massicotte

expenses of candidates, and advertising expenses of private intervenors (not

exceeding $300).8
Election expenses can be made only by agents appointed by parties and
candidates. There is a distinction between party expenses and candidate expenses.
Province-wide, parties may spend up to 60 cents per registered elector in those
electoral districts where they field candidates. In addition, in the 125 electoral dis-
tricts, candidates, whether sponsored by a party or not, may spend up to one
dollar per registered elector.9 Since 2001, these amounts have been readjusted
for inflation on a yearly basis. At the 2003 general election, with an electorate of
5,490,551, a party with a full slate of candidates could spend a maximum of
$3,404,025, while its candidates could spend in the aggregate $5,754,188, which
adds up to a total of $9,158,213. At by-elections, parties may not incur expenses,
but the ceiling on candidates’ expenses is increased by 60 cents per elector. No adver-
tising relating to the election may be made in electronic and printed media on the
first seven days of the campaign and on polling day. Both parties and candidates
must file with the Chief Electoral Officer a return of all their election expenses.
Candidates are reimbursed 50 per cent of the election expenses they incurred.
Not all candidates though, as this advantage is granted only to the winning candi-
date and to candidates who obtained at least 15 per cent of the vote in their rid-
ing. An advance of 35 per cent of the maximum election expenses is to be paid by
the Chief Electoral Officer to eligible candidates upon receipt of the election
results, with a final adjustment to be made upon receipt of the election expenses
return some three months later.
Initially, unlike candidates’ expenses, party expenses were not eligible for reim-
bursement. Since 1992, parties are reimbursed 50 per cent of their election
expenses. No threshold was provided then, but since 1998, only parties that
obtained one per cent of the vote province-wide are reimbursed.
The threshold for reimbursing candidates became an issue for litigation in
recent years. Under the 1963 law, reimbursement was provided to candidates
elected or having polled 20 per cent of the vote. However, reimbursement was also
guaranteed, well before the result of the election was known, to the winner of the
previous election (either a general or a subsequent by-election), and to candidates
sponsored by parties whose candidates ranked first or second in the riding at the
previous general election. The inner logic of that provision was followed to its con-
clusion in 1984, when such candidates were granted in addition, at the beginning
of the election campaign, an amount equal to 35 per cent of the spending ceiling,
as an advance on the reimbursement of their election expenses.
This was a unique privilege, not found in any other comparable legislation in
Canada and indeed, to this author’s knowledge, in the world.10 It meant that while
8
All dollar figures quoted in this chapter are, of course, in Canadian dollars.
9
Provision has been made for higher spending in five remote ridings. In four huge ridings in
Western and Northern Québec, the amount is $1.25 per elector, and reaches $1.70 in the small district
of Iles de la Madeleine, a group of islands on the Eastern Atlantic coast.
10
This provision was called ‘most inequitable’ by an authority on the subject: see KZ Paltiel, Political
Party Financing in Canada (Toronto, McGraw-Hill, 1970) 128.
 Financing Parties at the Grass-Root Level: The Québec Experience 157

other candidates had to poll 20 per cent of the vote in order to qualify, incumbent
Members and their challengers from the other main party in the district were
guaranteed the reimbursement of their expenses right from the start of the cam-
paign, and whether or not they later reached the 20 per cent threshold.11 Further,
the privileged candidates received a substantial cash payment at the beginning of
their campaigns, while other candidates, if eligible for reimbursement, had to wait
more than three months after polling day.
The scheme was a self-serving provision, obviously designed to provide a safe-
ty net for established parties. It did not prevent one of them, the Union Nationale,
from disappearing within the next 15 years, or the Parti Québécois, starting from
scratch, from becoming one of the main parties. Nevertheless, this clause was one
of the few oligopolistic provisions of the legislation and arguably infringed on the
principle of equal opportunity. As such, it was bound to be challenged one day or
another. The Action Démocratique du Québec (ADQ), a breakaway party created
in 1994, came to appreciate how inconvenient the scheme was for an emerging
party, and how vulnerable it might be to a court challenge. In Hébert v Procureur
général du Québec (1998), against the wishes of both main parties, the Superior
Court of Québec ruled the provision to be an infringement on both the Canadian
and Québec Charters, and invalidated it.12 In 2001, the provision attacked was for-
mally struck out from the legislation, and at the same time the threshold was low-
ered from 20 per cent to 15 per cent.13
Until 1998, independent spending was prohibited, and election expenses could
be made only by parties and candidates. The same rule had been extended to ref-
erendums, except that individuals and organisations not affiliated to one of the
referendum committees were allowed to spend a maximum of $600. In 1997, the
Supreme Court of Canada struck down the latter provision as too restrictive and
as an infringement on freedom of expression, and it was assumed that this neces-
sitated greater flexibility in the Election Act as well. In response, the legislature pro-
vided for an elector or an unincorporated group of individuals to be authorised
in each riding as a ‘particular intervenor’ (intervenant particulier). Individuals or
groups seeking authorisation must state that they do not intend to favour or dis-
favour, directly or indirectly, a candidate or a party; that they are not members of
any party; and that they are not acting directly or indirectly for a party or candi-
date. They are prohibited from becoming members of a party during the cam-
paign, and may not incur an expense in agreement, collusion or association with
another person. Expenses made by particular intervenors must be made out of

11
For example, in 1966, one major party candidate polled less than 6 per cent of the vote and was
nevertheless reimbursed, because his party had come second at the previous general election, while no
less than 54 third-party or independent candidates at the same election were not, though they had
obtained a higher proportion of the vote.
12
Hébert v Procureur général du Québec, Cour Supérieure du Québec, 11 December 1998, reported
in [1999] RJQ 267.
13
Loi modifiant la Loi électorale et d’autres dispositions législatives, SQ 2001, c 2.
158 Louis Massicotte

their own funds. They are not deemed to be election expenses except for some
purposes, must be disclosed in a post-election report and must not exceed $300.14

Political Contributions
The 1963 legislation was acclaimed as a milestone and some of its authors were
shortly thereafter invited to Ottawa to recommend the adoption of a similar sys-
tem for federal elections.15 But at the same time, contributions to parties and can-
didates remained undisclosed and unlimited. Despite the veil of secrecy which
covered the private funding of parties, it was well known that corporations were
contributing princely sums to the warchest of both the Liberal Party and the
Union Nationale.16 For that reason, more radical reformers such as René Lévesque
(one of the main architects of Québec’s so called Quiet Revolution), could still
claim that secrecy surrounding the source and amount of political contributions
allowed powerful and wealthy interests to influence in a decisive way the decisions
made by governments of whatever party. There is every reason to believe that they
at least guaranteed access to decision-makers.17 The victory of Lévesque’s Parti
Québécois in 1976 paved the way for a full-scale reform of political party financ-
ing which, despite numerous readjustments, has remained in force ever since.
In a nutshell, the 1977 legislation, rushed into the legislature after the PQ vic-
tory, obliged all parties to raise money more or less the same way the PQ had been
doing since its creation in 1968. Notably, contributions from ‘legal persons’ (ie
corporations, labour unions and other associations or interest groups) were
banned and the right to contribute to parties was reserved to electors qualified
under provincial legislation.
Following the most recent amendments to the provincial Election Act, political
contributions are now subject to the following rules. Sections 87 and 90 enshrine the
cornerstone of the 1977 legislation, that contributions may be made only by quali-
fied electors, and must be made by electors themselves out of their own property.
Contributions may be made only to entities registered with (‘authorised’
in Québec parlance) the Chief Electoral Officer. Four kind of entities may be
authorised: political parties, ‘party authorities’ (ie constituency and regional asso-
ciations), independent Members of the National Assembly, and independent

14
Election Act, ss 457.2 to 457.22, as enacted by SQ 1998, c 52, s 77.
15
The Federal Committee on Election Expenses was chaired by Alphonse Barbeau, one of the chief
architects of the Québec law. The report of this committee, known as the Barbeau Report (1966) led
ultimately to the passage of the Election Expenses Act of 1974 (SC 1973–74, c 51).
16
Secret contributions allow for any kind of unwarranted speculation, but it has been firmly estab-
lished by the Malouf Royal Commission of Inquiry that two large engineering companies, Régis
Trudeau & Associés and Desjardins Sauriol, had contributed no less than $748,000 to the Québec
Liberal Party between 1970 and 1976. The two companies received a substantial share of contracts con-
cluded in relation to the building of the Montréal Olympic Stadium in the 1970s. See Rapport de la
Commission d’enquête sur le coût de la 21e Olympiade, Vol 4, 1980, p 88–109, and Pierre O’Neill, ‘Des
“rapports étroits” avec la caisse du PLQ’ Le Devoir, 6 June 1980, 5.
17
P Fournier, Le Patronat québécois au pouvoir: 1970–1976 (Montréal, Hurtubise HMH, 1979)
114–17.
 Financing Parties at the Grass-Root Level: The Québec Experience 159

candidates. In order to be authorised, a political party must undertake to present

official candidates in at least 20 electoral districts at any general election, and its
application must be supported by the names, addresses and signatures of at least
25 electors per electoral district in 20 electoral districts, declaring they are mem-
bers or supporters of the party. If a party later proves unable to field 20 candidates
as promised, its authorisation is withdrawn. Party authorities are authorised upon
application by the party leader. Would-be independent candidates must wait three
years after a general election in order to apply for authorisation in anticipation of
the next general election. Their request must be supported by 100 electors. No
restrictions apply to independent Members of the National Assembly, except they
must request authorisation within 30 days of acquiring that status.
Contributions are defined as sums of money donated to a party, services ren-
dered and goods furnished to it free of charge for political purposes. The maxi-
mum amount an individual may contribute to each political party (including its
constituency organisations) within a year is $3,000.18 Volunteer work, anonymous
donations, loans, membership dues (up to $50), entrance fees to political activi-
ties (up to $60), free time or space in the media, transfers of funds within a party,
as well as State funding of any kind, are not considered as contributions, though
they must be disclosed.
Donations from civil society were intended to remain the chief source of rev-
enue for parties. However, they are supplemented by State subsidies to political
parties. Starting in 1975, a sum of $400,000 was appropriated to be shared yearly
among political parties according to the percentage of the popular vote each got
at the previous election.19 Two years later, possibly in order to compensate for the
loss of corporate revenue anticipated under the new legislation, the subsidy was
increased to 25 cents per registered elector (then about $1 million a year).20 In
1992, it was further increased to 50 cents per elector (now about $2.7 million a
year), not an unreasonable move in view of the cumulative effects of inflation
meanwhile. This adds to the reimbursements provided to candidates since 1963,
and to parties since 1992.
For each calendar year (every six months until 1981), chief financial officers of
authorised entities must file with the Chief Electoral Officer an audited and
detailed report including, inter alia, a general statement of revenues and total
expenditures, the number and amount of contributions received, together with
the name and address of each donor of more than $200. Failure to do so exposes
the party leader to legislative disqualification.
Finally, there is a tax incentive for political contributions, that has become
more generous over the years. Upon its introduction in 1977, the tax credit was 50
18
Before 1989, the ceiling was $3,000 for contributions to all authorised entities.
19
The eligible parties were those that had 12 Members in the Assembly (there were then 110 seats)
or had secured 20 per cent of the vote at the most recent general election, or had fulfilled either crite-
rion at the general election held prior to the most recent one.
20
At the same time, every party represented in the Assembly (there were five in 1977, two from
1981) was made eligible to public funding. From 1989, every authorised party, whether represented or
not in the Assembly, has received some public funding.
160 Louis Massicotte

per cent of the first $100 contributed, plus 25 per cent of the next $100, for a
maximum of $75. In 1983, this was increased to 50 per cent of the first $280
contributed, up to a maximum of $140. A further increase in 1995 brought the
credit to 75 per cent of the first $200, plus 50 per cent of the next $200, up to a
maximum of $250.
Like the 1963 legislation on election expenses, the 1977 law on political dona-
tions blended original features with provisions derived from other jurisdictions.
Registration procedures, reporting of donations, a ceiling on contributions and a
tax credit for political donations were inspired by corresponding legislations in
the neighbouring Province of Ontario or at the federal level. However, the prohi-
bition of corporate and labour union contributions was rather alien to the
Canadian mainstream.21
Which raises the question: why did Québec go that way? After all, few societies
have gone that far, and the conventional wisdom at that time was that no party
could rely solely on individual contributions.22 Though the US federal legislation
also bans corporate donations, contributions by political action committees
(PACs) are tolerated, which re-introduces some element of collective action in a
system otherwise premised on the supremacy of the individual. How can we
explain that Québec opted for that solution?
In my view, the roots of the Québec approach to political finance lie in two sets
of interrelated factors. The first one is the very nature of the political party which
enacted it. The Parti Québécois in its early formative years was quite unique in
North America insofar as it blended hard-line nationalism with strong social-
democratic inclinations. Both beliefs were anathema to big business, whose con-
tributions were consequently channelled to rival parties, namely the Liberal Party
and the Union Nationale.
The PQ might have tried to find alternative funding from the powerful and
increasingly nationalistic labour unions operating in the province. They did not,
for a variety of reasons. Chief among those was the will of its leader not to become
the political instrument of trade unions. The fact that some trade union practices,
especially long lasting strikes in the public health system, were widely unpopular
with many electors, may also have been a contributing factor. Certainly, there was
no evidence that formal trade union support could be a vital asset anyway on the
electoral scene. The lack of success of the Québec wing of the New Democratic
Party in federal elections, despite support from the Québec Federation of Labour,
was not very auspicious. Further, within trade unions, some activists considered
the PQ too ‘bourgeois’ to be worthy of support. Being snubbed by big business
without enjoying or accepting full support from big labour, the PQ could not do

21
A Canadian federal statute formally banned corporate contributions in 1908 (SC 1908, c 26). It
was never really effective, except to hinder trade union contributions to Labour parties. For that rea-
son, this law was repealed in the 1930s at the initiative of a Labour Member of Parliament.
22
KZ Paltiel, ‘Campaign Finance: Contrasting Practices and Reforms’ in D Butler, HR Penniman
and A Ranney (eds), Democracy at the Polls. A Comparative Study of Competitive National Elections
(Washington and London, American Enterprise Institute, 1981) 142–3.
 Financing Parties at the Grass-Root Level: The Québec Experience 161

otherwise than relying on contributions from its members and sympathisers,

essentially middle-class individuals working mostly in the public sector.
Another option might have been to accept foreign funding. For decades,
rumours circulated that a huge amount ($300,000) had been received from the
French government by the Parti Québécois, and were denied as a flat lie.23 It is now
established that after the 1970 election, a senior official in the Quai d’Orsay who
had a strong sympathy for Québec nationalists, had indeed offered the treasurer of
the PQ a contribution of $350,000, but that René Lévesque refused the proposal
outright when he heard of it, because he foresaw the dangers that foreign funding
would create for his party, should it be disclosed later. The offer was deemed to be
serious enough to warrant sending a party envoy to Paris in 1971, who transmit-
ted directly to the French official a confidential letter outlining the party’s refusal.24
The emphasis put by the PQ on individual contributions was thus far from
disingenuous. In following that principle, they largely made virtue of a necessity.
When they imposed it on other political parties, some of which had hitherto depend-
ed on corporate contributions, they were certainly not hampering their own cause.
Another line of explanation lies in the rather unique relationship of
Francophone Québeckers in general with economic power. Perhaps one should
say: the lack of such relationship, for it is well known that up to the 1980s,
Francophones were glaringly absent from economic decision-making centres in a
province where they account for about 80 per cent of the population. Countless
studies have documented the dominance of the Province’s economy by English
and American interests, the concentration of Francophones in low-paid jobs and
traditional sectors and the predominance of the English language in corporate
decision-making centres. In a province where big business spoke English, corpo-
rate contributions were perceived as English money, an important channel for
ensuring that the privileged position of Québec Anglophones would be protected.25

23
A disgruntled PQ member, Dr Marc Lavallée, claimed, in a book published in 1982, Adieu la
France, Salut l’Amérique (Montréal, Stanké, 1982) 105–24, that in his capacity as a member of the
party’s Executive Committee, he had been asked by René Lévesque to explore in Paris with French
bureaucrats and politicians the possibility of contributions to the party, that he asked in February 1970
a senior official of the Quai d’Orsay, Jean-Daniel Jurgensen, for a contribution of $300,000, and that
no immediate answer was provided. Lavallée never claimed, however, that the money had actually
been given, but claimed that Jacques Parizeau had taken charge of that file and had gone to Paris in the
midst of the 1970 campaign. Lévesque denied that Lavallée had been asked to do so, and Parizeau
denied having travelled to France at that time. Both claimed they had refused any money that ‘might’
come from France, but made no mention that a firm offer had been made. That rumour, that had sur-
faced in Ottawa in the early 1970s, was used as a justification by the Royal Canadian Mounted Police
to raid secretly the headquarters of the Parti Québécois in 1973 in order to find evidence of that con-
tribution. None was found.
24
P Duchesne, Jacques Parizeau: Vol 1, Le Croisé (Montréal, Québec/Amérique, 2001) 596–609. See
also N Lester, Enquêtes sur les services secrets (Montréal, Éditions de l’Homme, 1998) 326–7, and C
Roldan, ‘Le Québec et les visées secrètes de De Gaulle’, 1998 26(2) Cité Libre 36–44.
25
See the speech by René Lévesque (then an Opposition MLA) in Débats de l’Assemblée Nationale,
15 October 1969 (p 3099): ‘Dans une collectivité qui est petite et fragile comme le Québec, où tant de
leviers nous échappent, en particulier dans le domaine économique, et où les partis qui alternent au gou-
vernement sont sans doute les principaux centres de décision que nous ayons en main, comme population,
c’est encore plus vrai que partout ailleurs’.
162 Louis Massicotte

That situation infuriated supporters of independence, but was also resented by a

large number of non-separatist Francophones as well.26
Such specifics help us to understand why the individuals-only political funding
system not only originated in Québec, but remained for long an example of Québec
exceptionalism rather than an exportable commodity. They were apparently over-
looked by those Progressive Conservative Members of the House of Commons from
Québec who, from the mid 1980s, advocated the adoption of the Québec model as
a response to the numerous scandals which were then undermining public support
for their party. The idea was rejected largely because all three main federal political
parties depend heavily either on corporate (Liberal, Progressive Conservative)
or labour union (New Democratic Party) contributions and had no interest in cut-
ting such sources. Further, English Canadians never felt historically alienated from
the business community to the same degree as Francophone Québeckers did.
Yet, there are indications that the Québec approach may not remain that excep-
tional after all, as it has been emulated in recent years by a few jurisdictions where
public trust for politicians had been previously shattered by scandals: this
occurred in France (1995),27 Belgium (1994)28 and Manitoba (2000).29 In 2003, the
Parliament of Canada adopted the same kind of approach, though parties will
depend much more on government subsidies than on individual contributions.30

How Well the Current Regulatory System is Working

Election and Referendum Expenses

Election expenses have been controlled at the provincial level for over 40 years
now, while comparable rules have been extended in 1978, mutatis mutandis, both
to referendums31 and to municipal elections.32
There are indications that the implementation of the spending provisions of
the legislation was not very tight before 1977. First, some candidates did not sub-
mit a return of their election expenses, and their proportion tended to increase
26
Premier René Lévesque had only disdain for businesspeople, be they Francophone or
Anglophone. See P Godin, René Lévesque, Vol 2 (Montréal, Québec/Amérique, 1997) 159–68; Vol 3
(Montréal, Québec/Amérique, 2001) 10, 107, 150, 189, 196, 204–5, 289, 311. A typical quote (Vol 3, p
83) runs as follows: ‘René Lévesque believes bankers (les financiers) are sly enemies. He knows that no
small country can rely on them in order to exist. These people worship a single god: money’ [my
translation].
27
France, Loi no 95–65 du 19 janvier 1995 relative au financement de la vie politique (JO, 21 January
1995 p 1105), Art 4 (now Art L.52–8 of the Code électoral).
28
Belgium, Loi du 4 juillet 1989 relative à la limitation et au contrôle des dépenses électorales engagées
pour les élections des Chambres fédérales ainsi qu’au financement et à la comptabilisation ouverte des par-
tis politiques, Art 16bis, as enacted by Law of 19 May 1994.
29
The Election Finances Act, CCSM 2000, c E–32, sub-s 41 (1).
30
An Act to amend the Canada Elections Act and the Income Tax Act (political financing) LC 2003,
c 19.
31
Referendum Act (Loi sur la consultation populaire), RSQ, c C–64.1.
32
Loi sur les élections et les référendums dans les municipalités, RSQ, c E–2.2.
 Financing Parties at the Grass-Root Level: The Québec Experience 163

with years, reaching 14 per cent in 1976. Second, no less than 21 candidates (five
of whom were elected) filed returns indicating they had spent more than the limit
(one by as much as 37.6 per cent) though there is no record that they were sued
for that. Third, while returns indicate that all parties and the vast majority of can-
didates complied with the spending ceilings, research by political scientists cited
candid admissions by some election organisers that in practice candidates had
spent much more than they were allowed to, a finding that threw doubts on the
accuracy of reports.33 Since then, there have been no allegations of that nature.
Government advertising proved to be the first major hurdle for the spending
legislation, and the law failed that test utterly. The problem has remained minor
at general elections, though governments have been accused of broadcasting mes-
sages with political overtones. However, the stringent limits imposed on the two
referendum committees at the 1980 referendum on sovereignty-association were
a total failure. Formally, each committee complied with the $2 million ceiling, but
the federal government launched a major advertising blitz in the midst of the ref-
erendum campaign. This looked like a major breach of the law, as any spending
made outside referendum committees was conspicuously banned. The official
then in charge of the implementation of the spending provisions of the Act,
Québec’s Director General of Political Party Financing, thereupon went to the
Superior Court of Québec in order to secure a court order prohibiting Ottawa’s
advertising campaign. The Court answered that the Director General, though a
lawyer by training, had addressed the wrong court, as the law explicitly granted to
a three member special court known as the Referendum Council the power to rule
over referendum law disputes. A few days later, when the request was at last direct-
ed to the proper forum, the Council ruled that the Government of Canada (or, for
that matter, the Government of Québec) was not bound by the provisions of the
Act, due to a section of the Interpretation Act providing that no law affected the
rights and privileges of the Crown unless the Crown had specifically assented to
it.34
This ruling left the door of the barn wide open: federal advertising expenses
during the 1980 referendum have been variously estimated at $2 million, $5 mil-
lion, or even $17 million. As each referendum committee could not spend more
than $2 million, even the lowest of these figures is equal to the whole spending of
the ‘No’ Committee. There is no evidence that this carried the day, but it remained
a standing grievance for ‘Yes’ supporters.
There was no blitz of the same magnitude at the 1992 referendum on the
Charlottetown Accord. However, at the 1995 referendum, another major breach
occurred during the last week of the campaign. When opinion polls suggested that
33
D Latouche et al (ed), Le processus électoral au Québec (Montréal, Hurtubise HMH, 1975) 47–52;
A Bernard, Québec: Élections 1976 (Montréal, Hurtubise HMH, 1977), 87.
34
Directeur général du financement des partis politiques v Médiacom, Cour Supérieure du Québec, 13
May 1980; Directeur général du financement des partis politiques v Médiacom, Conseil du référendum,
16 May 1980; L Massicotte, ‘Une réforme inachevée: les règles du jeu électoral’ (1984) 25 Recherches
sociographiques 43; P Patenaude, ‘La publicité propagande électorale et référendaire’ (1981) 41 Revue
du Barreau 1045.
164 Louis Massicotte

the supporters of secession might win, a major demonstration, known as the

‘March for Unity’, was organised in Montréal a few days before the vote.
Demonstrators were bused or flown from other provinces.35 In a typical case, the
Algonquin College Student Association was sued in court by Québec’s Chief
Electoral Officer. In 1997, the Superior Court of Québec ruled that Québec courts
had no jurisdiction to rule over the alleged breach, as it had been committed out-
side the limits of the province.36
A more serious blow came later the same year when the Supreme Court of
Canada invalidated key provisions of the Referendum Act banning independent
spending. The decision originated from a challenge launched in 1992 by Robert
Libman, leader of the Equality Party (a party defending the interests of the English-
speaking minority in Québec), who alleged that the law infringed on the freedoms
of association and expression by forcing all political forces to join one of the two
umbrella committees in order to participate in the referendum campaign.
Such a challenge could be anticipated since the enactment in 1982 of the
Canadian Charter of Human Rights and Freedoms. The US Supreme Court had
decided that spending limits were unconstitutional in the Buckley v Valeo decision
(1976). In 1984, an Alberta lower court had similarly taken the view that the prohi-
bition by the Canada Elections Act of independent expenditures (known here as
‘third-party spending’) was an infringement on freedom of expression that could not
be reasonably justified in a free and democratic society.37 There was every reason for
the Québec government to be nervous when the Libman challenge was launched.
The law survived a first test in July 1992. In a substantial decision, the Québec
Superior Court agreed that the provisions of the referendum legislation infringed
on such freedoms, but concluded that they could nevertheless be allowed to stand
as a reasonable limit that could be justified in a free and democratic society. The
judge noted that the objective of the legislation was to create conditions for a fair
campaign, that such an objective was important and legitimate, that the spending
limits were an appropriate means to reach it, and that they were proportionate to
that goal insofar as they allowed groups outside umbrella committees to spend up
to a maximum of $600. The judge even quoted with approval a statement that
Canadian elections were more free than American elections because they were
more fair.38 This ruling was upheld in 1995 by the Québec Court of Appeal, with
one of the three judges dissenting.39
While refraining from endorsing the rationale behind the Valeo decision, the
Supreme Court of Canada overruled the two Québec courts.40 In a unanimous

35
Chief Electoral Officer, Référendum du 30 octobre 1995. Bulletins rejetés – Marche pour l’unité.
Rapport du Directeur général des élections (Québec, 1996) 47–60.
36
Algonquin College Student Association v Directeur général des élections du Québec, Cour Supérieure
du Québec, 2 April 1997.
37
National Citizens’ Coalition v Attorney General for Canada, Alberta Court of Queen’s Bench,
[1985] 11 DLR (4th) 480.
38
Libman v Procureur général du Québec [1992] RJQ 2141.
39
Libman v Procureur général du Québec [1995] RJQ 2015.
40
Libman v Procureur général du Québec [1997] SCR 569.
 Financing Parties at the Grass-Root Level: The Québec Experience 165

decision issued in October 1997, the Court, while lauding the objectives of Québec’s
Referendum Act, invalidated some of its key provisions. The $600 ceiling on inde-
pendent expenditures was deemed to be unnecessarily restrictive and not propor-
tional to the goal pursued. This had the side effect of jeopardising the actions
launched in court against the organisers of the March for Unity by the Chief
Electoral Officer, which had to be dropped shortly thereafter. The Québec legislature
might have used the so-called ‘notwithstanding clause’ of the Canadian
Constitution in order to protect the law from the Court’s decision.41 However, after
careful consideration of the issue, Premier Bouchard decided to comply with the
decision and to amend the Act accordingly. ‘Private intervenors’ were allowed at a
referendum to incur advertising expenses not exceeding $1,000. Had he done oth-
erwise, any referendum on secession held in the future would have been governed
by a legislation ending with a statement that it applied notwithstanding both the
Canadian and Québec Charters of Rights, a feature that international observers and
foreign governments might have held against Québec’s secessionist government.

Contributions
The most original and creative part of the Québec system is the contribution side.
How has this system worked in practice? Since 1978, parties have reported on each
year details on contributions and other revenue as well as spending. These reports
have been reproduced in a document made public in April of each year by the
Chief Electoral Officer. I have reviewed in earlier works the financial life of
Québec political parties since 1978, as reflected in these audited reports.42 For the
purposes of this chapter, I will assume that these reports reflect the financial real-
ity of the parties though, as we shall see, there are increasing doubts over that.
On the surface, as Table 1 suggests, Québec’s provincial political scene is quite
multi-party, as there have been never been less than six, and as many as 21, author-
ised parties each year since 1978. Yet, these numbers are quite misleading. Taken
together, the two larger parties, the secessionist Parti Québécois and the federalist
Liberal Party, got 95 per cent of the vote in both 1981 and 1985, 90 per cent in
1989, 89 per cent in 1994 and 86 per cent in 1998. In 2003, the rise of the ADQ
reduced that figure to 79 per cent. Apart from the ADQ, most other authorised

41
Under s 33 of the Constitution Act 1982, Parliament or a provincial legislature may provide for a
law to apply notwithstanding a court ruling declaring that it was unconstitutional. This derogatory
clause has been used very sparingly since then.
42
L Massicotte, ‘Party Financing in Québec. An Analysis of the Financial Reports of Parties,
1977–1989’, in FL Seidle (ed), Provincial Party and Election Finance in Canada, Vol 3 of Research
Studies of the Royal Commission on Electoral Reform, (Ottawa, Department of Supply and Services,
1991) 3–38; L Massicotte, ‘Popular Financing of Parties in Québec 1978–1989’ in AG Gagnon and AB
Tanguay (eds), Democracy with Justice. Essays in Honour of Khayyam Zev Paltiel (Ottawa, Carleton
University Press, 1992); and L Massicotte, ‘Political Finance in Québec: Potential Lessons for Emerging
Democracies’, paper presented at the joint conference ITAM-Université de Montréal, Mexico, April
1993, 28 pages, published as ‘Financiamento de partidos politicos en Québec: Lecciones potentiales
para democracias emergentes’ in BJ Stevenson, P Martin and A Noël (eds), Interpretaciones de la
Québec contemporanea (Mexico, Porrua, 1996).
166 Louis Massicotte

TABLE 1: Number of Authorised Entities on March 31 of Each Year

Year Parties Party organizations

Electoral Regions Province-

districts wide

1978 6 0 0 0
1979 7 255 36 0
1980 9 257 36 0
1981 12 292 13 0
1982 12 291 13 0
1983 15 294 14 1
1984 17 298 14 1
1985 17 309 14 1
1986 12 376 14 2
1987 14 392 14 1
1988 17 394 14 1
1989 17 395 14 1
1990 16 339 13 0
1991 14 313 15 0
1992 12 275 16 0
1993 14 255 16 0
1994 21 260 16 0
1995 16 296 18 0
1996 16 295 18 0
1997 17 301 18 0
1998 18 376 19 0
1999 10 376 19 0
2000 10 376 19 0
2001 11 376 22 0
2002 14 375 24 0
2003 a n/a n/a n/a
2004 a n/a n/a n/a

Source: Annual Reports of the Chief Electoral Officer. Information office of the Chief Electoral Officer.

parties were little more than empty shells that secured few votes, if indeed they
fielded any candidates. In recent years, the criteria for a party being authorised
have been made more stringent, possibly in order to deter freak parties.43
43
Under s 39 of the 1977 law (SQ 1977, c 11), the following could be authorised: the party of the
provincial Premier; the party of the Leader of the Official Opposition; any party which at the previous
general election had 10 official candidates; and any party whose leader was elected at a convention, which
had constituency associations in at least 10 electoral districts, and undertook to present candidates in at
least 10 electoral districts at the next general election. In 1984, the new Election Act (SQ 1984, c 51, s 325)
dispensed new parties from having a leader elected at a convention and deleted the requirement for 10
constituency associations, but required instead the signatures of 60 electors in each of 10 electoral dis-
tricts in support of the request for authorisation. Five years later, another brand new Election Act (SQ
1989, c 1, s 47) required that a new party undertake to present candidates in at least 10 electoral districts,
and required in addition that the application for authorisation be supported by the names, addresses and
signatures of 1000 electors declaring that they were members or supporters of the party, while any refer-
ence to the residence of these supporters was struck out. Under this liberal requirement, the number of
authorised parties peaked at 21 in 1994, including a Parti Citron (Lemon Party) and a Parti Chevreuil du
Québec (Deer Party). A 1998 amendment (SQ 1998, c 52, s 8) raised the number of required candidates
to 20, and demanded in addition the name, address and signature of 25 electors in each of 20 electoral
districts. The number of authorised parties dropped afterwards to 11. There is no obvious indication that
the democratic process in the Province has been much impoverished.
 Financing Parties at the Grass-Root Level: The Québec Experience 167

Five parties were represented in the National Assembly when the 1977 legisla-
tion was adopted. In addition to the larger two, they were the old Union Nationale,
and the younger Ralliement Créditiste and Parti National Populaire (PNP). All
three had vanished by 1981. Apart from the short-lived Equality Party in 1989, the
most serious challenge to the two-party system emerged in 1993 with the Action
Démocratique du Québec (ADQ), a group of breakaway French-speaking Liberals
disgusted with the party’s return to the federalist fold in 1992. The ADQ obtained
six per cent of the vote in 1994, 12 per cent in 1998, and 18 per cent in 2003.
During the last six months of 2002, the party even led in the opinion polls.
Table 2 provides the revenue and spending of all authorised entities and of the
two larger parties since the new fundraising rules came into force. The first thing
that strikes an observer after a casual review of figures is the dominance of the two
larger parties. From 1978 to 1989, they accounted for about 96–7 per cent of all
TABLE 2: Revenue and Spending of Authorised Entities
Year Liberals Parti Québécois All entities

Revenue Spending Revenue Spending Revenue Spending

1978 $2 195 078 $1 465 370 $2 266 418 $3 728 049 $4 663 368 $5 565 308
1979 3 150 692 2 811 013 2 918 001 5 550 033 6 246 201 8 809 645
1980 3 105 955 5 172 982 4 295 935 7 802 151 7 533 874 13 417 645
1981 1 076 871 6 143 899 4 927 671 10 134 543 6 372 288 17 024 500
1982 2 631 877 2 919 475 3 536 731 3 171 996 6 319 840 6 361 837
1983 3 746 839 3 763 625 2 910 274 2 916 652 6 800 185 6 894 704
1984 5 863 762 4 602 996 2 902 318 3 003 741 8 857 120 7 765 206
1985 10 130 019 7 197 380 6 906 030 4 249 929 17 549 608 11 869 439
1986 8 801 947 4 199 635 2 010 347 1 602 528 10 995 918 6 002 635
1987 8 364 091 5 079 554 1 805 436 1 995 240 10 414 003 7 321 085
1988 9 773 675 6 989 152 2 240 690 1 891 009 12 200 239 9 098 030
1989 6 716 743 12 202 222 5 803 344 6 091 621 13 009 184 18 789 033
1990 7 238 583 6 060 099 3 620 500 2 435 220 11 111 572 8 712 595
1991 7 225 506 6 775 822 3 783 462 2 718 918 11 281 876 9 730 579
1992 6 417 020 7 811 913 6 356 029 5 669 081 13 068 329 13 743 687
1993 8 033 163 5 567 436 4 878 613 4 353 227 13 226 424 10 213 928
1994 10 352 770 13 974 481 10 718 839 11 884 508 22 481 432 27 425 842
1995 7 371 082 6 924 286 9 572 868 8 404 941 17 420 748 15 701 814
1996 3 989 000 3 574 312 5 655 040 5 339 278 10 076 780 9 333 680
1997 4 394 199 3 843 355 5 740 611 4 798 774 11 000 587 9 474 297
1998 11 306 168 14 161 998 11 656 088 12 588 610 24 564 197 28 364 775
1999 5 638 803 4 575 787 6 069 766 5 397 249 12 293 702 10 543 714
2000 5 865 015 4 976 677 5 629 769 5 352 245 12 049 053 10 823 922
2001 7 475 381 5 430 248 5 876 285 5 240 754 14 101 588 11 330 854
2002 8 462 344 7 646 946 5 797 436 5 481 756 16 793 353 14 802 540
2003 14 560 624 14 696 016 11 477 646 13 655 801 33 062 990 38 135 091

Bold type figures indicate that a party raised more or spent more than the other main
party.
168 Louis Massicotte

funds raised and spending made by all registered bodies. Their share of cash con-
tributions, of party membership dues and of donors were in the same range. This
pattern survived throughout the 1990s, with the two larger parties together
accounting for 95.5 per cent of all revenues raised and for 96 per cent of spend-
ing made. Donors to both parties were 97.6 per cent of the total. In 2002 and 2003,
however, the share of the two larger parties fell to 85 per cent and 79 per cent of
all revenues, and to 89 per cent and 74 per cent of all spending.
The reason is, of course, the rise of the ADQ. Until 2001, the respectable show-
ing of the ADQ in the polls had never been matched financially. Its portion of all
parties revenues ranged from 1.6 per cent to 5.4 per cent. The party was then
heavily dependent on State funding (reimbursement of election expenses and
State subsidy), which accounted for fully 60 per cent of all its revenue for the peri-
od. However, the ADQ’s revenues were 14 per cent of the total in 2002, and 20 per
cent in 2003, while its share of spending reached 10.5 per cent and afterwards 24
per cent.
Party revenues have been anything but stable over time, and indeed have var-
ied quite dramatically from year to year. For example, total revenue went from
$8.9 million in 1984 to $17.5 million in 1985, crashed to $10.9 million the next
year, rebounded to $13 million in 1989, and to $22.5 million in 1994, going down
to $10 million in 1996, and rising to $33 million in 2003. Much of this roller-
coaster pattern is due to the occurrence of elections and referendums. The aver-
age revenue for all parties was $19.5 million for election years, $12.7 million for
referendum years, and $10.9 million for other years. Another factor is the strength
of party, as reflected by opinion polls. In particular, the PQ had serious financial
difficulties in 1986–88, a period when its electoral prospects were at their lowest.
Table 3 shows the sources of revenue for all authorised entities since 1978.
Contributions have remained the chief source for political parties, but their rela-
tive share has tended to decline over the years: from 64 per cent in the 1980s, to
60 per cent in the 1990s. Membership dues, admission fees and anonymous dona-
tions have remained comparatively marginal. This is in keeping with the spirit of
the law. The other main sources have come from the State: the reimbursement of
election expenses, and the State subsidy (which accounts for most of the ‘other’
sources).
However, the number of donors (Table 4) and the average contribution size
(Table 5) have varied dramatically since the law came into force. Contributions
have remained the main source of party funds, but they have become larger on
average and tend to come from a much smaller number of donors than before.
Financial reports of authorised entities do not indicate explicitly the num-
ber of donors. Rather, they reveal the number of receipts issued by the entity.
Prior to 1989, there was no obligation for parties to consolidate figures, so that
a single receipt would be issued by the entity to each single donor. Assuming
the number of donors is roughly equivalent to the number of receipts issued,
the contrast is striking between the first five (1978–82) and the most recent five
(1999–2003) years: the average number of receipts issued for contributions
 TABLE 3: Sources of Revenue, all Authorised Entities

Year Contributions Membership Admission Anonymous Reimburs. Other Total

dues fees donations electoral
expenses
1978 $3 760 957 $557 007 $276 666 $68 738 * * $4 663 368
1979 5 070 458 848 958 251 780 75 005 * * 6 246 201
1980 6 085 200 1 186 350 186 365 75 959 * * 7 533 874
1981 4 402 038 1 705 864 205 258 59 128 * * 6 372 288
1982 3 052 390 1 112 174 384 002 20 655 * $1 750 619 6 319 840
1983 3 529 929 1 054 784 543 349 18 248 * 1 653 875 6 800 185
1984 5 216 555 1 270 306 628 110 19 417 * 1 722 732 8 857 120
1985 10 703 941 1 894 233 553 565 39 958 $2 669 338 1 688 573 17 549 608
1986 7 521 116 896 274 323 234 13 791 773 451 1 468 052 10 995 918
1987 7 522 201 881 084 324 774 5 713 79 870 1 609 361 10 414 003
1988 8 568 505 1 018 697 739 879 7 363 51 808 1 813 987 12 200 239
1989 6 568 782 1 339 130 276 856 23 993 2 631 301 2 169 122 13 009 184
1990 7 000 851 936 860 437 203 10 737 931 501 1 794 420 11 111 572
1991 7 784 398 998 130 791 589 10 505 68 111 1 629 143 11 281 876
1992 9 122 476 1 051 912 412 874 13 109 12 512 2 455 446 13 068 329
1993 8 213 973 1 139 033 113 962 4 070 71 332 3 684 054 13 226 424
1994 11 153 584 1 339 055 172 311 18 888 5 995 545 3 802 049 22 481 432
1995 11 718 723 1 050 328 184 842 8 317 1 207 403 3 251 135 17 420 748
1996 5 962 511 795 305 244 650 2 943 228 951 2 842 420 10 076 780
1997 6 466 640 757 353 412 874 4 858 194 033 3 164 829 11 000 587
1998 13 367 378 1 338 721 175 519 12 512 6 776 188 2 893 879 24 564 197
1999 7 260 828 705 055 168 645 13 102 943 880 3 202 192 12 293 702
2000 7 774 842 710 493 603 447 7 917 99 318 2 853 036 12 049 053
2001 9 923 241 840 844 224 944 18 557 197 408 2 896 594 14 101 588
Financing Parties at the Grass-Root Level: The Québec Experience

2002 12 220 540 1 016 334 277 149 10 005 340 380 2 928 945 14 802 540
2003 17 543 427 916 644 257 588 37 052 10 446 257 3 862 022 38 135 091
* Were not included in financial reports in these years.
169
170 Louis Massicotte

TABLE 4: Number of Donors

(Number of Receipts Issued for Contributions)
Year Liberals Parti All
Québécois authorised
entities

1978 64 535 93 941 163 910

1979 124 439 107 569 235 139
1980 103 337 154 170 259 072
1981 11 049 168 910 185 803
1982 29 815 77 748 111 235
1983 50 009 49 143 100 181
1984 54 120 44 963 99 680
1985 61 791 61 895 128 391
1986 45 286 23 620 71 354
1987 66 524 22 118 96 864
1988 53 349 34 355 89 339
1989 11 821 66 582 82 027
1990 31 783 50 483 84 751
1991 25 637 49 348 77 156
1992 23 016 91 020 115 719
1993 28 442 47 840 77 373
1994 22 451 82 739 108 901
1995 27 057 86 741 114 544
1996 20 219 42 941 64 513
1997 16 925 38 337 56 700
1998 25 133 62 133 90 337
1999 19 195 30 989 51 909
2000 18 774 33 289 54 346
2001 23 644 31 821 58 082
2002 26 212 31 318 63 786
2003 26 276 39 685 75 982

Bold type figures indicate that the number of donors for a party was higher that year than
for the other main party.

dwindled from 191,000 to 60,800. Figures for 1996, 1997, 1999, 2000, 2001 and
2002 (non-election years) were the lowest since the came into existence.
Figures for 1992, 1994, 1995, 1998 and 2003 (election or referendum years)
were also lower than at any election year except 1989. The pattern of fluctua-
tions has been much the same as for revenue: 163,112 on an average referen-
dum year, 112,933 on an average election year, and 91,014 on other years. This
trend is worrying, since the tax credit for contributions has been increased
twice meanwhile.
Comparing the average size of contributions for the same years, we find that
the average contribution size went from $23–$27 (1978–82) to $140–$231
(1999–2003). When adjusted for inflation, the data indicate a substantial,
 Financing Parties at the Grass-Root Level: The Québec Experience 171

TABLE 5: Average Contribution Size

Year Liberals Parti All authorised entities

Québécois
In dollars In 2001 $
1978 $27 $20 $23 61
1979 21 22 22 54
1980 23 23 23 51
1981 65 20 24 47
1982 33 25 27 48
1983 36 33 35 59
1984 64 38 52 84
1985 104 64 83 129
1986 145 35 105 157
1987 98 38 78 111
1988 136 36 96 132
1989 254 49 80 104
1990 157 37 83 104
1991 207 48 101 119
1992 198 49 79 92
1993 196 54 106 122
1994 216 67 102 117
1995 181 77 102 114
1996 110 83 92 102
1997 146 100 114 124
1998 246 107 148 159
1999 165 126 140 148
2000 198 117 143 148
2001 234 129 171 171
2002 242 128 192 190
2003 319 148 231 222

Bold type figures indicate that the average contribution for a party was higher that year
than for the other main party.

though less dramatic, increase: from an average $52 (1978–82) to an average

$176 (1999–2003).44 Even taking inflation into account, the average donation
has substantially increased. The tendency of the Liberal Party to raise larger
contributions than the PQ, already obvious in the 1980s, has continued
unabated into the 1990s. Average donations to the ADQ have been $330 in 2002
and $376 in 2003, the highest among the three parties.

44
Dollar figures from the parties’ financial reports were converted in 2001 dollars using the infla-
tion calculator found on the website of the Bank of Canada (<http://www.bankofcanada.ca/en/infla-
tion_calc.htm>).
172 Louis Massicotte

There is further evidence that contributing to a political party in Québec still

remains a rather elitist activity. Financial reports do not provide any data on donors
other than the name and address of those who gave contributions exceeding $200
($100 until 1992). However, provincial taxation statistics provide interesting data on
donors, provided they claimed the tax credit they were entitled to. These figures are
to be taken with some caution, as many donors did not claim their tax credit (see
Table 6). Nevertheless, a sample of more than three-fifths is normally instructive.
Table 7 reveals that donors tend to come from upper revenue brackets. The
proportion of donors and the average size of their contributions both increase
substantially as one moves to upper revenue brackets. In 1997, taxpayers with a
revenue of $50,000 or more accounted for 10 per cent of all taxpayers, 43 per cent
of donors, while 63 per cent of contributions came from that source. The inclina-
tion to contribute, as well as the amounts contributed, both increased markedly
TABLE 6: Basic Data on the Tax Credit for Political Contributions

Year Number of Number of % donors Tax credits

tax credit donors claiming
claimants tax credit

1978 50 401 163 910 31 $1 125 000

1979 77 631 235 139 33 1 508 000
1980 90 358 259 072 35 1 727 000
1981 69 034 185 803 37 1 267 000
1982 50 708 111 235 46 926 000
1983 32 671 100 181 33 1 045 000
1984 43 103 99 680 43 1 454 000
1985 54 449 128 391 42 2 237 000
1986 37 023 71 354 52 1 749 000
1987 29 813 96 864 31 1 525 000
1988 44 543 89 339 50 1 936 000
1989 41 028 82 027 50 1 546 000
1990 47 676 84 751 56 1 807 000
1991 47 378 77 156 61 1 956 000
1992 53 851 115 719 46 2 404 000
1993 38 170 77 373 49 1 893 000
1994 54 457 108 901 50 2 525 000
1995 56 014 114 544 49 4 330 000
1996 36 685 64 513 57 2 506 000
1997 34 541 56 700 61 2 652 000
1998 63 346 90 337 70 5 897 304
1999 22 467 51 909 43 1 826 914
2000 40 136 54 346 74 3 468 000
2001 49 455 58 082 85 5 178 000

SOURCE: Figures provided by Gouvernement du Québec, Ministère du Revenu, Direction

générale de la planification, des programmes et du budget, Direction des études statis-
tiques. Ministère du revenu du Québec, Statistiques fiscales des particuliers.
 Financing Parties at the Grass-Root Level: The Québec Experience 173

TABLE 7: Contributions to Authorised Entities for Which Tax Credit was Claimed by Revenue
Bracket, 1997

Total revenue % of all No of % Total amount % Average

of taxpayer taxpayers taxpayers contributed donation
who made by those
contributions taxpayers

$0–$20 000 54 5 812 15 $455 898 8 $78

$20–$30 000 16 5 451 14 $533 550 9 $98
$30–$40 000 12 5 625 15 $618 284 11 $110
$40–$50 000 7 4 735 13 $576 438 10 $122
$50–$100 000 9 11 756 30 $1 963 904 34 $167
$100 000 + 1 4 849 13 $1 700 464 29 $351
TOTAL 99 37 728 100 $5 848 538 101 $155

SOURCE: Figures provided by Gouvernement du Québec, Ministère du Revenu, Direction

générale de la planification, des programmes et du budget, Direction des études statis-
tiques; Ministère du revenu du Québec, Statistiques fiscales des particuliers 1997.

as one moved upwards in the revenue ladder. The group of taxpayers earning
$100,000 or more (one per cent of the total), included 13 per cent of donors and
was the source of 29 per cent of all contributions in 1997. The pattern has been
the same for earlier and following years. These data suggest that while there are
many positive sides in the Québec system, calling it ‘financement populaire’ bor-
ders on overselling the commodity.
Taxation statistics for more recent years no longer include the amount con-
tributed by each taxpayers bracket, but still indicate the number of donors in each.
They suggest that elitism remains. Table 8 shows that in 2001 as in earlier years,
donors were disproportionately found among males, professionals and people in
their 40s and 50s. This is hardly surprising: men are more prosperous than women,
and they tend to be wealthier in middle age. On the whole, revenue appears to be by
far the most significant independent variable. Taxpayers earning $50,000 and more
(14 per cent of all taxpayers) included 46 per cent of all donors in 2001.

Increasing Dependence on Public Funding

When the law was passed, political scientist Vincent Lemieux predicted that rely-
ing on individuals to finance parties would work in a period of creative politics
like the late 1970s, but that in calmer times that source would prove unable to sat-
isfy party needs, and that parties would then increasingly become dependent on
public funding.45 The first decade did not appear to confirm that prediction. In the
long run, however, Lemieux appears to have been right.

45
V Lemieux, ‘Réforme à l’image du Parti québécois’ Le Soleil, 16 July 1977, B2.
174 Louis Massicotte

TABLE 8: Profile of donors who claimed a tax credit for a political contribution, 2001
(85 per cent of all donors for that year)

Variable Percentage among:

All taxpayers Donors

AGE:
Less than 35 29 8
35 to 49 32 29
50 to 64 22 37
65 and over 17 26
SEX:
Male 50 68
Female 50 32
TOTAL REVENUE:
Less than $25,000 58 21
$25,000–$49,999 28 33
$50,000–$99,999 12 30
$100,000 and more 2 16
MAIN SOURCE OF REVENUE:
Wage-earners 57 50
Pensioners 18 27
Unemployed 2 0.5
Investors 3 5
House renting 1 4
Capital Gains 0.2 0.5
Business 4 4
Professionals 1 6
Other 14 4

Source: Gouvernement du Québec, Ministère du Revenu, Statistiques fiscales des parti-

culiers. Année d’imposition 2001, Québec, Novembre 2003.

The strongest case in favour of the view that parties are in danger of becoming
wards of the government is a table prepared in May 2000 by the office of the Chief
Electoral Officer. Public funding accounted for 69.7 per cent of all party revenues
in 1996, 49.7 per cent in 1997, 43.3 per cent in 1998 and an astounding 77.5 per
cent in 1999. However, these figures need qualification. First, they did not square
either with those found in the parties financial reports for the same years, as edit-
ed by the office of the Chief Electoral Officer, or with those of Québec’s
Department of Revenue for tax credits. Second, these percentages were arrived at
by assuming that tax credits for political contributions should be considered as
public funding, but also that tax credits should therefore be deducted from the con-
tributions given by electors, which is a more debatable accounting convention. Tax
credits are monies designed to encourage electors to contribute, and in my view,
 Financing Parties at the Grass-Root Level: The Québec Experience 175

it is a questionable operation to equate them with a straight subsidy. If tax credits

are not deducted from contributions, public funding accounts for 26.8 per cent in
1996, 24.8 per cent in 1997, 31 per cent in 1998 and 41.7 per cent in 1999. The
higher figures for the latter two years, it must be pointed out, are due to the fact
that the election held in late 1998 brought substantial reimbursement of election
spending to parties and candidates, thus increasing temporarily the relative
weight of public subsidies.
Yet, even so adjusted, public funding accounts for a higher proportion of party
revenue than it did a few years ago. In 1985, another election year, reimbursements
of election expenses and the public subsidy accounted for 19 per cent of the rev-
enues of the Liberal Party, and 27 per cent of the revenues of the PQ. The turning
point appears to be 1992, when party election spending was made eligible to a 50
per cent reimbursement, and when the amount of the public subsidy was doubled.
Both measures suggest that parties had some trouble attracting individual contri-
butions, and found it necessary to open further the faucet of public funding.

A Potemkin Village?
Much more disturbing is the charge that individuals may contribute to a party
with the understanding that they will be reimbursed by the corporation they own
or manage, either through extra bonuses or faked expense accounts. As a conse-
quence, what formally looks like an individual donation amounts in reality to a
camouflaged corporate donation. Partners in engineering firms or legal studies, or
members of the same family, may agree together to contribute up to $3,000 each
to a party, thus magnifying the impact of their individual support.
To the extent that such practices become commonplace, the paradoxical result
of the legislation is to camouflage group contributions rather than eliminate
them. Indeed, in order to find out how much money a company which got a gov-
ernment contract gave to the ruling party, one has to track down the names of all
its owners or senior managers in the list of donors and to sum up their individual
donations, while under federal legislation, one has simply to look for the name of
the company to get the equivalent figure.
Some investigative journalists have tried to do just this. For example, in the mid-
dle of the controversy generated by the insistence of the provincial government to
relocate a downtown hospital in the outskirts of Montréal in 1992, opponents of the
move were able to point out that all contracts relevant to the move had gone to some
30 architect and engineering firms whose partners had together contributed some
$178,000 (over a period of three years) to the Liberal Party. The Minister responsi-
ble for the move replied that this was simply coincidental, that these firms had been
selected on the basis of professional criteria, and that all engineers in Québec had
contributed to the Liberal Party anyway as, he claimed, they had donated money to
the PQ during its years in office. No legal proceedings have followed.46
46
See P O’Neill, ‘Le dossier, ‘rouge’ de l’Hôtel-Dieu’, Le Devoir, 12 February 1993 A1 and A8; L
Lévesque, ‘Tous les ingénieurs contribuent à la caisse du Parti libéral’ La Presse, 13 February 1993, B1.
176 Louis Massicotte

So far, the most damning piece of evidence is a study conducted by the 1000
member Association professionnelle des ingénieurs du Gouvernement du Québec
(APIGQ) on the basis of the financial reports of parties for 1998 and 1999. In a
letter to the Minister of Electoral Reform in November 2000, the President of the
Association outlined some of its findings. There were many instances (400 in
1998, 170 in 1999) of individuals who gave to both parties, a common practice for
corporations who view political contributions as a business investment.47
Contributions from these ‘bicephalic donors’ totalled about $300,000 to each
party. There were indications that many of them had tried to hide their ‘ambiva-
lent’ feelings by modifying the spelling of their name or of their address. The
letter pointed out that donors of $3,000 (the maximum allowed) included gov-
ernment contractors in the building industry. There were instances of individuals
breaking the law by contributing more than $3,000. The letter noted that ‘social
activities’ were no longer confined to the Liberal Party, and that the PQ relied
increasingly on the same technique. Large ($1,000) and very large ($3,000) dona-
tions to the PQ had increased substantially (by 92 per cent and 181 per cent
respectively) after the party came to office.
In a series of articles, journalist Kathleen Lévesque disclosed the main findings
of that study. Further, she interviewed some businesspeople who confirmed that
the law was circumvented on a large scale. Former PQ Cabinet Minister Yves
Duhaime, now recycled in the private sector, was quite blunt:

When a senior company executive is donating $3,000, do you believe that money
comes from his own salary? He is granted by his boss a $6,000 bonus. Assuming a
taxation rate of 50 per cent, this includes $1,500 for federal income tax, $1,500 for
provincial income tax and $3,000 for the party. This is what happens. It always
worked. Professionals working for companies do the same.48

In the same article, other businessmen revealed they were solicited by ministers’
assistants and that not contributing meant they would be blacklisted: ‘If you are
in business and you are not seen at [then Premier] Landry’s cocktail, notice there-
of will be taken. So, in order to be in the game, I buy tickets’.49

Possible Solutions

Up until recently, Québec’s fundraising system had been hailed locally as a

tremendous achievement and proposed to the whole world both as evidence that
47
During the Spring of 2002, it was revealed that the Liberal candidates at by-elections had con-
tributed to the Parti Québécois. One of them was heading a company working on public roads. See A
Duchesne, ‘Le candidat libéral Pierre Delangis a donné plus au PQ qu’au PLQ’ La Presse, 10 June 2002,
A5; S Paradis, ‘Une candidate libérale qui a déjà contribué à la caisse du PQ’ La Presse, 22 March 2002.
48
K Lévesque, ‘Financement des partis politiques. Comment contourner la loi’ Le Devoir, 22
February 2001, A1 and A8. My translation.
49
Ibid. My translation.
 Financing Parties at the Grass-Root Level: The Québec Experience 177

Québec was a most democratic society and as a model to follow. In a political

context of intergovernmental rivalry, one of the objectives of the legislation was
to restore public trust in the Québec government, both within and outside
Québec. The excellence of the law was quoted as an argument reinforcing the
credibility of referendums on sovereignty: whatever international and Canadian
constitutional law might dictate, surely the outcome of a referendum organised
under such exemplary rules had to be obeyed.50 Its originality was interpreted not
as an indication that Québec was way out, but as additional evidence that
‘Québec’s democracy’ was different—and better—than Canadian democracy. The
legislation was supported even by parties that had been initially lukewarm.
Québeckers were proud to point out that compared with neighbouring jurisdic-
tions, their own provincial politics had been scandal-free since 1978.
Whether this enthusiasm was warranted is increasingly questioned. Routine
praise for the system in Québec among election officials and media elites has not
been matched by systematic and critical study of how the law actually worked. One
of the conclusions of this chapter is that even when judged on its own terms, the
actual working of the Québec system is far from perfect: the number of individual
donors has decreased sharply, the average contribution size has increased, and par-
ties are becoming increasingly dependent on the State, as the various sources of gov-
ernment funding and the tax credit had to be made more generous, especially in the
1990s. Most of the money given to parties comes from the upper-middle class.
For years, scepticism has been mounting as to whether the law was actually
complied with, and whether the parties’ financial reports reflected reality.
Prominent businessmen hinted privately, and sometimes uttered publicly, that the
law was routinely evaded and that in practice the system had degenerated into a
sham: interested corporate contributions were still channelled to parties, but were
so efficiently camouflaged that the net impact of the law was to deceive the pub-
lic by projecting a reassuring picture. Rather than being a pious religious image,
Québec’s fundraising laws were likened to a triptych: the outside panels featured
the Lady surrounded by angels, but opening the panels revealed a much darker
picture of little devils perpetrating their usual business.
The latter view is in the process of becoming prevalent. Québec’s former Chief
Electoral Officer, Pierre-F Côté, who had been for years a staunch defender of
‘René Lévesque’s legacy’, astounded his audience—and many others—in late 1999
by calling the system a failure and by suggesting that corporations be allowed to
contribute to parties.51 Coming from a former official who had previously

50
See for example the presentation of former Liberal leader Claude Ryan to the Legislative
Committee of the Canadian House of Commons on Bill C–20, An Act to give effect to the requirement
for clarity as set out in the opinion of the Supreme Court of Canada in the Québec Secession Reference, 21
February 2000, <http://www.parl.gc.ca/InfoComDoc/36/2/CLAR/Meetings/Evidence/clarev05e.htm#
1645>.
51
PF Côté, ‘Financement des partis politiques: adapter les règles pour améliorer l’éthique’ in AG
Bernier and F Pouliot (eds), Éthique et conflits d’intérêts (Montréal, Liber, 2000) 59–63; D Lessard,
‘Pierre-F Côté propose de permettre aux compagnies de financer les partis politiques’ La Presse, 27
November 1999, B11.
178 Louis Massicotte

brushed aside criticisms of the law as if they amounted to an attack on Québec’s

identity, this turnaround spoke volumes. At the same time, the federal wing of the
PQ, the Bloc Québécois, faced with a sharp drop both in the number of donors
and of the amounts contributed, abandoned its previous policy of refusing corpo-
rate contributions though the latter were allowed under federal legislation.52 Both
mainstream parties hesitate to launch a debate on the issue, as each is likely to see
its own public image, not to speak of Québec’s reputation in Canada and abroad,
being shattered. Yet, as the APIGC study suggests, what was hitherto dismissed as
cynical attacks coming from opponents of popular financing might later be con-
firmed.
The first six months of 2002 were marred by serious allegations of corruption
at all three levels of government. The director general of the Parti Québécois had
to resign his position after revelations that he had received princely sums to act as
a lobbyist. Too cosy relations with another lobbyist led to the resignation of
Minister Gilles Baril. A tough bill regulating lobbying was passed by the Assembly
shortly after. Opinion polls published at that time cast doubt on the assumption
that Québec provincial politics is cleaner, or at least is perceived to be so.53
What can we do? One option is to stick to the existing legislation, but to
enforce it in a much more stringent way. After all, lawbreaking in itself is no con-
vincing argument for making legal what the law prohibits. Instances of drunken
driving, tax evasion, plagiarising, are regrettable indeed, but few would conclude
that they warrant the repeal of the Criminal Code, of the Income Tax Act or of
copyright legislation. A more appropriate conclusion in each case may be that the
law should be more strictly enforced.54 This would require both the powers of
inquiry and the legal staff of the Chief Electoral Officer to be increased. Tracking
hidden corporate contributions would be made easier by obliging major donors
to disclose the name of the company they work for. Yet, this begs the question:
what will be left if camouflaged corporate contributions are taken out of the pic-
ture? Will parties find enough money to carry out their activities?
Another option is lifting the ban on contributions from legal persons, while
disclosing them, as advocated by Yves Duhaime.55 This would align Québec legis-
lation on those in force in Ottawa until 2003 and in most other provinces.
Contributions could be limited in size, though it would be easy to circumvent
such ceilings by creating dummy companies. The rights of individual sharehold-
ers and trade union members might be protected by demanding, as Britain does,
52
L Plamondon, MP, ‘Financement des partis politiques: le Bloc québécois tente de s’adapter à la
réalité fédérale’ Le Devoir, 18 January 2000, A6; JD Bellavance and A McIntosh, ‘Bloc diverted money
to pollster’ The National Post, 21 January 2001, A1 and A10. For a criticism of the Bloc’s decision, see
D Monière, ‘Le Bloc ne doit pas ressembler aux vieux partis pour son financement’ Le Devoir, 18
January 2000, B3.
53
Léger Marketing, ‘Les Canadiens et la corruption des gouvernements. Rapport’, a poll conducted
in early April 2002; JD Bellavance, ‘Le favoritisme à Ottawa et à Québec: c’est du pareil au même, selon
CROP’ La Presse, 12 April 2002, A1–4.
54
At present, offenders are liable to fines ranging from $100 to $10,000.
55
K Lévesque, ‘Le soutien financier aux personnes morales devrait être permis’ Le Devoir, 25
February 2001, A2.
 Financing Parties at the Grass-Root Level: The Québec Experience 179

that political contributions be approved by majority vote instead of being decid-

ed privately by the leadership. The Liberals might welcome that solution, as they
have every reason to expect generous funding from the business community, but
nothing excludes that the PQ, by now an established party with some record of
business friendly moves, would not receive its share (as does Blair’s New Labour
Party), in addition to labour union funding. How would public opinion react?
One should not assume too quickly that the public at large would be outraged: the
unanimous praise in Québec media for the banning of corporate contributions
conceals the fact that a substantial proportion of Québeckers, according to a poll
conducted in 1990 for the Royal Commission on Electoral Reform, supported
such contributions.
There is a third option, put forward by a former Chief Electoral Officer, where-
by corporations would be allowed to contribute, subject to disclosure of large
donations and to a ceiling, but contributions would be transferred to a trust
account maintained by the Chief Electoral Officer and distributed among parties
on the basis of the popular vote for each.56 This implies that corporations could
not direct money to a specific party, and would have no control over which party
would get the money. This suggestion seems exceedingly naive, insofar as there is
doubt that corporations would be interested in contributing under such terms.
Another option is that contributions from civil society, be they coming from
corporations, labour unions or even individuals, be banned altogether, and that
parties rely henceforth exclusively on public funding. One could imagine then the
State subsidy to be increased markedly and to be apportioned among parties
according to their electoral performance. There are obvious drawbacks: parties
would be exposed to degenerating into empty shells relying on government fund-
ing rather than on militant activity; they would become wed to an interventionist
government and might be perceived by the general public as being in a standing
conflict of interests, as it is the prerogative of the legislature to determine the total
amount to be apportioned; they would be protected, at least until the next gener-
al election, against the reaction of angry militants dissatisfied with the policies of
their own government; the emergence of new political forces would be made
more difficult because public funding is mostly based on past electoral perform-
ance.
As of the Summer 2004, party finance had disappeared from the public agen-
da in Québec, not the least because the adoption by the federal Parliament in 2003
of a new legislation largely inspired by the Québec approach, led many to con-
clude that the latter was after all the best possible system, or the least of all evils.
The record suggests, however, that new loopholes might be eventually exposed
publicly in the future, leading to some hard questions being asked.

56
Côté, above n 51 at 62.
 Part IV
Regulation and Judicial Review
 9
Throwing in the Towel:
The Constitutional Morass of
Campaign Finance
SAMUEL ISSACHAROFF

‘MONEY, LIKE WATER, will always find an outlet.’1 So informs the lead opinion
of Justices Stevens and O’Connor in the Supreme Court’s latest pronounce-
ment on campaign finance regulation. And so it undoubtedly will. In light of the
developments of the twenty-five years following Buckley v Valeo,2 described by
Professors Briffault and Persily in the chapters that follow, the Court’s confidence
that it can predict how the latest regulatory endeavor will play out is dramatically
shaken. The 1974 rendition of the Federal Election Campaign Act, truncated by the
Buckley divide between contributions and expenditure regulation, yielded an
innovative array of ‘outlets,’ first in the form of the trickles of PACs and finally in
the torrents of soft money.
But the distinctive feature of American campaign finance over the past 20 years
has been that the organising regulatory force has come from an increasingly com-
plicated if not contradictory set of opinions from the Supreme Court. The flow of
campaign funds, particularly through innovative channels of evasion of regulato-
ry limits, has been shaped by the odd juxtaposition of limited private funding at
the contribution level and unbounded largesse at the expenditure level. In light of
the most recent combination of the Bipartisan Campaign Reform Act and a sur-
prisingly pliant Supreme Court, the regulatory environment has shifted again, this
time to some remove from the overarching strictures of the Constitution.
The early evidence is that Bipartisan Campaign Reform Act (BCRA) will fol-
low its regulatory predecessors in prompting new forms by which money seeks to
influence, cajole, inform, capture, and even corrupt—Buckley’s enduring if ill-
defined contribution to the constitutional arsenal of regulation. Only those weak
in history and firm in self-assured prognostication would venture how the new
regulatory environment will direct the flow of campaign funds. Perhaps money
will move to the newest entrants, the so called ‘527 organisations’ who walk a
1
McConnell v FEC 124 S Ct 619, 706 (2003).
2
424 US 1 (1976).
184 Samuel Issacharoff

finely drawn line between seeking to influence elections and express advocacy.3
Perhaps the most significant feature will prove to be the relatively unreviewed
expansion of hard money which, combined with innovative fundraising tech-
niques, has already propelled the main presidential contenders to opt out of the
federal financing system altogether. Perhaps as well, the bundlers of hard money
will emerge as the first new institutional force, akin to PACs after Buckley.
Or perhaps, this is much ado over nothing. A regime that liberalises the flow of
hard money directly to candidates and parties may remove some of the politics of
circumvention. The limitation on expression during critical periods of the cam-
paign cycle—the times when public discourse turns to the issues of the day—has
troubling political and constitutional overtones, but is restricted to the pariahs of
political expression: corporations and labor unions.4 There is an odd quality to the
gingerly protection of expressive activity for the myriad interest groups of the
American political spectrum, but for the exclusion from the public arena of labor
and capital. How far we have come from the 19th and 20th century political the-
ories that were the contending forces that drove the engine of history.
It is possible to engage the Court’s latest handiwork on many different levels.
For example, there is the curious clustering of unions and corporations as nothing
more than compelled accumulations of wealth whose hapless constituents, absent
campaign finance regulation, are forced to endure whatever political endorsements
their organisations fancy. Unmentioned is the vast regulation of union internal life
under the Beck/Abood line of cases that require segregation of all political funds
and allow for objecting union members to demand the rebate of any union dues
spent on political activity.5 Or perhaps it is the malleability of the concept of the
‘appearance of corruption,’ a concern that threatened to swallow the First
Amendment in Austin6 and now returns with a vengeance in McConnell.7 Or per-
haps it is the Court’s disturbing and sudden humility in allowing congressional
expertise to reign supreme in the matter of—what else—how best to elect a
Congress. Given my prior writings on the need to be vigilant when incumbent
power threatens to undermine the competitive accountability of politics, there is
more than a touch of recognition when Justice Scalia warns of the risks of incum-
bent self-protection in closing off potential sources of electoral criticism.8 But for
now I wish to leave all of these important issues to the side. I have always been
more taken by the issue of the paradoxical effects of campaign finance regulation9
and for such an assessment, as Chou en Lai is once reported to have quipped about
the French Revolution, ‘it is too early to tell.’10
3
Ibid at 678, n 67.
4
Ibid at 687.
5
See Communications Workers of America v Beck 487 US 735 (1988); Abood v Detroit Beard of
Education 431 US 209, 236 (1977).
6
Austin v Michigan Chamber of Commerce, 494 US 652 (1990).
7
McConnell v FEC 124 S Ct 619, 661 (2003).
8
Ibid at 721 (Scalia, J, concurring in part and dissenting in part).
9
See S Issacharoff and P Karlan, ‘The Hydraulics of Campaign Finance Reform’ (1999) 77 Texas
Law Review 1705.
10
Quoted in G Roeder, Jr, ‘People’s Century: History Made Visible’ (1997), available at <http://busi
nessweek.com/bwdaily/dnflash/apr2004/nf2004045_3567_db056.htm>, last accessed 12 May 2005.
 The Constitutional Morass of Campaign Finance 185

Despite my discomfort with incipient restrictions on speech during the critical

facets of the election cycle, and despite my sympathy for Justice Scalia’s worries
over self-serving regulation over the powers that be, I find much to commend the
Court’s basic holding. I say this with substantial hesitation because I agree with
Justice Kennedy that a constitutional foundation based on vague notions of
appearance of corruption is ‘unbounded and susceptible to no limiting princi-
ple,’11 and may easily threaten bedrock conceptions of political competition that
ensure that ‘[d]emocracy is premised on responsiveness.’12 But, nonetheless, I
share the sense that the Court has proven not particularly successful at managing
its increasingly regulatory role in campaign finance law. So it is difficult not to
welcome the Court’s humbling acknowledgment that, ‘[w]e are under no illusion
that BCRA will be the last word on the matter. Money, like water, will always find
an outlet. What problems will arise, and how Congress will respond, are concerns
for another day.’13 Not only are congressional findings entitled to deference,
announces the Court, but so are its ‘predictive judgments.’14
While the new regulatory regime unfolds in practice, it is possible to examine
McConnell v FEC not so much for how it will play out in the cold-blooded world
of political influence but for how the Court came to its conclusion. Put another
way, what is the Court’s view of the relation between constitutional law and the
political process that explains how it handled the challenge to BCRA? After all, it
was the Constitution itself that the Court used as the template for fashioning
much of the campaign finance regulatory regime of the past several decades. When
taken as a lens through which to gauge the Court’s jurisprudence of the political
process, McConnell unfortunately yields at least three competing, somewhat
coherent, yet largely incompatible approaches to the constitutional law of politics,
thereby carrying forward the central and unreconciled tensions in this entire area
of law. The remainder of this introductory chapter on American law will be direct-
ed to the principles underlying the Court’s response to the world of politics.

Rights, Deference and Process

The Rights Domain in Politics

From the most basic right-to-vote cases, through the minority vote dilution cases,
through Baker v Carr and the reapportionment revolution,15 the Court’s political
process jurisprudence has always had a strong element of enforcement of individ-
ual rights. There have been debates on and off the Court about the role that rights
11
McConnell v FEC 124 S Ct 619, 747 (2003).
12
Ibid at 748.
13
Ibid at 706.
14
Ibid at 673.
15
See S Levinson, ‘One Person One Vote: A Mantra in Need of Meaning’ (2002) 80 North Carolina
Law Review 1269, 1296.
186 Samuel Issacharoff

discourse could or should legitimately play in claims defined by aggregation. But

whatever the limitations, the Court has returned time and again to the language
of first-order constitutional rights when intervening in the political sphere.
Sometimes the rights component is rather self-evident, as with challenges to lim-
itations on the ability to register to vote on account of a poll tax or a residency
durational requirement.16 Other times, the rights component is more of a reach,
as when the Court in California Democratic Party v Jones crafted a strong right of
associational autonomy to prevent the imposition of a blanket primary require-
ment in California.17
Rights claims necessarily put courts in conflict with the democratic processes.
When properly functioning, democracies respond ultimately, if imperfectly, to
majoritarian commands. A rights claim may properly challenge a majoritarian
determination that an out-group be prohibited from participating, as historically
has been done for reasons of sex or race or wealth or duration of residency. A
rights claim may similarly assert that majoritarian processes render minorities
incapable of participating effectively, as with minority vote dilution suits. Insofar
as campaign finance regulation inescapably burdens expressive activity, First
Amendment arguments are invariably a part of the litigation landscape.
Without entering into the merits of the First Amendment claims in BCRA,
there can be little doubt, after Buckley, that there must be a significant rights over-
lay to the expressive dimension of campaign finance regulation. The First
Amendment approach would require some elevated showing of both need for the
regulation and tightness of fit between state objectives and means taken. A strik-
ing feature of McConnell is the almost complete absence of such conventional
First Amendment concerns. The opinion is replete with references to the congres-
sional interest in forestalling the poorly defined ‘appearance of corruption.’18 Not
only does the Court repeatedly announce its intent to defer to congressional judg-
ments, but extends this to what Congress ‘may’ have concluded or what may be
‘reasonable’19 or, in one passage, to the value of ‘common sense’ in determining
the ambit of congressional regulatory authority.20
What is most striking, however, is the sudden and inexplicable resurgence of
First Amendment formalism with regard to—of all people—minors. Stunningly,
in light of the radically diminished First Amendment protections minors receive
in general, Chief Justice Rehnquist announces that the restrictions on contribu-
tions by minors ‘may . . . impinge on the protected freedoms of expression
and association’ and that, accordingly, the burdens of BCRA must be subject to
heightened scrutiny.21 The rejoinder that contributions through children appear
to be an invitation to evasion, an argument that carries the day with regard to

16
See Guinn v United States 238 US 347, 363 (1915).
17
530 US 567, 581–2 (2000).
18
McConnell v FEC, 124 S Ct 619, 661 (2003).
19
Ibid at 672–3.
20
Ibid at 661.
21
Ibid at 711.
 The Constitutional Morass of Campaign Finance 187

contributions to parties, all of a sudden fails because, ‘the Government offers

scant evidence for this form of evasion.’22
The sudden emergence of conventional First Amendment scrutiny cannot be
attributed to the different authorship of separate parts of the opinions of the
Court; both Rehnquist and Stevens/O’Connor write the holdings of the Court.
What emerges instead is a perfectly viable First Amendment lever with real clout
as to restrictions on burdening expressive activity—but with no predictable
mechanism for determining when it will be pulled.

Deference to Political Judgments

As opposed to the invitation to judicial scrutiny of the rights domain, a distinct
jurisprudential tradition would leave the political process largely to political
determinations. Whether dressed up formally as the political question doctrine,
or more typically, as the regulatory domain for managing elections, the Court has
reserved for the political process a significant area relatively immune from consti-
tutional scrutiny. Hence the repeated invocations throughout the opinion of the
importance of deferring to congressional judgments, even beyond the boundaries
of actual fact finding.23
The difficulty comes with drawing the line between the inherently expressive
quality of participation in the political process and the need to permit coherent
regulation of the political process. A critical example comes with the act of getting
on the ballot. Because the state must print a ballot with a presumably finite num-
ber of candidates, all rules requiring preconditions for appearing on the ballot
impose a direct burden on political participation. The Court’s response has been
to treat most ballot access matters (eg, signature requirements to get on the bal-
lot) as regulatory affairs guaranteeing the orderly administration of elections,
while reserving more exacting constitutional scrutiny for specific access restric-
tions that attempt more directly to regulate speech.24 Unfortunately, it is not easy
to tell ex ante which side of the regulatory/expressive divide any particular form
of regulation will fall on. Once categorised as a matter of regulation of the elec-
toral arena, the Court’s decision to defer to the political and administrative judg-
ments of state electoral authorities appears unassailable. The trick, however, lies in
the categorisation.
Consider, for example, the disclosure requirements that form the core of
the regulations upheld in Title II of BCRA. Among the provisions upheld were
those requiring disclosure of the sponsors of anything falling within the sweeping
category of ‘electioneering communication.’25 Relying on Buckley, the Court
22
Ibid.
23
See, eg, McConnell v FEC 124 S Ct 619, 661 (2003). For examples of the Court’s prior strictness in
requiring congressional fact finding, see United States v Morrison 529 US 598, 614 (2000); City of
Boerne v Flores 521 US 507, 536 (1997); United States v Lopez 514 US 549, 564 (1995).
24
See, eg, Cook v Gralike 531 US 510 (2001); McIntyre v Ohio Elections Commission, 514 US 334
(1994).
25
2 USCS section 441(d) (2003).
188 Samuel Issacharoff

eliminated any possible claim of First Amendment privilege by invoking the state’s
regulatory interest in,

providing the electorate with relevant information about the candidates and their
supporters; deterring actual corruption and discouraging the use of money for
improper purposes; and facilitating enforcement of the prohibitions of the Act.26

Viewed in its regulatory light, there is no question but that the Court should defer
to the congressional determination that disclosure measures preserve the integri-
ty of the electoral process. But should disclosure be seen as a mere regulatory
device or as a form of compelled speech that threatens to disrupt the free flow of
information in the political marketplace of ideas?
For the Court in McConnell, the answer appeared so obvious that the issue was
never meaningfully engaged. But compare for a moment how the Court, in anoth-
er opinion by Justice Stevens, condemned an Ohio law prohibiting the publication
of anonymous leaflets on electoral matters because ‘the category of speech regu-
lated by the Ohio statute occupies the core of the protection afforded by the First
Amendment.’27 In McIntyre v Ohio Elections Commission, the Court invoked the
Federalist Papers for the historical pedigree of anonymous speech in the political
domain and even speculated that anonymity may enhance the expressive quality
of speech: ‘Anonymity thereby provides a way for a writer who may be personally
unpopular to ensure that readers will not prejudge her message simply because
they do not like its proponent.’28 As if in rapture, the Court goes on to extol the
centrality of anonymous (and presumably critical) speech in the constellation of
constitutional values:

The decision in favor of anonymity may be motivated by fear of economic or offi-

cial retaliation, by concern about social ostracism, or merely by a desire to preserve
as much of one’s privacy as possible. Whatever the motivation may be, at least in the
field of literary endeavor, the interest in having anonymous works enter the market-
place of ideas unquestionably outweighs any public interest in requiring disclosure
as a condition of entry. Accordingly, an author’s decision to remain anonymous, like
other decisions concerning omissions or additions to the content of a publication, is
an aspect of the freedom of speech protected by the First Amendment.29

I do not intend this discussion as a condemnation of disclosure. Indeed, I rather

favour disclosure as a limited, information-enhancing mechanism to identify the
role of money in politics. Instead, the focus is on the absence of doctrinal moor-
ing for the Court’s willingness to cede to political judgments in the freighted arena
of politics. The Court could have moved in the direction of process, and directed
26
McConnell, 124 S Ct 619, 647–8 (2003).
27
McIntyre v Ohio Elections Comm’n 514 US 334, 346 (1995).
28
Ibid at 342. For an extended discussion of the privacy concerns in anonymity, see W McGeveran,
‘Mrs McIntyre’s Checkbook: Privacy Costs of Political Contribution Disclosure’ (2003) 6 Pennsylvania
Journal of Constitutional Law 1.
29
McIntyre, above n 26 at 341–2.
 The Constitutional Morass of Campaign Finance 189

its attention to the public outcry over moneyed influences in politics, or it could
have looked to the ubiquity of campaign finance restrictions in jurisdictions that
allow for referendum mechanisms that bypass legislative self-interest, or it could
even have looked to congressional reluctance to regulate this arena as evidence of
lack of anticompetitive motivation. But instead, the Court purports to defer to
legislative fact findings on the ephemeral claim of appearance of corruption. As
McIntyre shows, however, such appearances are as readily trumped by the virtue
of political speech as they are predictable grounds for electoral regulation.

Integrity of the Political Process

The rights approach assumes an active judiciary critically engaging the outputs of
the majoritarian process, while the deference regime requires courts to cede to the
institutional expertise of the very same majoritarian legislative processes. A third
alternative, grounded conceptually in the Carolene Products 30 and the tradition of
John Ely’s Democracy and Distrust,31 would have the judiciary selectively intervene to
protect the process integrity of politics. As I have addressed on many previous occa-
sions,32 the core idea here is that the legitimacy of democratic processes turns on
the processes that protect the competitive accountability to the electorate, and fur-
ther that courts perform an invaluable service in securing the integrity of the process.
Process integrity has been a critical, if often not fully explicated, factor in many
of the most inflammatory interventions of the Court into the political process in
recent years. For example, and most controversially, there is Justice Scalia’s defence
of the Court’s injunction against further recounts in Florida in the 2000 election
on the grounds that the Court needed to ensure ‘election results that have the
public acceptance democratic stability requires.’33 A similar, if less controversial,
concern for process regularity is found in the Court’s first opinion on Florida
2000 requiring reassessment of Florida law to assure compliance with ‘a principle
of federal law that would assure finality of a State’s determination [of election
results] if made pursuant to a state law in effect before the election . . .’34 It is also
possible to read the Court’s Shaw v Reno line of cases35 as expressing a concern that
the extravagance of district-line manipulations in a way that conveyed a political
process distorted by racial concerns. While each of these examples will no doubt
provoke bitter rejoinders, the point is that the Court has within its arsenal analyt-
ic approaches to process distortions that have commanded decisive majorities in
historic cases.

30
United States v Carolene Prods Co 304 US 144, 152 n 4 (1938).
31
John Hart Ely, Democracy and Distrust: A Theory of Judicial Review (Cambridge, Harvard
University Press, 1980).
32
See, eg, S Issacharoff, ‘Gerrymanders and Political Cartels’ (2003) 116 Harvard L Rev 593; S
Issacharoff & R Pildes, ‘Politics as Markets: Partisan Lockups of the Democratic Process’ (1998) 50
Stanford LJ 643.
33
Bush v Gore 531 US 1046, 1046 (2000).
34
Bush v Palm Beach County Canvassing Board 530 US 70, 78 (2000).
35
Eg, Miller v Johnson 515 US 900 (1995); Shaw v Reno 509 US 630 (1993).
190 Samuel Issacharoff

In McConnell, it was Justice Scalia who forcefully took up the argument for
process integrity:

[BCRA] forbids pre-election criticism of incumbents by corporations, even not-for-

profit corporations, by use of their general funds; and forbids national-party use of
“soft” money to fund “issue ads” that incumbents find so offensive . . .
If all electioneering were evenhandedly prohibited, incumbents would have an enor-
mous advantage . . .
Is it accidental, do you think, that incumbents raise about three times as much “hard
money”—the sort of funding generally not restricted by this legislation—as do their
challengers?36

This argument goes essentially unanswered in McConnell. It may be that the Scalia’s
assessment of BCRA as nothing more than an incumbent-protection scheme rings
hollow in light of the clear reformist history of the Act—although the Act’s prove-
nance does not necessarily explain its final form. Or it may be that Scalia’s process
integrity rhetoric is simply a rhetorical parry—it was Scalia who authored the lead
opinion in a case the same Term that was most hostile to any judicial role in thwart-
ing the most egregious of incumbency preservation mechanisms: the sweetheart ger-
rymandering of non-competitive districts.37 My aim, once again, is not to claim that
incumbent featherbedding is the salient feature of BCRA. Rather, it is that, as with
the rights claims and the invocation of deference of legislative judgments, interven-
tion for reasons of process integrity is a cognisable and coherent approach to judicial
superintendence of the political process. Unfortunately, like the witches in MacBeth,
there is a fleeting and unpredictable quality to the apparitions of such doctrines.

Conclusion

There is no escaping that, as well captured by my colleague Richard Briffault,

McConnell is ‘a stunning triumph for campaign finance reform.’ The Court has
given broader latitude to regulations encroaching on expression than even the
most intrepid advocates of reform could reasonably have hoped for. But for an
opinion in such a volatile and visible area of law, there is a marked absence of
structured argument, let alone inspired language. Rather, the opinion reads of res-
ignation, of a Court confronted with the intractable conflict of limiting the role of
private money in an increasingly expensive system funded by that same private
money. Whether BCRA is the latest manifestation of the law of unintended con-
sequences in the domain of campaign finance remains to be seen. How sophisti-
cated actors will seek to game the system, and whether they succeed also remains
to be seen. For now, the Court has thrown in the towel. Perhaps just as well.

36
McConnell v FEC 124 S Ct 619, 720–1 (2003).
37
Vieth v Jubelirer 541 US 267(2004).
 10
Soft Money, Congress and the
Supreme Court
RICHARD BRIFFAULT

Introduction
ON 27 MARCH 2002, President George W Bush signed the Bipartisan Campaign
Reform Act of 2002 (‘BCRA’ or ‘the Act’) into law. The culmination of a six-year
legislative and political struggle, BCRA is the most significant change in federal
campaign finance law in nearly thirty years. The Act addresses a broad range of
campaign finance issues, including fundraising on federal property, contributions
by foreign nationals, modification of the contribution limits for congressional
candidates facing high-spending self-funded opponents, donations to the presi-
dential inauguration committee, electronic filing and internet access to campaign
disclosure reports, and penalties for the violation of campaign finance laws. But
the heart of the Act is the regulation of political party soft money. The Act sharply
curbs the ability of state parties to use soft money in federal elections and com-
pletely bars the national parties from using soft money.
The soft money restrictions were immediately challenged on the grounds that
they violate the First Amendment rights of political parties and party adherents.
In December 2003, the Supreme Court, in McConnell v FEC,1 upheld all of BCRA’s
major provisions, including the restrictions on political party soft money.
McConnell is the single greatest legal victory for campaign finance regulation since
the modern era of campaign finance law was ushered in three decades ago by
the enactment of the Federal Election Campaign Act (FECA) of 1971, the FECA
Amendments of 1974, and the decision in Buckley v Valeo.2
This chapter will trace the development of soft money, examine BCRA’s soft
money provisions, and analyse McConnell’s treatment of constitutional questions
posed by soft money restrictions. It will conclude by briefly considering the
impact of BCRA on campaign finances and the implications of McConnell for the
future of campaign finance law.
1
540 US 93 (2003).
2
424 US 1 (1976).
192 Richard Briffault

The Rise of Soft Money

Soft money emerged out of the political complications of federalism. Federal

campaign finance law regulates only federal elections, but federal and state elec-
tions often occur concurrently, with candidates for federal and state offices
appearing on one ballot. Party committees undertake campaign efforts that
simultaneously assist both their federal and state candidates. Spending on federal
candidates must satisfy FECA’s dollar limitations and source prohibitions—such
as the bans on contributions by business corporations, unions, and government
contractors—but spending in state elections is beyond FECA’s scope and subject
only to state law. Many state campaign finance laws are far less restrictive than
FECA. Some permit corporations or unions to support candidates; some do not
limit individual or political action committee (‘PAC’) donations.
In the late 1970s, party committees pressed the Federal Election Commission
(‘FEC’) to let them use funds that do not comply with FECA to finance campaign
efforts that would help the party ticket as a whole, including both federal and state
candidates. In 1978 the FEC determined that a state party could use funds imper-
missible under FECA to defray a portion of administrative overhead, voter
registration, and voter mobilisation activities that benefit both federal and state
candidates. In 1979, the FEC went further and decided that national party com-
mittees could also accept contributions otherwise barred by FECA to finance
expenditures in support of a portion of its expenditures on behalf of a combined
federal-state ticket. As a result, a party committee could receive and spend con-
tributions from corporations and unions—otherwise barred by FECA—and
donations from individuals and PACs in excess of FECA’s dollars ceilings on (i)
nonfederal election activities, and (ii) the nonfederal portion of activities in sup-
port of combined federal-nonfederal election efforts. Soft money—that is, money
that has an effect on federal elections but is not subject to federal contribution,
expenditure or disclosure rules but is technically aimed at nonfederal election
activities—was born.
Soft money donations to the national parties rose from an initial $19 million
in 1980 to $45 million in 1988.3 Soft funds were used to build up the infrastruc-
ture of the national parties—to hire staff, acquire office space, develop direct mail,
polling and issues research operations, acquire data processing equipment, and
create and improve facilities for mass media communications—on the theory that
since some portion of these activities is aimed at state and local elections, a
portion of the cost could be defrayed by money not subject to FECA’s restrictions.
The national parties also transferred millions of dollars in soft money to state
parties to build their infrastructures and to fund shared voter mobilisation pro-
grams. In 1990, the FEC, in response to years of prodding by campaign finance

3
Prior to 1990, the FEC did not require the parties to report on their soft money accounts, so the
numbers in text are only estimates. See H Alexander & M Bauer, Financing the 1988 Election (Boulder,
Westview Press, 1991) 37.
 Soft Money, Congress and the Supreme Court 193

reformers and the courts, issued rules requiring party committees to report their
soft money funds and regulate the allocation of expenses for shared activities
between federal and nonfederal accounts. The rules limited the ability of party
committees to shelter some funds for shared expenses in nonfederal accounts, but,

[t]he general effect of the guidelines was . . . to give party organisations a clearer sense
of how to spend soft money legally, and, at least in some instances, to permit them .
. . to pay a greater share of their costs with soft money than they had been before.4

Soft money exploded in the 1990s. In 1991–92, the two national parties raised $86
million in soft money, or double the amount for 1987–88. Soft money accounted
for 17 per cent of total national party receipts in the 1992 election cycle. By
1995–96, national party soft money receipts trebled to $263.5 million and
accounted for 30 per cent of total national party income. In 1999–2000, soft
money receipts for the two major parties nearly doubled again to $495.1 million,
and soft money accounted for 40 per cent of the party fundraising—and nearly 50
per cent of the funds received by the Democratic Party.5
The growth in soft money reflected two developments. First, a substantial
number of donors were willing to make very large soft money contribu-
tions. According to the Center for Responsive Politics, in the 1995–96 cycle, 150
individuals or entities donated $250,000 or more in soft money—including five
corporations and two unions that made contributions in excess of $1 million.6 An
additional 25 entities made contributions of between $600,000 and $975,000
each. In 1999–2000, approximately $300 million in soft money (or 60 per cent of
the total) came from just 800 donors.7 The average donation in this group of top
donors was, thus, approximately $375,000. The rise of soft money, thus, mocked
the campaign finance laws, providing large contributors with a major opportuni-
ty to circumvent FECA’s contribution restrictions.
Second, the parties discovered a major new use for soft money—issue advo-
cacy advertising. In Buckley, the Supreme Court, driven by First Amendment con-
cerns, read FECA’s disclosure requirements narrowly to apply only to advertising
that ‘expressly advocates’ the election or defeat of clearly identified federal candi-
dates. All other advertising, even ads that were plainly election-related, were
deemed to be ‘issue’ advocacy if they lacked the ‘magic words’ of express advoca-
cy. Such issue ads were outside the scope of federal campaign finance regulation.

4
A Corrado, ‘Party Soft Money’ in A Corrado, et al (eds), Campaign Finance Reform: A Sourcebook
(Washington, DC, Brookings Institute, 1997) at 175.
5
FEC, ‘FEC Reports Increase in Party Fundraising for 2000,’ <http://www.fec.gov/press2001/
051501partyfund/051501partyfund.html> (24 April 2005) (in 1999–2000 soft money accounted for
$495 million out of total national party receipts of $1.236 billion, and for $245 million out of total
national Democratic party receipts of $520 million).
6
Center for Responsive Politics, ‘Top Overall Contributors,’ <http://www.opensecrets.org/pubs/
btl/topover.html> (24 April 2005).
7
See C Holman & L McLoughlin, Buying Time 2000: Television Advertising in the 2000 Federal
Election (New York, Brennan Center for Justice at New York University School of Law, 2001) at ch 8
p 12.
194 Richard Briffault

Issue ads were initially the province of independent committees, but in 1995–96
the parties began to air issue ads that criticise or promote a candidate and use soft
money to pay for them. In the 1996 election, the parties spent an estimated $68
million on issue ads.8 In the 2000 election, the parties spent $162 million on elec-
tioneering issue ads,9 and issue ads accounted for 37.8 per cent of party soft
money spending during the 1999–2000 election cycle.10 This ability to deploy soft
money for the direct support of federal candidates both dramatically expanded
the role of soft money in financing federal election campaigns and provided a
powerful impetus for the solicitation of further soft money donations.

BCRA’s Restrictions on Political Party Soft Money

BCRA restricts soft money by adding new section 323 to FECA. The first subsec-
tion, section 323(a), prohibits national political party committees from soliciting,
receiving, or transferring or directing to another person or committee any funds
that do not comply with FECA’s dollar limitations, source prohibitions and
disclosure requirements. As Justices Stevens and O’Connor put it in their co-
authored opinion11 for the McConnell Court, section 323(a) ‘takes national parties
out of the soft-money business.’12
The other principal soft money provisions address the activities of state and
local political parties. This is critical to any effective control over soft money since
a ban limited to the national parties would most likely lead donors and party lead-
ers to redirect their efforts to the state and local parties.13 However, since a portion
of state and local party spending is undoubtedly aimed at nonfederal elections, a
complete ban on state and local party soft money comparable to the restriction on
national parties would effectively federalise state and local election campaign
finances.
8
D Beck, et al, Issue Advocacy Advertising During the 1996 Campaign: A Catalog (Philadelphia,
Annenberg Public Policy Center at the University of Pennsylvania, 1997) 3, 34, 55.
9
See Buying Time, above n 7 at Figure 4–5.
10
See Buying Time above n 7 at Figure 8–5.
11
The opinion for the Court in McConnell actually consists of three separate opinions with four
authors. In an unusual arrangement, Justices Stevens and O’Connor co-authored the opinion dealing
with BCRA’s Titles I and II, including soft money and issue advocacy. This opinion was joined by
Justices Souter, Ginsburg, and Breyer. Other opinions dealing with other parts of the Act were
authored by Chief Justice Rehnquist, and by Justice Breyer.
12
540 US at 133.
13
Even before BCRA’s enactment, when national party committees were free to accept and spend
soft money, state and local committees played a pivotal role in the soft money system. Under the FEC’s
rules for combining hard and soft money in the financing of mixed federal/nonfederal activities, the
state parties could generally pay for a significantly greater portion of their activities from soft money
than their national counterparts. Consequently, in recent elections the national parties directed or
transferred millions of dollars of soft money to the state parties. In 1999–2000, the national party com-
mittees reported transferring $265 million in soft money (or more than half of their total soft money
receipts) to state and local party committees. See J Dunbar, M Sylvester and R Moore, ‘State parties col-
lected nearly $570 million in contributions, soft money transfers in 2000: States used as a $263 million
back door for soft money’ <http://www.statesecrets.org> (26 June 2002).
 Soft Money, Congress and the Supreme Court 195

Avoiding the difficult federalism question that comprehensive federal regula-

tion of state and local parties would pose, BCRA adheres to FECA’s focus on fed-
eral elections, but widens the definition of state and local party federal election
activity to include expenditures that benefit federal candidates even though they
are not aimed at federal candidates explicitly or exclusively. Thus, section 323(b)
prohibits state and local parties from using soft money to finance ‘Federal election
activit[ies],’ which are defined to consist of:

(i) voter registration activities within 120 days before a regularly scheduled
election for federal office;
(ii) voter identification, get-out-the-vote activity or generic campaign activity
conducted in connection with an election in which a candidate for federal
office appears on the ballot14;
(iii) public communications that refer to a clearly identified candidate for feder-
al office and promote or oppose that candidate; and
(iv) services provided by party staffers who spend more than 25 per cent of their
time working in connection with a federal election.

Three additional provisions further extend the soft money ban. Section 323(d)
prohibits political parties from soliciting funds for or donating funds to tax-
exempt organisations which participate financially in federal elections. Section
323(e) prohibits federal candidates and office holders from soliciting, receiving,
spending, transferring, or directing soft money in connection with any election
for federal, state, or local office.15 Section 323(f) prohibits state and local candi-
dates and officeholders from spending soft money on public communications
that support or oppose federal candidates.

McConnell and Soft Money

McConnell upheld all the soft money restrictions. Four of the five subsections
were upheld by 5–4 votes; the fifth, section 323(e), was validated by a vote of 7 to 2.

The National Party Soft Money Ban

The national party soft money ban required the Court to address and resolve four
questions: First, should the ban be subject to the lower standard of review which
the Court has applied to restrictions on contributions even though the ban
14
There is one significant exception to these restrictions on soft money. Individuals may donate up
to $10,000 per calendar year to state and local political parties for use on voter registration and mobi-
lisation and generic party activity, provided the activities do not refer to a clearly identified candidate
for federal office.
15
Federal officeholders running for state office may solicit, accept and spend soft money for their
state campaigns provided they comply with applicable state laws.
196 Richard Briffault

applies not just to donations to the parties but to party solicitations, expenditures,
and the donation and direction of funds to others? Second, even if the soft money
ban is treated as a contribution restriction, can it be justified by the governmen-
tal interest in preventing the corruption and the appearance of the corruption of
public officials—which are the only constitutional bases for limiting donations—
given that soft money is, by definition, contributed not to candidates and office-
holders but to political parties? Third, even if some donations to political parties
present dangers of corruption and the appearance of corruption because of the
use of the donated funds to benefit particular candidates, does that justify a
sweeping, blanket ban on all national party uses of soft money? Finally, does the
ban unconstitutionally burden the ability of the national political party commit-
tees to work with their state and local counterparts? The majority answered the
first three questions ‘yes,’ and the last one ‘no.’
The majority, in the opinion co-authored by Justices Stevens and O’Connor,
easily concluded that the less rigorous contribution limit standard of review
should apply. Although the soft money ban nominally limits the spending as well
as the receipt of soft funds, the spending limit focuses only on soft money contri-
butions; it does not cap total party spending or spending on particular activities.
‘[F]or purposes of determining the level of scrutiny, it is irrelevant that Congress
chose in section 323 to regulate contributions on the demand rather than the sup-
ply side.’16 Similarly, the solicitation limit is aimed at the solicitation of soft
money; it does not limit the number of potential donors who can be solicited for
funds, or the ability of the party to combine its request for funds with political
messages. So, too, the limit on party donation and direction of funds to others
applies only to party support that involves soft money, not a cap on party support
of other committees generally. Thus, despite the references to activities other than
contributions, the soft money ban is really aimed solely at limiting the size and
source of donations to the parties by forcing all money handled by the national
parties to comply with the hard money limits.
Second, the Court found the limits on donations to parties were justified by the
need to prevent the corruption and the appearance of corruption of federal candi-
dates and officeholders. Although soft money is contributed to the parties, the
record demonstrated that federal officeholders and candidates play a major role in
soliciting soft money; that the parties offer soft money donors special opportunities
to meet with high-level federal officials as an incentive to donations; and that soft
money is frequently used to fund activities that benefit particular candidates so that
‘candidates would feel grateful for such donations and that donors would seek to
exploit that gratitude.’17 Soft money had emerged to enable campaign participants
to evade FECA’s restrictions on contributions to candidates. The Court found,

evidence in the record shows that candidates and donors alike have in fact exploited
the soft-money loophole, the former to increase their prospects of election and the
16
540 US at 138.
17
Ibid at 145.
 Soft Money, Congress and the Supreme Court 197

latter to create debt on the part of officeholders, with the national parties serving as
willing intermediaries.18

‘Both common sense and the ample record’19 confirmed that soft money contri-
butions to the parties enable donors and candidates to evade the statutory limits
on donations to candidates and are the basis for corrupting relationships between
donors and officeholders, and of the appearance of donor-candidate corruption.
Third, perhaps the most difficult issue for the national party soft money ban
was its comprehensive scope. In 2001, in Federal Election Commission v Colorado
Republican Campaign Committee (‘Colorado Republican II’)20 the Court had
upheld FECA’s limits on party spending coordinated with the party’s candidates,
finding that parties could serve as conduits for donations from contributors to
candidates, so that limits on party spending limited the ability of donors to get
money to candidates. Colorado Republican II involved party expenditures coordi-
nated with particular federal candidates. But section 323(a) applies to all nation-
al party expenditures including those spent in off-year state and local elections,
such as the October 2003 California gubernatorial recall, when no federal candi-
dates are even on the ballot.
Relying on a floor statement by one of BCRA’s House sponsors and the expert
reports of several political scientists, the Court determined that the close institu-
tional relationship of the national parties and national elected officials justified
the regulation of all donations to the national party committees. As the Court
noted,

the national committees of the two major parties are both run by, and largely com-
posed of, federal officeholders and candidates. Indeed, of the six national commit-
tees of the two major parties, four are composed entirely of federal officeholders.21

The Court concluded that,

[g]iven this close connection and alignment of interests, large soft-money contribu-
tions to national parties are likely to create actual or apparent indebtedness on the
part of federal officeholders, regardless of how those funds are ultimately used.22

As a result, the interests in preventing corruption and the appearance of corrup-

tion were found ‘sufficient to justify subjecting all donations to national parties to
the source, amount, and disclosure limitations of FECA.’23
Finally, the Court dismissed the argument that section 323(a) would impermis-
sibly interfere with national party cooperation with state and local party commit-
tees, including the planning of campaign finance strategies. The Court found that
18
Ibid at 146.
19
Ibid at 145.
20
533 US 431 (2001).
21
540 US 155.
22
Ibid.
23
Ibid at 156.
198 Richard Briffault

BCRA continues to permit ‘a wide range of joint planning and electioneering activ-
ities,’ including the soliciting and expenditure of hard money, and national party
officer participation in discussions concerning state party uses of soft money.24

The State and Local Party Soft Money Restrictions

Much as national party soft money developed as a device for circumventing
FECA’s limits on hard money contributions to candidates and parties, both
Congress and the Court recognised that limits on national party committees
would simply stimulate new efforts at evasion. As Justices Stevens and O’Connor
put it:

Congress recognised that, given the close ties between federal candidates and state
party committees, BCRA’s restrictions on national committee activity would rapid-
ly become ineffective if state and local committees remained available as a conduit
for soft-money donations.25

Indeed, even prior to BCRA’s enactment, the national parties had actively solicit-
ed soft money for and funneled soft money to the state parties to take advantage
of FEC rules that permitted state parties to use soft money to fund a far greater
fraction of so-called ‘mixed activities’ that national parties were allowed to do.
Noting this practice, the Court found Congress’ determination that restrictions
on state and local party committees were necessary to prevent the circumvention
of FECA’s limits to be ‘firmly rooted in relevant history and common sense.’26 The
only question was whether the state and local party restrictions were sufficiently
narrowly tailored to federal election activities to avoid unnecessarily burdening
state and local party freedom to participate in state and local elections.
Relying on expert testimony and other evidence in the record, the Court agreed
that the first two categories of BCRA-defined ‘federal election activities’—voter reg-
istration and mobilisation activities within 120 days of a regularly scheduled elec-
tion and generic party activities in connection with an election—‘confer substantial
benefits on federal candidates,’ who are appropriately grateful for the contributions
that fund those efforts. The 120-day rule focuses the federal restriction ‘on the sub-
set of voter registration activity that is most likely to affect the election prospects of
federal candidates.’ The generic election activity restriction applies only to elections
when federal offices are at stake. As a result of these ‘temporal and substantive lim-
itations’ these provisions were a ‘reasonable response’ to the corruption danger cre-
ated by contributions to state and local parties to fund these election activities.27
The Court gave even shorter shrift to the challenge to the prohibition on the
use of soft money for state and local party ‘public communications’ that promote
or attack a candidate for federal office. The ‘public communications’ restriction
24
Ibid at 160.
25
Ibid at 161.
26
Ibid at 165.
27
Ibid at 167–8.
 Soft Money, Congress and the Supreme Court 199

arises at the intersection of soft money with BCRA’s other central concern—issue
advocacy. The Supreme Court in Buckley, in order to avoid unconstitutionally
vague and overbroad restrictions, had limited FECA’s regulation of independent
expenditures to express advocacy. If McConnell had followed Buckley on this
point, BCRA’s ‘public communications’ restrictions might have been held uncon-
stitutional. Instead, the Court summarily noted the ‘abundant’ evidence in the
record that public communications that support or oppose a federal candidate
‘directly affect[]’ federal elections and ‘benefit directly federal candidates.’
Restrictions on the use of soft money to pay for such public communications
could be justified by anti-corruption concerns. The Court tersely rejected the
argument that the definition of ‘public communication’ was too broad, finding
instead that by focusing on advertising that promotes or opposes federal candi-
dates the provision is ‘closely drawn to the anticorruption interest it is intended to
address.’ The claim of unconstitutional vagueness drew even less concern. In a
footnote, the Court concluded that the statutory terms ‘clearly set forth the con-
fines within which potential party speakers must act in order to avoid triggering
the provisions.’ These terms were sufficiently explicit to regulate the activities of
party committees ‘since actions by political parties are presumed to be in connec-
tion with election campaigns.’28
The Court easily concluded that preventing the circumvention of the soft
money restriction also justified the requirement that state and local parties spend
federal funds to pay the salary of any employee spending more than 25 per cent
of his or her compensated time on federal election activities.
The Court also summarily dismissed the argument that BCRA’s extensive reg-
ulation of state and local parties, and its inevitable impact on state and local party
participation in state and local elections held at the same time as federal elections,
violates principles of federalism.

Other Soft Money Restrictions

Tax-Exempt Organisations
The Court concluded it was ‘entirely reasonable’29 for Congress to act prophylac-
tically to prevent the parties from soliciting soft funds for, or making or directing
soft money contributions to, politically active tax-exempt organisations which
could use those funds to participate in federal election campaigns. Evidence in the
record demonstrated that the parties had engaged in this practice even prior to
BCRA’s enactment. The only real issue was whether section 323(d) was narrowly
tailored since the provision does not simply restrict political parties from donat-
ing or soliciting soft money for tax-exempt organisations but flatly bans all party
aid to such organisations, including hard money. A complete ban on hard money
donations would prevent parties from giving any support to these organisations

28
Ibid at 169–70 and n 64.
29
Ibid at 174.
200 Richard Briffault

but do ‘little to further Congress’ goal of preventing corruption or the appearance

of corruption of federal candidates and officeholders.’ The Court solved the con-
stitutional problem by looking to BCRA’s legislative history, and its particular
concern with soft money, to limit section 323(d) to the solicitation and donation
of soft funds only, and then upheld the subsection.

Federal Candidates and Officeholders

Seven members of the Court approved section 323(e)’s restrictions on the raising
and soliciting of soft money by federal candidates and officeholders. The majori-
ty found the ban ‘closely drawn’ to prevent corruption or the appearance of cor-
ruption.30 Justice Kennedy, joined by Chief Justice Rehnquist, concurred, finding
that the provision—which contains exceptions permitting candidates to speak at
fundraising events, to solicit or direct unlimited funds to organisations not
involved in federal election activity, and to solicit or direct donations of up to
$20,000 per year from individuals to organisations involved in federal election
activity—is sufficiently ‘narrowly tailored to satisfy First Amendment require-
ments.’31 This was the only soft money restriction that garnered the support of any
of the Justices outside the Stevens-O’Connor group.

Public Communications by State and Local Candidates and Officeholders

The Stevens-O’Connor majority upheld section 323(f)’s prohibition on state and
local candidates and officeholders spending soft funds to pay for ‘public commu-
nications’ that promote or support, or attack or oppose, a clearly identified can-
didate for federal office. This measure, like the other restrictions on soft money,
was justified by the anticircumvention concern. Given the prior history of success-
ful efforts to evade campaign finance limitations, Congress was ‘eminently reason-
able’ in predicting that state candidates and officeholders would ‘become the next
conduits’ for the use of soft money in federal campaigns.32

McConnell and the Expansion of the Idea of

‘Corruption’

Since Buckley v Valeo the prevention of corruption and the appearance of corrup-
tion have been ‘the only legitimate and compelling government interests thus far
identified for restricting campaign finances.’33 Contributions may be limited
because, according to the Court, they present the danger of corruption and the
appearance of corruption. By contrast, candidate expenditures and independent
expenditures by parties, individuals and interest groups on efforts to communicate
30
Ibid at 182.
31
Ibid at 314.
32
Ibid at 185.
33
Federal Election Commission v National Conservative PAC 470 US 480, 496–7 (1984).
 Soft Money, Congress and the Supreme Court 201

with and persuade voters may not be limited because they do not present the dan-
ger of corruption. The Court, however, has been maddeningly imprecise in its def-
inition of corruption. Buckley focused on the concept of the quid pro quo, finding
that ‘[t]o the extent that large contributions are given to secure a political quid pro
quo from current and potential office holders, the integrity of our system of repre-
sentative democracy is undermined.’34 Buckley, however, declined to define what it
meant by quid pro quo, indicating only that the term was more inclusive than out-
right bribery. ‘[T]he giving and taking of bribes’ are ‘only the most blatant and spe-
cific attempts of those with money to influence governmental action.’35
Subsequently, in FEC v National Conservative Political Action Committee (‘NCPAC’),
the Court treated corruption as a form of financial exchange: ‘The hallmark of cor-
ruption is the financial quid pro quo: dollars for political favors.’36 More recently,
Nixon v Shrink Missouri Government PAC37 defined corruption to include the
‘broader threat from politicians too compliant with the wishes of large contribu-
tors.’38 Citing Buckley, Shrink Missouri asserted ‘[t]hese were the obvious points
behind our recognition that the Congress could constitutionally address the power
of money to “influence governmental action” in ways less “blatant and specific” than
bribery.’39 However, in our political system individual and interest group efforts to
influence governmental action are not only normal and expected, but also norma-
tively desirable and constitutionally protected. Shrink Missouri, like Buckley before
it, gave little guidance as to what efforts to influence government are permissible—
indeed, constitutionally protected—and what efforts count as corrupt.
McConnell addressed three aspects of the corruption problem. First, as in earli-
er cases, the Court considered what candidate or officeholder response to a
campaign contribution would be considered a corrupt result. Second, the Court
examined what constitutes an exchange. Implicit in Buckley’s focus on the quid pro
quo is the idea of an exchange between donor and donee, but BCRA’s soft money
regulations do not address contributions by individuals to candidates, or even by
individuals to parties for ultimate contribution to candidates. Rather, BCRA regu-
lates gifts to parties—and the parties’ use of such gifts—not expressly tied to spe-
cific candidates. Does this present the danger of corruption or the appearance of
corruption? Finally, what evidence would Congress have to produce to justify a
restriction as necessary to prevent corruption or the appearance of corruption?
On the first question, the Court expanded the concept of corrupt result to
include the ‘special access’40 to officeholders that donors obtain from their contri-
butions. The Court repeatedly focused on the use of donations to ‘buy preferen-
tial access to federal officeholders’41 and thereby ‘open the doors of the offices of

34
Buckley v Valeo 424 US 1 at 26–7 (1976).
35
Ibid at 28.
36
470 US at 497.
37
528 US 377 (2000).
38
Ibid at 389.
39
Ibid.
40
540 US 150.
41
Ibid at 156.
202 Richard Briffault

individual and important Members of Congress and the Administration.’42 So,

too, the Court emphasised the corruption inherent in the ‘peddling’43 and ‘sale’44
of access to donors and potential donors in order to obtain contributions.
Although the Court had previously made clear that corruption was not limited to
outright vote-buying, the Court’s language of undue influence had nonetheless
focused on the effects of large contributions on government decision-making. By
focusing on special access, McConnell reframed the corruption analysis from the
consideration of the impact of contributions on formal decisions to their effect on
the opportunity to influence government actions. While surely the ultimate con-
cern with special opportunities for influence is the effect of such influence on gov-
ernment, the Court treated preferential access as a problem in itself, and found
that Congress could take steps to eliminate a campaign finance device that creates
incentives to officeholders to give special access to donors.
Justice Kennedy’s dissent blasted the Court, finding that,

‘[a]ccess in itself . . . shows only that in a general sense an officeholder favors some-
one or that someone has an influence on the officeholder. There is no basis, in law
or in fact, to say favoritism or influence in general is the same as corrupt favoritism
or influence in particular.45

In his view, the Court ‘adopts a definition of corruption that . . . is at odds with
standard First Amendment analysis because it is unbounded and susceptible to no
limiting principle.’46
Justice Kennedy’s dissent is to some extent unfair. The Court did not state that
all unequal access or unequal influence was corrupt. Indeed, it specifically held
that ‘mere political favoritism or opportunity for influence alone is insufficient to
justify regulation.’47 The Court emphasised that only access sold in exchange for
campaign contributions, not other forms of influence, could be regulated as pre-
senting the danger of corruption or the appearance of corruption. Nor was Justice
Kennedy more successful at coming up with a limiting principle that would pro-
vide a clear distinction between corruption and the appropriate interaction
between interest groups and officeholders. At one point Justice Kennedy implied
that only ‘actual corrupt, vote-buying exchanges’ could be regulated, but he, too,
agreed that Buckley permitted the regulation of ‘undue influence’ broader than
vote-buying.48
Certainly Justice Kennedy was correct in stating that private access to and
influence with government decision-makers—and government responsiveness to
such access and influence—are not harmful per se, but rather are inherent in the
42
Ibid at 148, n 46 (quoting Judge Kollar-Kotelly, quoting the declaration of a donor). See also ibid
at 165, n 61.
43
Ibid at 150.
44
Ibid at 155.
45
Ibid at 296.
46
Ibid.
47
Ibid at 153.
48
Ibid at 293.
 Soft Money, Congress and the Supreme Court 203

nature of representative government. ‘Democracy,’ as he noted, ‘is premised on

responsiveness.’49 And he was certainly right in suggesting that in order to protect
the constitutional right to seek to influence government while also recognising
government’s efforts to preclude corrupting influence, the Court needs a standard
that can ‘distinguish good political responsiveness from bad.’50 But Justice
Kennedy presented no such theory. Instead, as discussed more fully below, he
focused not on the officeholder’s response to the campaign contribution but on
the closeness of the relationship between a donor and a candidate.
As for the access theory of corruption itself, it has the benefit of focusing the
corruption inquiry less on the ultimate actions of public officials and more on the
processes of decision-making. Special access is likely to be easier to prove than
‘undue influence.’ It is often difficult to know whether a particular individual or
interest group had any influence over a government actor or whether that influ-
ence was either dispositive or ‘undue.’ Access is more measurable and it is easier to
determine whether access is related to the solicitation and receipt of contribu-
tions. We can tell if a large donor was invited to a White House breakfast or a
policy retreat with Congressional leaders, much as we can tell whether special
meetings or briefings are offered as a reward for large donations. Moreover, spe-
cial access is certainly closely connected to the idea of appearance of corruption.
Indeed, special access is typically the channel through which undue influence
flows. Special access provides the large donor with an extra opportunity to make
her case, to be heard during negotiations while a bill is in committee, to be briefed
on what is happening while a bill is being marked up, or to speak to a member of
Congress concerning which bills should be treated as priorities. If special access to
officeholders provides the opportunity for the exercise of special influence, then
‘[t]he best means of prevention is to identify and remove the temptation.’51
To be sure, the Court merely asserts, without really defending, its fundamental
premise that special access procured by money—as opposed to friendship, family
ties, ideological affinity, or prior support—is uniquely corrupt.52 However, the
idea that the influence of money contributions to elected officials raises the dan-
ger of corruption has been at the heart of campaign finance law since Buckley.
Even the dissenting justices assumed that the use of money to influence govern-
mental action is corrupt; they just would have limited the category of corrupt
officeholder response to a contribution to a formal vote or something close to it.53
But it is not clear why the concept of corrupt response should be so limited. If it
is ‘troubling to a functioning democracy’ that ‘officeholders will decide issues not
on the merits or the desires of their constituencies, but according to the wishes of
those who have made large financial contributions valued by the officeholder,’54
49
Ibid at 297.
50
Ibid.
51
Ibid at 153.
52
Ibid at 355 (benefits to federal candidates and officeholders from newspaper endorsements)
(Rehnquist, CJ)
53
Ibid at 259 (Scalia, J); Ibid at 269 (Thomas, J); Ibid at 291–8 (Kennedy, J).
54
Ibid at 153.
204 Richard Briffault

then Congress should be able to respond to the campaign finance practices that
create the unequal access that make it more likely that decision-makers will act
‘according to the wishes’ of large donors.
The second way McConnell expands the concept of corruption involves the
notion of corrupt exchange. In Buckley, the danger of corruption arose from con-
tributions to candidates and political committees. This squarely raised the issue of
a quid pro quo between donor and candidate. Buckley and later cases also applied
the concept of the corrupt exchange to include contributions by individuals to
intermediary organisations, or by intermediary organisations to candidates,
where there was evidence that the intermediary would function as a conduit link-
ing the original donor to the candidate.55 In Colorado Republican II, the Court
specifically found that party expenditures coordinated with candidates function
as conduits for the transmission of funds from donors to candidates. BCRA’s
national and state political party soft money restrictions involve a more attenuat-
ed relationship between donors and candidates than in previous cases. Soft money
donations pass from the original individual or interest group donors to party
committees which use the funds not to make a contribution to or a coordinated
expenditure with a particular candidate, but to undertake an expenditure—on
voter registration, voter mobilisation, generic party speech or public communica-
tions—that benefits that candidate, along with, possibly, other candidates sup-
ported by the party committees. In the case of the national party committee, the
expenditure might help state rather than federal candidates. Soft money funds do
not move from donors to parties to candidates, but rather remain with the parties
where they are used in many ways, not all of which benefit party federal candi-
dates.
McConnell expanded the concept of corrupt exchange to include such soft
money donations. The Court found federal officeholders enjoy a ‘special relation-
ship and unity of interest’56 with their political parties, particularly the national

55
See, eg, Buckley, 424 US 1, 38 (1976) (upholding FECA’s limitation on an individual’s total con-
tributions in any calendar year—in addition to limitations on donations to candidates, political com-
mittees, and parties—on theory that aggregate limit ‘serves to prevent evasion’ of limits on donations
to candidates ‘by a person who might otherwise contribute massive amounts of money to a particular
candidate through the use of unearmarked contributions to the candidate’s political party’); California
Medical Association v Federal Election Commission (‘CalMed’) 453 US 182, 197–8 (1981) (upholding
limit on amount organisation can give its own PAC; although there was no danger that the organisa-
tion could corrupt its own PAC, the provision would ‘prevent circumvention of the very limitations on
contributions that this Court upheld in Buckley’) (plurality opinion); see Ibid at 203 (concurring opin-
ion of Blackmun, J) (‘contributions to multicandidate political committees may be limited to $5,000
per year as a means of preventing evasion of the limitations on contributions to a candidate or his
authorised campaign committee’); Colorado Republican II, above 20, 533 US at 456–7 (limits on party
expenditures coordinated with candidates justified by need to prevent donors from using parties as
conduits); FEC v Beaumont, 539 US 146 (2003) at 155 (limits on corporate contributions justified in
part to prevent corporate officers and directors from using corporations as conduits for contributions
to candidates).
56
540 US at 145. See also Ibid at 152 (‘the close ties that candidates and officeholders have with their
parties’); Ibid at 154 (‘the close relationship between federal officeholders and the national parties’);
Ibid at 156, n 51 (‘the record demonstrates close ties between federal officeholders and the state and
local committees of their parties’).
 Soft Money, Congress and the Supreme Court 205

committees. Given the unique role parties play in placing their candidates on the
ballot, mobilising voters, and organising Congress, the Court found that parties
have structural ties to candidates unmatched by any other interest groups.57 This
creates at least the theoretical possibility that donations to party committees
raise the same corruption dangers as donations to the candidates. Moreover, the
Court—noting the many ways in which candidates do in fact benefit from soft-
money-funded activities; the candidates’ awareness of the identities of soft money
donors and of the use of the soft funds and of the candidates’ consequent grati-
tude for the soft money donations; the role of federal candidates and office-
holders in running party campaign committees and soliciting soft funds; and the
parties’ use of access to federal officeholders as an incentive to and a reward for
soft money donations—found the danger of corrupt exchanges through the par-
ties was reflected and reinforced by campaign finance practices.
McConnell, thus, makes an important new statement about the nature of
political parties. In recent cases, the Supreme Court has seen the parties as organ-
isations vital to citizen participation in the political process and has emphasised
the First Amendment rights of the parties.58 McConnell, however, emphasises a
different aspect of the parties, at least of the two major parties that have long
dominated the American political scene: Parties play a central role in organising
the executive branch and Congress, linking elected officials together, and shaping
government decision-making. The parties are a part of both our campaign
finance system and our governance structure, much as government officials play
an important role in directing the parties. As the raison d’etre of campaign
finance law is controlling the influence of campaign money on government
actions, the Court found that it made sense to apply the same laws to the party
committees that interconnect election campaigns with the elected officials.
Justice Kennedy sharply dissented. He stressed the need for a ‘limiting princi-
ple’ that would prevent concerns about corruption and the appearance of corrup-
tion from resulting in undue regulation of contributions. The limiting principle
for him was the need for a direct link between the donor and the candidate.59
Contributions to the parties not earmarked for specific candidates and not involv-
ing solicitation by candidates or officeholders could not be corrupt because they
do not involve such a direct connection
Justice Kennedy’s position on this point is completely unpersuasive. If, as seems
possible, (i) spending by a party—on issue research, voter registration, voter
mobilisation, or public communications—can help its candidates even though
the spending does not involve a contribution to the candidate or an expenditure
coordinated with a candidate; (ii) candidates know this and are therefore grateful
to the donors who fund these activities; and (iii) donors know this and make con-
tributions to a candidate with the expectation of candidate gratitude, then why

57
Ibid at 188.
58
See, eg, California Democratic Party v Jones 530 US 567 (2000); Eu v San Francisco Co Dem Central
Comm 489 US 214 (1989); Tashjian v Republican Party of Connecticut 479 US 208 (1986).
59
540 US 296–8.
206 Richard Briffault

cannot soft money donations to the parties raise at least the possibility of corrup-
tion?60 And does not the role of federal officeholders in soliciting soft funds—
including funds that will benefit party candidates other than themselves—and in
making access to themselves available as an incentive to and reward for soft money
donations provide evidence that soft money functions this way at least some of the
time? To be sure, this does not prove that all donations to the parties raise the dan-
ger of corruption. The targeted restrictions on state and local party soft money may
correlate more closely with the dangers of corruption than the absolute ban on
national party soft money. But surely, there is a sufficiently strong theoretical and
empirical basis for rejecting Justice Kennedy’s categorical assertion that soft money
contributions do not raise any danger of corruption that Congress may regulate.
With respect to the third question—the evidence needed to sustain the party
restrictions—the Court built on its prior Shrink Missouri decision, which had held
that the amount of evidence needed to sustain a contribution limit is not great
and which had upheld a state contribution limit on a fairly slim evidentiary show-
ing.61 Indeed, the record in McConnell concerning soft money fundraising prac-
tices, the uses of soft money in federal elections, and the impact of soft money on
Congress was enormous.62 To be sure, although Shrink Missouri relied on relative-
ly little evidence, all of it involved claims of government actions that were linked
to campaign contributions,63 whereas the evidence cited by McConnell involved
either the exchange of contributions for preferential access or broad assertions by
donors, present and past officeholders, consultants and political scientists about
the pervasive effects of contributions on the political process. The Court cited rel-
atively little evidence of the impact of particular donations on specific govern-
ment decisions.64 This, however, is entirely consistent with the Court’s redefinition
of corruption in terms of special access.
The Court cited relatively little evidence to justify the restriction of all dona-
tions to the national political parties, rather than just those donations solicited by
candidates or officeholders or used to pay for activities that benefit federal candi-
dates. Again, however, this is consistent with the Court’s expansion of the concept
of corrupt exchange and its finding of a close structural relationship between
national party committees and federal officeholders and candidates affiliated with
the parties. Relying on the statements of three political science experts and one of
60
Justice Kennedy himself acknowledged that ‘[a]s a conceptual matter, generic party contributions
may engender good will from a candidate or officeholder.’ Ibid at 301.
61
528 US at 393–4 (citing the affidavit of the co-chair of the state legislature’s Interim Joint
Committee on Campaign Finance Reform; a handful of newspaper accounts; and the referendum vote
for contribution limits).
62
The findings of fact relating to BCRA’s soft money provisions compiled by the McConnell three-
judge district court came to approximately 270 pages in Federal Supplement 2d. See 251 F Supp 2d at
331–56 (Henderson, J), 439–525 (Kollar-Kotelly, J), and 815–74 (Leon, J).
63
Above n 37 at 393–4.
64
The statement that ‘[t]he evidence connects soft money to manipulations of the legislative calen-
dar, leading to Congress’ failure to enact, among other things, generic drug legislation, tort reform, and
tobacco legislation’ McConnell 540 US at 150 (citing two of the district court opinions and the decla-
rations of Senator McCain and former Senators Simpson and Simon) is the only specific linkage of
soft money to congressional action.
 Soft Money, Congress and the Supreme Court 207

BCRA’s sponsors, the Court concluded that the national parties and federal office-
holders are so ‘inextricably intertwined’65 that ‘large soft-money donations to
national party committees are likely to buy donors preferential access to federal
officeholders no matter the ends to which their contributions are eventually put.’66
Due to the deep and ongoing ties between officeholders and their national parties,
the Court found that donations to the national parties are likely to earn the grat-
itude of officeholders and provide large donors with special access to government
decision-makers.
This seems a reasonable assumption. As the Court notes, ‘the national commit-
tees of the two major parties are both run by, and largely composed of, federal
officeholders. Indeed, of the six national committees of the major parties, four are
composed entirely of federal officeholders.’67 Although some money donated to
the national parties may not be used in federal campaigns, national party lead-
ers—who are often federal officeholders—take a leading role in dealing with
big donors, soliciting funds, arranging opportunities for special meetings with
Congressional leaders and executive branch officials, and deciding how those
funds will be used. They are likely to be aware of who the donors are and to be
grateful in their capacities as party leaders and federal officeholders—even if they
are not directly benefited by the donations as candidates. As a result the structure
of the national party-officeholder relationship itself is sufficient to meet the evi-
dentiary burden of justifying a complete ban on national party soft money.

Conclusion

Campaign Finance Under BCRA

Prior to BCRA’s enactment some critics were concerned that soft money reform
would devastate the parties. As of this writing, the United States is only part-way
through its first federal election cycle under BCRA, but it is clear the parties are
flourishing financially. Aided by BCRA’s significant increase in FECA’s hard
money limits on individual donations to the parties,68 the parties are raising more
in hard money than they had previously done in hard and soft money combined.
As of 30 June 2004, the political parties had raised $762.4 million in hard money
alone, as compared with $657.3 million in combined hard and soft money at the
same point in the election cycle in 2000.69 In other words, the parties have fully

65
Ibid at 155 (quoting statement of Rep. Shays).
66
Ibid.
67
Ibid.
68
BCRA raised the maximum individual hard money contribution to the party national commit-
tees from $20,000 to $25,000 per year. BCRA also significantly raised the aggregate cap on total con-
tributions an individual can make.
69
See FEC, ‘Party Fundraising Continues to Grow,’ <http://www.fec.gov/press/press2004> (6 August
2004).
208 Richard Briffault

replaced the $268 million in soft money they had obtained by this point in 2000.
In short, BCRA does not appear to have hurt the parties financially.70
On the other hand, as some sceptics predicted, with contributions to the par-
ties more tightly restricted, hundreds of millions of dollars have begun to flow to
independent organisations. The principal beneficiaries are the entities known col-
loquially—after the section of Internal Revenue Code under which they are
organised—as Section 527 committees. These committees can raise and spend
money in connection with federal elections but, if they do not have a ‘major pur-
pose’ of funding express advocacy in support of or in opposition to a federal can-
didate, they are not subject to FECA. Although the Court in McConnell upheld the
various provisions in BCRA that went beyond Buckley’s ‘express advocacy’ test,
BCRA did not address the 527s.71 The FEC spent much of 2004 grappling with
whether and how to apply McConnell’s new approach to the definition of election-
related expenditures to the activities of 527 committees before concluding, on
August 19, to table the matter until after the election.
527s are not entirely beyond regulation. They are subject to Internal Revenue
Code disclosure requirements, although these rules are less extensive than FECA’s.
A 527 committee can neither contribute to nor coordinate its activities with a can-
didate. Like other entities, a 527 committee may not spent corporate or union
treasury fund contributions on electioneering broadcast ads within 60 days of the
general election. But, more importantly, under current law 527 committees can
accept unlimited individual donations and contributions from corporate and
union treasury funds. They are, thus, well-positioned to re-introduce soft money
into national politics.
It appears they are doing just that. Based on its examination of IRS findings,
the Center for Public Integrity reports that as of 20 August 2004, the 527 commit-
tees had spent $248 million in 2003–04, although roughly $45 million of that
was spent by committees involved primarily in state elections.72 Not all of this is
new money diverted by BCRA. The Center for Public Integrity found that 527
70
BCRA has not hurt candidates either. As of 30 June 2004, congressional candidates had raised
$798.7 million or an increase of 32% over the comparable period in 2001–02. See FEC, ‘Congressional
Fundraising Continues to Grow,’ <http://www.fec.gov/press/press2004> (18 August 2004). As of 31
July 2004, presidential candidates had raised $650 million, or 88% more than the $345 million raised
by candidates by the same date in 2000. See Campaign Finance Institute, ‘Candidates’ Receipts Up
88% from 2000; Small Contributions Quadrupled; Large Contributions More Than Doubled,’
<http://www.cfinst.org> (25 August 2004).
71
Although McConnell did not directly address the 527 committees, the Court referred to its past
approval of FECA’s $5000 limit on contributions to multicandidate political committees as a means of
precluding candidates and donors from using these committees to avoid the limits on donations to
candidates—even though the limits on donations to these committees may also affect their ability to
engage in constitutionally protected independent spending 540 US at 152 n 619. This suggests the anti-
circumvention concern so central to McConnell could support regulation of the 527 committees. On
the other hand, the Court’s validation of BCRA’s soft money restrictions indicated that political par-
ties are ‘entities uniquely positioned to serve as conduits for corruption.’ Ibid at 156 n 51. This may
make it more difficult to impose similar restrictions on 527 committees not controlled or formally
affiliated with parties, candidates or officeholders.
72
See Center for Public Integrity, ‘Silent Partners: How political non-profits work the system,’
<http://www.publicintegrity.org/527> (25 April 2005), 2003–04 Running Total as of 20 August 2004.
 Soft Money, Congress and the Supreme Court 209

committees spent $149.7 million in the 2000 election cycle and $192.3 million in
the 2002 cycle.73 Nevertheless, some wealthy donors, who formerly gave to candi-
dates or parties, are now giving to 527 committees instead.74
Plainly the rise of the 527s threatens to outflank BCRA. Because 527s are, by
definition, supposed to be acting independently of candidates and parties their
activities may pose less of a ‘corruption’ danger than political party soft money.
Yet, the ability of such transparently election-related quasi-partisan organisations
as the Media Fund, a pro-Democratic group led by long-time Democratic opera-
tive Harold Ickes, the George Soros-backed America Coming Together, or the
now-notorious Swift Boat Veterans for Truth to evade FECA’s restrictions and
requirements is plainly as important a challenge to campaign finance law as polit-
ical party soft money was in the 1990s and the 2000 election.

The Future of Campaign Finance Doctrine

McConnell is the rare Supreme Court decision that answers more questions than
it opens. McConnell completely resolves the debates over the constitutionality of
soft money restriction and issue advocacy regulation that marked the last decade.
Moreover, the case settles, rather than unsettles, major points of campaign finance
doctrine, including, inter alia, the use of a less rigorous standard of review for
contribution limitations.
One fundamental question was not raised in McConnell: Buckley’s determina-
tion that expenditure restrictions are subject to strict judicial scrutiny and that the
interests in equalising either political influence generally or the financial resources
available to competing candidates cannot justify limits on independent spending or
candidate spending, including a candidate’s spending of his personal wealth.
Although Congress is unlikely to adopt spending limits any time soon, more
activist states and localities, particularly those that permit voter-initiated legisla-
tion, may be tempted to do so. What, if anything, are the implications of McConnell
for future efforts to limit campaign spending by candidates or independent groups?
There are three possible answers to this question.
First, McConnell in no way challenges Buckley’s determination that such spend-
ing limits are unconstitutional. Indeed, in applying the contribution standard to
soft money, the Court emphasised the differences in constitutional burdens posed
by contribution, as opposed to expenditure, limitations, as well as the special dan-
gers large contributions may pose for the integrity of the political process.75
The second answer, however, is that although McConnell carefully limited itself
to contribution restrictions, the tenor of the decision may have opened the door
to reconsideration of the Court’s position on expenditure limitations. The central

73
See Center for Public Integrity, ‘Overall Expenditures Made by 527 Committees,’
<http://www.publicintegrity.org/527/> (25 April 2005).
74
See Center for Public Integrity, A Knott and A Armendariz, ‘527s Attract New Donors as Others
Abandon System in Wake of BCRA,’ <http://www.publicintegrity.org/527> (29 August 2004).
75
540 US at 134–8.
210 Richard Briffault

themes of McConnell—that campaign finance restrictions promote democratic

values; that election law involves a balancing of competing constitutional con-
cerns; and that a significant measure of deference is due to the political actors who
have a greater understanding of the implications of campaign finance practices
for the realities of political life—have direct implications for the question of the
constitutionality of spending limitations.
The communication of political ideas that results from unlimited campaign
spending is surely a crucial democratic concern. Spending allows candidates to
make their case, enables challengers to contest incumbents, and provides vital
electoral information to voters. But unlimited campaign spending also implicates,
and potentially compromises, other vital democratic concerns, including voter
equality and competitive elections. Voter equality is a central premise of our dem-
ocratic system, yet surely it is undermined when some voters and groups of vot-
ers, due to their enormous wealth, are able to spend far more campaign money,
and potentially have far greater influence on campaign outcomes than most
Americans. Electoral competitiveness is also threatened when, as is typically the
case in our system, one candidate, usually the incumbent, is able to raise and
spend far more money than his opponent. Certainly unlimited expenditures, by
enabling incumbents and personally wealthy candidates to spend all the money
they can raise, may burden competitiveness by driving up the spending level and
thus increasing the amount of money necessary to fund a competitive race. The
ability of an incumbent or wealthy candidate to drastically outspend competitors
may discourage these competitors from entering the fray at all.
A Court following McConnell ‘s concern with the ‘integrity of the [electoral]
process’ and its recognition that limits on money can actually ‘benefit public par-
ticipation in political debate’76 might be willing to reopen the question of the con-
stitutionality of spending limits, particularly in situations, like the spending of a
candidate’s personal wealth, that seem to most directly challenge equality norms
while discouraging participation by other candidates.77 This is not to say that the
Court should treat spending limits as deferentially as it now treats contribution
limits. Spending limits present constitutional dangers as well as potential benefits.
If set too low, they could favor incumbents, and throttle debate. But, following
McConnell, the Court could take into account the potential for appropriate spend-
ing limits to promote public participation and advance democratic values and
move away from Buckley’s absolute opposition to such limits and their use to pro-
mote voter equality and financially fairer contests between candidates. McConnell
could lead to more of a pragmatic, balancing approach, in which the values to be
advanced by a spending limit, and the level of the limit in light of recent spend-
ing practices in the relevant jurisdiction, would be taken into account and
weighed against the potential harm to robust debate and the opportunity for
challengers and interest groups to make their views known. Certainly, following
76
Ibid at 136–7.
77
Compare Shrink Missouri, above n 37, 528 US at 405 (Breyer, J, concurring) (suggesting that
Buckley might be reconsidered to make ‘less absolute the contribution/expenditure line particularly in
respect to independently wealthy candidates’).
 Soft Money, Congress and the Supreme Court 211

McConnell, the Court should be willing to take seriously evidence presented by

Congress or a state or local legislature that a reasonable spending limit can pro-
mote fairer contests, encourage participation, and increase voter confidence in the
integrity of elections, without abdicating its responsibility to assure that limits do
not unduly curtail the opportunity for vigorous debate.
A change in the Court’s position on spending limits would also alleviate
the dissonance between the Court’s general position that only corruption and
the appearance of corruption can justify restrictions on the use of campaign
money—with corruption defined as a transaction, direct or indirect, between a
donor and a candidate or officeholder—and its validation of the limits on the
independent expenditure of corporate and union treasury funds.78
There is, however, a third possibility—that McConnell may hang by a thread.
The critical portions of the case were decided by 5–4 votes. Moreover, several jus-
tices are plainly sceptical of Buckley’s deferential standard of review for contribu-
tion restrictions.79 Justices Scalia and Thomas are ready to overturn Buckley on
this key point. The other two—Justice Kennedy and Chief Justice Rehnquist—
purported to apply Buckley, but Justice Kennedy’s opinion, which Chief Justice
Rehnquist joined—was highly critical of Buckley’s deferential standard of review
of contribution restrictions.80 They would require far more evidence of the cor-
rupting effects of a campaign finance practice—and would use a far more
constrained definition of corruption—than the majority. These justices are not
reconciled to a deferential approach to contribution limits—let alone willing to
consider expenditure limits.
The long-term significance of McConnell is, thus, both uncertain and hostage
to future changes in the composition of the Court. The case could exemplify a
pro-reform shift that might culminate in a reconsideration of Buckley’s approach
to expenditure restrictions. Alternatively, it could be the high-water mark of
reform, to be followed, upon a change in the membership of the Court, by a
reopening of Buckley’s deferential approach to contribution restriction. Or, if the
current division on the Court is maintained, it could demonstrate the persistence
of Buckley’s contribution/expenditure distinction, despite critical academic com-
mentary and the criticism of many members of the Court. That would not be a
surprising outcome.

78
See 540 US at 203. Austin v Michigan Chamber of Commerce 494 US 652 (1990).
79
Four members of the Court—Chief Justice Rehnquist and Justices Kennedy, Scalia and Thomas
were also ready to reverse Austin v Michigan Chamber of Commerce and invalidate the longstanding
federal bans on the use of corporate and union treasury funds in federal elections.
80
540 US at 308–12. In his separate dissent, Chief Justice Rehnquist did not criticise Buckley, but
only Buckley’s application to the soft money limits. However, he also joined Justice Kennedy’s opinion
‘in full.’ Ibid at 350.
 11
The Law of American Party Finance
NATHANIEL PERSILY

FOR THOSE LOOKING into the American system of political party financing
from the outside, the combination of labyrinthine rules and amorphous constitu-
tional constructs appears unique and bewildering. The complexity of the rules
and impenetrability of the guiding concepts, however, grow from the peculiar
place of political parties and political money in the American constitutional
design. Indeed, the ‘problem’ of party financing can serve as a lens through which
to view the distinctness of America’s regime of political regulation. This chapter
attempts to analyse this problem in a way that highlights the unique features both
of the constitutional law of American party finance and of the relevant parts of
the political system that produce it.
Beginning with an explanation of the constitutional law of American party
financing, this chapter describes a continuing clash between grand American val-
ues of free speech and clean government. Parties, on the one hand, occupy a
constitutional space of sacred First Amendment activity (that is, speech and asso-
ciation), and on the other, they have historically served as repositories for anti-
democratic tendencies of corruption, oligarchy, disfranchisement and patronage.
Regulations of party financing and the related constitutional jurisprudence have
attempted to control the excessive tendencies of parties while, at the same time,
they try not to undermine parties’ core functions. Second, this chapter explains
the difficulty of fitting party financing into the dominant mode of constitutional
argument over campaign finance which limits the discussion to a state interest in
combating actual or apparent corruption and creates a bright line between con-
tributions and expenditures. It then moves to a description of the structural fea-
tures of the American party system that present unique difficulties when it comes
to regulating party financing. Parties exist vertically at every level of American
federalism, horisontally in the executive branch and two houses of the legislature,
and functionally in the formal party apparatuses and the less formal groupings of
party adherents. Because the American party system is porous and decentralised,
regulating party financing poses both insurmountable burdens and unique con-
stitutional risks. The chapter closes with a discussion of whether recent reforms of
American party financing have weakened political parties, as many had warned.
214 Nathaniel Persily

Measuring party ‘strength’—let alone the effect of reforms on that strength—

turns out to be a difficult task. Recent reforms may have weakened parties accord-
ing to some measures while strengthening them according to others and, perhaps
more accurately, have shifted power in the party system away from some incarna-
tions of the party and toward others.

Where We are and How We Got Here:

The Law of American Party Finance

To understand the current regime of regulation of party financing one needs to

understand the constitutional limits the courts have placed on laws that seek to reg-
ulate money flowing into and out of political parties. Although the next section will
challenge the reasoning of the relevant caselaw, a few fundamentals are useful to
understanding why the current legal regime looks the way it does. The relevant con-
stitutional constraints include the bright line distinction between campaign expen-
ditures and contributions, the treatment of parties as similar to other interest
groups, and the overarching importance of preventing actual or apparent corrup-
tion as the only court-sanctioned state interests for regulation of campaign finance.

The Expenditure-Contribution Distinction

Since the landmark decision in Buckley v Valeo,1 the courts have drawn a bright
line between expenditures, which implicate core political speech and receive the
strictest constitutional scrutiny, and contributions, which do not. Constraining an
individual’s expenditure of money restricts the actual amount of speech uttered,
the argument goes, and independent expenditures do not pose the same threat of
corruption as do financial transactions between a contributor and a candidate. In
contrast, the Court has considered contribution restrictions as primarily implicat-
ing the freedom of association between the contributor and candidate and impli-
cating speech by proxy. In other words, contributions enable the candidate’s
speech, but by themselves contributions only express a generalised message of
support (‘I support X candidate’). That message remains intact so long as one
retains the ability to contribute something to the candidate, and the Court has not
viewed such a message as amplified by the amount an individual could contribute.
Finally, contribution restrictions target the interaction between a contributor and
a candidate and are therefore better tailored toward preventing corruption or its
appearance than are expenditure restrictions. Contribution limits prevent large
amounts of money from changing hands and reduce the possibility that campaign
contributions will buy political favours (that is, quid pro quos).

1
424 US 1 (1976) Much of the foregoing discussion is drawn from N Persily, ‘Contested Concepts
in Campaign Finance’, (2003) 6 University of Pennsylvania Journal of Constitutional Law 607.
 The Law of American Party Finance 215

Political parties can serve as contributors, recipients of contributions or as

organisations that make expenditures. Consistent with the general constitutional
distinction, the courts have upheld regulations of both contributions to the politi-
cal party or contributions from a political party to a candidate, while striking down
regulations of party expenditures.2 However, because some party expenditures are
not truly independent—that is, some kind of joint agreement or concerted action
often exists between the party and a candidate—the courts treat those ‘coordinat-
ed expenditures’ as if they were contributions, which can therefore be regulated. As
will be discussed in the next section, political parties pose unique conceptual diffi-
culties for the anticorruption rationale that undergirds American campaign
finance jurisprudence. Suffice it to say for the moment, however, that the Court has
viewed parties as potentially corrupting of candidates, as possibly corrupted by
contributions, but as non-corrupting when they spend money independently.
A special corporate and union exception exists to the general rule dividing
unprotected contributions from protected expenditures. Because of judicial
recognition of their potential to corrupt the democratic process, corporate and
union treasury money can be banned outright—that is, the Constitution does not
prevent the state from banning contributions or even expenditures of corporate
or union treasury funds.3 Therefore, the Court has upheld laws that ban corpora-
tions from using their treasury money to make contributions to candidates or
parties and upheld laws that ban corporations from making expenditures on can-
didate-specific advertising close to an election.

The Primacy of the State Interest in Combating Corruption or its

Appearance
Within these constitutional guidelines, the state can limit contributions to candi-
dates and parties as well as limit independent expenditures by corporations and
unions for two reasons only: to combat corruption or the appearance of corruption.
From Buckley v Valeo to McConnell v FEC, the Supreme Court has never sanctioned
alternative interests—beyond the actual or apparent corruption rationales—as con-
stitutional justifications for regulating campaign finance. What the Court has meant
by ‘corruption,’ however, has vacillated somewhat over time and between contexts.
Buckley clarified that this notion of corruption included political quid pro quos but
extended beyond simple bribery by way of campaign contributions. It extends to
‘undue influence on an officeholder’s judgment’4 as manifested in ‘the broader
threat from politicians too compliant with the wishes of large contributors.’5
2
See Colorado Republican Federal Campaign Committee v FEC 533 US 431 (2001) (Colorado
Republican II); Colorado Republican Federal Campaign Committee v FEC 518 US 604 (1996) (Colorado
Republican I).
3
See Austin v Mich Chamber of Commerce 494 US 652, 660 (1990); FEC v Beaumont 123 SCt 2200
(2003); McConnell v FEC 124 SCt 619, 677 (2003). But see First National Bank of Boston v Bellotti 435 US
765 (1978) (striking down limits on corporate expenditures in a campaign to defeat a popular initiative).
4
Colorado Republican II, 533 US at 441.
5
Nixon v Shrink Mo Gov’t PAC 528 US 377, 388–9 (2000) (quoting Buckley v Valeo 424 US at 28).
216 Nathaniel Persily

‘Corruption is a subversion of the political process. Elected officials are influenced

to act contrary to their obligations of office by the prospect of financial gain to
themselves or infusions of money into their campaigns.’6 ‘Just as troubling to a func-
tioning democracy as classic quid pro quo corruption is the danger that officehold-
ers will decide issues not on the merits or the desires of their constituencies, but
according to the wishes of those who have made large financial contributions valued
by the officeholder.’7 In the special case of corporate expenditures, corruption has
expanded to include, ‘the corrosive and distorting effects of immense aggregations
of wealth that are accumulated with the help of the corporate form and that have lit-
tle or no correlation to the public’s support for the corporation’s political ideas.’8
The anticorruption interest is not limited to actual evidence of these modes of
political distortion or undue influence; it extends to the appearance of corruption
as well. In the Buckley Court’s words,

of almost equal concern as the danger of actual quid pro quo arrangements is the
impact of the appearance of corruption stemming from public awareness of the oppor-
tunities for abuse inherent in a regime of large individual financial contributions.’9

For example, the sale of access for campaign cash, regardless of the effect on actu-
al policy or votes, creates an appearance that ‘money buys influence’10 even if the
dots between a campaign contribution and a representative’s vote cannot be con-
nected. The state has an interest in avoiding these ugly appearances because ‘pub-
lic awareness’ of the mere opportunity for influence could erode public trust in
representatives and representative institutions:

Congress could legitimately conclude that the avoidance of the appearance of

improper influence “is also critical . . . if confidence in the system of representative
[g]overnment is not to be eroded to a disastrous extent.”11

In furtherance of these interests in combating actual or apparent corruption,

Congress enacted and later amended the Federal Election Campaign Act (FECA)
and then two years ago enacted the Bipartisan Campaign Reform Act of 2002
(BCRA) to close loopholes that were discovered or carved into the earlier law.
The history of American campaign finance law can be seen as a series of stages of
legislative innovation, followed by judicial and sometimes administrative modi-
fication, accompanied or succeeded by exploration on the part of entrepreneurs
seeking to get around these new legal constraints, followed by another round of

6
Federal Election Comm’n v National Conservative Political Action Comm 470 US 480, 497 (1985).
7
McConnell, 124 SCt at 666.
8
Austin v Michigan Chamber of Commerce 494 US 652, 660 (1990).
9
Buckley, 424 US at 27.
10
McConnell, 124 SCt at 666.
11
Buckley, 424 US at 26–7 (quoting Civil Service Comm’n v Letter Carriers, 413 US 548, 565 (1973)).
See also McConnell, 124 SCt at 660–2.
 The Law of American Party Finance 217

legislation to plug up loopholes discovered or created in the extant regulatory

regime. The most recent round of reforms focused on political parties, which had
become the avenue of choice for otherwise prohibited contributions to candi-
dates, particularly from corporations, unions and wealthy individuals.

The Bipartisan Campaign Reform Act (BCRA)

Acting within the constitutional constraints described above, Congress passed and
the President signed the Bipartisan Campaign Reform Act of 2002. The limits
entailed in the new law are depicted in Table I. One of the law’s primary targets
was so called ‘soft money,’ which refers principally to corporate and union treas-
ury money, as well as large contributions from wealthy individuals, that influenced
federal elections through contributions to political parties. Political parties spent
soft money on party-building activities, which often included candidate-specific
television advertisements that promoted favoured candidates or attacked their
opponents. BCRA attempted to choke off corporate and union treasury money
from the national parties, limiting both the parties’ acceptance and spending of
such funds, while also ensuring that all contributions by individuals and interest
groups (known as ‘hard money’) would be made within strict limits.
As it banned soft money, BCRA raised the hard money limits. An individual
can now contribute $2000 per election (that is, for both primary and general elec-
tion) to a candidate; $25,000 per calendar year to a national party committee, and
$10,000 per year to a state party committee’s federal account (that is, the state
party’s trough of money used for federal election purposes). However, an individ-
ual can only give $95,000 in the aggregate over two years to federal candidates and
parties combined. Political Action Committees (PACs), which are interest groups
that ordinarily organise to support multiple candidates in an election year, can
give $5000 per election to a Senate, House, or Presidential candidate, $15,000 per
calendar year to a national party committee, and $5000 per calendar year to a state
party committee’s federal account.
In addition to these restrictions on the sources and amount of money that can
flow into the party, the law places limits on how much money can flow out of the
party to the candidate. National party committees can give $35,000 per year
(adjusted for inflation) to a Senate candidate, and $5000 per election to each
House candidate and Presidential candidate. State parties can contribute $5000
per election to House, Senate, and Presidential candidates. However, these contri-
bution limits are largely meaningless, since most party activity in a candidate’s
campaign is done through coordinated expenditures, which are limited through
complex inflation adjusted formulas pegged to 1974 dollar limits, or independent
expenditures which are unlimited. For a given Senate race, for example, both the
national party committee and the state party committees can make coordinated
expenditures in an amount totaling two cents (adjusted for inflation) times the
voting age population of the state. The limits range from $74,620 (for the 10 least
populated states) to $1,944,896 for California. Such expenditures are effectively
218 Nathaniel Persily

Regulated Activity National Party Committees State Party Committee

(federal accounts)

Personal Contribution $25,000/year for each $10,000/year to each state or

Limit to Party Organisation national committeea local party committeea
Aggregate Personal $57,500 every two years, less $37,500 every two yearsa
Contribution Limits the amount donated to
PACsa
Political Action Committee $15,000/year $5000/year
(PAC) Contribution Limit
to Party Organisation
Source Restrictions corporations and unions: corporations and unions:
from segregated funds from segregated funds
(PACs) only (PACs) only
Contribution Limit: Party $35,000/electiona from $5000/electiona
Organisation to Senate national party committee
Candidate and Senate campaign com-
mittee combined; additional
$5,000/election from
Congressional campaign
committee
Contribution Limit: $5,000/electiona by each $5000/electiona
Organisation to House national party organisation
Candidate (national party committee,
Senate campaign committee
and Congressional cam-
paign committee)
Independent Expenditure Unlimited Unlimited
Limit
Coordinated Expenditure approximately $16 million (state coordinated expendi-
Limit: Organisation to for the 2004 election tures are deducted from
Presidential Candidate in national party coordinated
General Election expenditure limit and must
occur with national party
committee permission)
Coordinated Expenditure two centsa times the voting two centsa times the voting
Limit: Organisation to population of the state population of the state
Senate Candidate (range from $74,620 to (range from $74,620 to
$2,000,000, for the 2004 $2,000,000, for the 2000
election) election)
Coordinated Expenditure $37,310a for 2004 election $37,310a for 2004 election
Limit: Organisation to ($74,620 for states with only ($74,620 for states with only
House Candidate one representative) one representative)
a
Contribution limits for individuals and parties are adjusted annually for inflation.

TABLE I. Contribution and Expenditure Limits for Federal Races

 The Law of American Party Finance 219

contributions since the party and the candidate agree on how the money should
be spent. Furthermore, even once the coordinated spending limit is reached, both
state and national parties can still make unlimited independent expenditures for
the benefit of their candidates, owing to the Supreme Court’s decision referenced
above that held such expenditures as protected by the First Amendment.

Doctrinal Difficulties
This set of somewhat bizarre and incongruous regulations flows from the constitu-
tional doctrine described above. On the one hand, parties are like candidates, such
that contributions to them can be regulated in order to prevent corruption. On the
other hand, parties are like outside groups in that their contributions may corrupt
candidates, but their independent expenditures are uncorrupting, unregulable, and
constitutionally protected. But what does it mean for a party to corrupt a candidate?
And how might a contributor corrupt a party? These are difficult, but central, ques-
tions that the courts have only begun to answer. Three different notions tying cor-
ruption to political parties have emerged in the caselaw—corruption of the party,
corruption by the party, and corruption through the party. Figure A depicts these
concepts graphically. The solid arrows represent contributions or coordinate expen-
ditures, the dotted arrows represent independent expenditures.

Independent Expenditures

Independent Expenditures Independent Expenditures

Party
of by

Contributor Candidate

through
FIGURE A: Corruption of, by, and through the Party

Corruption of the Party

Corruption of the party occurs when contributors gain influence over a party due
to their campaign contribution or expenditure. If the state has an anticorruption
interest in regulating contributions to a political party for the party’s own benefit,
it must be because the party, like a candidate or officeholder, controls some meas-
ure of state power that can be used for the contributor’s benefit. Just as an office-
holder can help pass a bill, get someone a patronage appointment or contract, or
otherwise dole out official favours, so too a party and its leaders, the argument
220 Nathaniel Persily

goes, can use their formal and informal powers to pay back contributors for their
generosity. It is essential to understand that this type of corruption does not
depend on how the political party spends the money it receives. The assumption
here is that the mere donation of funds to the party will make the party beholden
to the contributor and likely to use its influence to pay the contributor back.
Assuming for the moment that ‘the party’ is a definable and identifiable entity,
what does it mean for a contributor to have ‘undue influence’ over the party? Of
course, the notion of undue influence is a problem, in general, for campaign
finance law, because it assumes that a baseline amount of ‘due’ influence exists.12
Undue influence does not mean merely unequal influence: candidates’ family,
friends, and constituents, let alone the leaders of industry and interest groups, will
have greater influence than the average voter. Rather, in the rhetoric of campaign
finance, influence becomes ‘undue’ when the recipient feels beholden to the con-
tributor because of the money the contributor donates to the campaign.
In the case of corruption of a political party, though, the concept of undue
influence becomes even more problematic. How much influence should an aver-
age voter or party member have over a party? How do we know when a contribu-
tion has purchased excessive influence? And most important, how do we know
when and how the party has paid back the contributor? The paradigmatic case of
undue influence over a candidate comes in the form of money for votes on bills.
When it comes to undue influence over a party, the forms of possible ‘payback’
depend on the dimension of the party to which one pays attention. In theory, the
party organisation could pay the contributor back by giving the contributor access
and influence over party operations, by allowing the contributor to place a thumb
on the scales when it comes to nominating decisions, or by changing a platform
plank according to the contributor’s wishes—eg, dropping handgun reform from
the platform once the National Rifle Association (NRA) ponies up.
When reformers concentrate on corruption of a political party though, they usu-
ally focus on the party-in-government. Under this view, the party pays the contribu-
tor back by using its governmental arm to push through or obstruct legislation, redi-
rect patronage, or otherwise make use of the formal machinery of government to sat-
isfy contributor demands. A contributor gives money to the chairman of the
Democratic National Committee (DNC), for example, and in return, he urges
Democratic members of Congress to vote in certain ways, telling them it would be
good for the financial health of the party. There might be several variants of this type
of party corruption, but the formula is simple: contributor gives to party leader, party
leader coerces/urges representatives in government to cater to contributor’s wishes.
Sometimes the representative from the party organisation might be an unelect-
ed official, such as the leader of the DNC, but the leader could also be an elected
official, such as the President or the members of Congress that lead their parties’
respective congressional campaign committees. In return for the contribution to
the party organisation, not only might the elected officials, who lead the party, pay
the contributor back with their own votes etc, but they might be able to use the
12
See S Issacharoff and P Karlan, ‘The Hydraulics of Campaign Finance Reform’ (1999) 77 Texas
Law Review 1705.
 The Law of American Party Finance 221

carrots and sticks that come with their leadership position to coerce their col-
leagues to satisfy the contributor’s demands. Indeed, contributors might find that
contributions to party leaders are the most efficient way to gain influence over leg-
islation. If a contributor is concerned about obstructing certain pieces of legisla-
tion, why should she waste time giving small contributions to many candidates
when she could place a large cheque in the hands of someone who controls com-
mittee assignments for half the House? Such contributions have presumably
become more effective in recent years as party leadership in the Congress has
became more hierarchical and power more concentrated among a few members.

Corruption by the Party

Corruption by the party occurs when a party uses its financial clout so as to gain
undue influence over its candidates or officeholders. Corruption by the political
party entails a wholly different dynamic and set of concerns than corruption of
the political party. In this context, the constitutional debate revolves around
undue influence of party leaders over members of the party-in-government due
to party leaders’ control of party contributions to candidates. In other words, the
leaders’ control of party pursestrings allows them to extort votes out of incum-
bent officials who depend on party money to run an effective campaign.
Reformers point to this type of corruption to justify limits on party contributions
to the candidate or expenditures on behalf of the candidate.
As the focus shifts from the contributor’s corruption of the party to the party’s
corruption of its candidates, parties assume the qualities of interest groups, corpo-
rations, or other outsiders with the potential to corrupt the candidates beholden to
them. The idea of party corruption of candidates may seem a bit bizarre at first, but
the view has gained several adherents at the Federal Election Commission (FEC),
in the judiciary, and among good government groups. As Justice Stevens explained
in his dissent in Colorado Republican I, the ‘interdependency [between a party and
a candidate] creates a special danger that the party—or the persons who control the
party—will abuse the influence it has over the candidate by virtue of its power to
spend.’13 In describing and agreeing with the FEC’s position in Colorado Republican
II, the dissenting judge in the Tenth Circuit panel explained, ‘limits on party con-
tributions are necessary to prevent unscrupulous party officials from furthering
their pet interests, thereby corrupting or appearing to corrupt the legislative
process.’14 And as one Supreme Court amicus brief put it in Colorado Republican II:
When individual members of Congress become increasingly powerful within the
institution, not by virtue of their legislative abilities and achievements, but instead
because of their control of the campaign spending decisions of the political parties,
there is a potential for a corruption of the democratic processes. Individual mem-
bers of Congress may become afraid to buck the pet interests of individual party
leaders, even when the party itself lacks a firm position on the issue.15
13
Colorado Republican I, 518 US at 648 (Stevens, J dissenting).
14
FEC v Colorado Republican Federal Campaign Committee 213 F3d 1221, 1244 (10th Cir 2000).
15
Amicus Brief of Brennan Center for Justice at NYU School of Law, Colorado Republican II at 27.
222 Nathaniel Persily

Under this view, the state’s interest in preventing party corruption of candidates
justifies setting limits that force candidates to fund their campaigns from individ-
uals and organisations. Just as one corporation, interest group, or contributor
should not have undue influence over a candidate, the argument goes, so too the
financial voice of the party should not be the loudest one the candidate hears.
This view of parties as just another type of organisation with excessive influ-
ence due to campaign contributions has some obvious problems. Unlike other
interest groups, parties exist to have influence over their candidates. Campaign
finance issues aside, political parties remain the principal organising entity
both for elections and for legislatures. Candidates usually must be nominated
by the party members or the party organisation, they run under the party label
in the general election, and once elected, they become part of the party’s cau-
cus in the legislature, which itself organises leadership positions, committees
etc along party lines. If parties’ undue influence over their candidates is a prob-
lem, then parties, not money, is the problem.
To understand the deficiencies of the corruption-by-parties argument, one
must first realise that the argument does not depend at all on the source of the
party’s funds. In other words, a party can corrupt a candidate under this theory
even if its funds are ‘clean’—part of a state funding scheme, a bake sale or whatev-
er. All that matters is that the party has ‘too much influence’ because of the money
it might contribute to a candidate’s campaign. Undue influence manifests itself
when representatives vote with the party, subordinating their conscience or con-
stituents to the campaign cash value of a party vote. Defection from the party line,
under this view, entails more than the cost of losing favour in the party’s eyes; it
comes with the risk that the party might withhold funds from a reelection cam-
paign or even worse, throw its financial weight behind an opponent in the primary.

Corruption through the Party

Most reformers would argue the real problem with parties and money is not cor-
ruption of or by the party, but corruption through the party: that is, the use of
parties as mere conduits for the transfer of cash from contributor to candidate. By
treating the parties as mere bank accounts into which contributors deposit and
candidates withdraw, contributors use parties to get around the restrictions on
individual contributions to candidates. In both Colorado Republican II16 and most
recently in McConnell v FEC the Court found the conduit corruption argument to
be the most persuasive justification for regulating party participation in the fund-
ing of campaigns.
The concept of conduit corruption is not uniquely applicable to political par-
ties. In theory, any individual or organisation could serve as a transit point for
contributions en route from contributor to candidate. The Court in Colorado
Republican II said as much:

16
See Colorado Republican II 533 US at 452–4.
 The Law of American Party Finance 223

[W]hether they like it or not, [parties] act as agents for spending on behalf of those
who seek to produce obligated officeholders . . . [T]his party role, which functional-
ly unites parties with other self-interested political actors . . . accordingly, provides
good reason to view limits on coordinated spending by parties through the same
lens applied to such spending by donors, like PACs, that can use parties as conduits
for contributions meant to place candidates under obligation.17

In fact, because of their uniquely close relationship to candidates, parties are in

the best position to serve as conduits for contributions. They have developed elab-
orate tallying systems and various other legal equivalents to winks and nods to
keep track of which party funds were raised by and are therefore deserved by
which candidates.18 It would be difficult to disagree with the proposition that
insofar as direct contributions corrupt a candidate, indirect contributions going
through a party conduit can do so almost as well.
The basic problem with the conduit corruption argument is conceptual, not
empirical, however. It runs into difficulties when it is used to justify restrictions
on the flow of money both into and out of the party conduit. Once the flow of
money is restricted at one end of the party conduit, the state’s interest in combating
corruption at the other end vanishes. A simple example might help prove the point.
Suppose a campaign finance law limits individuals to contributing $2000 to candi-
dates and $8000 to a party and limits parties to contributing $40,000 to candidates.
The total amount of potential corruption of a candidate per donor would be $10,000
($2000 + $8000). However, because the party is limited in how much money it can
reroute, only five donors could achieve that level of corruption (5 ⫻ $8000 =
$40,000). After the fifth donor gives as much as he can, the sixth donor (and every
donor thereafter) can only give $2000; any money given to a party that has maxed
out its contribution to the candidate is wasted as far as the contributor is concerned
and free of corrupting potential as far as the candidate is concerned. The cap on party
contributions, therefore, forces donors to compete against each other to squeeze
through the party conduit to get to the candidate. This competition would occur
even if the $8000 limit on contributions to political parties were to disappear.19

Where the Justices Stand

Three basic schools of thought have emerged on the Court when it comes to fit-
ting parties into the corruption-preoccupied framework of the constitutional law
of party finance. The prevailing view of Justices David Souter, Sandra Day
O’Connor, and Stephen Breyer treats political parties as just another species of
interest groups, deserving no special constitutional protections nor subject to spe-
cial burdens. Thus, the decisive plurality on the Court has interpreted the First
Amendment as guaranteeing a party’s right to make unlimited independent
17
Colorado Republican II 533 US at 452.
18
Colorado Republican II 533 US at 453, 457–60.
19
Although, then one individual could potentially give a $40,000 contribution to the party that
would then be forwarded on to the candidate.
224 Nathaniel Persily

expenditures in support of a candidate20 while allowing restrictions on contribu-

tions from the party to the candidate that serve to combat real or apparent cor-
ruption.21 For these three, the danger of corruption lies principally in the use of
parties as passthroughs for otherwise prohibited contributions to candidates—
‘conduit corruption’ or ‘corruption through the party.’ Under this view, parties
exist as bank accounts or, less affectionately, money launderers: contributors
deposit and candidates withdraw.
The two other camps on the Court treat political parties as having a special role
in campaigns and a unique relationship to candidates that earns them different
treatment than that for other groups. For Chief Justice William Rehnquist and
Justices Anthony Kennedy, Clarence Thomas and Anthony Scalia, parties’ special
relationship or the ‘practical identity of interests’22 between parties and candidates
argues for greater First Amendment protection of political parties, since their
speech is constitutionally indistinguishable from that of their candidates. As
Justice Thomas put it: ‘The very aim of a political party is to influence its candi-
date’s stance on issues and, if the candidate takes office or is reelected, his votes.’23
Somewhat in tension with this position, those four tend to support the idea that
money passed through the party is cleansed of corrupting potential because par-
ties sever the link between contributor and candidate24—that is, they dispute the
idea of conduit corruption or corruption through the party. If officeholders look
with favour on those who contribute to their party, they do so not for their own
benefit but for the ‘good of the team,’ under this view. That variant on the tradi-
tional quid pro quo arrangement is sufficiently attenuated in the party context to
fall beyond the notion of corruption, these Justices argue.
For Justices Stevens and Ginsburg, in contrast, the special nature of parties jus-
tifies greater regulation given the unique corruption risks the party-officeholder
relationship poses. A contributor may more efficiently gain disproportionate
influence over the policy-making process by giving a large contribution to a party
at the behest of a party leader who can guarantee to whip groups of votes on the
contributors’ favourite bills. Indeed, under this view the party’s financial clout—
whatever the original source of its funds—poses a problem of undue influence of
the party over its candidates: that is, corruption by the party. The awesome finan-
cial power of parties, under this view, threatens the independence of legislators
and can tip the balance in favour or against a decision to take official action on
legislation. With the power to pull the plug on a candidate’s campaign by refusing
to spend money in the race may come the power to induce an elected official to

20
See Colorado Republican I, 518 US 604.
21
See Colorado Republican II, 533 US 431.
22
Colorado Republican I, 518 US at 630 (Kennedy, J, concurring in the judgment).
23
Colorado Republican I, 518 US at 646 (Thomas, J, concurring in judgment and dissenting in part).
24
See ibid (‘American political parties, generally speaking, have numerous members with a wide
variety of interests . . . Consequently, the influence of any one person or the importance of any single
issue within a political party is significantly diffused. For this reason . . . campaign funds donated by
parties are considered to be some of “the cleanest money in politics.”’ (quoting J Bibby, ‘Campaign
Finance Reform’ (1983) 1 Commonsense 10)).
 The Law of American Party Finance 225

toe the party line when her conscience or constituents might lead to a different
result.

Who and What is the Party

The American party finance ‘problem’ is as much a product of constitutional struc-

ture as it is constitutional doctrine. The party system mirrors the political system
in its division among branches and levels of government. It also is archetypically
American in the diffusion of power not only among the formal institutions but
also among less formal groups in American civil society. Whereas in other coun-
tries one might more easily point to the party leader or even the party’s headquar-
ters, in the American system parties exist as networks of groups and institutions
inside and outside of government. One of the goals of this discussion of party mul-
tidimensionality and campaign finance is to emphasise the often-made argument
that entrepreneurial campaign contributors will always find some way to direct
money into some part of the party system despite particular regulations. In listing
the many dimensions and possible entities eligible to be called ‘the party,’ howev-
er, the discussion also draws attention to the possible tradeoffs of a campaign
finance system that directs money toward one type or dimension of a party and
away from others.25 The multiple dimensions of parties are depicted in Table II.

VO Key’s Three Dimensions of Party

Political scientists have often described American political parties as consisting of
three parts: the party organisation, the party-in-government, and the party-in-the-
electorate.26 A party organisation, such as the Democratic National Committee, con-
sists of professional political workers whose job is to build the party and further its
interest both during and between elections. The party-in-government refers to
elected or appointed officials at all levels of government, such as the members of the
House Democratic Caucus and Republican Conference or even the President him-
self. Finally, the party-in-the-electorate refers to the party rank-and-file whose
major activity in relation to the party is voting in primary elections, supporting the
party’s candidates in the general election, and maybe giving a contribution to the
party every once in a while. As Key himself recognised, no subpart of the party is
hermetically sealed from the other. All members of the party organisation and
party-in government are also members of the party-in-the-electorate, for example.
Campaign finance reformers are principally concerned with restricting the
influence of ‘outsiders,’ including members of the party-in-the-electorate, on the
25
Much of the forgoing discussion is drawn from N Persily, ‘Soft Parties and Strong Money’ (2004)
3 Election Law Journal 315.
26
See VO Key, Politics, Parties, and Pressure Groups (5th ed, New York TY Crowell, 1964) 163–5; N
Persily and BE Cain, ‘The Legal Status of Political Parties: A Reassessment of Competing Paradigms,
(2000) 100 Columbia Law Review 775, 778–9.
226 Nathaniel Persily

party-in-government. The party-in-the-electorate or some subsection of it, under

this view, can be a source of undue influence through excessive contributions.
Those who fear corruption-of-the-party or corruption-by-the-party seek to limit
the electorate’s (and others’) financial influence over the organisation or the organ-
isation’s influence over the party-in-government. What might be described as the
purist reform position, tends to argue that the influence of any arm of the party
over another should never be due to the exercise of financial clout. Votes, persua-
sion and mobilisation are the proper tools of intraparty influence; money is not.

The Federalism Dimension

The existence of different levels of government and corresponding elections pre-
sents formidable obstacles to the effective regulation of political party financing.
Because federal election law regulates the financing of federal elections, the mere
existence of state elections and parties creates inevitable difficulties for any feder-
al regulatory regime. Parties in all three of VO Key’s forms exist at the federal,
state, and local level, and each level of the party can influence elections in anoth-
er. The daunting challenge presented to any scheme of federal regulation is to reg-
ulate each level of the party, but only insofar as that level of the party participates
or affects federal elections.27
Indeed, the ‘federalism problem’ helped puncture the soft money loophole
into the pre-BCRA campaign finance regime. Several states allowed corporate
and union contributions to state political parties, which federal law generally
prohibited to candidates for federal office and which the national parties could
use only for certain ‘party building’ activities. Thus, for state elections, permissive
state laws applied, and for federal elections, the more restrictive federal law might
apply. The question then arose how to classify state party expenditures that
helped the party in all of its manifestations. Because state parties wear different
hats depending on whether they are trying to influence a federal or state election,
how does one know which hat they are wearing (and how they should be regu-
lated) when their actions assist all components of the party at the same time? The
existence of federal, state and local parties—each with a distinct claim to First
Amendment protection28—necessarily leads to over and underinclusive regula-
tion of each dimension of a political party. No law can be written with sufficient
specificity such that it regulates parties in one electoral sphere without somehow
impeding their activities in another one, or such that it captures the universe of

27
See N Persily, ‘Soft Money and Slippery Slopes’ (2002) 1 Election Law Journal 401, 407 (describing
the constraints on Congress’ power to regulate state and federal elections).
28
The procession downward from federal to state to local parties does not imply that a ‘lower’ level
is subordinate to an upper level. In fact, each level of the party has First Amendment rights that can
be asserted against the other. A local party that disagrees with a law sanctioned by the state party still
could have a constitutional right to opt out. See Eu v San Francisco County Democratic Comm, 489 US
214 (1989). Conversely, state and local parties cannot force the national party to change its rules to
accommodate them. See Democratic Party of the United States v Wisconsin 450 US 107 (1981); Cousins
v Wigoda 419 US 477 (1975).
 The Law of American Party Finance 227

contributions and expenditures that a party can make even when it is acting
within the relevant electoral context.
With respect to soft money and state parties, the most recent law (BCRA) errs
on the side of overinclusion—meaning that in its attempt to regulate state parties
in their federal capacity it necessarily regulates them in their state capacity. For
example, a state party’s voter registration and turnout efforts, as well as the salary
of its employees that spend at least 25 per cent of their time on federal elections,
must be paid for with money subject to federally imposed limits. For some state
parties, such as those that have no competitive federal race on the ballot, all such
activity will necessarily be exercised in the parties’ state electoral capacity.
Nevertheless, because such activities may generally affect the fates of federal can-
didates appearing on the ballot, the law regulates them or else all money banned
to the federal parties would simply move toward the state parties.

The Separation of Powers Dimension

Just as parties can be conceptualised ‘vertically’ along the federalism dimension so
too can they be conceptualised ‘horisontally’ along the dimension of separation of
powers. At both the state and federal level and among the party as an organisa-
tion, in government and in the electorate,29 the party adopts different personae
depending on the branch of government in which it is operating or which it hopes
to influence. We can therefore conceive of parties in the executive and in each
house of a legislature.30
This feature of the American party system is probably so obvious that it does
not warrant extensive elaboration. In each house of Congress, the parties organ-
ise themselves into respective caucuses, and those parties-in-the-legislature
have corresponding campaign organisations, such as the Democratic
Congressional Campaign Committee (DCCC) and Democratic Senatorial
Campaign Committee (DSCC). Only the party with control of the Presidency can
be said to have a party-in-the-executive, but once the presidential campaign
begins, the separation of powers becomes relevant in distinguishing the party
organisations dedicated to the presidential election from those committed to
electing partisans to the House and Senate. Analogous institutions and organisa-
tions exist at the state level among governors, assemblies and state senates.
Just as they coordinate to pass legislation, so too the separate party organisa-
tions cooperate when it comes to campaigns. Each party organisation is aware of
the activities of another and sometimes uses the same consultants, pollsters and
29
Maybe less so with respect to the electorate. Separation of powers affects the party-in-the electorate
insofar as the constituencies for elections to each branch of government are different. In other words,
the party-in-the-electorate for a US Senate race are all the party members in a given state, while for a
given House race the party-in-the-electorate is limited to the party members in the particular district.
30
Perhaps one could conceive of parties in the judiciary as well, especially in states that elect judges.
Even among appointed judges (at both the federal and state level) one might say that judges remain
tied to a political party and could be influenced by the party. However, the ‘party-in-the-judiciary’ is
probably not relevant to a discussion of campaign finance.
228 Nathaniel Persily

advertising agencies. However, their missions are distinct: to elect as many party
members to their respective branches. Therefore, each campaign committee has
its own accounts, websites, ad campaigns, etc, and each provides an opportunity
for separate influence by the same pool of contributors.
To grapple with this multiplication of subparty institutions, the BCRA sets
limits on an individual’s total contributions to national party committees. An
individual can give no more than $25,000 per year to national party committees
and no more than a total of $57,500 over two years to all national party commit-
tees and other multicandidate political committees (including state party com-
mittees) combined. Were it not for the aggregate limit, individuals could evade the
limits by contributing to each party committee in each branch and level of gov-
ernment throughout the 50 states.

The Formal/Functional Dimension

A tour through most college government textbooks would provide the informa-
tion necessary to define the dimensions of party discussed thus far. In the context
of campaign finance, however, unique party institutions have emerged with the
specific goal of furthering a party’s election-financing goals while not being
recognised as the party itself. This dimension—which I am calling the
formal/functional dimension—is the one that gives would-be reformers fits and
that has spawned a cottage industry of campaign finance lawyers. It also has
become increasingly relevant over the past year as the Federal Election
Commission (FEC) has attempted to interpret what types of organisations are
subject to the limits placed by the new law.
The formal/functional dimension arrays party institutions according to
whether they take the form of a party, per se, or merely perform campaign-
related functions that assist or advantage the party. This is the most difficult
dimension to describe, but it is also the most important when it comes to assess-
ing the effect of certain reform proposals. One of the principal criticisms of the
BCRA is that it will move contributions away from the formal party apparatus
and toward less accountable, less transparent, and less visible organisations.
At least four types of organisations can serve the functions of the party without
actually ‘being’ the party: multicandidate political committees (PACs), 501(c)(3)
charitable organisations, 501(c)(4) lobbying organisations, and 527 political
organisations. Merely listing the sections of the tax code associated with these
organisations hints at the complexity of describing them and at their loophole-
defining quality. Any number of what most observers would call ‘interest groups’
can reconfigure themselves to fit into one of these classifications. What makes
them relevant for our purposes, however, is the opportunity they present to par-
ties and their members to evade restrictions on the parties themselves while still
achieving the parties’ campaign objectives.
Multicandidate political committees (PACs) are the easiest to understand, in
part because they are defined by the campaign finance laws as opposed to the tax
 The Law of American Party Finance 229

code. Simply put, they are organisations that have registered with the FEC, have
received contributions from more than 50 persons and have contributed to five or
more candidates for federal office.31 Corporations and unions can establish PACs,
pay their overhead costs and then have a designated list of individuals contribute
to them to constitute a separate, segregated fund, that is, distinct from the corpo-
ration or union’s treasury money. In theory, PACs are the campaign arms of issue-
specific interest groups seeking to elect candidates favourable to their cause. In
reality, PACs can become extensions of the candidates and parties themselves.
Elected officials, particularly party leaders and prospective presidential candi-
dates, establish so called ‘Leadership PACs’ to make contributions and expendi-
tures to benefit their preferred candidates, including their own candidacy.
Only some 501(c)(3) and 501(c)(4) organisations are relevant to elections and
campaign finance, making regulation of those that are active in campaigns some-
what difficult. 501(c)(3) organisations are formed for religious, educational, chari-
table, or scientific purposes, donations to them are tax deductible, and the law pro-
hibits them from supporting or opposing candidates in a campaign. 501(c)(4)
organisations are different in that contributions to them are not tax deductible, they
are generally formed to conduct lobbying activities, and they are allowed to partic-
ipate in campaigns if they pay taxes on their campaign expenditures. Both types of
organisations are allowed to receive unlimited contributions from individuals.
527 organisations differ from 501 organisations in that a 527 (sometimes called
a ‘Stealth PAC’) is created specifically for the purpose of influencing elections.
Most PACs are also 527 organisations. However, some 527 organisation do not
register as a PAC, and therefore cannot support or oppose specific candidates. Like
a 501(c)(4), contributions to a 527 are not tax deductible and they are potential-
ly unlimited. Until recently, 527 organisations did not even need to disclose who
gave them money.
Space considerations prevent a detailed analysis of the differences between
these organisations.32 However, the relevant similarity for purposes of campaign
finance is the engagement of these organisations in advocacy—particularly televi-
sion commercials, voter registration, and get out the vote efforts—that might
affect the outcome of an election. Each organisation can perform some of the
functions normally attributed to political parties. A PAC can collect contributions
and redistribute them to a party’s candidates. A 527 organisation can collect con-
tributions and spend them to promote a political party—sometimes, as with Tom
DeLay’s ‘Republican Majority Issues Committee,’ not even feigning any distance
between the organisation and the party. A 501(c)(4) organisation can run ads pro-
moting the party, perhaps incurring taxes for its expenditures. And a 501(c)(3)
31
2 USC s 441a(a)(4) (2002).
32
Two useful publications that analyse the differences are Common Cause, Under the Radar: The
Attack of the ‘Stealth PACs’ on our Nation’s Elections (2000), and JE Kindell and JF Reilly, Election Year
Issues (2001) (available at http://www.irs.gov/pub/irs-utl/topici02.pdf). Readers eager to get a sense of
the complexity of these organisations may want to take a look at DL Simmons, ‘An Essay on Federal
Income Taxation and Campaign Finance Reform’ (2002) 54 Florida Law Review 1. Merely printing out
the article proves the point: the ‘essay’ is 118 pages long with 774 footnotes.
230 Nathaniel Persily

organisation, as well as all of the organisations listed above, can run ads on issues
and promote causes that might be salient to a given campaign and indirectly help
a party.
Under current Supreme Court precedent, organisations other than unions or
corporations have an unconditional right to make expenditures supporting the
election of candidates.33 To the degree the BCRA restricts electioneering by these
independent groups—a somewhat open question—it comes very close, if not
stepping over, the constitutional line. It is still too soon to tell whether the BCRA
527 loophole will merely replace the FECA soft money loophole as the way to
evade the source and amount restrictions under the statute. The FEC has punted,
for the moment, on an interpretation of BCRA that would settle this controversy.

Formal

PARTY-IN- PARTY PARTY-IN-THE-

GOVERNMENT ORGANISATION ELECTORATE

Senate Senate party caucuses Party Senatorial Party members

Campaign Committees in each state

House House party caucuses Party Congressional Party members

FEDERAL

Campaign Committees in each congres-

sional district
Execu- President and cabinet National Party Party members
tive Convention; National throughout
Party Committee (eg, nation for presi-
DNC) dential elections

Upper State senate (upper State senate party cam- Party members
House house) caucuses paign committee in each senate
district
Lower State assembly (lower State assembly party Party members
STATE

House house) caucuses campaign committee in each assembly

district
Execu- Governor and other State party organisation Party members
tive elected and appointed in each state
members of executive
branch
Local elected officials Local party organisation Party members
LOCAL

in each locality

33
See FEC v Massachusetts Citizens for Life 479 US 238 (1986).
 The Law of American Party Finance 231

Functional

PARTY-IN- PARTY PARTY-IN-THE-

GOVERNMENT ORGANISATION ELECTORATE

Senate Leadership PACs led Interest groups organ- State-based

by individual senators ised to elect party mem- interest groups
bers to Senate that could affect
senate elections
(not created
by elected offi-
cials)
House Leadership PACs led Interest groups organ- District-based
FEDERAL

by individual con- ised to elect party mem- interest groups

gressmen bers to House that could affect
House elections
(not created
by elected offi-
cials)
Execu- PACs led by President Interest groups organ- National interest
tive ised for presidential groups (not cre-
election ated by elected
officials)

Upper Interest groups organ- Interest groups created Interest groups

House isations organised by to promote party in that could affect
state senators state senate races state senate elec-
tions (not creat-
ed by elected
officials)
Lower Interest groups creat- Interest groups created Interest groups
STATE

House ed by state assembly- to promote party in that could affect

men state assembly races state assembly
elections (not
created by elect-
ed officials)
Execu- Interest groups led by Interest groups created State based
tive Governor to promote party interest groups
throughout state (not created by
elected officials)
Interest groups creat- Interest groups created Locally created
LOCAL

ed by local officials to promote party in and based inter-

locality est groups

TABLE II. The Multiple Dimensions of Party in Campaign Finance

232 Nathaniel Persily

Does Campaign Finance Reform Weaken American

Political Parties and How Would We Know?34

In the recent debate over campaign finance reform culminating in the Supreme
Court’s decision in McConnell v FEC, everyone seemed to be a fan of strong polit-
ical parties. Despite all the pyrotechnics launched by the various expert reports, a
few fundamental points of agreement never seemed in dispute: strong political
parties are desirable, rich parties are better than poor parties, and parties play a
unique and important role in elections. Even in the 1,638 pages comprising the
opinions of the district court judges and the more than 300 pages of opinions
emerging from the Supreme Court, these maxims appeared uncontested. Of
course, the agreement ended there, and the parties to the litigation, the district
court judges and the Supreme Court Justices were bedeviled by the empirical
details surrounding the BCRA’s soft money ban: did soft money strengthen par-
ties? Would the BCRA weaken parties? Were parties strong or weak before the pas-
sage of the BCRA?
Much of the subtextual battle concerning the effect of the soft money ban and
the BCRA’s threat to parties’ freedom of expression and association grew out of
contested definitions of party ‘strength.’ Needless to say, a lack of agreement as to
whether the BCRA will weaken parties is unsurprising when no one can agree on
what defines a strong party or how to measure a party’s strength. I suggest here
a few ways of defining party strength and evaluate the state of the parties before
and after the BCRA according to these measures. Measuring party strength is dif-
ficult, however, not only because of the contested notion of ‘strength,’ but also
because of the multiple incarnations of America’s political parties, as noted
above. BCRA may have weakened parties according to some measures while
strengthening it according to others and, perhaps more accurately, has shifted
power in the party system away from some incarnations of the party (such as the
national party organisations) and toward others (such as the state parties and
shadow interest groups). Finally, it may be the case that the soft money ban has
had different effects on the two parties; contrary to the interests of its principal
supporters and detractors, the ban may have made the Republican Party
‘stronger’ and the Democratic Party ‘weaker.’
Despite the plaintiffs’ hyperbolic claims in the litigation, no one can reasonably
argue that the BCRA has or will silence political parties. Even those who forecast-
ed doom and gloom need to admit that parties will remain the strongest non-can-
didate institutions in American politics for the foreseeable future. Moreover,
despite the audacious predictions of the many experts on both sides of the case,
neither before the case, nor after are we sure about the effect of the BCRA on party
strength. Indeed, what do observers mean when they say that the BCRA will weak-
en or strengthen parties? It is not as if parties could lift x pounds before the BCRA
34
Most of the discussion in this section is excerpted from N Persily, ‘Soft Parties and Strong Money’
(2004) 3 Election Law Journal 315.
 The Law of American Party Finance 233

and they now can lift y pounds, so if x is greater than y we can say parties have
become weaker. We can begin to tackle this question by assessing the strength of
each component of the party according to VO Key’s distinctions: measuring the
strength of the party-in-government by its ability to execute its programmatic
agenda, the strength of the party in the electorate by rates of party identification
among voters, and the strength of the party organisation by its ability to recruit,
nominate and elect its candidates.

Parties’ Ideological Coherence and the Frequency of Party-line

Voting in the Legislature
In a historical and comparative sense, political scientists have considered the
United States to have a weak party system.35 This weakness was relative to the hier-
archical and disciplined party systems in European parliaments. In particular,
parties in those systems ‘stood for something.’ By that, observers meant the par-
ties had recognizable and differentiated agendas with party platforms that sent a
clear signal to the voters as to what they could expect from the party if elected. In
contrast, America’s ‘umbrella-like’ or ‘big tent’ political parties were considered
comparatively weak, with watered-down platforms and electoral strategies that
attempted to blur the differences rather than distinguish between the parties. Not
only were ‘strong’ parties, under this view, ideologically coherent and defined, but
they were also unified and hierarchical: once elected they could deliver on their
promises. Individual defections from parties were relatively rare in ‘strong’ party
systems, as compared to America’s legislative party caucuses where the job of the
whip was often analogised to herding cats.
Although historically American parties may have been weak according to this
measure, in recent years they have become much stronger, even resembling their
European counterparts. Whereas once it might have been difficult to say where
the parties stood on civil rights, the environment, social issues, etc, now one can
easily identify issues with one or the other major party. Of course, the parties blur
or converge on certain topics (such as free trade, the war on terrorism, the pledge
of allegiance, or for that matter, campaign finance reform), but on most issues
where disagreement exists that disagreement usually falls along party lines. To be
sure, there are some ‘outliers,’ but no longer are Rockefeller Republicans or
Dixiecrats a significant bloc in their respective parties.
Perhaps it is fair to say that we have now achieved a ‘more responsible two-party
system.’ One can easily see the evidence of the increased coherence and cohesiveness
of the parties in the well-documented jump in party-line voting in recent years.36 By
35
See American Political Science Association Committee on Political Parties, ‘Toward a More
Responsible Two Party System’ (1950) 44 American Political Science Review (Supplement).
36
See R Fleisher and JR Bond, ‘Partisanship and the President’s Quest for Votes on the Floor of
Congress’ in Polarized Politics: Congress and the President in a Partisan Era (Washington, DC,
Congressional Quarterly, 2000); M Collie and J Mason, ‘The Electoral Connection Between Party and
Constituency Considered’ in D Brady, J Cogan and M Fiorina (eds), Continuity and Change in House
Elections (Palo Alto, Stanford Press, 2000).
234 Nathaniel Persily

this measure, then, parties were arguably at their strongest level in recent American
history before passage of the BCRA and have remained at that peak in the immedi-
ate aftermath of its passage. How might the new law affect this aspect of their
strength? Perhaps campaign finance reform will have no effect, because other factors
are primarily responsible for the remarkable levels of party cohesiveness and polari-
sation.37 The rise of the Republican Party in the South, the creation of safe and ideo-
logically pure congressional districts, and the centralisation of authority in the House
of Representatives all contribute to highly disciplined and ideologically more cohe-
sive parties. However, the campaign finance system and the rise of soft money, in par-
ticular, gave party leaders additional carrots and sticks to use to keep legislators from
straying off the party’s path. Rewards of party expenditures or threats of withhold-
ing funds in a particular race allowed party leaders to extort votes or to cajole mem-
bers into toeing the party line. Indeed, this type of financial influence (or ‘strength’)
of the party was part of the process of corruption-by-the-party the proponents of the
BCRA alleged.
If, as the plaintiffs argued in McConnell, informal interest groups will become
relatively more influential in elections as a result of the BCRA, perhaps the threats
or rewards that come from party financing will have less force. If soft money flows
to outside groups whose power and electoral influence rise at the party organisa-
tion’s expense, the relative capacity of the party to whip its members into line
could be undermined. As a result, the parties might become less cohesive and
defined because their leaders may have less ability to aggregate the different inter-
est groups together into the party.
Some might applaud such a development. To the degree the parties have polarised
and become more cohesive they misrepresent the underlying American population,
especially moderate voters who find the Republicans too conservative and the
Democrats too liberal. If outside groups will fracture the party coalitions, perhaps
members of Congress will be more ‘free’ to take positions not dictated by their party
leaders. The opposite scenario is also possible, however. Perhaps these outside
groups, which often come from the extreme ends of the political spectrum, will actu-
ally pull representatives and parties even farther apart. If interest group leaders
replace (or at least undermine) party leaders as the principal legislative arm-twisters
or cajolers, then the already unrepresentative Congress will become even more so.

The Strength of Party Identification in the Electorate

In describing American parties as weak, some point to the relatively low rate of party
identification in the electorate. European parties are stronger in that voters are less
likely to identify as independent, the argument goes, whereas about a third or more
of the American population so identifies. Observers of American elections have
pointed to split ticket voting and the dominant influence of incumbency and the
‘personal vote’ on voters’ decisions, suggesting that party identification is less
37
See R Fleisher and JR Bond, ‘The Shrinking Middle in the US Congress’ (2004) 34 British Journal
of Political Science 429.
 The Law of American Party Finance 235

politically relevant in America than elsewhere. Indeed, even in the McConnell litiga-
tion, one expert report specifically referenced the low rate of strong party identifica-
tion as an indication that soft money has not strengthened parties.38
This assessment of the state of the parties shares similar faults to the previous
ones. Although Americans today may be less likely than those of previous genera-
tions to identify with a party, their voting behavior indicates strong party
attachments. Most of those who identify themselves as independents are really clos-
et partisans who vote similarly to those who proudly wear (or proclaim) the party
label.39 More importantly, party line voting has dramatically increased: if you know
someone’s partisanship or partisan preferences in the previous election, you can
predict their vote quite reliably.40 Although the 1970s and 1980s may represent peri-
ods of party weakness among the electorate, parties today have grown stronger.
If the parties in the electorate are relatively strong, what does campaign finance
reform portend? To answer this question may require an exploration into the deep
psychological roots of party attachment to investigate whether money, let alone
the availability of soft money, might make a difference.41 Voters often develop their
party loyalties at a young age from their parents and as a product of voters’ refer-
ence groups (such as race, religion, region).42 Party identification is a social, as well
as a political phenomenon; like allegiance to a sports team or a religion, for many
these attachments, once formed, will be immune to the tactics money can buy.
That being said, the effort and expense of party mobilisation efforts can pay off in
the integration of interest groups into the party’s coalition and the formation of
lasting attachments among the group’s members. As with any other association,
attachments can form from outreach efforts by the organisation, even if in the
case of parties political beliefs are deeply held.
The question then becomes: will the BCRA inhibit parties in their outreach
efforts? Much ink was spilled in the expert reports in the McConnell litigation over
the question whether party mobilisation efforts (to promote both the party and
its candidates, as discussed in the next section) will decline as a result of the
38
See JS Krasno and F Sorauf, ‘Why Soft Money Has Not Strengthened Parties’ in A Corrado et al
(eds), Inside the Campaign Finance Battle: Court Testimony on the New Reforms (Washington, DC,
Brookings, 2003) 51, (‘In 1992, 29 percent of respondents identified themselves as strong Democrats
or Republicans compared with 31 percent in 2000. These figures are near the historic low . . . whatev-
er party building the $1.2 billion of soft money has funded over the past decade, it has done little or
nothing to attract citizens to the party banners.’).
39
See BE Keith et al, The Myth of the Independent Voter (Berkeley, UC Press, 1992).
40
See LM Bartels, ‘Partisanship and Voting Behavior, 1952–1996’ (2000) 44 American Journal of
Political Science 35. Bartels explains:
the impact of partisan loyalties on voting behavior has increased in each of the last six presi-
dential elections, reaching a level in 1996 almost 80 percent higher than in 1972—and signifi-
cantly higher than in any presidential election in at least 50 years. The impact of partisanship
on voting behavior in congressional elections has also increased markedly, albeit more recent-
ly and to a level still well below that of the 1950s.
R Fleisher and JR Bond, ‘The Shrinking Middle in the US Congress,’ (2004) 34 British Journal of
Political Science 429.
41
See generally WE Miller and JM Shanks, The New American Voter (Cambridge, Harvard Press,
1996) 128–40.
42
See generally, D Green et al, Partisan Hearts and Minds (New Haven, Yale Press, 2002).
236 Nathaniel Persily

disappearance of soft money.43 Everyone seems to agree that if the BCRA made the
parties poorer, then their mobilisation efforts might suffer, but experts could not
agree on whether the parties could make up for the lost soft money in other ways
(as it appears they currently have) or whether soft money (or much money at all)
was being used for such mobilisation efforts to begin with.
At issue here, though, is the same question posed with respect to the parties in
the legislature: will outside groups become more important than parties as sources
of political identification and mobilisation? Partisan identification will likely remain
the most electorally relevant political identity for most Americans for some time.
However, if the party ‘brand’ becomes diluted as a result of the loss of power of par-
ties in the legislature, and if parties choose to funnel their hard money toward elec-
tioneering ads rather than mobilisation, as many argue they will if forced to choose,
and if outside groups become the primary face-to-face political contact for voters,
then perhaps we can expect party identification in the electorate to weaken as well.
The number of ‘ifs’ in that sentence should not be lost upon the reader; restrictions
on party fundraising are only one component in the complicated parade of horri-
bles that would produce wholesale weakening of the party in the electorate.

Power to Recruit, Nominate, and Elect Candidates

For many on the Court and in the litigation, the strength of parties can best be
seen in their ability to recruit, nominate and elect candidates. Party organisations
exist primarily to get their favoured candidates nominated and elected, and their
strength can be measured according to their success. The story of party reform—
in the realm of campaign finance and elsewhere—has been the transfer of this
particular type of strength or power away from party organisations to the mass
media, candidate organisations and interest groups.44 According to this measure
the parties are probably weaker today than they were during the good old days of
urban machines and patronage politics. Some blame the rise of primary elections,
the McGovern-Fraser reforms of the Democratic Party and the 1974 FECA
Amendments for this transfer of power away from the parties.45 Others point out
that in recent years parties have resurged, perhaps because of the rise in soft
money,46 or perhaps because they have finally learned how to play the determina-
tive role in candidate-centered campaigns.47
43
For the position that such mobilisation efforts will decline, see SM Milkis, ‘Parties versus Interest
Groups,’ and RJ La Raja, ‘Why Soft Money Has Strengthened Parties’ in Corrado et al (eds), n 38 above.
For the position that soft money has not made any significant difference in parties’ mobilisation effort
and that parties will easily adapt to a world without soft money, see Krasno and Sorauf, n 38 above, and
D Green, ‘The Need for Federal Regulation of State Party Activity’ in Corrado et al (eds), n 38 above.
44
See generally N Polsby, The Consequences of Party Reform (Oxford, Oxford Press, 1983) (describ-
ing the effect of the McGovern-Fraser reforms on the Democratic Party).
45
See SM Milkis, ‘Parties versus Interest Groups’ in Corrado et al (eds), n 38 above.
46
See RJ La Raja, ‘Why Soft Honey Has Strengthened Parties’ in Corrado et al (eds), n 38 above.
47
See J Aldrich, Why Parties?: The Origin and Transformation of Political Parties in America (Chicago,
U Chicago Press, 1995) 273; VA Farrar-Myers and D Dwyre, ‘Parties and Campaign Finance,’ in JE
Cohen et al (eds), American Political Parties: Decline Or Resurgence (Washington, DC, Congressional
Quarterly, 2001).
 The Law of American Party Finance 237

In any case, party resources, both in absolute terms and relative to interest
groups, candidate organisations, and the media, are a critical factor in assessing
the strength of parties to conduct campaigns. On this measure the McConnell
majority and dissenters disagreed as to the effect of the BCRA. Buying the argu-
ment of defendants’ experts that parties will adapt to a changing financial envi-
ronment, the majority implied that parties will not be weakened and might even
be strengthened by the new reforms. According to the majority, ‘the restriction
here tends to increase the dissemination of information by forcing parties, candi-
dates and officeholders to solicit from a wider array of potential donors.’48 On this
view, the soft money ban is bitter tasting but ultimately reinvigorating medicine.
By starving the parties of large contributions it forces them to reach out to more
people. As one of the defendants’ experts explained this ‘tough love’ approach to
campaign finance:

Limiting soft money, far from weakening political parties, will make them stronger.
Parties will be encouraged to reach out to their supporters for volunteer labor and
small donations. To do so, parties will be encouraged to inspire their activists with a
policy agenda. The free flow of soft money has meant that parties have little need to
inspire support; they can simply purchase all of the labor they require to execute
their campaign.49

According to its defenders, the BCRA might wean parties from their addiction to
television advertisements and focus them on grass roots mobilisation.
According to the plaintiffs and the dissenters in McConnell, the disappearance
of soft money will directly affect parties’ ability to mobilise voters, coordinate with
the various entities that comprise the party, and run effective campaigns on behalf
of candidates. Justice Scalia’s dissent went so far as to suggest that the majority’s
reasoning, if not the BCRA itself, ‘threatens the existence of all political parties.’50
Even under the most optimistic scenarios of party adaptation to the new reforms,
it is difficult to make the argument that the parties will be better able to campaign.
To do so requires an assumption of some form of false consciousness on the part
of the parties pre-BCRA: It was always in the parties’ interest to spend more time
going for many small donations instead of a few big ones, but they did not know
it. Even if available evidence since the passage of the BCRA indicates that the par-
ties have raised more hard money (under the new, higher limits) than they pre-
viously did in hard money and soft money combined, it is difficult to understand
how they are therefore stronger once one source of fundraising has been cut
off. Unless parties have a limited appetite for cash that will be equally sated by
many small donations as it would with a few large ones, then the absence of
the soft money avenue leaves parties poorer than they otherwise would be. Maybe
this is not such a bad thing if the parties have indeed misspent soft money, and
48
124 SCt at 658.
49
D Green, ‘The Need for Federal Regulation of State Party Activity’ in Corrado et al (eds), n 38
above at 110.
50
McConnell, 124 SCt at 725 (Scalia, J dissenting).
238 Nathaniel Persily

alternatively, maybe the state’s anticorruption interests nevertheless justify weak-

ening the party in this way. However, the BCRA, like any campaign finance restric-
tion, prevents parties from using all possible tools that may advance the common
interests of the party and candidates in a campaign.

Conclusion

Any assessment of the effect of campaign finance reform on America’s political

parties must examine party organisational strength relative to other groups or
dimensions of the party, as well as the strength of the Democratic Party relative to
the Republican Party. It may be too early to make such an assessment with respect
to the effect of the BCRA. The early evidence in the post-BCRA period suggested
that Democrats, despite their widespread support for the BCRA, were the early
losers. With respect to their base of contributors, Republicans had always done
better among individual donors, while Democrats had held their own in collect-
ing money from corporations and, particularly, unions. The BCRA biases the sys-
tem in favour of those individuals who can afford to give about $25,000 to a party,
and Republicans are favourably represented in that pool. However, Democratic-
leaning 527 organisations (interest groups serving as shadow parties for financing
purposes) have fared better thus far than similar Republican organisations. Such
an edge may be ephemeral though, as Republicans have only begun to explore this
avenue of fundraising.
The story of the most recent reform efforts, judicial and administrative reac-
tions, and subsequent responses by political entrepreneurs fits the pattern of
party adaptation that has characterised regulation in this area. The ability of par-
ties to morph along several dimensions and into and out of formal institutions
leaves would-be reformers with the difficult choice of shifting power among dif-
ferent incarnations of the party or targeting the core First Amendment rights of
a variety of associations. Because an individual’s right to give money to an organ-
isation and the right of organisations to express their members’ political opinions
exist at the core of First Amendment protections, corruption of the party or
through the party may be the inevitable risk of a system that places such preem-
inent value on such rights. The alternative may be a system that aggressively reg-
ulates not just the formal party institutions that receive the greatest attention
under the current law, but also any group of people that organises and raises
money for political purposes.
To highlight the Hobson’s choice between unconstitutional regulation and inef-
fective regulation is not to say that laws attempting to prevent corruption by way
of party financing do nothing. Even when regulations only move money around
the party system, the resultant transaction and opportunity costs change who exer-
cises power in the financing of campaigns. Although observers lament the shift of
money away from transparent and accountable formal party organisations and
 The Law of American Party Finance 239

toward shadowy, unaccountable interest groups, the redirection of funds disperses

and channels political power toward a broader range of people. Should Congress
find that such a move threatens the party institutions in some tangible way, the
party-in-government is hardly an impotent bystander: the next round of campaign
finance legislation can then deal with this new set of problems.
The debate over party financing tends to vacillate between paranoia, irrational
exuberance, and fatalism. Reformers paint a picture of corrupt parties beholden
to moneyed interests and promise a future where politics is cleaner and more
democratic. Detractors warn that reforms will decimate political parties, have per-
verse effects, or perhaps do nothing at all, so why bother? In truth, the history of
regulation of party financing instructs us that the law is only one component of a
complicated array of factors that affect the incentives and behaviors of the rele-
vant political actors. The law can shape the relevant political environment but can
also be overwhelmed by it. The most one can expect from any given reform is that
it will address the problem of the day while fulfilling neither the most unrealistic
expectations of its supporters nor the most apocalyptic projections of their oppo-
nents.
 Part V
Regulation and Judical Review:
Divergent Paths
 12
The Supreme Court of
Canada’s Political Theory and
the Constitutionality of the
Political Finance Regime
COLIN FEASBY

Introduction
THE CANADA ELECTIONS ACT creates a comprehensive approach to political
finance that consists of disclosure of financial information, limits on political con-
tributions and expenditures, financial support for electoral participants, and the
provision of discounted and free television and radio broadcasting.1 The regime,
taken as a whole, is an attempt to manage the flow of political money and, by
extension, shape the contours of political discourse. Such an intervention into the
democratic process necessarily raises constitutional questions. Foremost among
the constitutional questions are: Do limits on citizens’ ability to participate in the
democratic process contravene the right to freedom of expression, the right to
equal treatment under the law, and the democratic rights guaranteed by the
Charter of Rights and Freedoms?2 And, is the system of public support for electoral
participants consistent with those same Charter rights?
Surprisingly, the constitutionality of the political finance regulation apparatus
has only begun to be tested in Canadian courts. Indeed, after refusing to consider
several important political finance cases in the 1990s, the Supreme Court of
Canada has recently weighed into the debate. The Court’s recent forays into the
realm of political finance have seen the Court articulate a theory of democratic
politics that may guide the resolution of future political finance cases.
The Court endorsed what it calls an ‘egalitarian model of elections’ in the con-
text of upholding expenditure limits on third parties during election campaigns
1
Canada Elections Act, SC 2000, c 9 [‘Canada Elections Act’ or ‘CEA’].
2
Part I of the Constitution Act 1982, being sch B to the Canada Act 1982 (UK), c 11 [‘Charter’].
244 Colin Feasby

in Harper v Canada.3 The egalitarian model, as I have argued previously, is rooted

in the idea that citizens with equal abilities should have an equal ability to partic-
ipate in the political process.4 As such, the egalitarian model requires that the
influence of private wealth be constrained.
Figueroa v Canada, another recent decision of the Supreme Court, considered
several aspects of the Canada Elections Act including a restriction that prevented
small political parties from issuing tax receipts to donors in the same fashion as
large political parties.5 The Court held that the restriction was unjustified and
that Parliament has ‘an obligation not to enhance the capacity of one citizen to
participate in the electoral process in a manner that compromises another citi-
zen’s parallel right to meaningful participation in the electoral process.’6 Figueroa
indicates that the Court’s political theory has application beyond the limited
context of spending limits. Moreover, Figueroa provides important clues as to
how the Court may deal with challenges to public funding and the regime gov-
erning the reservation and allocation of free and discounted broadcasting time
for political campaigns.
This chapter begins by explaining relevant elements of the Charter and judi-
cial review under the Charter so that the reader may understand the doctrinal
context in which the cases to be discussed in the balance of the chapter were
decided. The second part of this chapter discusses Harper and Figueroa and
explains the political theory behind the egalitarian model endorsed by
Parliament and the Court. Here it is argued that the egalitarian model and its
animating concept—deliberative equality—is intended by the Court to guide the
resolution of future political finance cases. The last part of this chapter reconsid-
ers two important political finance cases decided by appellate courts in the 1990s:
Barrette v Canada7 and Reform Party of Canada v Canada.8 Barrette and Reform
Party respectively upheld the sections of the Canada Elections Act that pertain to
public funding and the reservation and allocation of broadcasting time. The
Court’s adoption of the egalitarian model, it is argued, makes it likely that if
heard today, Barrette and Reform Party would be decided differently. Indeed, it is
argued that important elements of the public funding and broadcasting regime
that exist today are unconstitutional. In conclusion, a subject conspicuously
absent from both Harper and Figueroa—the impact of political competition on
judicial review of the political finance regime—is raised.

3
Harper v Canada (Attorney General) [2004] 1 SCR 827 at para 62 [‘Harper’].
4
C Feasby, ‘Libman v Quebec (AG) and the Administration of the Process of Democracy under the
Charter: The Emerging Egalitarian Model’ (1999) 44 McGill Law Journal 5. [‘Egalitarian Model’]; See
also, H MacIvor, ‘The Charter of Rights and Party Politics; The Impact of the Supreme Court Ruling
in Figueroa v Canada (Attorney General)’ (2004) 10 Choices (Montreal, Institute for Research on Public
Policy) at 5.
5
Figueroa v Canada (Attorney General) [2003] 1 SCR 912 [‘Figueroa’].
6
Ibid at para 50.
7
Barrette v Canada (Attorney General) (1994) 113 DLR (4th) 623 (Que CA) [‘Barrette’].
8
Reform Party of Canada v Canada (Attorney General) (1995) 123 DLR (4th) 366 (Alta CA)
[‘Reform Party’].
 Political Theory and the Constitutionality of the Political Finance Regime 245

A Primer on Charter Doctrine and its Application

to the Democratic Process

The Canadian Constitution is comprised of various domestic and imperial

statutes supplemented by unwritten constitutional principles. The most impor-
tant constitutional acts are the Constitution Act 1867,9 which sets out the divi-
sion of powers between the federal government and the provincial governments,
and the Constitution Act 1982, which contains the Charter. So far as judicial con-
sideration of federal political finance regulation is concerned, the Charter—a
constitutional Bill of Rights—is of greatest import. Courts may declare laws
inconsistent with rights guaranteed by the Charter to be unconstitutional and of
no force or effect.10 A declaration of invalidity may be overridden by Parliament
for a limited period of time under the Charter’s ‘notwithstanding clause.’11 The
notwithstanding clause, however, has rarely been invoked.12
Judicial review under the Charter shares some characteristics with judicial
review under the First Amendment and the European Convention on Human
Rights.13 Charter review is explicitly a balancing exercise where individual rights
and state interests are weighed.14 Under the Charter, the Court first determines
whether a right has been infringed. Once an infringement is found, the Court
then considers whether infringing law is a ‘reasonable limit’ that is ‘demonstrably
justified in a free and democratic society.’15 The justification offered by the govern-
ment is tested by first considering whether the objective of the infringing law is
‘pressing and substantial.’ If the objective is pressing and substantial, the Court
determines whether there is a ‘rational connection’ between the law and the objec-
tive of the law and whether the law ‘minimally impairs’ the right in question. If the
infringing law is rational and minimally impairing, then the Court weighs the
‘salutary and deleterious effects’ of the law to determine constitutionality.16
There are three Charter rights that have particular relevance to the law of the
democratic process: (1) Section 2(b) which protects freedom of expression17; (2)
Section 3 which provides that ‘[e]very citizen of Canada has the right to vote in
an election of the members of the House of Commons . . . and to be qualified for
membership therein;’18 and (3) section 15 which guarantees to every individual ‘the
equal protection and benefit of the law without discrimination.’19 Each of sections
9
Constitution Act 1867 (UK), 30 and 31 Vict, c 3.
10
Charter, above n 2 at s 52.
11
Ibid at s 33.
12
See T Kahana, ‘Understanding the Notwithstanding Mechanism’ (2002) 52 University of Toronto
Law Journal 221 at 223.
13
Convention for the Protection of Human Rights and Fundamental Freedoms (4 November 1950) 213
UNTS 221.
14
R v Oakes [1986] 1 SCR 153.
15
Charter, above n 2 at s 1.
16
Dagenais v Canadian Broadcasting Corporation [1994] 3 SCR 835 at 839.
17
Charter, above n 2 at s 2(b).
18
Ibid at s 3.
19
Ibid at s 15(1).
246 Colin Feasby

2(b), 3 and 15(1) have developed unique doctrines and, as will become obvious in
later sections of this chapter, the application of these doctrines to a common issue
can lead to inconsistent or conflicting results. Not surprisingly, courts have strug-
gled with how to resolve political finance issues when confronted with alleged vio-
lations of some or all of these Charter rights.
Expression protected by section 2(b) has been defined to include almost any
human act short of violence.20 Accordingly, impugned laws—almost all laws for
that matter—invariably restrict an individual’s freedom of expression. The result of
this interpretation of expression is that in each case the Court is involved in balanc-
ing the objective and impact of laws in cases brought under section 2(b). This is in
stark contrast to the interpretation of the scope of democratic rights under section
3. There have been relatively few section 3 cases heard by the Court since the adop-
tion of the Charter in 1982. The cases fall into two identifiable categories. First, there
are cases that deal with the denial of the right to vote to a whole class of individu-
als, the best example of which are the prisoner voting cases.21 Second, there are cases,
such as Saskatchewan Electoral Boundaries, which is a one person, one vote case, that
deal with the qualitative aspects of the right to vote.22 The approach to section 3
developed in the prisoner voting cases, stated definitively in the recent Sauvé case, is
absolutist like the approach to expression in section 2(b) in the sense that the Court
is hostile to any attempt by the state to abridge citizens’ physical right to vote and
any consideration of the merits of the restriction must take place in the context of
section 1. The Court in Sauvé was deeply sceptical of the government’s justification
for limiting prisoner voting even in the face of popular support for the measure and
a lengthy history of similar measures in Canada and other jurisdictions. The analy-
sis in Sauvé suggests that where a violation of the physical right to vote is found, any
justification offered by the state will be subjected to strict scrutiny.
Standing in seemingly stark contrast to Sauvé is the approach to defining the
qualitative aspects of the right to vote in Saskatchewan Electoral Boundaries. The
majority decision of the Supreme Court in Saskatchewan Electoral Boundaries—
also written by McLachlin J—took an uncritical view of justifications offered for
population deviations of up to 25 per cent from district averages. McLachlin J jus-
tified her deferential stance in Saskatchewan Electoral Boundaries by interpreting
the right to vote as not guaranteeing the right to an equal vote, but a right to
‘effective representation.’ The concept of ‘effective representation’ is malleable—
certainly more so than the idea of one person, one vote that predominates in the
United States.23 McLachlin J held that while ‘[r]espect for individual dignity and
social equality mandate that citizens’ votes not be unduly debased or diluted . . .’,
population deviations of up to plus or minus, 25 per cent do not violate section 3
20
Irwin Toy v Quebec [1989] 1 SCR 927.
21
Sauvé v Canada (Attorney General) [1993] 1 SCR 438; Sauvé v Canada (Chief Electoral Officer)
[2002] 3 SCR 519 [‘Sauvé’].
22
Reference re Provincial Electoral Boundaries (Sask) [1991] 2 SCR 158 [‘Saskatchewan Electoral
Boundaries’].
23
Karcher v Daggett 462 US 725 (1983) (no deviation tolerated in Congressional districting); White
v Regester 412 US 755 (1973) (10 per cent deviation tolerated in state legislative districts).
 Political Theory and the Constitutionality of the Political Finance Regime 247

and do not have to be justified under section 1. McLachlin J’s rationale was that
legislatures, frequently through the instrument of boundary commissions, must
have sufficient flexibility to realise certain social objectives.
The effect of Saskatchewan Electoral Boundaries is that the primary consideration
of questions relating to the quality of the right to vote—which arise in parallel with
expression issues in the political finance context—will be in the context of the def-
inition of the rights guaranteed by section 3 not in the evaluation of the govern-
ment’s justifications for limiting rights under section 1 as would be the case with
section 2(b). A restriction on, for example, election day campaigning by candidates
would be a violation of section 2(b) that the government would have to justify
under section 1; whereas such a restriction may or may not constitute a violation of
section 3 depending whether the Court determined that the concept of effective
representation had been compromised. The incompatible analytical frameworks
under sections 2(b) and 3 make it difficult as a practical matter for courts to con-
sider section 2(b) and section 3 simultaneously.24 As a result, there is a temptation
for courts to identify one or the other section as the primary right engaged by a chal-
lenged law. The choice of section 2(b) or section 3 as the primary right engaged
affects the structure of judicial reasoning and, one suspects, judicial psychology.
Section 15(1) and section 3 also overlap to some degree. Section 15(1) guaran-
tees equality of all persons under the law whereas the equality of citizens, as seen
in Saskatchewan Electoral Boundaries, informs the contours of the democratic
rights protected by section 3. Whilst section 15(1) guarantees the equality of all
persons under the law, it has been interpreted principally as an anti-discrimina-
tion measure that protects individuals who are members of historically disadvan-
taged groups. Section 15(1) protects individuals from discrimination based on
certain specified characteristics such as race, age, sex and disability and unwritten,
but analogous, grounds which have been found to include sexual orientation,25
marital status,26 citizenship,27 and others. Moreover, discrimination on an enumer-
ated or analogous ground only contravenes section 15(1) if it is also a ‘violation
of essential human dignity.’28 The narrow interpretation of section 15(1) makes it
of limited relevance to the resolution of election law disputes given that racial, lin-
guistic, and religious limitations on the right to vote have been eliminated.29 At the
same time, the narrow interpretation of section 15(1) presents a difficulty for
24
See, eg, Harper, above n 3 at para 66, finding that third party spending restrictions infringe the
right to freedom of expression under s 2(b) and, at the same time, finding at para 74 that the same
restrictions do not limit the ‘informational component’ of the s 3 right to vote. The Court concluded
that the infringement of freedom of expression was constitutional under s 1.
25
Vriend v Alberta [1998] 1 SCR 493.
26
Miron v Trudel [1995] 2 SCR 418.
27
Lavoie v Canada [2002] 1 SCR 769.
28
Law v Canada (Minister of Employment and Immigration) [1999] 1 SCR 497 at 549–52.
29
Section 3 has been interpreted to only apply to elections for provincial legislatures and for the feder-
al Parliament. Accordingly s 15(1) is often the basis for challenges to referendum laws, municipal election
laws, and other democratic processes outside the scope of s 3: See, eg, Haig v Canada (Attorney General)
[1993] 2 SCR 995; Borough of East York v Ontario (Attorney General) (1997) 34 OR (3d) 789 (Gen Div)
aff’d 36 OR (3d) 733 (CA). Indeed, the Court used s 15(1) in the context of Indian Band elections to rem-
edy a restriction on voting by off reserve Band members: Corbiere v Canada [1999] 2 SCR 203.
248 Colin Feasby

Courts when presented with equality arguments advanced in the context of sec-
tion 3. Should Courts, as was done in Saskatchewan Electoral Boundaries, read in
to the democratic rights protected by section 3 a right to equality that is broader
in scope than the explicit constitutional equality guarantee in section 15(1)? What
is clear from the discussion of Harper and Figueroa that follows is that the Court
is committed to the conclusion in Saskatchewan Electoral Boundaries; namely, that
an implicit guarantee of equality exists within the democratic rights in section 3.
The remaining question is: What are the contours of the equality guarantee in sec-
tion 3? This question will be considered in the next section of this chapter.

The Supreme Court of Canada’s Political Theory

Harper v Canada: The Endorsement of the Egalitarian Model

The right of third parties—individuals and interest groups who are neither candi-
dates nor political parties—to make election expenditures has been the context
within which much of debate over the place of political finance regulation in the
democratic process has taken place.30 Harper is the latest case to deal with the ques-
tion of third party expenditures. Prior to Harper, two distinct lines of authority exist-
ed. First, in National Citizens Coalition31 and Somerville32 considering third party
spending limits in the Canada Elections Act and in Pacific Press33 considering similar
restrictions in the British Columbia Elections Act, provincial trial and appellate courts
adopted the simple view that the expression of political views was of paramount
importance in a democratic society and could not be limited in the name of
promoting a more fair political process. None of these cases concerning third party
spending were heard by the Supreme Court. Second, in Libman, a case concerning
provisions in Quebec’s referendum legislation that limited expenditures by anyone
who was not a member of the official ‘Yes’ or ‘No’ committees, the Court held that in
pursuit of a fair political process the legislature may limit the ability of private wealth
to dominate discourse.34 In the wake of Libman, the federal Parliament enacted new
third party expenditure restrictions which, in turn, were challenged in Harper.
Harper was a frontal assault on Libman. At trial and in the Alberta Court of
Appeal, Libman was distinguished on the grounds that some aspects of an aca-
demic study relied upon by the Lortie Commission in recommending third party
spending limits to Parliament which, in turn, was relied upon by the Supreme
Court in coming to its decision, had been discredited.35 Harper also concerned
30
See A Geddis, ‘Democratic Visions and Third-Party Expenditures: A Comparative View’ (2001) 9
Tulane Journal of International and Comparative Law 5.
31
National Citizens Coalition v Canada (Attorney General) (1984) 11 DLR (4th) 481 (Alta QB).
32
Somerville v Canada (Attorney General) (1996) 136 DLR (4th) 205 (Alta CA).
33
Pacific Press v British Columbia (Attorney General) [2000] 5 WWR 219 (BCSC).
34
Libman v Quebec (Attorney General) [1997] 3 SCR 569.
35
Harper v Canada (Attorney General) [2001] 9 WWR 650 (Alta QB); aff ’d (2003) 23 DLR 275 (Alta
CA) at 310–11.
 Political Theory and the Constitutionality of the Political Finance Regime 249

issue advocacy and the delineation of the boundary between electoral expression
and generic political expression.36 The Court, however, focused on the first ques-
tion and elided the second. The failure to address the issue advocacy problem is a
fundamental flaw in the Court’s reasoning in Harper, but it is not one that falls
within the scope of this chapter.
Previously I have used the term ‘egalitarian model’ to describe the approach to
election regulation recommended by the Lortie Commission, imperfectly embod-
ied in the Canada Elections Act, and endorsed by the Court in Libman.37 The egali-
tarian model as discerned from the entrails of Libman could only be described as
an emerging model; the structure of which was as much hidden as it was exposed.
The Court in Harper adopted the label ‘egalitarian model’ and emphatically
endorsed the central premises of Libman:

The Court’s conception of electoral fairness as reflected in the foregoing principles

is consistent with the egalitarian model of elections adopted by Parliament as an
essential component of our democratic society. This model is premised on the
notion that individuals should have an equal opportunity to participate in the elec-
toral process. Under this model, wealth is the main obstacle to equal participation . . .
Thus, the egalitarian model promotes an electoral process that requires the wealthy
to be prevented from controlling the electoral process to the detriment of others
with less economic power.38

The egalitarian model—as it relates to the justification of limits on election

spending at least—is predicated on two themes that recur in liberal legal and
political theory concerning the regulation of political finance over the last forty
years. First, the egalitarian model is based on the idea that ‘citizens similarly gift-
ed and motivated [should] have roughly an equal chance of influencing the gov-
ernment’s policy . . . irrespective of their economic and social class.’39 The concept
of equal opportunity of influence on public policy in practical terms means an
equal opportunity to participate in political deliberation. ‘Deliberative equality’ is
a useful term that I use to describe the equal opportunity to participate in politi-
cal deliberation.40 Harper notably highlights deliberative equality as normatively
desirable.41
The greatest threat to deliberative equality is private wealth which, unlike other
politically advantageous attributes such as charisma or eloquence, has an identi-
fiable and self-serving interest. In other words, private wealth is a systemic chal-
lenge to public politics. While this idea is shared by many liberal theorists, it was
expressed most clearly by John Rawls who wrote:
36
See C Feasby, ‘Issue Advocacy and Third Parties in the United Kingdom and Canada’ (2003) 48
McGill Law Journal 11 [‘Issue Advocacy’].
37
Feasby, ‘Egalitarian Model,’ above n 4.
38
Harper, above n 3 at para 62.
39
J Rawls, ‘The Basic Liberties and Their Priority’ in S Darwall (ed) Equal Freedom: Selected Tanner
Lectures on Human Values (Ann Arbor, Mich; University of Michigan Press, 1995) 105 at 175.
40
Feasby, ‘Issue Advocacy,’ above n 36 at 16–21.
41
Harper, above n 3 at paras 63 and 72.
250 Colin Feasby

The liberties protected by the principle of participation [in the democratic process]
lose much of their value whenever those who have greater private means are permit-
ted to use their advantages to control the course of public debate. For eventually
these inequalities will enable those better situated to exercise a larger influence over
the development of legislation. In due time they are likely to acquire a preponderant
weight in settling social questions, at least in regard to those matters upon which
they normally agree, which is to say in regard to those things that support their
favoured circumstances.42

Indeed, it is not a coincidence that the Lortie Commission which performed a

comprehensive review of the regulation of Canada’s democratic system quoted
this passage from Rawls in its explanation of then current and recommended
campaign finance regulations.43
Second, the egalitarian model is premised on an understanding that the state is
not inevitably the enemy of freedom of expression. Indeed, the egalitarian model
assumes that certain restrictions are necessary for the existence of an adequate
public forum for political debate. To emphasise the point, the Court acknowl-
edged Owen Fiss’ argument that:

[In some situations] the state may have to act to further the robustness of public
debate in circumstances where powers outside the state are stifling speech. It may
have to allocate public resources—hand out megaphones—to those whose voices
would not otherwise be heard in the public square. It may even have to silence the
voices of some in order to hear the voices of others. Sometimes there is simply no
other way.44

Prominent in Fiss’ view and that of the Court is that public funding is a necessary
corollary to spending restrictions. The Court explicitly acknowledged this fact
when it pointed out that,

the State can provide a voice to those who might otherwise not be heard. The Act
does so by reimbursing candidates and political parties and by providing broadcast
time to political parties.45

Whereas the Court indicates that state support for political actors is permissible
(even desirable), it is silent on the question of how such support may be allocat-
ed. Indeed, if anything, the implication is that such public support should be tar-
geted at those whose voices would otherwise not be heard in the political debate.
This latter view is consistent with the concept of deliberative equality, though not
necessarily consistent with the current political finance regime.
42
J Rawls, Theory of Justice (Oxford, Clarendon Press, 1972) at 225.
43
Canada, Royal Commission on Electoral and Party Financing, Final Report: Reforming Electoral
Democracy, vol 1 (Ottawa, Canada Communications Group, 1991) (Chair: Pierre Lortie) at 326
[‘Lortie Commission’].
44
O Fiss, The Irony of Free Speech (Cambridge, Mass; Harvard University Press, 1996) at 4; Harper,
above n 3 at para 62.
45
Harper, above n 3 at para 62.
 Political Theory and the Constitutionality of the Political Finance Regime 251

Figueroa v Canada: Extension of the Egalitarian Model?

Whilst Harper is a restatement of the Court’s egalitarian model, Figueroa, which
preceded Harper in time, is in actual fact the next step in the evolution of the
Court’s articulation of its political theory. Figueroa demonstrates that the
Supreme Court believes that deliberative equality is not merely a justification for
spending limits, but also a principle that should generally inform the regulatory
treatment of political parties and, presumably, candidates. Notably, in Figueroa,
the Court prefers the objective of deliberative equality over a countervailing
objection commonly raised against the equal treatment of candidates and politi-
cal parties; namely, that only serious candidates and major parties deserve access
to the full range of benefits because only they have a realistic chance of represent-
ing voters in Parliament.
Figueroa is the Supreme Court’s first political finance case not to deal with
third party election expenditures. Instead, Figueroa deals with the Canada
Elections Act requirements to be registered as a political party. Whilst the re-
gistration of political parties may seem a mundane question, it has important
implications for the political finance regime. Registered party status is the key to
receiving many of the rights afforded to political parties under the Canada
Elections Act and, in particular, benefits offered under the political finance regime.
Among other things, status as a registered political party entitles a political party
to ballot identification, the ability to issue tax receipts to donors between elec-
tions, and the ability to transfer unspent funds between candidates and the party
after an election.46
Miguel Figueroa, the appellant and leader of the Canadian Communist Party,
contended that the requirement that political parties field 50 candidates in an
election to qualify as a registered party violated his democratic rights as a candi-
date, insofar as his party’s inability to access financial incentives available to major
parties undermined his ability to meaningfully participate in the electoral process.
He further contended that the registration requirement undermined the demo-
cratic rights of voters by making it more difficult for small parties to publicise
their views which, in turn, distorted the dissemination of political viewpoints in
favour of the major parties. Figueroa’s claims were based on the theory that sec-
tion 3 and its animating principle, ‘effective representation,’ require all political
parties to be treated fairly and equally. Figueroa’s submission was essentially that
section 3 guarantees deliberative equality in the democratic process.
Figueroa was successful at trial, but was rebuffed in the main by the Ontario
Court of Appeal. To the Court of Appeal ‘effective representation’ described the
end product of the democratic process. If ‘effective representation’ is viewed as an
end rather than a means, then it makes sense for section 3 to be engaged only by
those electoral participants who stand a reasonable chance of election. The Court
of Appeal held that:

46
Figueroa, above n 5 at para 18.
252 Colin Feasby

[T]he purpose of section 3 is engaged only by those political parties that possess the
capacity to aggregate interests on a national level and participate in the governance
of the country subsequent to an election. A party that does not participate in an
election with a view to forming a government, or at least winning a substantial num-
ber of seats in Parliament, is not a party that possesses the capacity to advance the
objective of effective representation. Thus, it is not improper to withhold benefits
from political parties whose level of participation is so minimal as to be incapable
of serving that goal.47

The Court of Appeal’s approach is consistent with the view, and indeed it was
argued before the Supreme Court, that the political finance system should
promote majority governments. Majority governments, it was argued, are norma-
tively desirable because they tend to be more stable and ‘provide more effective
governance than governments that consist of coalitions between or among vari-
ous political parties.’48
The majority of the Supreme Court rejected the government’s position and
held that the quality of the electoral process is more important than the outcome
of the process. The Court explained the inherent importance of participation in
the electoral process in the following terms:

[P]articipation in the electoral process has an intrinsic value independent of its

impact upon the actual outcome of elections. To be certain, the electoral process is
the means by which elected representatives are selected and governments formed,
but it is also the primary means by which the average citizen participates in the open
debate that animates the determination of social policy.49

The Court further elaborated that section 3 guarantees the right of each citizen to
play a meaningful role in the electoral process.50 The Court’s elevation of the value
of meaningful participation over an orderly outcome (ie effective governance)
leads ineluctably to the conclusion that electoral participants—candidates and
political parties—must be treated equally irrespective of their likelihood of suc-
cess. Essentially, if a candidate or political party is to meaningfully participate in
the electoral process, there must be a level playing field or, to put it differently,
deliberative equality.
The right to meaningfully participate in the electoral process seems, in some
respects, to be based upon an expressive theory of law.51 Laws that foster equal par-
ticipation in political discourse contribute to citizens’ dignity and self-worth and
thereby enhance the legitimacy of the political process. Deliberative equality, in

47
Figueroa, above n 5 at para 22.
48
Ibid at para 79.
49
Ibid at para 29.
50
Ibid at para 30.
51
E Anderson & R Pildes, ‘Expressive Theories of Law: A General Restatement’ (2000) 148 University
of Pennsylvania Law Review 1503; C Sunstein, ‘On the Expressive Function of Law’ (1996) University
of Pennsylvania Law Review 2021; R Levy, ‘Expressive Harms and the Strands of Charter Equality:
Drawing Out Parallel Coherent Approaches to Discrimination’ (2002) 40 Alberta Law Review 393.
 Political Theory and the Constitutionality of the Political Finance Regime 253

this respect at least, is analogous to the right to an equal vote.52 The Supreme
Court, however, also offered an instrumental reason for protecting the right of cit-
izens to meaningfully participate in the electoral process:
Large or small, all political parties are capable of introducing unique interests and
concerns into the political discourse. Consequently, all political parties, whether
large or small, are capable of acting as a vehicle for the participation of individual
citizens in the public discourse that animates the determination of social policy.53

In other words, small parties with their unique perspectives add a dimension to
the process of public deliberation that may indirectly result in better governance.
Levelling the playing field for small parties, then, may contribute as much to the
good governance of the country as measures that enhance the prospects of major-
ity government.
Section 3 jurisprudence, as is clear from the preceding discussion, is replete with
concepts and principles, but precious few rules. Nevertheless, what emerges from
Figueroa comes close to being a rule. The Court held that ‘legislation that exacer-
bates a pre-existing disparity in the capacity of the various political parties to
communicate their positions to the general public is inconsistent with section 3.’54
This statement indicates that the Court intends to provide guidance to lower
courts in resolving section 3 cases that has hitherto been lacking. With this in
mind, Part IV of this chapter revisits two prominent provincial appellate cases con-
cerning public funding and allocation of discounted and free broadcasting time.

The Egalitarian Model and the Constitutionality of

Public Funding and the Political Broadcasting Regime

Revisiting Barrette v Canada and the Constitutionality of

Candidate Funding Thresholds
The Structure of Public Funding of Candidates
The Canada Elections Act provides that a percentage of candidate election expens-
es and registered political party election expenses will be reimbursed from the
public purse if certain thresholds are met.55 The provisions governing the
52
See R Dworkin, ‘What is Equality? Part 4: Political Equality’ (1987) 22 University of San Francisco
Law Review 1 at 9, distinguishing between equality of impact (ie voting) and equality of influence
(deliberative equality).
53
Figueroa, above n 5 at para 41.
54
Ibid at para 54.
55
Political parties must receive five per cent of the vote in the electoral districts in which they
endorse candidates or two per cent of the national popular vote in order to qualify for reimbursement
of expenses: CEA, above n 1 s 435. The level of reimbursement was raised from 22.5 per cent to 50 per
cent in connection with the enactment of contribution limits in 2003. The level of reimbursement for
the 2004 election was set at 60 per cent because political parties had little time to adjust to the changes
254 Colin Feasby

reimbursement of candidate expenditures provided that all candidates receiving

at least 15 per cent of the popular vote in their district were entitled to reimburse-
ment of 50 per cent of their election expenditures.56 These thresholds for reim-
bursement may at first glance appear to be a small obstacle for candidates. The
results of the 2000 general election, however, showed that the thresholds were, in
fact, a significant barrier. Indeed, a majority of candidates failed to achieve the
threshold of support required to qualify for reimbursement of election expenses.
In 2002, the Chief Electoral Officer (‘CEO’) released a report entitled
Modernizing the Electoral Process.57 The CEO recommended that the 15 per cent
popular vote threshold for candidates to qualify for reimbursement of election
expenses be lowered to 5 per cent. The CEO recognised that the 15 per cent
threshold is intrinsically flawed and stated that, ‘[t]he existing qualification level
for candidates places more emphasis on public support and less emphasis on
enhancing access to the system.’58 The obvious question that arises upon recom-
mending a reduction in the qualifying threshold from 15 per cent to 5 per cent is:
Why stop there? Why not reduce the threshold to zero? For the CEO, reason for
limiting the availability of reimbursement is the potential burden on public
finances.59 The question is whether this is a reasonable fear.
The information presented in Table 1 suggests that lowering the threshold for
reimbursement to zero would not unduly burden the treasury. Of course, a
change to a zero threshold might alter the spending behaviour of marginal candi-
dates and political parties. Even recognising this possibility, it is hard to see how
to the financing regime: An Act to amend the Canada Elections Act and the Income Tax Act (political
financing) SC 2003, c 19, s 72 (‘CEA 2003’). The reimbursement of political party expenses during the
2000 election are shown in the table below.

Political Party Number of Total Election Limit of Reimbursement

Candidates Expenses Election Expenses

Bloc Quebecois 75 1,968,693 3,383,175 404,402

Canadian Alliance 298 9,669,648 12,638,257 2,167,520
Canadian Action 70 392,108 3,097,545 0
Christian Heritage * 35,126 * 0
Communist 52 13,563 2,264,407 0
Green 111 17,747 4,888,177 0
Liberal 301 12,525,174 12,710,074 2,809,219
Marijuana 73 9,724 3,284,537 0
Marxist-Leninist 84 2,088 3,817,444 0
Natural Law 69 38,304 3,096,518 0
NDP 298 6,334,585 12,584,911 1,423,516
PC 291 3,983,301 12,352,405 875,701
Total 1722 34,990,661 74,117,450 7,680,358

56
CEA, above n 1 ss 464 and 465. The reimbursement amount for candidates was raised to 60% in
2003: CEA 2003 s 49.
57
J-P Kingsley, Modernizing the Electoral Process: Recommendations from the Chief Electoral Officer
of Canada Following the 37th General Election (Ottawa, Elections Canada, 2001) [‘Modernizing the
Electoral Process’].
58
Ibid at s 3.1.1.1.
59
Ibid at s 3.1.1.1.
 Political Theory and the Constitutionality of the Political Finance Regime 255

Political Num- Total Authorised Actual Refund Projected

Party ber of Candidate Limit of (15% threshold) Refund
Candi- Expenses Election (0%
dates ($) Expenses Number Amount ($) threshold)
($) of
Candidates
Bloc 75 4,254,434 5,173,089 69 2,150,314 2,150,314
Quebecois
Canadian 70 313,024 4,765,655 0 0 156,512
Action
Canadian 298 9,514,889 20,288,121 182 4,216,160 4,757,445
Alliance
Communist 52 14,760 3,442,556 0 0 7,380
Green 111 201,801 7,622,028 0 0 100,901
Indep/Unaf- 86 358,486 5,935,689 2 42,581 179,243
filiated
Liberal 301 14,633,510 20,473,830 288 7,036,924 7,316,755
Marijuana 73 6,992 4,966,992 0 0 3,496
Marxist- 84 7,916 5,735,466 0 0 3,958
Leninist
Natural Law 69 4,463 4,692,900 0 0 2,232
New 298 3,954,481 20,279,509 57 1,187,063 1,977,241
Democratic
Progressive 291 4,572,457 19,839,223 87 1,617,459 2,286,229
Conservative
Total 1,808 37,837,213 123,215,028 685 16,250,501 18,918,606

TABLE 1: Reimbursement of Candidate Expenses—2000 General Election60

extending the reimbursement program to all candidates would unduly burden the
public treasury. First of all, Canadian elections are inexpensive as a result of
spending and contribution limits. Second, candidates are only reimbursed 60 per
cent of their expenses. Reimbursement would no doubt be an incentive to
increased expenses, but it would be a limited incentive—especially for candidates
funding their own campaigns—because candidates would remain responsible for
covering 40 per cent of their expenses. Third, political parties allocate their
resources rationally. Political parties will continue to focus spending on races that
are competitive. Candidates of major political parties in electoral districts where
60
All data except projected refunds at zero per cent threshold taken from <www.elections.ca>. Not
all actual refund figures provided by Elections Canada equal 50 per cent. The projected refund at zero
per cent was estimated using the higher of: (a) the actual refund figure for those parties that qualified
for reimbursement; or (b) 50 per cent of total candidate expenditures.
256 Colin Feasby

the party has dim prospects are unlikely to attract the same kind of financial sup-
port from the national party organisation as candidates in districts where the
party is competitive. Fourth, most marginal candidates are unlikely to attract sub-
stantial donations for the same reasons that they are unable to attract substantial
support at the polls. As a result, it will likely be only the exceptional case where an
individual receiving between zero per cent and five per cent or even 10 per cent of
the vote in a constituency would be reimbursed more than a token amount.
Prior to the 2004 general election, Parliament introduced reforms based on the
Chief Electoral Officer’s recommendations. The amendments to the Canada
Elections Act deviated from the Chief Electoral Officer’s recommendations in one
important respect; the threshold for reimbursement of candidates was only low-
ered from 15 per cent to 10 per cent. The apparent reason for setting the thresh-
old at 10 per cent was that in the five party system that prevailed in 2003 when the
amendments were adopted, the government believed that at that level most major
party candidates would stand a good chance of qualifying for reimbursement.61

Reconsidering Barrette v Canada

The threshold for reimbursement of candidate election expenses was challenged
following the 1988 election by a failed New Democratic Party candidate in Quebec.
The action was brought in the name of M Barrette, the failed candidate’s official
agent. The candidate, M Payette, received only 11.89 per cent of the vote in his con-
stituency; short of the 15 per cent of the popular vote required to qualify for
partial reimbursement of election expenditures. Payette testified that he never
expected to win the election, but that he ran because he believed that his party’s
point of view should be put before the electorate for discussion. He went on to
explain that in order to disseminate his message he had to incur costs that, whilst
moderate, were beyond the funds available from the constituency association. In
order to make the payments necessary to publicise his platform, he borrowed funds
anticipating that the reimbursement after the election would be enough to satisfy
this debt. The trial judge accepted that the expectation of reimbursement affected
Payette’s decision to become a candidate as well as the conduct of his campaign.
More importantly, the trial judge found that the partial reimbursement threshold
might affect the decisions of other potential candidates in the future.62
Payette complained that making reimbursement conditional on obtaining a
percentage of the popular vote violated the right to freedom of expression in sec-
tion 2(b) of the Charter, the right to vote in section 3 of the Charter, and the
equality rights in section 15(1) of the Charter. The trial judge found that the
purpose of the 15 per cent reimbursement threshold was ‘to discourage the pro-
liferation of parties and candidates unable to attract an important following’ and
parties and candidates that are ‘ephemeral, marginal, frivolous or insignificant.’63
He went on to observe that:
61
37th Parliament, 2nd Session, Standing Committee on Procedure and House Affairs, (3 April
2003) at 1210.
62
Barrette v Canada (Attorney General) (1992) 14 CRR (2d) 166 (Que Sup Ct) at 178.
63
Ibid at 181.
 Political Theory and the Constitutionality of the Political Finance Regime 257

In theory, each candidate should be afforded an equal opportunity to communicate

his views to the electorate; otherwise there is a danger that the latter will be given a
distorted or incomplete view of the issues. Of course, perfect equality is impossible.
Much will depend upon the capacity of each candidate to use effectively and persua-
sively the opportunities afforded to him, but the law should not contribute to or
aggravate inequalities.64

The trial judge held that the reimbursement threshold ‘tends to discourage some
serious candidates for election from conducting an effective campaign, for fear of
incurring costs that may or may not be subsidised by the government.’65 The trial
judge went on to find that the preferential reimbursement scheme was contrary to
section 3 of the Charter because it denied candidates ‘equal opportunity’ which
the trial judge noted is ‘essential to fairness in elections.’66
The trial decision in Barrette in some respects anticipates the reasoning adopt-
ed by the majority of the Supreme Court in Figueroa. The idea that ‘the law should
not contribute to or aggravate inequalities’ is simply a different way of expressing
the rule in Figueroa that ‘legislation that exacerbates a pre-existing disparity in the
capacity of the various political parties to communicate their positions to the gen-
eral public is inconsistent with section 3.’ Similarly, the idea that candidates have
a right to ‘equal opportunity’ which includes equal access to public funds is con-
sistent with the egalitarian model explained in Harper. The Barrette trial judge
anticipated the Supreme Court’s approach to section 3 challenges by considering
equality arguments relevant to the right to vote and, indeed, the Court’s egalitar-
ian political theory.
McCarthy JA, writing the primary judgment of the Court of Appeal, accepted
the trial judge’s characterisation of the purpose of the reimbursement threshold;
namely, to discourage the proliferation of parties and candidates. And without
any sense of irony, McCarthy JA went on to claim: ‘No one suggests that that pur-
pose as such interferes with the rights guaranteed by section 3.’67 In other words,
the law is designed to discourage participation in elections, but it does not
infringe upon the right to vote or the right to stand for election guaranteed by sec-
tion 3. McCarthy JA was able to take this seemingly absurd position because of his
view on the appropriate constitutional standard for adjudicating equality issues.
McCarthy JA held that if equality arguments are to be considered, the standard
must not differ from that embodied in section 15(1). Essentially, McCarthy JA
held that section 3 does not create a different approach for equality issues that are
peculiar to the democratic process. McCarthy JA opined:
[N]othing in the Charter . . . support[s] the supposition that there are two kinds of
prohibited discrimination, one explicitly prohibited and one implicitly prohibited.
64
Ibid at 181 (emphasis added). A similar view was expressed in the context of a challenge to an up
front funding scheme for Quebec provincial elections that provided funds on a preferential basis to
incumbents: Hébert v Quebec (Procurer Général) [1998] AQ No 3675 (Que Sup Ct) at para 96.
65
Ibid at 182.
66
Ibid at 182.
67
Barrette, above n 7 at 625.
258 Colin Feasby

In other words, if the portions of the Act here in question are unconstitutional it
must be because they infringe not on section 3 or section 2(b) but section 15. They
do not impede the right to vote or to express oneself freely; the question is whether
they encourage with discriminatory purpose or effect the exercise of any of those
rights.68

McCarthy JA went on to hold that:

I am unable to see in the 15 per cent threshold for partial reimbursement of election
expenses any discriminatory purpose or effect within the meaning of section 15 of
the Charter. Unsuccessful candidates who do not obtain at least 15 per cent of the
valid votes cast are not, in my view, a “discrete and insular minority.” Nor are they a
“disadvantaged group in Canadian society.” If the 15 per cent threshold discrimi-
nates against them, such discrimination is not based on any analogous ground. For
the same reasons, the 15 per cent threshold involves no prohibited discrimination
against voters who, if they are more fully informed, might vote differently.69

Having found that no Charter rights were violated by the 15 per cent popular vote
threshold for reimbursement of candidate election expenses, McCarthy JA
declined to undertake section 1 analysis weighing the merit of the state’s objective.
Mailhot JA in a concurring decision considered on a hypothetical basis whether
the law could be upheld under section 1 if it contravened section 3. Mailhot JA
concluded that given the ‘government’s limited financial resources . . . [it] is justi-
fied in limiting the access to a reimbursement to candidates who receive a certain
amount of support from the voters . . .’70
The Court of Appeal’s decision in Barrette is predicated entirely on the under-
standing that section 3 does not provide any substantive protection for equality
interests or, if it does, those interests mirror the protections afforded by section
15(1). In light of Figueroa, the Court of Appeal in Barrette is plainly wrong.
Figueroa, like Barrette, was framed as a constitutional challenge under sections
2(b), 3 and 15(1) of the Charter. The Supreme Court, however, ‘determined that
this matter can be disposed of solely with reference to section 3 of the Charter.’71
As such, Figueroa confirms that section 3 is the proper venue for the considera-
tion of equality issues—such as those in Barrette—pertinent to the democratic
process. The assumption that informed the Court of Appeal’s decision in Barrette
is, therefore, incorrect.
Given the Court of Appeal’s decision in Barrette was based on a now discred-
ited doctrinal approach and acceptance of an anti-democratic and anti-egalita-
rian legislative purpose, the only remaining question is whether the threshold
could be upheld under section 1 if a different state objective was asserted. The
most logical alternative justification for the popular vote threshold is that identi-
fied by the CEO and Mailhot JA—cost. The question of cost has the potential to
68
Ibid at 627.
69
Ibid at 628.
70
Ibid at 632.
71
Figueroa, above n 5 at para 17.
 Political Theory and the Constitutionality of the Political Finance Regime 259

chill judicial fervour. Courts may be unwilling to override Parliament’s judgment

when cost is the basis for limiting access to social programs.72 Courts have recog-
nised that Parliament must make choices between competing social objectives
when allocating finite financial resources. Whilst cost might be a persuasive objec-
tion to judicial activism in some circumstances, the discussion in the preceding
section of this chapter suggests the cost of extending funding at current levels to
all candidates would not result in a significant increase in the total cost of
reimbursements. The safeguards against runaway costs—for example, spending
limits—that are already built into the public political finance regime make cost
containment a state objective unworthy of overriding citizens’ democratic rights.

Revisiting Reform Party v Canada—the Constitutionality of the

Reservation and Allocation of Discounted and Free Broadcast
Time
The Structure of the Political Broadcast Regime
Television is one of the most expensive means of communicating political mes-
sages, but it is nevertheless widely thought to be an effective way of reaching large
numbers of electors. The irregular timing of elections in Canada’s Westminster-
style political system creates the possibility that political parties—except for the
governing party that usually controls the timing of the election—will, as a practi-
cal matter, have difficulty in purchasing television advertising in advance of the
election.73 The Canada Elections Act remedies this perceived problem by requiring
national television and radio networks to provide 390 minutes of radio and tele-
vision time during an election period at their lowest commercial rate to political
parties for election advertising. In addition to the discounted advertising time
reserved, the Canada Elections Act in tandem with the Broadcasting Act74 reserves
free television and radio time that may be used for advertisements or lengthier
political programming by the political parties. The political broadcasting regime
provides that the television and radio networks must reserve an amount of free
time at least equivalent to the amount provided in the previous election. During
the last three elections, the amount of free television broadcast time provided by
the networks has been 214 minutes. Of particular significance, the free time pro-
vided to political parties does not count as an ‘election expense’ and is not includ-
ed when calculating political party spending limits.75 Prior to the Reform Party
case discussed below, the reservation and allocation provisions were complement-
ed by a prohibition on political parties purchasing broadcast time outside the
statutory framework.
72
Ibid at para 66. See also, Nova Scotia (Workers’ Compensation Board) v Martin [2003] 2 SCR 504
at para 109: ‘Budgetary considerations in and of themselves cannot normally be invoked as a free
standing pressing and substantial objective for the purposes of s 1 of the Charter.’
73
Reform Party, above n 8 at 386.
74
Broadcasting Act, SC 1991, c 11, as amended.
75
CEA, above n 1 s 339.
260 Colin Feasby

An independent Broadcast Arbitrator allocates the paid and free advertising

time among the registered parties. The Broadcast Arbitrator is guided in his allo-
cation by the statutory formula set out in section 338. The formula instructs the
Broadcast Arbitrator to give equal weight to

(a) the percentage of seats in the House of Commons held by each of the regis-
tered parties at the previous general election, and
(b) the percentage of the popular vote at the previous general election of each
registered party.

The Broadcast Arbitrator is also to give,

half the weight given to each of the factors referred to in each of paragraphs (a) and
(b) to the number of candidates endorsed by each of the registered parties at the pre-
vious general election expressed as a percentage of all candidates endorsed by all
registered parties at that election.76

New political parties are entitled to the lesser of the smallest amount of time allotted
to a registered political party or six minutes. Subsection 5 provides that the Broadcast
Arbitrator may ‘modify the allocation in any manner he deems fit’ if he considers the
allocation dictated by the formula to be ‘unfair to any of the registered parties or con-
trary to the public interest.’ Section 345(2) provides that the statutory allocation
formula applies to the allocation of free television and radio broadcast time as well.
The allocation system embodied in section 338 has its origins in the informal
system used by the CBC to allocate free time among parties.77 The allocation sys-
tem was codified in the 1958 Broadcasting Act and in 1974 migrated to the
Elections Act where it was applied to the allocation of paid advertising time as
well.78 From 1974 to 1991 the Broadcast Arbitrator allocated paid and free adver-
tising time according to the statutory formula with discretionary deviations from
the formula’s allocation being made on an ad hoc basis. With a legal challenge to
the allocation system pending, in 1992 the newly appointed Broadcast Arbitrator
invited all political parties to offer suggestions as to how he might exercise his dis-
cretion in a systematic fashion to address the inequities of the statutory allocation
formula. All of the political parties except the governing Progressive Conservative
Party rejected strict adherence to the statutory formula. For their part, the
Progressive Conservatives contended that they ‘more than any other group or
individual, are entitled to use the public airwaves.’ This windy pronouncement
was justified in the following way:

[I]t is reasonable that the party in government should be provided with ample
opportunity to defend its record in government and to outline its plans to build on

76
CEA above n 1 s 338.
77
J LaCalamita, ‘The Equitable Campaign: Party Political Broadcasting Regulation in Canada’
(1984) 22 Osgoode Hall Law Journal 543 at 553.
78
Ibid at 553.
 Political Theory and the Constitutionality of the Political Finance Regime 261

that record. It is equally reasonable then, to expect that the party in official opposi-
tion, the party charged with the parliamentary responsibility for challenging the
record and the plans of the governing party to be provided with the second largest
opportunity to summarise its criticisms and offer alternatives. Lastly, other opposi-
tion and non-parliamentary parties could then reasonably expect to be allocated
sufficient but less time to outline their platforms and policies.79

The Broadcast Arbitrator then considered three alternatives to the statutory for-
mula. The first alternative suggested dividing the available time allotment equally
among all of the registered parties. Equal allocation approach was rejected
because it was fundamentally inconsistent with the statutory formula. Moreover,
the Broadcast Arbitrator observed that allocation of significant amounts of paid
time to the smaller parties would result in that time going unused. The second
alternative, proposed by the Reform Party, is really a variant of the equal alloca-
tion approach. The maximum approach, as the Broadcast Arbitrator termed it,
would have allowed any party to purchase up to 110 minutes of time at the dis-
counted rate. The problem with the maximum approach was that it was not only
inconsistent with the statutory formula, it would require the reservation of more
than the 390 minutes reserved by the Canada Elections Act. The alternative adopt-
ed by the Broadcast Arbitrator is the formula promoted by the Liberal and New
Democratic Parties. This approach, called the one-third minimum approach, allo-
cates 130 of the 390 reserved minutes equally among all parties. The remaining
260 minutes are then allocated according to the statutory formula. The Broadcast
Arbitrator has employed the one-third minimum approach for every allocation
since 1992. The Broadcast Arbitrator’s allocation of paid time in election years for
the 1993, 1997, 2000, and 2004 federal general elections is set out in Table 3.

Reconsidering Reform Party of Canada v Canada

The reservation and allocation of paid and free broadcast time was challenged by
the Reform Party prior to the 1993 federal general election. At the time of the legal
challenge, the Reform Party only had one member of Parliament who had been
elected during a by-election. Despite being a relatively new party, prior to the 1993
federal general election the Reform Party was running a major party-type cam-
paign with substantial funding and candidates in all of the electoral districts in
Manitoba, Saskatchewan, Alberta and British Columbia. The Reform Party, how-
ever, was only given the right to purchase 17 minutes of discounted television and
radio advertising and a corresponding amount of free time by the Broadcast
Arbitrator using his one-third minimum approach.
The Reform Party challenge was principally to the allocation of discounted and
free broadcast time and the prohibition on purchase of broadcast time outside
the statutory framework. The Reform Party contended that the allocation formu-
la, even as amended by the Broadcast Arbitrator, unjustifiably gave weight to
79
Broadcasting Arbitrator, Reasons for Decision: 1992 Allocation of Paid Time (31 December 1992) at
8. Available at <www.elections.ca>.
262 Colin Feasby

Party 1993 1997 2000 2004 TOTAL

Liberal 78:00 118:00 113:00 122:30 431.30
Progressive Conservative 116:00 34:00 48:00 – 198.00
New Democrat 55:00 26:00 40:30 39:00 160.30
Bloc Quebecois 5:00 43:00 40:30 41:00 129.30
Conservative – – – 88:30 88.30
Reform 17:00 51:00 – – 68.00
Green 15:00 13:00 15:30 20:30 64.00
Canadian Alliance – 59:30 – – 59.30
Marxist-Leninist 5:00 12:00 14:30 18:30 50.00
Christian Heritage 16:00 13:00 14:30 6:00 49.30
Communist 14:00 6:00 6:00 17:30 43.30
Natural Law 5:00 17:00 17:00 – 39.00
Canadian Action – 6:00 14:30 18:00 38.30
Libertarian 16:00 13:00 – – 29.00
Party for the Commonwealth of Canada 14:00 13:00 – – 27.00
Marijuana – – 6:00 18:30 24.30
Option Canada 14:00 – – – 14.00
Canada Party – 13:00 – – 13.00
Collective Group – 6:00 – – 6.00
Rainbow Coalition – 6:00 – – 6.00
Canadian Party for Renewal 5:00 – – – 5.00
Confederation of Regions Western 5:00 – – – 5.00
National Party of Canada 5:00 – – – 5.00
Nationalist Party of Quebec 5:00 – – – 5.00
Total 390:00 390:00 390:00 390:00

TABLE 3: Allocation of Paid Television and Radio Broadcast Time for Purchase—1993–2004
80
Federal General Elections

political parties’ performance in the last election with no regard to changes in

popular support since the last election The allocation formula, therefore, discrim-
inated against emerging parties such as the Reform Party. The impact of the allo-
cation formula was crystallised by the prohibition on purchase of time outside the
statutory framework. Essentially, the discounted and free political broadcasting

80
Broadcasting Arbitrator, Reasons for Decision: 1993 Allocation of Paid Time (3 August 1993);
Reasons for Decision: 1997 Allocation of Paid Time (21 April 1997); Reasons for Decision: 2000 Allocation
of Paid Time (20 October 2000); Reasons for Decision: 2004 Reallocation of Paid Time (16 April 2004).
All available at <www.elections.ca>.
 Political Theory and the Constitutionality of the Political Finance Regime 263

regime discriminated against emerging parties and prevented them from mitigat-
ing the impact of the discrimination.
The government responded to the Reform Party’s position by asserting that:
(1) broadcasting is an important means of political communication; (2) broad-
cast time is limited and sometimes unavailable; (3) broadcasters might favour the
messages of certain parties over others; (4) broadcasting is expensive and it is in
the public interest that costs be controlled so that one party does not out bid
others; and (5) providing discounted and free broadcast time contributes to the
overall control of election expenditures.81 The essence of the government’s sub-
mission was that the discounted and free political broadcasting regime was
designed to mitigate the distorting effects of wealth on the political process. In
other words, the provision of discounted and free broadcasting time to political
parties was part and parcel of what is now called the egalitarian model. The gov-
ernment also contended that the unequal allocation was necessary to prevent the
allocation of precious broadcasting time to ‘single issue’ or ‘regional’ political par-
ties.82 Broadcast time must be allocated principally to the political parties with a
reasonable chance of forming the next government so that voters can inform
themselves of the policies of, and decide among, the major contenders.
McFadyen JA, writing for the majority of the Alberta Court of Appeal, held
that the prohibition on the purchase of broadcast time outside the statutory
framework infringed the right to freedom of expression and was not justified
because it was not integral to political broadcasting regime. With respect to the
reservation and allocation of discounted and free broadcasting time, however,
McFadyen JA accepted the government’s position. She found that the paid and
free political broadcasting regime addressed a pressing and substantial objective;
namely, ensuring ‘the availability of broadcast time to political parties during fed-
eral election campaigns and the control of costs . . . .’83 She went on to find that the
unequal allocation of reserved time was not only reasonable, but necessary, hold-
ing that:

[E]qual allocation of these limited resources is not feasible and is not in the public
interest which requires that the public be informed of the major issues in an election
and the position being taken by political parties which stand a realistic chance of
forming a government. While other voices and interests have the right to be heard,
lesser access to the free and purchasable time, which broadcasters are required by
legislation to provide, is a reasonable and proportionate response to the problem.84

McFadyen JA’s conclusions can be assailed on several fronts. To begin with, she
followed the logic of the Quebec Court of Appeal in Barrette. To the extent that
the claim by the Reform Party was an equality claim—essentially a claim for equal
treatment in the allocation of discounted and free broadcast time—she held that
81
Reform Party, above n 8 at 386.
82
Ibid at 387.
83
Ibid at 386.
84
Ibid at 387.
264 Colin Feasby

the threshold to be met was that prescribed by section 15(1) of the Charter, not
section 3. As discussed previously in the context of Barrette, this doctrinal
approach is a fundamental error in light of Figueroa. McFadyen JA found that the
Reform Party did not enjoy protection under section 15(1) and that the individ-
ual members of the Reform Party were not discriminated against by the unequal
allotment of discounted and free time under the broadcasting regime. McFadyen
JA opined that:

I do not accept that there is unfairness to or discrimination against individual mem-

bers of political parties by unequal access by political parties to broadcast time. I do
not accept that a political party, which enjoys limited support of a small number of
individuals who wish to promote a specific interest or to ridicule the process, is the
equal of a political party which has the support of a far greater number of voters
and genuinely strives to provide information about its program for governing the
country.85

McFadyen JA went on to note that any unfairness to emerging political parties

could be addressed by the Broadcast Arbitrator who maintains discretion to devi-
ate from the statutory formula.
McFadyen JA also refused to accept that the reservation and allocation provi-
sions—once freed from the prohibition on purchase of additional time outside the
statutory framework—violated either section 2(b) or section 3 of the Charter.
Nevertheless, McFadyen JA went on to consider hypothetically whether the reserva-
tion and allocation provisions could be saved under section 1 if she was incorrect
and they did, in fact, violate section 2(b) or section 3. McFadyen JA first considered
the purpose of the broadcast regime. She adopted the trial judge’s conclusion that
the allocation provisions ‘assured that the limited time available would not be undu-
ly occupied by groups who had no interest in or chance of succeeding in the elec-
tion.’86 This is the same rationale that was behind the provision limiting the ability
to issue tax receipts to registered parties that was discredited in Figueroa.
Madam Justice Conrad, writing for the minority of the Court in Reform Party,
offered a criticism of the majority’s position from an egalitarian perspective.
Unlike McFadyen JA who accepted the Government’s characterisation of the pur-
pose of the legislation, Conrad JA questioned whether, in fact, the political broad-
casting regime was truly motivated by a desire to mitigate the influence of wealth
on the political process:

[T]he challenged scheme creates . . . the very inequity which it is feared wealth would
create; favouritism and free time to the established parties. Moreover, the free time
does not need to be accounted for in election expenses. Thus it cannot be a lack of
equality, or fairness, created by wealth that is the objective of this particular legisla-
tion, because the allocation formula is inconsistent with such a goal.87

85
Ibid at 390.
86
Ibid at 378.
87
Ibid at 409.
 Political Theory and the Constitutionality of the Political Finance Regime 265

Conrad JA’s point is powerful, but she overreaches. The allocation formula does
not show that the political broadcasting regime lacks an egalitarian purpose.
Instead, the allocation formula is an example of how high-minded interventions
in the democratic process can be distorted by Parliamentary perceptions of the
public interest. Without going so far as to attribute self-serving motives to elected
representatives, it is reasonable to suppose that Parliamentarians may unjustifi-
ably conflate their self-interest and the public interest. Indeed, Conrad JA later
observed that legislative history showed that, ‘Parliament wanted to ensure there
would be free time and that all broadcast time would be controlled by a reserva-
tion and allocation system favouring the incumbents.’88 Conrad JA likened the
impact of the broadcasting regime on political discourse to the impact of a gerry-
mander on the right to vote.89
Undoubtedly, the Parliamentary self-interest that Conrad JA identified as being
behind the broadcast regime’s allocation formula also informed the statutory
requirement that political parties have 50 candidates to be ‘registered’ and to issue
tax receipts that was considered in Figueroa. The rule that emerged from
Figueroa—that legislation may not exacerbate a pre-existing disparity in the
capacity of political parties to communicate with the public—will address the
problem of legislative self-interest in many circumstances. Remarkably, the broad-
cast time allocation formula, despite its obvious flaws, does not necessarily con-
travene the rule in Figueroa. The allocation formula replicates, not exacerbates,
pre-existing disparities between political parties. Giving McFadyen JA the benefit
of the doubt, this may be what she meant when she found that the allocation for-
mula did not discriminate against small political parties.
One of the problems that emerges from the majority and minority reasons in
Reform Party is that the Westminster Parliamentary system together with the diffi-
culty in obtaining prime broadcasting time on short notice at a reasonable price
makes it difficult to create an effective and fair means of allocating discounted and
free broadcasting time. If there is no reservation and allocation of broadcast time,
there is the risk that only the party in government, which usually controls the tim-
ing of an election, will be able to obtain prime broadcasting time. Accordingly, the
absence of some form of political broadcasting regime may be worse than the
imperfect one that exists. There are only two real alternatives to the current alloca-
tion formula. First, broadcasting time could be allocated quarterly or even month-
ly based on an opinion poll conducted for that purpose. This approach would not
address Conrad JA’s concern about replicating disparities in wealth, but it would
substantially address the concern about discrimination against emerging political
parties. Second, broadcasting time could be allocated equally to all political parties
irrespective of their past performance or current prospects. This approach would
address Conrad JA’s concern that an allocation formula not echo the disparities in
wealth between the parties, but might invite pragmatic objections.

88
Ibid at 418.
89
Ibid at 424.
266 Colin Feasby

Conclusion: The Egalitarian Model and Competition

The Supreme Court is clearly committed to ensuring that the egalitarian model of
election regulation enacted by Parliament is true to the political theory that
inspired it. The egalitarian model as presently conceived, however, is impover-
ished by a lack of attention to the role of competition in the political process.
Competition is normatively desirable in the political process because when chal-
lengers are competitive they either bring renewal by defeating incumbents or,
when they fail, incumbents are pushed to be better candidates and representa-
tives.90 Moreover, competition raises the level and intensity of political discourse
and cannot help but enhance citizens’ participation in the political process. By
way of contrast, lack of political competition breeds complacency and contempt
for the democratic process. As a result, regulations of the political process should
promote, not inhibit, competition. Too often, however, competitive pressures can
distort the regulation of the political process. As Conrad JA pointed out in her dis-
sent in Reform Party, regulations adopted by Parliament can favour incumbents
and operate as entry barriers to the political process.
One of the central tenets of the political theory that underpins the egalitarian
model is that the state is not to be inherently distrusted. Indeed, the state has a role
in facilitating the equal participation of all citizens in the political process. The
Court is right to accept as a matter of theory that the state can act to promote egal-
itarian objectives; however, there are clear warning signs that the Court should
not turn a blind eye to the possibility that political finance regulations can reflect
the self-interest of parliamentarians in being re-elected. Indeed, the idea that
some participants in the electoral process are more legitimate than others is a
recurring example in the cases discussed in this chapter of Parliament’s perspec-
tive as a participant in the electoral process rather than an impartial rule-maker.
Moreover, important parts of the political finance regime have anti-competitive
aspects. Public funding by way of reimbursement, for example, favours those can-
didates and parties who can finance election campaigns up front. Anti-competi-
tive effects can also be identified in the political broadcasting regime and political
party expenditure limits which are determined with reference to the previous
election. These measures institutionalise historic advantages and help to perpetu-
ate the status quo. Not surprisingly, some scholars who argue for increased aware-
ness of the impact of political competition on the regulation of the democratic
process contend that political finance regulations must be subjected to strict
scrutiny.91
The question going forward, then, is whether the egalitarian model is inconsis-
tent in that it appears to require both a deferential approach and strict scrutiny.
Whilst it is a subject that deserves its own chapter, it can be posited that an
90
R Briffault, ‘Public Funding and Democratic Elections’ (1999) 148 University of Pennsylvania Law
Review 563 at 569.
91
S Issacharoff & R Pildes, ‘Politics as Markets: Partisan Lockups of the Democratic Process’ (1998)
50 Stanford Law Review 643 at 688–90.
 Political Theory and the Constitutionality of the Political Finance Regime 267

approach to judicial review may be developed that is not intrinsically hostile

to political finance regulation, but, at the same time, is capable of subjecting
Parliament’s motives to close examination. The egalitarian justification for such
an approach can be found in the dissenting reasons of Conrad JA in Reform
Party—the advantages of incumbency overlap to a significant degree with the
advantages of wealth. In other words, regulations that favour incumbents will in
many cases favour the candidate or party with the most financial resources.
Conrad JA’s view is much the same as that of John Rawls who wrote that,

Political power rapidly accumulates and becomes unequal; and making use of the
coercive apparatus of the state and its law, those who gain the advantage can often
assure themselves of a favored position.92

Conrad JA’s and Rawls’ approach is consistent with the Court’s political theory
and provides a foundation for the Court to adapt its approach to judicial review
without undermining the egalitarian model.

92
J Rawls, A Theory of Justice, Revised Edition (Cambridge, Mass; Belknap Press, 1999) at 199.
 13
Elections, Democracy and Free Speech:
More at Stake than an Unfettered
Right to Advertise
JANET L HIEBERT

ALL DEMOCRATIC POLITICAL communities must establish fair election rules

to ensure that the electoral processes and the outcomes generated are legitimate.
Unlike the obvious requirement of ensuring that all adult citizens are entitled to
vote,1 that the vote is free from intimidation and violence and that turnout is
robust, the criteria for fair elections raises a number of philosophical quandaries.
Amongst the most important of these is what role should money play in elections?
Specifically, what balance should be struck between (i) the ability of individuals
and groups to spend money on election advertising to promote issues or to spend
money on advertisements that support or oppose particular candidates and par-
ties, and (ii) the opportunity of citizens to participate in the election process on
equal terms, given unequal access to the monetary resources required for political
advertisements?
Canada has regulated the federal election spending of candidates and parties
since 1974 in an effort to promote equality in citizen participation. But the sus-
tainability of this regulatory framework has been in jeopardy almost since its
inception because of a number of successful constitutional challenges to one
essential element of the electoral regime: restrictions on ‘third party’ or what will
be referred to in this chapter as ‘independent expenditures’ (the election spending
of individuals or groups other than registered candidates and parties).2 Trial and
provincial appeal court judges have repeatedly ruled that limits on independent
expenditures are unconstitutional. In so doing, they have adopted a narrow view
of the relationship between democratic principles and election rules, focusing on
whether the state can demonstrate that actual harm would arise if independent
1
This claim may be contested because many believe that it is legitimate to ban prisoners from vot-
ing. However, the Supreme Court of Canada has ruled that such prohibitions are unconstitutional. See
Sauvé v Canada (Chief Electoral Officer) [2002] 3 SCR 519.
2
I prefer the term ‘independent expenditures’ because the term ‘third party spending’ is confusing
in Canada’s multi-party political system.
270 Janet L Hiebert

expenditures were not subject to spending limits. But in reaching this conclusion,
the relevant judges have not only mischaracterised the purpose of the impugned
legislation, they have also failed to acknowledge a rival and, arguably, more robust
model of democracy that emphasises equality of citizens: a goal that depends
upon regulating the amount of all forms of election spending.
Although limits on independent expenditures have had a ‘high mortality rate’3
at the trial and provincial court of appeal levels, the Supreme Court of Canada in
2004 upheld their legitimacy in Harper v Canada (Attorney General).4 If there is
now any lingering doubt about the stability of this regulatory regime, the reason for
this is entirely political. At the time of writing, the Official Opposition in the feder-
al Parliament is headed by Stephen Harper, the very individual who launched the
latest constitutional challenge to limits on independent expenditures while serving
as president of the National Citizens’ Coalition (NCC). The NCC, a right-wing
group that advocates ‘freedom through less government’, has a history of challeng-
ing the constitutional validity of limitations on independent expenditures, and has
characterised the Supreme Court decision as ‘a tragic day in Canadian democracy.’5
Harper, now resigned from the NCC and leader of the Conservative Party stated
publicly that the Supreme Court had made a ‘terrible mistake’ in upholding limits
on independent expenditures,6 and while campaigning in the 2004 federal election
promised that if elected his government would allow Canadians to disseminate
their views during elections—a decision that would require repealing the legisla-
tion.7 His criticism of this Supreme Court decision, which is characterised by con-
siderable deference to Parliament (discussed below), appears extremely hypocriti-
cal in light of Harper’s public denouncement of the Supreme Court for being gen-
erally too activist in its interpretation of the Canadian Charter of Rights and
Freedoms (from herein Charter) and his campaign promise to reduce judicial
activism by appointing judges who are more deferential to Parliament.8 In the 2004
federal election that was held shortly after the Supreme Court verdict, the incum-
bent Liberal government was reduced to minor status, suggesting that the future of
the regulatory framework for election expenses cannot be taken for granted.
This chapter will discuss the judicial treatment of this issue and assess the impli-
cations of judicial review for the normative objectives of the election regulatory
framework. This analysis is important both to understand the role of the courts in

3
This characterisation is borrowed from the majority Alberta Court of Appeal ruling in Harper v
Canada (Attorney General) (2002) 14 Alta LR (4th) 4 at para 4.
4
Harper v Canada (Attorney General) [2004] SCC 33.
5
National Citizens Coalition, ‘NCC Battles Gag Laws’; <http://www.morefreedom.org/NCCLive/
campaigns/campaignsArticle.jsp?PageID=4&ArticleID=130>, (21 July 2004).
6
The Conservative Party of Canada was officially formed on 8 Dec 2003, after the merger of the
Alliance and Progressive Conservative parties.
7
‘The Conservatives and the Judges’ The Globe and Mail (Toronto), 21 June 2004,
<http://www.globeandmail.com/servlet/ArticleNews/TPPrint/LAC/20040621/EJUDGE21/TPComme
nt/> (21 July 2004).
8
This campaign promise was reported in the above story, and prompted considerable election
commentary on what the election of a Conservative government would mean for the evolution of the
Charter.
 Elections, Democracy and Free Speech 271

resolving this issue and to assess critics’ opposition to limits on independent

expenditures during federal elections.

Regulating Election Costs

The central purpose of limiting independent expenditures is pursuit of equality

amongst citizens in their election participation. This normative goal is sought,
primarily, by regulating the amount of money that candidates and parties can
spend during the election campaign, in conjunction with a system of partial pub-
lic funding of candidate and party election costs.9 Limiting independent expendi-
tures is an essential but ancillary element of this regulatory framework.
In restricting the amount of money that can be spent in elections, the regulato-
ry framework is premised on the assumption that disparity in resources affects cit-
izens’ capacity to participate in a fair and equitable manner. Limits on campaign
spending, along with partial reimbursements for election costs, promote equality in
citizen election participation by preventing elections from becoming so exorbitant-
ly expensive that only those who are wealthy, or have support from wealthy donors,
can contest office in a meaningful way. By restricting the cost of elections, candidate
and party spending limits also release elected officials from their dependency on
wealthy donors and, with that, liberate them from having to cater to the demands
of organised interests that may conflict with constituents’ or public interests. These
spending limits promote equality in citizen participation in another way as well, by
preventing those who are wealthy from dominating electoral discourse. They pre-
vent wealthy individuals or groups from purchasing large quantities of commercial
advertising to promote the issues they consider important, or draw attention to the
candidates they support or oppose, while the majority of citizens remain silent
because of their inability to purchase comparable opportunities for speech.
The central element of this regulatory framework, spending limits for candi-
dates and parties, has never been constitutionally challenged. Nevertheless, the
difficulty of successfully defending limits on independent expenditures in lower
and provincial appeal courts had cast serious doubt on the continued viability of
the entire regulatory framework. Why the issue of regulating independent expen-
ditures was so important is because their fate would almost certainly have deter-
mined the viability of the broader goal of promoting equality by controlling
candidate and party election spending. It is highly unlikely that the objective of
controlling the election expenses of candidates and parties could be sustained
indefinitely, if independent expenditures continued to be unregulated. Candidates
were particularly vulnerable to unregulated independent expenditures. What
made them so vulnerable was the potential for their modest levels of permitted
spending to be matched or exceeded by independent expenditures. For example,
candidates in the Canadian general election of 2004 were legally entitled to spend
9
The public funding dimension has recently been changed, as will be discussed below.
272 Janet L Hiebert

between $51,854.63 and $83,471.30 depending on the size of their electoral dis-
tricts.10 If independent expenditures were to target candidates in a negative manner,
candidates would be placed in an unfair position because their own spending lim-
its would constrain their ability to purchase advertising to reply. Alternatively, inde-
pendent expenditures could be used for supportive parallel campaigns to augment
what a candidate was legally entitled to spend. Thus, if this gap in the regulatory
framework were to persist, the likely result would be unenforceable spending limits.
Quite apart from the issue of whether candidate or party spending limits
would be enforceable if independent expenditures were not also regulated, was the
question of whether they could be legally sustained. It is highly unlikely that can-
didates or parties would have continued to accept the constitutional validity of
their own spending limits, particularly if they believed that their election chances
were being hurt by this incongruity in the regulatory rules for election spending.
If candidate or party spending limits were themselves challenged as an unconsti-
tutional violation of freedom of expression, it is difficult to imagine that the judi-
ciary would have looked favourably upon a regulatory arrangement that was so
incoherent as to be manifestly unfair. The illogical asymmetry that would exist
from restricting candidate or party spending but not restricting independent
expenditures, would have rendered the entire electoral regulatory regime
extremely vulnerable from a constitutional perspective.

Constitutional Challenges to Regulating Independent

Expenditures

The Canadian Parliament has on four different occasions passed legislation that
regulated independent expenditures during federal election campaigns; each of
the last three initiatives was motivated by the need to respond to a judicial deci-
sion that either negated the effect of the restriction or, after the Charter was
adopted in 1982, rendered it unconstitutional for violating freedom of expression.
Limits on candidate and party spending passed in 1974 were accompanied by
a prohibition on other individuals or groups from spending money to promote or
oppose a candidate or party. The only exception to this prohibition was if these
independent expenditures were incurred ‘in good faith’ for the purpose of gaining
support for an individual’s views on an issue of public policy, or to advance the
aims of a nonpartisan organisation. But within a few years it became apparent
that this ‘good faith’ defence was not enforceable because it could be invoked for
ostensibly partisan purposes.11 In 1983 the federal Parliament passed legislation to
10
Elections Canada, General Election 2004, ‘Final Candidate Election Expenses Limits’, <www.elec
tions.ca>. (21 July 2004).
11
The ineffective nature of this defence became clear after an individual was acquitted of violating
the law despite not having any articulated policy position, and advocating a direct partisan message
not to vote ‘Liberal’. R v Roach, unreported, (Judicial District of York, Ont Prov Ct (Crim Div) 24 Oct
1977)), aff ’d (1978), 25 O (2d) 767 (Co Ct).
 Elections, Democracy and Free Speech 273

redress this situation and banned all forms of independent expenditures. This leg-
islation was soon subject to litigation, was declared unconstitutional in Alberta,
and was not enforced anywhere else in the country.12 The third legislative attempt
to control independent expenditures, in 1993, introduced a $1,000 spending limit
for partisan advocacy, while imposing no restriction on issue advocacy. Like the
earlier ban on independent expenditures, this legislation was soon declared
unconstitutional at trial,13 a decision that was upheld by the Alberta Court of
Appeal14 and was not appealed further. However, in an unrelated decision,
the Supreme Court of Canada specifically disapproved of the Alberta Court of
Appeal’s ruling.15 The fourth federal attempt to regulate independent expendi-
tures, (the current legislation passed in 2000), was declared unconstitutional at
the trial level,16 a decision upheld by the Court of Appeal,17 but reversed on appeal
by the Supreme Court.18 These restrictions on independent expenditures, which
have now been declared constitutional by the Supreme Court, establish strict
spending limits for individuals and groups but also for the first time impose a
requirement that groups register and, depending on the level of their spending,
submit audited accounts of their expenditures. The legislation limits independent
expenditures, by either individuals or groups, to a maximum of $150,000 nation-
ally, in which no more than $3,000 can be spent in any electoral district, to
promote or oppose the election of candidates by naming them, showing their like-
nesses, identifying them by their respective political affiliations or taking a posi-
tion on an issue with which candidates are particularly associated.19
Canada has held six federal elections (1984, 1988, 1993, 1997, 2000 and 2004)
in which independent expenditures have been regulated only twice (during the
last two elections).20 With the exception of the 1988 election, the other elections
where independent expenditures were not regulated did not result in substantial
levels of individual or interest group election spending. Many believe the 1988
election, which had unprecedented levels of independent expenditures, was an
aberration. What distinguished this election from others was both the promi-
nence of a single issue—Canada’s Free Trade Agreement (FTA) with the United
12
National Citizens’ Coalition v Canada (Attorney General) [1984] 5 WWR 436 (Alta QB).
13
Somerville v Canada (Attorney General) (1993) Oral judgment (Alta QB 25 June) J McLeod.
14
Somerville v Canada (Attorney General) (1996) 136 DLR (4th) 205 (Alta CA).
15
Libman v Quebec (Attorney General) [1997] 3 SCR 569 at 619.
16
Harper v Canada (Attorney General) (2001) 93 Alta LR (3d) 281.
17
Harper v Canada (Attorney General) (2002) 14 Alta LR (4th) 4.
18
Harper v Canada (Attorney General) [2004] SCC 33.
19
The legislation uses the term ‘third party’ spending and defines a third party as an individual, cor-
poration or a group. A group is defined as an unincorporated trade union, trade association or other
group of persons acting together by mutual consent for a common purpose.
20
Independent expenditures were regulated only during the last three weeks of the 2000 election.
On 22 Oct 2000, an election writ was issued for an election date of 27 Nov 2000. Stephen Harper
applied to the same trial judge who had earlier declared the legislation unconstitutional, to seek an
injunction that would restrain the Chief Electoral Officer of Canada and the Commissioner of Canada
Elections from enforcing limits on independent expenditures. This injunction was granted [2000] AJ
No 1226 (QL), and was upheld by the Alberta Court of Appeal [2000] AJ No 1240 (QL). On 10 Nov,
the Supreme Court granted a stay of the injunction [2000] 2 SCR 764. Spending limits were in force
for the remainder of the election.
274 Janet L Hiebert

States—and the fact that the two leading political parties could be distinguished
according to whether they supported or opposed the FTA. Only one political
party, the governing Progressive Conservative Party (PC), supported the FTA.
Consequently, it was possible to infer from issue-oriented advertisements that
promoted free trade, that the message conveyed support for the PC party.21 But
while the amount of money spent by independent expenditures favoured one side
of the FTA issue, no empirical evidence suggests that this spending had an effect
on the election outcome.
Few scholarly studies have been undertaken to monitor independent expen-
ditures in elections or to assess how they influence voters’ behaviour. The most
systematic attempt was conducted in relation to the 1988 election. The author
of this study, political scientist Richard Johnston, sought to measure the effects
of independent expenditures (in newspaper advertising) on voters’ intent. For
this assessment he used data provided by the Royal Commission on Electoral
Reform and Party Financing (Lortie Commission, which was established in
November 1989). Johnston initially concluded that independent expenditures
might have helped increase intentions to vote for the PC party late in the 1988
campaign, although not enough to explain the entire gap in the popular vote
between the PC and Liberal parties.22 But upon subsequent review, Johnston
revised his opinion, concluding that the net impact of independent expendi-
tures related to the FTA was null.23 In his revised opinion, ‘third-party advertis-
ing coefficients defy substantive interpretation: some are large and significant
but the pattern is offsetting and the total coefficient effectively zero.’24 A study
was also done that recorded independent expenditures in the 1993 election. But
unlike the 1988 election, no attempt was made to evaluate the effects of this
spending on election behaviour. The study of 1993 election expenses, which

21
In that election, the estimated amount of advertising in the form of independent expenditures
was $4,729,104. The overwhelming majority ($3,638,904) was spent promoting free trade. In compar-
ison, the amount of political advertising by the PC party was $4,716,737, combined with $7,462,877
by PC candidates, which meant that for every advertising dollar the party and candidates spent, 30
cents of independent expenditures were also spent on the most important issue to that party and its
candidates. This estimation understates the actual amount of spending and was based on interest
group advertising for the entire election period in 14 newspapers, supplemented by information
provided by some of the interest groups involved. See J Hiebert, ‘Interest Groups and Canadian Federal
Elections’ in FL Seidle (ed), Interest Groups and Elections in Canada, Research Studies, (Toronto,
Dundurn Press, 1991) 20–23.
22
R Johnston ‘The Volume and Impact of “Third-Party” Advertising in the 1988 Election’ Memo to
the Royal Commission on Electoral Reform and Party Financing (unpublished, 1990).
23
N Nevitte has interpreted Johnston’s revised opinion as meaning that independent expenditures
had no effect on the 1988 election. But Bakvis and Smith disagree, and draw upon Johnston’s original
study that suggested ‘while it is true that the data disclose nothing firm about the effects of third party
advertising, still from a social science perspective it would be unwise to reject altogether the possibili-
ty of such effects’: Bakvis H and J Smith, ‘Third-Party Advertising and Electoral Democracy: The
Political Theory of the Alberta Court of Appeal in Somerville v Canada (Attorney General) [1996]’
(1997) 23 Canadian Public Policy 164 at 171.
24
R Johnston et al, Letting the People Decide: Dynamics of a Canadian Election (Montreal, McGill-
Queen’s University Press, 1992) 163.
 Elections, Democracy and Free Speech 275

focused principally on newspaper advertisements, revealed independent expen-

ditures of $235,000.25
The validity of restricting independent expenditures has been subject to debate
almost from the time such measures were first implemented three decades ago.
Critics argue that restrictions on independent expenditures stymie the articula-
tion of ideas at the most important time in a political cycle, the election contest,
and believe that the governmental and parliamentary support for them has been
based entirely on self-interest: to insulate established parties from public scrutiny
and criticism. Many who are critical of limits on independent expenditures reject
the premise that they are necessary to protect the integrity of candidate and party
spending limits. They consider the only compelling reason to restrict independ-
ent expenditures is if these expenditures would otherwise harm the political
process, but argue no evidence of this problem exists. For example, Brian Tanguay
and Barry Kay conclude that not only is there no substantive evidence to justify
severe restrictions of independent expenditures, but that institutional differences
between Canada and the United States make it unlikely that interest groups will
present the same kind of threat to electoral democracy in Canada as they produce
in the United States.26 Alternatively, some argue that if the integrity of candidate
and party spending limits is dependent upon restricting independent expendi-
tures, all spending constraints should be removed. Independent expenditures
force candidates and parties to address issues that may otherwise be neglected or
to respond to criticism of their positions or records. Thus protecting independent
expenditures is important for citizens’ right to freedom of expression and to pro-
vide society with a more informed citizenry.27
But critics of limits on independent expenditures cannot possibly anticipate
how their removal would affect election behaviour. As suggested above, it is
unlikely that candidates or political parties would continue to accept the legitima-
cy of their own spending limits, particularly if these left them unable to fully
respond to negative advertisements or if they perceived that their partisan rivals
were being advantaged by favourable advertisements paid for by independent
expenditures. Moreover, if elections were to become laissez faire contests in terms
of how much money candidates and parties could spend, this would require
25
The low level may be explained, in part, by uncertainty about the legality of independent expen-
ditures. At the time of the election, legislation was in place that restricted independent expenditures to
$1,000. But the status of this legislation was uncertain because it was subject to constitutional chal-
lenge. A ruling that the legislation was unconstitutional was being appealed to the Alberta Court of
Appeal during the election campaign. This uncertainty about the status of the legislation led to the
decision by Elections Canada not to enforce the spending regulations. J Hiebert, ‘Money and Elections:
Can Citizens Participate on Fair Terms amidst Unrestricted Spending?’ (1998) 31 Canadian Journal of
Political Science 91 at p 96.
26
B Tanguay and B Kay, ‘Third-Party Advertising and the Threat to Electoral Democracy in Canada:
The Mouse that Roared’ (1998) 17 International Journal of Canadian Studies 57.
27
See, eg, F Palda, Election Finance Regulation in Canada. A Critical Review (Vancouver, Fraser
Institute, 1991); J Cameron, ‘Participation and Democratic Process: Do Third-Party Spending Limits
Protect or Threaten Democratic Values?’ Canada Watch, July/August 1993, pp 7–8; D Francis, ‘A New
Attack on Freedom of Speech’ Maclean’s, 31 May 1993; B Tyler, ‘Third-Party Limits Hurt Public’s
Right-to-Know’ The Gazette (Montreal), 31 July 1997.
276 Janet L Hiebert

reassessing uses of public monies and tax credits, particularly in light of legisla-
tion passed in 2003 (An Act to Amend the Canada Elections Act and the Income
Tax Act (Political Financing)), which bans corporate and union contributions to
candidates and parties, restricts the amount that individuals can contribute to
candidates and parties, and introduces a scheme of public financing related to the
level of support a party receives in federal elections. This legislation was motivat-
ed by an attempt to create more public confidence in the political and electoral
process by enhancing the fairness and transparency of candidates’ and parties’
election finances.28 It represents the most significant development in terms of
election finance since the 1974 legislative amendments were passed.

Judicial Treatment of Restrictions

on Independent Expenditures

Before addressing the judicial treatment of this issue, it is helpful to first explain
the structure for reviewing claims that rights have been infringed under the
Charter. The Charter envisages a two-stage process for evaluating the constitu-
tionality of legislative actions. In the first stage, courts address the issue of whether
a right has been infringed. Only upon finding that there has been an infringement
do judges proceed to the second stage, which is to determine whether the restric-
tion is justified and reasonable.29 The government has consistently conceded that
limits on independent expenditures violate freedom of expression. Consequently,
the focus in judicial review has been on whether restrictions on independent
expenditures are justified. When determining the validity of these, the essential
criteria boil down to the following: does the legislative objective represent a suffi-
ciently important public purpose to justify restricting a right and, if so, has it been

28
Bill C-24, An Act to Amend the Canada Elections Act and the Income Tax Act (Political
Financing) introduced a new requirement that only citizens and permanent residents can make finan-
cial contributions to registered parties, candidates, constituency associations, and leadership and nom-
ination contestants. These contributions by individuals are subject to an annual limit of $5,000 for
each party, including amounts given to electoral district associations, candidates and nomination con-
testants. The legislation prohibits corporations, trade unions and associations from making contribu-
tions to any registered political party or to any leadership contestants. However, they are allowed to
contribute small amounts, a maximum of $1,000 collectively, toward a party’s candidates, nomination
contestants and electoral district associations or to a candidate who is not associated with a registered
party. The legislation was controversial and was passed by vote of 172 to 62. The government bill was
supported by the New Democratic Party and the Bloc Québécois, and was opposed by the Canadian
Alliance and the Conservatives (which have since merged to create the Conservative Party). For more
information about this legislation, see Legislative Summary, ‘Bill C-24: An Act to Amend the Canada
Elections Act and the Income Tax Act (Political Financing), < http://www.parl.gc.ca/common/
Bills_ls.asp?Parl=37&Ses=2&ls=C24 > (21 July 2004), and ‘Campaign financing: Chrétien’s plan for
reform’ CBC News < http://www.cbc.ca/news/ > (21 July 2004).
29
The relevant provision is s 1, which provides: ‘The Canadian Charter of Rights and Freedoms guar-
antees the rights and freedoms set out in it subject only to such reasonable limits prescribed by law as
can be demonstrably justified in a free and democratic society.’
 Elections, Democracy and Free Speech 277

developed in a way that is rational, minimally intrusive, and are the effects of the
impairment proportional to the importance of the legislative objective?30
Trial and provincial court of appeal decisions reveal considerable scepticism
about the merits of regulating independent expenditures. This scepticism has been
influenced by the following three judicially-held assumptions. First, legislation that
intentionally restricts independent expenditures is inherently suspect because limit-
ing free speech is inconsistent with democratic principles. Second, the only possible
justification for restricting independent expenditures is to prevent corruption to the
political process. Third, demonstrating this harm exists requires empirical evidence
that if independent expenditures were not regulated, they would result in actual
harm, such as evidence that money ‘buys’ elections. Each of these assumptions is
problematic on their own. Together, they operate so as to make it virtually impossi-
ble for a government to satisfy judges that limits on independent expenditures are a
reasonable and justifiable restriction of freedom of expression under the Charter.

Assumption One: Limits on Independent Expenditures Contradict

Democratic Principles
Until the 2004 Supreme Court ruling in Harper, Canadian courts showed little
sympathy for arguments that the purpose of regulating independent expenditures
is sufficiently important that it justifies restricting expression.31 The highest degree
of scepticism came from Justice Conrad of the Alberta Court of Appeal who, while
reviewing the 1993 limits on independent expenditures, characterised as contra-
dictory the claim that such restrictions are a justifiable limit on speech because the
legislation ‘purports to protect the democratic process, by means of infringing the
very rights which are fundamental to a democracy.’32
Judicial treatment of this issue prior to the Supreme Court’s 2004 Harper deci-
sion reflected a narrow conception of democracy, focusing entirely on the nega-
tive dimension of the speech claim, freedom from state interference, rather than
on what effects unregulated spending could have on election participation. By
conceiving of this constitutional conflict exclusively in terms of an assault on free
speech, the judiciary turned a blind eye to the argument that an unrestricted
opportunity to engage in advertising is not the only, or even best, measure of a
healthy democratic polity. Yet an alternative perspective is that restricting the
amount of election spending (including that by candidates and parties as well
as other individuals and groups) is vital to the health of a liberal democratic
community. 33 Indeed, concerns about the negative ways that money affects the
30
The judicial approach to this inquiry is set out in R v Oakes [1986] 1 SCR 103.
31
The one exception was a 1988 Supreme Court judgment that did not address the specific issue of
regulating independent expenditures, but in dicta, characterised the objective of controlling referen-
dum costs as laudable. Libman v Quebec (Attorney General) [1997] 3 SCR 569.
32
Somerville v Canada (Attorney General) (1996) 136 DLR (4th) 205 (Alta CA) at para 66.
33
Smith and Bakvis make this argument particularly forcefully when suggesting that the ‘manner in
which election campaigns are conducted and financed is a significant factor in the health of liberal
democracies.’ J Smith and H Bakvis, ‘Changing Dynamics in Election Campaign Finance: Critical
Issues in Canada and the US’ (2000) 1:4 Policy Matters (Montreal, IRPP) 4.
278 Janet L Hiebert

political process explain why so many democratic communities have deemed it

necessary to regulate election spending.34 Translated into the language of rights,
controlling election costs protects the equal right of citizens to contribute to self-
governing. Restricting independent expenditures is an ancillary dimension of the
larger normative project of attempting to control the costs of elections to ensure
meaningful citizen involvement in all aspects of elections—both in public debate
about the importance of issues and in the right to seek public office.
Experience has shown that many candidates raise more money than they are
legally entitled to spend35 and would almost certainly spend more money if they
were not prohibited from doing so and if they presumed that increased spending
would enhance their prospect for election. Yet costly elections undermine citi-
zens’ right to be treated equally when participating in one dimension of self-
government—seeking public office. Regardless of personal skills or merit, those
with modest means would have extreme difficulty mounting an effective cam-
paign if election spending were extremely costly, unless capable of raising large
amounts of money. Candidates’ dependency on wealthy donors could lead to
the very ‘harm’ the judiciary seems willing to contemplate as a justification
for restricting election spending (discussed below): that money will have a cor-
rupting influence on the political process. If contesting elections becomes so exor-
bitantly costly that candidates become dependent on donors with deep pockets,
citizens will have an obvious concern about whose interests are being given con-
sideration in the development and passage of public policy.
There is a second way in which a citizen’s right to be treated equally is under-
mined by costly elections. All citizens may have an equal right to vote. But money
is the currency that controls access to the principal venue for election debate;
specifically, paid advertising in the commercial media. Citizens are simply not
equal in their capacity to ‘command the attention of others for their own candi-
dates, interests, and convictions.’36 Most citizens cannot afford any significant
opportunity to participate in this venue. Only a very small minority of citizens
can afford to purchase commercial advertising to promote issues that are impor-
tant to them, or to draw attention to the candidates they support or oppose. Thus,
unregulated election spending could lead to such serious discrepancies in citizen
participation as to normatively cast doubt on the primacy of an unrestricted abil-
ity to ‘purchase’ speech. As Ronald Dworkin argues:

No citizen is entitled to demand that others find his [or her] opinions persuasive or
even worthy of attention. But each citizen is entitled to compete for that attention,
and to have a chance at persuasion, on fair terms, a chance that is now denied [in the
US] to everyone without great wealth or access to it.37

34
H Alexander and R Shiratori (eds), Comparative Political Finance among the Democracies (Boulder,
Westview Press, 1994).
35
W T Stanbury, Money in Politics: Financing Federal Parties and Candidates in Canada (Toronto,
Dundurn Press, 1991), 361.
36
R Dworkin, ‘The Curse of American Politics’, The New York Review of Books, 17 Oct 1996, 19 at 23.
37
Ibid.
 Elections, Democracy and Free Speech 279

The concern is not simply how citizens’ different levels of wealth afford some
citizens more opportunity to exert influence on the election. In an unregulated elec-
tion environment, many of the key election participants will not be citizens at all—
but corporations, often internationally controlled. But it is important to remember
that elections are for citizens to participate in the act of self-governing. For the very
reason that citizens alone are given the right to vote, a political community should
be worried about corporations or foreign residents being able to use their financial
resources to help frame national electoral debates and, through large political dona-
tions, determine which candidates can afford to be competitive.
Far from concluding that democratic principles cast suspicion on the goal of
regulating independent expenditures, these spending limits, when part of a coher-
ent and comprehensive attempt to control all election costs, actually enhance
democratic values. To refer again to Dworkin, one of the most passion-
ate advocates of rights-based principles, defending spending limits does not
mean abandoning a commitment to rights (or, in the context of his intellectual
contributions, turning one’s back on the argument that rights should ‘trump’ social
policy objectives that would threaten these). On the contrary, Dworkin believes that
the amount of money raised and spent impacts in a negative way on citizens’ equal
right to influence the democratic outcome.38 Dworkin is writing of American poli-
tics but his concerns about unregulated election spending have universal resonance.
Supporters of an unregulated election environment claim that the best remedy for
distortion or a lack of truth in election advertising is more advertising. But it is sim-
ply not the case that more election advertising ensures that manipulative advertise-
ments will be clarified or that all important issues will be debated. The classic
portrayal of the unregulated exchange of ideas and opinions draws upon the analo-
gy of the marketplace. Defenders claim that the marketplace of ideas provides the
best opportunity for free and open debate, because ideas must stand up to broad
scrutiny and only the most meritorious of these will emerge triumphant. The unstat-
ed assumption about how this marketplace works is the pluralist expectation that all
ideas, or different perspectives on issues, will be aired and citizens, once armed with
full and complete information, will be able to reach prudent judgments. Proponents
of this ‘romantic’ conception of the exchange of ideas do not adequately acknowledge
what effect money has on the functioning of this marketplace.39 In contemporary
elections, it is not the power of ideas but money that is the most important commod-
ity for political debate. The ability to purchase advertising determines how much
attention will be drawn to particular issues, and how these will be portrayed. Only
those whose desire to participate in election debate is matched by the financial
resources they need to ‘speak’ can participate in this marketplace. The majority of
voices must remain silent, resulting in attention given to only some issues and only
partial perspectives on these. Far from encouraging a free exchange of all ideas, the
commercial marketplace for election advertising is more aptly characterised as an
38
Ibid.
39
Long ago Zechariah Chaffee criticised this romanticised version of the marketplace of ideas. Z
Chaffee Jr, Free Speech in the United States (Cambridge, Harvard University Press, 1941) 137.
280 Janet L Hiebert

exclusive club where membership is restricted to the extremely wealthy or to

those with access to others’ wealth.40
Some also lament the nature of the debate that costly elections produce, sug-
gesting a relationship between expensive elections and a diminution of the quali-
ty of electoral debate. When regulations do not restrict the cost of seeking election
or trying to influence the vote, television advertising becomes an extremely
important venue for electoral debate. Although this venue has broad exposure, it
also takes on a character that is the antithesis of meaningful debate. Costs dictate
the format for the majority of political advertisements. This format, often 30-
second and even shorter commercials, denies the opportunity to develop argu-
ments and counter-arguments. Driven by the constraints of time, designers of
these advertisements turn these into memorable television moments by relying on
sensational claims that voters can remember, but which are often couched as neg-
ative advertisements and even manipulative and misleading messages.41

Assumption Two: The Only Justification is to Prevent Corruption

to the Political Process
One measure of the level of judicial scepticism about regulating independent
expenditures was the extent to which some judges have downplayed arguments
that spending restrictions were necessary to promote equality, and their determi-
nation instead to characterise their central purpose as to prevent mischief or harm
to the political process42 or to minimise corruption in elections.43
The purpose of regulating independent expenditures has frequently been mis-
characterised by the judiciary, which has linked these spending limits to concerns
about corruption. Although an historical impetus for controlling election costs
was fear of corruption, the trading of votes for money and the exchange of policy
consideration for financial support,44 this concern has been mitigated significant-
ly by the establishment in 1974 of spending limitations for candidates and parties,
which have reduced candidate and party dependency on a small number of large
contributors.45 Nevertheless, the judiciary has frequently assessed the limits on
independent expenditures in terms of their purported connection to redressing
fears of corruption. But as argued above, this is not the purpose of these spending
limits. Limits on independent expenditures are an ancillary element of the nor-
mative project of promoting equality in citizen participation in elections.

40
This argument draws from J Hiebert, ‘Money and Elections: Can Citizens participate on Fair
Terms amidst Unrestricted Spending?’ (1998) 31 Canadian Journal of Political Science 91 at 102–3.
41
For discussion of the effects of television advertisement on the election process see, S Anso-
labehere and S Iyengar, Going Negative: How Political Advertisements Shrink and Polarize the Electorate
(New York, The Free Press, 1995).
42
National Citizens’ Coalition v Canada (Attorney General) [1984] 5 WWR 436 (Alta QB) at 453.
43
Somerville v Canada (Attorney General) (1996) 136 DLR (4th) 205 (Alta CA) at para 81.
44
WT Stanbury, Money in Politics: Financing Federal Parties and Candidates in Canada (Toronto,
Dundurn press, 1991) 52.
45
Ibid at 411.
 Elections, Democracy and Free Speech 281

The judicial treatment of this issue prior to the Supreme Court’s ruling in
Harper provides strong support for those who accept the importance of rights yet
are sceptical about the benefits of judicial review of a bill of rights. If a benefit of
a bill of rights is that it requires governments to explain and justify decisions that
unduly infringe upon rights, a shortcoming is that judicial review assess the legit-
imacy of governmental decisions based on classical liberal assumptions that
assume (a) the state is the enemy of freedom and that (b) freedom is realised by
the absence of constraints. Thus, a bill of rights can complicate the assessment of
what comprises an appropriate relationship between the opportunity to purchase
advertising and the normative objective that citizens participate in the election
process as equal members of the political community. It is not that a bill of rights
forbids consideration of state actions that may be necessary to promote equality,
as distinct from action to prevent actual harm or inaction to protect freedom. But
the hegemonic assumptions associated with legal liberalism, upon which the
Charter like most bills of rights depend, influence judicial assumptions that the
essential purpose of judicial review is to protect citizens from the state, that free-
dom is engendered principally through limiting the state, and that unless proof of
harm is established, state actions that appear to limit a right are inherently sus-
pect. Thus, the argument that legislation that deliberately seeks to restrict a form
of speech is nevertheless justified, particularly in the absence of concrete proof of
actual harms that have or would arise, has received a rocky judicial reception.
That trial and provincial appeal courts have been wholly reluctant to give serious
consideration to the argument that spending constraints enhance democratic values,
suggests one of two explanations, both equally troubling. One possible explanation
is that the courts involved subscribed to a thin understanding of democracy; one
that assumes the only relative consideration is the negative dimension—the ability
to be free from state constraints. This view may be consistent with a libertarian
approach to freedom. But democracy is seldom defended entirely on the basis of lib-
ertarian principles. Only an extremely narrow definition of democracy, one that is
intentionally oblivious to the power and influence that accrue from money, would
assume that an unfettered ability to engage in election advertising is the obvious or
only compelling interpretation of democratic values. An alternative possibility, no
less troubling, was that judges (below the Supreme Court level) were intellectually
arrogant by portraying the resolution of this complex and contested issue as
amenable to a singular answer—theirs. But far from giving rise to a singular response
to the question of whether election advertising can or should be regulated, the rele-
vant issues are complex, philosophical and subject to considerable contestation.

Assumption Three: Justification for Limits Requires Proof that

Money ‘Buys’ Elections
A consequence of the trial and provincial appeal courts’ determination to assess
the legitimacy of limits on independent expenditures in terms of whether
they were required to prevent harm was judicial demand for empirical proof of
282 Janet L Hiebert

their necessity. Judges queried how restricting independent expenditures could

possibly be considered legitimate in the absence of proof that if not regulated
these expenditures would have resulted in harm or corruption. Moreover, judges
implied that this proof would have to be extremely compelling. For example, in
Pacific Press v British Columbia (Attorney General), which looked at the validity of
this issue at the provincial level, the Court characterised the ‘presumed link’
between candidate and party spending and independent expenditures as ‘theoret-
ical abstractions’ and ‘unproved hypotheses’ that were not empirically verified.46 In
the absence of empirical evidence showing what problems might occur if
independent expenditures were unregulated, the Court concluded there is ‘no
authority for the proposition that claims of common sense justification are to be
preferred over scientific evidence or that claims of common sense justification can
rebut scientific evidence.’47 Also insisting upon demonstration of harm was the
Alberta Court of Appeal in Somerville v Canada. Justice Conrad acknowledged
the difficulty of measuring the effects of money in terms of quantitative analysis.
Nevertheless, her characterisation of the issue revealed the expectation that the
government must demonstrate a causal relationship between money and harm, as
evident in the question: ‘Is there a danger that someone could “buy” an election?’48
Even when judges indicated that scientific proof of the financial link between
independent expenditures and harm was not required, they still demanded
empirical evidence to satisfy a less burdensome standard—such as apprehension
of harm.49 But even if this evidence could have been amassed (the implications of
having to do so are discussed below) it is still not clear whether the trial or provin-
cial appeal court judges would have accepted the legitimacy of restrictions on
independent expenditures, as suggested in the startling statement by Justice
Conrad, that even had the government demonstrated that independent expendi-
tures have had an effect on an election outcome, she would ‘have great difficulty
accepting’ that their limitation is constitutionally justified.50
Canadian trial and provincial appeal court judges have drawn considerable
support for their conclusion that there is no justification for restricting independ-
ent expenditures from the fact that the author of the only empirical attempt to
assess the effects of independent expenditures on voters’ intentions (the Johnston
study discussed above) subsequently revised his assessment. Judicial insistence
on evidence of harm led some judges to conclude that this revised opinion has
repudiated the justification for limiting independent expenditures.51 But this
46
Pacific Press v British Columbia (Attorney General) [2000] BCSC 248 at paras 77–9.
47
Ibid at para 79.
48
Somerville v Canada (Attorney General) (1996) 136 DLR (4th) 205 (AltaCA) at para 66.
49
Harper v Canada (Attorney General) (2001) 93 Alta LR (3d) 281 at para 275.
50
Somerville v Canada (Attorney General) (1996) 136 DLR (4th) 205 (AltaCA) at para 69.
51
Thus in the Pacific Press case the Court concluded that since Professor Johnston no longer stands
by his original findings, the conclusions of the Lortie Common on this issue ‘can no longer be said to
be based on empirical findings.’ Similarly, in the Harper decision the Court states that since the Hiebert
study was ‘materially dependent’ on the initial study by Johnston, this leaves the Hiebert study ‘bereft
of the only scientific analysis of the effects of third party election expenses in a Canadian federal elec-
tion.’ Pacific Press v British Columbia (Attorney General) [2000] BCSC 248 para 105, Harper v Canada
(Attorney General) (2001) 93 Alta LR (3d) 281 at paras 67–8.
 Elections, Democracy and Free Speech 283

assumption was problematic for two reasons. First, the judiciary has been under
the mistaken impression that the principal sources that influenced legislation (the
Lortie Commission’s Final Report, and a study on independent expenditures con-
ducted on its behalf) were aware of Johnston’s reversal before they were complet-
ed.52 Second, and more significant, the judiciary failed to acknowledge that the
argument made by the Lortie Commission was a normative one—that principles
of fairness and equity underlie the Canadian regulatory regime and that these are
dependent upon regulating all election expenses, including independent expendi-
tures. Although empirical evidence demonstrating a link between advertising and
voters’ intentions would certainly lend force to this normative argument, and sup-
port the recommendation to regulate independent expenditures,53 the Lortie
Commission would have argued in favour of regulating all election expenses,
including independent expenditures, even in the absence of empirical evidence
demonstrating any linkage between voter intentions and election advertising.54
Quite separate from the problem of this judicial misunderstanding about the
reasons that motivated a Royal Commission to recommend limits on independ-
ent expenditures, a serious concern with the lower and appeal courts’ insistence
on proof, or empirical justification for an apprehension of harm, was that it estab-
lished a standard that simply could not be satisfied, especially within a political
regime that seeks to control election costs. Until a political community is either
required by the judiciary, or chooses voluntarily, to conduct elections that are not
subject to spending limits, how can it demonstrate what consequences will arise
from unregulated spending? How can anyone prove something that has not yet
happened? Yet the implication of the judiciary’s treatment of this issue was that
not until Canadian regulatory attempts were so paralysed that the state was no
longer able to restrict campaign spending, would it be in a position to gather
information to support the apprehension that costly elections have a negative
impact on democratic values. And after this occurs, the community would have to
watch and chronicle signs that campaign donations had been traded for influence,
or that elections had become too costly for many would-be-candidates to seek
public office. But would a political community ever have confidence that it had a
constitutional green light to proceed with spending restrictions, no matter how
52
The Johnston memo was submitted December 1990. The original Hiebert study was completed
29 April 1991 (the completion date of the study is published on p 64). Neither Johnston nor myself,
author of the study, can pinpoint the precise date in which he advised me, by telephone, of his revised
opinion, but we agree it was sometime between Feb and March 1992, by which time the Commission
had finished its work and the Hiebert study was very likely published (although the release of this vol-
ume was delayed to coincide with the published release of most of the other 23 volumes of studies).
The Lortie Commission signed off on its four volume report Nov 1991.
53
J Hiebert, ‘Interest Groups and Federal Elections’, above n 21 at 3–76.
54
I make this argument as the author of the principal study of independent expenditures conduct-
ed on behalf of the Lortie Commission. Moreover, in court testimony, Research Director Peter Aucoin
testified that Johnston’s preliminary findings regarding the effect of third party spending on the 1988
federal election were not determinative of the position taken by the Lortie Commission on third party
spending, and that even if aware that Johnston would later revise his assessment, he would still have
recommended third party spending limits to preserve the fairness of the electoral system. Harper v
Canada (Attorney General) (2001) 93 Alta LR (3d) 281 at para 77.
284 Janet L Hiebert

important these seemed, given the inherent difficulty of satisfying the judiciary’s
insistence on empirical proof of the harmful effects of money or demonstrating
the causal relationship between money and harm?
Courts are understandably reluctant to entertain restrictions on freedom of
expression. But it is disheartening to have a court pose the question of whether
regulating independent expenditures is justified in such crude terms as requiring
proof that a person can somehow ‘buy’ an election. This characterisation of the
role of money in elections reveals judges’ failure to comprehend the complex ways
that money affects other values that are integral to democracy. Critics of spending
regulations predictably point to examples of candidates having spent large
amounts of money, and yet failing to win a plurality of the vote. Ross Perot may
have spent a large personal fortune while failing in his 1992 bid for the presiden-
cy of the United States. But all this proves is that money may not actually save a
failed candidacy. A better lesson to be drawn from the Perot experience is how an
extremely rich person was able to exercise far more influence on the campaign
agenda for the presidential race than the majority of his fellow citizens with ordi-
nary financial means. Whatever the power of ideas that Perot held, these would
not have swayed anywhere near the vote they did had Perot not been able to sat-
urate the media through paid political advertisements.55
The role of money in elections is far more nuanced than the judiciary and
many critics of campaign spending limits seem willing to acknowledge. Social sci-
entists have not yet determined predictable and acceptable methods to determine
how expensive elections must become before they discourage candidates from
contending for public office; how money affects the competitiveness of a candi-
date; and how the volume, nature and timing of election advertising influences
the way voters determine which issues are important. But the inability to demon-
strate how money affects voting behaviour, or to establish empirical verification
of the precise relationship between dependency on large political donations and
political conduct once in office, does not mean that money has a benign influence
on the election process, particularly when the amounts spent are large and
inevitable discrepancies exist between how much citizens can afford to spend.
In addition to the judiciary’s naïve assumptions about the role of money in the
election process, its treatment of independent expenditures revealed a poor
understanding of the different functions that political parties and independent
expenditures serve. For example, in Somerville v Canada the Alberta Court of
Appeal rejected the validity of regulating independent expenditures because the
legislation gives ‘preferential protection’ to political parties. In the court’s view,
not only did this aspect of the legislation conflict with the Charter, it was so
directly contrary to the purpose of the Charter that it could never be constitution-
ally justified.56 This conclusion revealed the court’s failure to comprehend the dif-
ferent role political parties play in an election from that of interest groups. The
centrality of political parties in the Canadian political system distinguishes them
55
C Sunstein, Democracy and the Problem of Free Speech (New York, The Free Press 1999) 99.
56
Somerville v Canada (Attorney General) (1996) 136 DLR (4th) 205 (Alta CA) at para 78.
 Elections, Democracy and Free Speech 285

from other organisations or groups. Parties organise the political processes of

democratic parliamentary government. Their role is integrally connected to
Canada’s constitutional system, based on the Westminster model of parliamentary
government and the principle of responsible government. Canadians do not elect
the Prime Minister. It is through parties that the positions of executive authority
in the government are filled. Political parties also organise the competition for
elected office. Parties are the primary institutions for recruiting and selecting can-
didates for elections to the House of Commons.
The lower and appeal courts also revealed poor understanding of how spending
limits would have a differential impact on candidates and interest groups. In
Somerville v Canada the Alberta Court of Appeal concluded that the contrast between
what individuals or groups are allowed to spend and what candidates are entitled to
spend was so disproportionate that it was ‘arbitrary and unfair’ (the legislation at
issue imposed a $1,000 spending limit on independent expenditures, while candi-
dates were permitted to spend approximately $55,000).57 But spending limits affect
candidates differently than they do independent groups. Candidates are subject to a
finite spending limit. Yet a plurality of interest groups can organise around an infinite
number of issues and, by coordinating their efforts or by coincidence in their spend-
ing patterns, can augment the amount of money used to engage in partisan advoca-
cy for or against a candidate. Thus, establishing comparable levels of spending for
candidates and any single individual or group would not only undermine the integri-
ty of spending limits for candidates but would be manifestly unfair, particularly for
those candidates who were targeted by multiple, negative advertisements.

The Supreme Court in Harper v Canada (Attorney General)

The Supreme Court of Canada handed down its judgment in May 2004, in which a
6–3 majority held that the limits on independent expenditures were constitutional-
ly valid. A majority of the Supreme Court explicitly repudiated the approach to this
issue taken by lower courts. Unlike the earlier courts’ focus on whether the legisla-
tion was necessary to prevent corruption, the majority recognised the intent of the
legislation as promoting equality in citizen participation. Justice Bastarache, writing
on behalf of the majority, characterised Parliament’s legislative objective as the pro-
motion of ‘electoral fairness’ by ‘creating equality’ in political discourse.

The overarching objective of the [independent expenditure] limits is electoral fair-

ness. Equality in the political discourse promotes electoral fairness and is achieved,
in part, by restricting the participation of those who have access to significant finan-
cial resources. The more voices that have access to the political discourse, the more
voters will be empowered to exercise their right in a meaningful and informed man-
ner. Canadians understandably have greater confidence in an electoral system which
ultimately encourages increased participation.58

57
Ibid at para 80.
58
Harper v Canada (Attorney General) [2004] SCC 33 at para 91.
286 Janet L Hiebert

In defending the legislation, the Attorney General had expressed concern that
lower courts had inappropriately required scientific proof that harm had actually
occurred or, alternatively, proof that independent expenditures had influenced
voters’ intentions and election outcomes to the point of unfairness. The majority
agreed with this characterisation, concluding that the requirement that the
Attorney General produce definitive social science evidence ‘establishing the caus-
es of every area of social concern’ represented an unreasonably high onus.59 The
majority ruled that the Attorney General need not demonstrate evidence of actu-
al harm to demonstrate that the legislation represents a pressing and substantial
objective, ruling that what was required was ‘sufficient informed evidence of the
importance of electoral regulation in our free and democratic society.’ From the
majority’s perspective, the Lortie Report was the central piece of this evidentiary
record.60
But unlike the trial judge and a majority of the Court of Appeal, which dis-
counted the Lortie Report because of its use of the controversial Johnston study,
the Supreme Court did not accept that this reliance lessens the persuasiveness of
the Royal Commission’s recommendation to restrict independent expenditures or
the reasonableness of the legislation that followed. From its perspective, this judi-
cial finding was wrong, as were those in earlier cases that had ruled that independ-
ent expenditures were invalid because of a lack of actual evidence that this
advertising influences the electorate. The majority held that the fact that the
Johnston opinion was revised does not negate the persuasiveness of the argument
for regulating independent expenditures.61 Moreover, the majority was highly
sceptical about the appropriateness of requiring awareness of ‘evidence of the
actual pernicious effect of the lack of spending limits in past elections’ in order to
justify that limits on independent expenditures are warranted, stating, ‘[s]urely,
Parliament does not have to wait for the feared harm to occur before it can enact
measures to prevent the possibility of the harm occurring or to remedy the harm,
should it occur.’62
In explaining its disagreement with lower courts, the majority stated that the
lower courts had shown insufficient deference to Parliament’s normative objec-
tives and had placed too much emphasis on the lack of empirical evidence
demonstrating a link between independent expenditures and voters’ intentions.63

Under the egalitarian model of elections, Parliament must balance the rights and
privileges of the participants in the electoral process: candidates, political parties,
third parties and voters. Advertising expense limits may restrict free expression to
ensure that participants are able to meaningfully participate in the electoral process.
For candidates, political parties and third parties, meaningful participation means

59
Ibid at para 93.
60
Ibid at paras 93–4.
61
Ibid at paras 94–9.
62
Ibid at para 98.
63
Ibid at para 64.
 Elections, Democracy and Free Speech 287

the ability to inform voters of their position. For voters, meaningful participation
means the ability to hear and weigh many points of view. The difficulties of striking
this balance are evident. Given the right of Parliament to choose Canada’s electoral
model and the nuances inherent in implementing this model, the Court must
approach the justification analysis with deference. The lowers courts erred in failing
to do so . . . In the end, the electoral system, which regulates many aspects of an elec-
tion, including its duration and the control and reimbursement of expenses, reflects
a political choice, the details of which are better left to Parliament.64

A central issue in the litigation was whether the spending restrictions were too low
to allow for meaningful participation. The majority recognised that spending lim-
its must be carefully tailored to ensure that they do not unduly restrict the infor-
mational component of the right to vote. Yet, from the majority’s perspective, the
trial judge had not given sufficient attention to the potential number of independ-
ent expenditures or the abilities of individuals or groups to coordinate their activ-
ities to augment the influence of their advertisements. In its view,

meaningful participation in elections is not synonymous with the ability to mount

a media campaign capable of determining the outcome. In fact, such an understand-
ing of ‘meaningful participation’ would leave little room in the political discourse
for the individual citizen and would be inimical to the right to vote.65

The dissenting judges differed sharply in their characterisation of the effects of the
legislation, indicating they thought that the low level of allowable spending was
‘draconian’, particularly in the absence of any demonstration that such low spend-
ing limits were required to meet the perceived dangers of inequality, an uninformed
electorate and the public perception that the system is unfair. As the minority stat-
ed, the legislation itself may exacerbate the dangers it was intended to address:

Citizens who cannot effectively communicate with others on electoral issues may
feel they are being treated unequally compared to citizens who speak through polit-
ical parties. The absence of their messages may result in the public being less well
informed than it would otherwise be. And a process that bans citizens from effective
participation in the electoral debate during an election campaign may well be per-
ceived as unfair. These fears may be hypothetical, but no more so than the fears con-
jured by the Attorney General in support of the infringement.66

Conclusion

Until the majority Supreme Court ruling in Harper Canadian judges had become
alarmingly close to the position taken by the US Supreme Court ruling in Buckley
64
Ibid at para 87.
65
Ibid at para 74.
66
Ibid at para 38.
288 Janet L Hiebert

v Valeo,67 which held the notion of fairness in elections as foreign to the constitu-
tional values that underlie the political community. Whether Canadian judges
rejected fairness explicitly, or implicitly, by demanding unrealistic proof that
money ‘buys’ elections, the result was the same. Trial and provincial court judges
gave primacy to negative liberty—the ability to advertise without being subject to
strict spending limits—without considering the effects this has on citizens’ equal-
ity.
The Supreme Court’s approach differs from the earlier judicial treatment of
this issue in a number of ways, the three most significant being: its recognition
that the objective of the legislation was to promote equality in citizen participa-
tion, and not to address corruption; that this was an objective that was valid and
consistent with democratic values; and its willingness to defer to Parliament when
defining the exact balance that should be struck between opportunities to spend
money on political advertising and the attempt to limit election spending.
Not everyone will accept that judicial deference is appropriate, particularly
when the parties in Parliament are affected by the rules they adopt for electoral
contests. It makes no sense denying that the political parties that supported the
legislation have self-interest in the rules for election conduct. This self-interest
explains why decisions about other aspects of the electoral process, such as estab-
lishing federal electoral boundaries, have been taken out of Parliament’s hands
and the responsibilities given to independent boundary commissions. Whether or
not an independent body should also make decisions about what rules should
govern election finance, the levels of allowable election spending, the decisions
about who can contribute to candidates or parties, or whether and how much
public funding should be available, will be the subject of much debate. But what-
ever the arguments made to defend such an idea, there are serious concerns about
assuming the judiciary is the appropriate body for making such decisions. Judicial
review may serve an important role in assessing the rules of election engagement,
to ensure that they are not manifestly unfair, privilege specific parties or candi-
dates or obviously disadvantage specific groups or particular individuals. But this
oversight role is not the same as actually determining the substantive content of
the rules themselves, decisions that require choices between competing normative
values, a task that, arguably, does not comfortably fit with the role of judicial
review or the method associated with judicial interpretation. As the Alberta Court
of Appeal stated in Harper, a difficulty it perceived when assessing arguments that
restrictions on independent expenditures were necessary to foster egalitarian
principles was the requirement of ‘balancing the competing normative values’
involved.68
Determining the appropriate resolution of the different normative values asso-
ciated with the question of what role money should play in elections is not
amenable to an obviously correct or singularly more persuasive answer, even
when reviewed under a bill of rights. The questions that arise in constitutional
67
Buckley v Valeo, 424 US 1 (1976) 48–9, 56–7.
68
Harper v Canada (Attorney General) (2002) 14 Alta LR (4th) 4 at para 126.
 Elections, Democracy and Free Speech 289

challenges, such as the ones discussed in this chapter, speak to important philo-
sophical quandaries about what priorities and values should be protected and
promoted in the electoral process. And like many other philosophical debates, rea-
sonable citizens will have differences on the resolution of this conflict.
If citizens believe that an inappropriate balance has been struck under the cur-
rent regulatory regime, which clearly emphasises the primacy of political parties
and candidates over non-registered individuals or groups during elections, they
should argue for continued deliberation—a robust public debate—about what
values should be protected in election law: whether, for instance, more libertarian
interpretations of the election process should prevail over more egalitarian con-
cerns of equality. Some will argue that because the election period in Canada is
both finite and short, this is too crucial a period to silence diverse opinions. If it
is a choice between equality, on the one hand, and unrestricted opportunities to
engage in paid debate, on the other hand, then the choice is the latter. Others will
counter that equality is too important to be adversely affected by laissez faire
spending. Some might, nevertheless, concede that more imagination is required to
allow for interest group participation in election debate in ways that do not
undermine equality. Apart from these basic philosophical disagreements on first
principles, some of the questions that might arise are: Should commercial media
time be set aside for independent expenditures and, if so, should the state pay
some or all of these costs? How would eligibility to participate be determined?
What alternative venues can be provided for individual or interest group partici-
pation? Should the incumbent government be precluded from spending public
monies to publicise that government’s record, particularly in the period immedi-
ately before the election campaign?
But substituting judicial opinion for these debates is not the answer. Although
some may worry about whether the deference extended by a majority of the
Supreme Court in Harper was appropriate, others are every bit as troubled by the
trial and provincial court treatment of this issue. Whatever the appropriate
answer(s) to this quandary about which normative values election rules should
promote, the trial and appeal courts’ insistence that the validity of regulating
independent expenditures be treated as an empirical and not normative issue, and
their imposition of a standard of justification (proof of harm) that is extremely
difficult, if not impossible, to satisfy, introduced a chilling quality to this debate.
These assumptions frustrate meaningful debate by portraying critics of spending
limits as the only defenders of democracy and casting doubt on the motives and
merits of alternative views, even when these reflect a compelling interpretation of
democratic values. The issues at stake are too serious and too philosophically con-
tested for the judiciary, singularly, to define the bounds and parameters of what
constitutes a free and democratic society. For this reason, the Supreme Court’s
deference may not be misplaced.
 Part VI
Starting from Scratch
 14
Developing Political Parties in the
European Union: Towards a
European Party Statute?
STEPHEN DAY AND JO SHAW 1

Introduction
This chapter redirects the inquiry a bit. Instead of looking at the funding of polit-
ical parties in the context of established democratic political orders, our attention
turns to the development of political parties in the context of creation of a
Europe-wide political arena—in this case the European Union. Hence our focus
is on the recent institutional development of the so called European political par-
ties (‘euro-parties’), an indispensable feature of which is the manner in which
these emergent political parties are to be funded. As this chapter will seek to show,
the constitutional framework within which this has developed is a central aspect
of the evolution of transnational parties in the European Union context. One of
the key reference points is Article 191 of the EC Treaty (formerly Article 138a EC)
which provides that:

Political parties at European level are important as a factor for integration within the
Union. They contribute to forming a European awareness and to expressing the
political will of the citizens of the Union.

This provision was originally introduced by the Treaty of Maastricht in 1993. Ten
years later, the Treaty of Nice added an important second paragraph allowing for
legislative measures to be adopted to give more than mere rhetorical force to these
principles:
1
The chapter draws upon joint research by Stephen Day and Jo Shaw on The Constitutionalisation
of Transnational Political Parties (ESRC Grant Number: R000223449). It draws on an earlier publica-
tion in Election Law Journal, vol 3, no 2(2004) at 259–64. The funding of the ESRC is acknowledged
with thanks.
294 Stephen Day and Jo Shaw

The Council, acting in accordance with the procedure referred to in Article 251,
shall lay down the regulations governing political parties at European level and in
particular the rules governing their funding.

The procedure in Article 251 EC to which the provision refers is Council-Parliament

co-decision. Legislative measures about the institutional framework for the future
development of European political parties can now be adopted as the culmination of
an interactive legislative process involving all three political institutions. The Council
decides by a qualified majority vote, and in addition the measure must be approved
by the European Parliament. The Commission provides vital input into the legisla-
tive process through its power to make legislative proposals and its ability to change
the proposal to reflect both European Parliament amendments and the Council’s ini-
tial ‘Common Position’. In sum, each institution has a form of veto power over legis-
lation, and some capacity to shape the form and content of legislative measures. On
the other hand, no single Member State has a veto over the adoption of legislation,
given that the Council must act by a qualified majority.
The chapter concentrates only on the most recent efforts made by euro-parties
to increase their significance within the institutional architecture of the European
Union by pressing for the practical legislative tools now offered by Article 191 to
be put to use. Only a brief presentation is made of earlier efforts which focused
primarily on emphasising the normative force of the first paragraph of Article
191, given the absence of a credible legal basis. However, some background is pre-
sented in the second section given there remain profound doubts in both the aca-
demic literature and within the realm of politics as to the real value of euro-parties.2
As European parties, do these federations of national parties have some real ‘value-
added’ as meta-networks for transnational party cooperation? In so far as they are
European parties, what is their relationship to other vehicles for citizen interest rep-
resentation at the EU level, notably (transnational) civil society?
The central narrative of the chapter is concerned with institutional develop-
ments. In the third section we review briefly the history and general approach of
the proposals made by the European Commission in 2000 and 2001 to establish a
legal framework for European Party Statutes. This was intended to increase the
visibility (and legitimacy) of the euro-parties and to operationalise Article 191 by
means of measures adopted on the basis of Article 308 EC. Thereafter, we dis-
cuss the subsequent adoption in 2003 of a more limited Regulation based on
the second, new, paragraph of Article 191 setting down outline rules govern-
ing European political parties, including rules on funding.3 This measure defines
‘political parties at European level’ (Article 2). These are parties or ‘alliances
of parties’, with legal personality under national law in the Member State in which
they have their seat, which must satisfy certain conditions relating to
2
L Bardi, ‘Transnational Party Federations, European Parliamentary Groups and the Building of
Europarties’ in R Katz and P Mair (eds), How Parties Organise (London, Sage, 1994).
3
Regulation 2004/2003 of the European Parliament and of the Council of 4 November 2003 on the
regulations governing political parties at European level and the rules regarding their funding, [2003]
OJ L297/1.
 Political Parties in the EU: Towards a European Party Statute? 295

representativity, the observance of fundamental principles upon which the EU is

founded (eg liberty, democracy, rule of law, human rights), and the intention to
participate in elections for the European Parliament (Article 3). Parties which sat-
isfy these conditions may apply for funding from the European Parliament, under
conditions managed by the European Parliament (Article 4). To obtain funding,
they must provide a series of documents to back up the application such as a pro-
gramme and a statute. The European Parliament is in charge of verifying compli-
ance with the conditions, as well as disbursing the funds (Article 5). It must also
therefore verify compliance with conditions and obligations relating to the dis-
bursement of funds, such as what types of funding and donations are permissible
for euro-parties, and what activities it may apply these funds to (Articles 6–8). The
Parliament is required to put in place mechanisms to control implementation,
including seeking reimbursement of funds improperly received or applied by
euro-parties (Article 9). To understand better what difference in practice the meas-
ure will make, we also look at some of the immediate effects of this measure,
including the implementing measures within the European Parliament and in par-
ticular its Bureau, and the initial implications for euro-parties in terms of compli-
ance with the Regulation in order to make successful applications for funding.
In brief, the new Regulation finally brings to EU law an institutionally focused
definition of the general characteristics that are required for a body to be classi-
fied as a ‘political party at European level’, in terms of its legal basis, representativ-
ity, and basic adherence to political values. By bringing a sense of order and
regularising some aspects of behaviour, the process of institutionalising the euro-
parties within the EU constitutional architecture can be seen to be taking place.
This has long been the goal of many actors operating within and around Euro-
pean political parties.4
The narrative is brought to a conclusion in the fifth section with a review of
measures taken to implement Regulation 2004/2003. The conclusion offers some
brief thoughts regarding the significance of the new institutional arrangements
for euro-parties for the future of euro-parties more generally.

The Evolution of the Euro-Parties in the

Post-Maastricht Era

There have been, up to mid-2004, five main euro-parties:5 the European People’s
Party;6 the Party of European Socialists (PES);7 the European Liberal, Democrat
4
See the narrative set out in KM Johansson and PA Zervakis, ‘Historical Institutional Framework’
in KM Johansson and P Zervakis (eds), European Political Parties between Cooperation and Integration
(Baden-Baden, Nomos, 2002). For a critique of the new party financing regulation, see HH von Arnim
and M Schurig, The European Party Financing Regulation, (Munster, Lit Verlag, 2004).
5
For a brief discussion of other initiatives to establish euro-parties see below text accompanying n 95.
6
Usually referred to as the EPP. Website: <http://www.eppe.org/>.
7
Usually referred to as the PES. Website: <http://www.pes.org/>.
296 Stephen Day and Jo Shaw

and Reform Party;8 the European Green Party/European Federation of Green

Parties;9 and the Democratic Party of the Peoples of Europe-European Free Alliance
(nationalists and ethno-regionalists of a broadly progressive hue).10 They are com-
posed of parties from each of the EU Member States (sometimes more than one per
state) and in some cases from countries outside of the EU (especially in the case of
the European Green Party which is more pan-European in nature with 33 full mem-
ber parties). As the EU has enlarged, so new national parties have been received into
membership, in many cases after a period of associate membership during the acces-
sion process. Each euro-party has some form of relationship with a European
Parliamentary Group,11 but in essence they are distinct and exist to fulfil a different
agenda. As a 1996 Report to the European Parliament (the ‘Tsatsos Report’) put it:

The party and the body representing it in Parliament, the political group, are natu-
rally closely linked. The party and political group must, however, each have their
own institutional and political role. The political groups’ arena is parliament. The
party cooperates with the political group in this context, but it must also perform its
tasks in the run-up to elections and—unlike the political group—seek to inform and
engage in public debate and political education in society between elections.12

In practice, until 2004, (with the exception of the EPP which had already earlier
developed a separate legal existence and presence outside the European
Parliament) the euro-parties were based in the European Parliament, and largely
staffed and funded out of the budgets of the European Parliament party groups.
The formal constitutional legitimacy of the euro-parties stems from Article
191(1) EC. This is very much a framework provision, which is widely regarded as
having an ‘influential’ effect rather than a direct ‘hard’ legal effect, although it has
only been substantially subjected to analysis in the context of German legal sci-
ence.13 Curiously, while referring to the relevance of parties to ‘integration’, Article
8
Usually referred to as the ELDR. Website: <http://www.eldr.org/index.php>.
9
Usually referred to as the Greens. Websites: <http://www.europeangreens.org/> or <http://www.
eurogreens.org/>.
10
Usually referred to as the EFA, or sometimes the DPPE-EFA. Website: <http://www.efa-dppe.org/>.
11
In some cases, there is a direct relationship between the European Parliamentary Group and the
transnational party, eg PES—Socialist Group in the European Parliament (<http://www.socialist
group.org/>). In the case of the EPP, the European Parliamentary Group is somewhat wider, and incor-
porates conservative political forces which are not in full membership of the party: Group of the
European People’s Party and European Democrats in the European Parliament (<http://www.epp-
ed.org/>). In the 2004–2009 European Parliament, the situation of the ELDR has changed, as it no
longer has its ‘own’ group, but participates in a somewhat broader centrist group entitled the Alliance
of Liberals and Democrats for Europe (ALDE) (<http://eld.europarl.eu.int/>). The case of the Greens
and the European Free Alliance is different, as these two transnational parties work within the same
Parliamentary Group so as to increase their significance (<http://www.greens-efa.org/>). The Protocol
of Understanding between the members of the Green Group and the EFA Group states:
This group is the expression of the political will of two separate and progressive European
political families to co-operate in order to strengthen their mutual political interests in the
European Parliament. The visibility of the component parts will be guaranteed.
12
Report on the constitutional status of the European political parties (A4-0342/96), Committee on
Institutional Affairs, Rapporteur: Dimitris Tsatsos, at p 9.
13
See eg M Morlok, ‘Constitutional Framework’ in Johansson and Zervakis, above n 4.
 Political Parties in the EU: Towards a European Party Statute? 297

191 does not refer directly to democracy or other political values of a legitimate
polity. Furthermore, it does not as such give a constitutional definition of what a
party actually is—whether, for example, they are fundamentally ‘private’ or ‘pub-
lic’ entities. It does mention the ‘political will’ of the citizens, a reference point
which recalls the strong influence of the German Constitution on this particular
European provision, especially Article 21 on political parties which is phrased in
not dissimilar terms. However, despite the reference to citizens, Article 191 is not
individual rights oriented, but is concerned, like Article 21 of the German
Constitution, with a structural guarantee of the system of party-based demo-
cracy.14
In the text of the Constitutional Treaty (‘CT’) negotiated on the basis of the
draft prepared by the Convention on the Future of Europe, and agreed by the
Intergovernmental Conference of Heads of State and Government in June 2004,15
the euro-party provision has found a new home. This text sets out for the EU, for
the first time, certain key principles of democracy. The provision on political par-
ties is housed in a chapter on ‘the democratic life of the Union’ (Article I–45(4)
CT). Article III-331 CT allows for regulations governing such parties to be estab-
lished by European laws, including rules governing their funding, replicating
Article 191(2) EC.
We would argue for a many-stranded approach to understanding what euro-
parties are and how they work, which allows space not only to include the existing
variety of euro-parties, but also allows for the possible intensification of their role
in the future.16 Thus we adopt a three-fold typology of euro-parties. One vision
sees the euro-parties merely as facilitating bodies for national party leaders. Those
who view the EU primarily as an intergovernmental project with only relatively
weak and dependent supranational elements see euro-parties not as autonomous
transnational actors but as arenas for bi- and multi-lateral relations. Alternatively,
euro-parties can be seen as ‘value added’ meta networks with a political and organ-
isational reach (dependent on resources). Such entities can reduce transaction
costs of cooperation, which is particularly important for the smaller parties. That
cooperation might include, where appropriate, seeking to influence the policy
direction taken by the EU’s legislative institutions through transnational party
coalition-building, or seeking to influence the constitutional direction taken by the
EU in the context of intergovernmental conferences and, more recently,
Conventions. The euro-parties should only exist to fulfil those tasks which the
national parties cannot. This means that they should not be seen as a competitor
14
See generally, T Papadopoulou, Politische Parteien auf europäischer Ebene. Auslegung und
Ausgestaltung von Article 191 (ex 138a) EGV (Baden-Baden, Nomos, 1999); R Stentzel, ‘Der normative
Gehalt des Art. 138a EGV—Rechtlicher Grundstein eines europäischen Parteiensystems?’ (1997)
Europarecht 174.
15
See the draft Treaty establishing a Constitution for the European Union, elaborated by the
Convention on the Future of Europe during 2002 and 2003 ([2003] OJ C169/01), and the consolidat-
ed text of the Treaty establishing a Constitution for Europe agreed by the IGC on 18 June 2004 ([2004]
OJ C310/1).
16
This is developed in more detail in S Day and J Shaw, Transnational Parties and the European
Constitution (Oxford, Hart Publishing, 2006) forthcoming.
298 Stephen Day and Jo Shaw

to the national party. The contestation between different actors and interests
involved in euro-parties resolves very much around these two alternative visions of
euro-parties. Finally, it is possible to see euro-parties as representative vehicles for an
emerging European demos built upon mass-type party qualities including individ-
ual party membership, localised branches, the privilege and indeed duty to present
candidates for election, and internal democratic procedures including the election of
delegates to Party Congresses with responsibility for formulating party policies and
positions. This remains very much the minority (and idealistic) position.
Each of these visions of the euro-party can be seen as valid projections of the
hopes, aspirations and indeed intentions of some of those working within the
framework of euro-parties at present. European parties are currently in a state of
flux, responding to and at the same time impacting upon evolving institutional
and constitutional environments. In order best to demonstrate these tensions, the
remainder of this chapter will address the adoption of measures regulating
European Parties as a case study of the institutional development of political par-
ties ‘at European level’, in the terms initially given voice by Article 191 EC.17

The Initiative to Develop the Legal Basis for a European

Party Statute

There have been a number of attempts to develop and promulgate a legal basis for
European political parties and even a formal framework for the recognition of
party statutes. This has followed two pathways. The first involved amendments to
the EC Treaty first to establish constitutional recognition of political parties and
subsequently to provide for a specific legal basis for the adoption of measures reg-
ulating political parties. The latter was eventually adopted in the Treaty of Nice.
The second involved the use of the EC Treaty as it stood to bring about the early
adoption of a measure, even in advance of amendment of the Treaty.
Although the introduction in 1993 of a provision such as Article 138a (now
191) could be seen as a limited success for the three largest euro-parties (EPP, PES,
ELDR) which supported the initiative at the time, in particular through pressure
from their Presidents (all Belgian at the time) and from their Secretary Generals
(all German at the time), the euro-parties failed in their second objective to secure
a clause in the provision which would allow for the operationalisation of the
rhetorical force of promoting ‘political parties at European level’. Some years later,
17
In this chapter, we do not discuss in detail other possible initiatives to formalise or strengthen the
role of the euro-parties in the European political system, such as the suggestion that at every European
Parliament election there should be a set of reserved seats in the Parliament for which the members
are elected off common European-wide party lists of candidates chosen by the euro-parties, or the
possible enhanced role in the future of the euro-parties in the selection of the President of the
Commission. On some of these questions, see the contribution of S Hix, ‘Possibilities for European
Parties: 2004 and Beyond’, 27 February 2003, <http://www.theepc.net>. See also Day and Shaw, above
n 16 for further details.
 Political Parties in the EU: Towards a European Party Statute? 299

the point was taken up again in a 1997 European Parliament Resolution, based on
the 1996 Tsatsos Report. The Resolution argued that:

European political parties organized and acting on a transnational basis are neces-
sary so that a genuine European citizenship may emerge which monitors, discusses
and influences the expression of political will at European level.18

Although unsure of what the exact parameters of their organisational nature ought
to be, Tsatsos foresaw how ‘various features [could be] derived from the image of
the political parties in the Union’s Member States and transferred—mutatis
mutandis—to the level of the European Union.’19 However, he was clear that such
parties had to be ‘more in terms of goals and organization than a mere electioneer-
ing organization or an organization that merely supports a political group and par-
liamentary work.’20 It was the supranational bias of these comments—which also
raised the prospect of individual membership and the spectre of increased use of
majority-based decision-making in the future—which rendered the report unac-
ceptable for many of the national delegations in the Council of Ministers and
resulted in it being sidelined and not taken forward as the basis for action.
However, the significance of this episode, and of a subsequent unsuccessful initia-
tive on the part of the Greek Government to seek an amendment to Article 191 in
the context of the Treaty of Amsterdam, was that it was laying down markers which
could be picked up again at a later date and creating a set of assumptions about
‘what is’ a transnational party which would influence subsequent initiatives.
The pressure for reform picked up again once more in February 2000 when a
joint letter was sent to the European Commission by the leaders of the five euro-
parties, in combination with a letter and draft proposal from the leaders of the
four Parliamentary Groups to which these parties were linked, claiming that,

strong European parties, complementing the European Parliament and its political
groupings, can become a vital element of democratic life and political debate in the
Union.21

Their call for action was bolstered by the role which the parties had taken in
democracy promotion in central and eastern Europe, and the associated costs
which had arisen as a consequence of this.22 At that stage the proposal was in a

18
Resolution on the constitutional status of European political parties, [1997] OJ C 020/29, at point
C, A4-0342/96, Rapporteur: Dimitris Tsatsos (PES).
19
Tsatsos Report, above n 12 at para 8
20
Tsatsos Report, above n 12 at para 9.
21
See letter headed ‘The Importance and further development of European political parties’, from
the leaders of the four Parliamentary Groups to Commission President Romano Prodi, 21 February
2000; document held on file by authors.
22
See Day and Shaw, above n 16, esp Chp 5 on enlargement. See also G Mangott, H Waldrauch and
S Day (eds), Democratic Consolidation: International Influences in Hungary, Poland and Spain
(Baden-Baden, Nomos, 2000).
300 Stephen Day and Jo Shaw

very rudimentary form. It contained five general areas that dealt with the issues of
definition, organisational provisions, tasks, funding and recognition.23
Additional pressure to clarify the financial arrangements for euro-parties also
came from the Court of Auditors’ yearly financial reports, which one former
leader of a European Parliament political group has claimed were ‘awaited with
dread’.24 The Court’s Special Report (2000) on The expenditure of the European
Parliament’s political groups concluded that the present financial set-up whereby
funds were being siphoned off from the party groups in the EP to support the
party federations was illegal under EU law.25 These developments culminated,
in October 2000, in a European Parliament Bureau decision on ‘European
Parliament support for European Political Parties’ which sought in the very short
term to lay down stricter guidelines and enhance the transparency under the pre-
sent rules, but which was coupled also with a recognition that,
the existing system of support for European political parties must be replaced, at the
latest by the end of 2004, by a definitive, permanent Community regulation defin-
ing and giving substance to the concept of ‘European political party’.26

Historically, the funding of the euro-parties remained dependent upon subsidies

from the European parliamentary groups. Staff, logistical costs and funds for
conferences, workshops and so on all came from the budget of the European
Parliament. One insider suggested that ‘an analysis of the books would be an eye-
opening experience.’27 It came to be widely recognised in political circles that only
specific parliamentary work (eg the work of the political groups) should be eligi-
ble for funds from the Parliament’s budget. The broader-based tasks of a
European political party, which took it beyond the Parliament, should be financed
by other means. Promulgation of the measure allowing for the recognition of
party statutes would enable a percentage of future funding to come from the gen-
eral budget of the EC by creating objective conditions for the allocation of funds.
It was left to the Commission to draw up a draft proposal—on the legal basis
of Article 308 EC and thus requiring only one-time consultation of the Euro-
pean Parliament and a unanimous vote in the Council. However, some of those
involved in discussions remained unsure of the appropriateness of using Article
308 since it could easily be claimed that such a measure was an example of the
alleged ‘competence creep’ which contributes so much to making the European
Union appear much more omnipotent than it really is. The House of Commons
Select Committee on European Scrutiny in the United Kingdom, while not pro-
posing to withhold clearance and to apply the scrutiny reserve, nevertheless
remained ‘doubtful about the adequacy of the legal base.’ These doubts arose
despite the assurances of the minister who argued that ‘Article 308 is justified
23
European Party Statute: Working document of European Political Parties, Brussels, 15 February 2000,
held on file.
24
Interview with former EP Group Leader, April 2002.
25
See Court of Auditors Special Report No 13/2000, [2000] OJ C181/1, 28 June 2000.
26
See Bureau Decision on European Parliament Support for European Political Parties (adopted at
the Bureau meeting of 2 October 2000) DV\424902EN.doc.
27
Interview, December 2001.
 Political Parties in the EU: Towards a European Party Statute? 301

legally. Provided we get the details right, I am content that Article 308 be used, not
least to ensure full transparency of funding for [euro-parties] as soon as possi-
ble.’28 During the European Parliamentary debate, the legality of the proposal was
questioned by MEPs from various euro-sceptic and/or rightwing groups in par-
ticular such as EDD,29 UEN30 and TGI,31 with one MEP even threatening court
action in the event that the measure was adopted.32
The publication of the Commission’s proposal33 was accompanied by all the
expected rhetoric on enhancing the connectedness of the EU to its citizens. The
Commission’s press release commented that:

This legislative initiative represents major political progress. It helps to create the
right conditions for forging the much needed link between the institutions—the
European Parliament in particular—and the citizens of the Union.34

Alongside the rhetoric of democratising the EU, the draft dealt in practice with
the more banal aspects of the functional criteria necessary for an organisation to
be constituted as a European political party, including the requirement that a
European party have a formal statute in the sense of formal establishment in the
European Union, and that it have appropriate levels of representation across the
EU and its Member States. The measure would also have regulated the nature and
extent of funding that could be expected and how that should be spent and
accounted for. The proposal comprised a number of central principles which have
continued to dominate debate about institutional forms for euro-parties,
notwithstanding the eventual failure of this first formal proposal:

● The requirement that parties must address issues relating to European inte-
gration in their political work, but with no stipulation that they must adopt
pro-European standpoints;
● The principle that any parties which are recognised must apply democratic
party procedures;
● The principle that European political parties must necessarily be representa-
tive beyond national borders (although the precise degree of that transnation-
al representativeness always remained highly contested); and
28
Select Committee on European Scrutiny First Report,’ Statute and Financing of European Political
Parties,’<http://www.publications.parliament.uk/pa/cm200102/cmselect/cmeuleg/152-i/15260.htm>
(14 April 2005).
29
Europe of Democracies and Diversities: a euro-sceptic group with a broad political base, super-
seded in the 2004–2009 European Parliament by the Independence/Democracy group.
30
Union for a Europe of the Nations: a rightwing euro-sceptic group.
31
Technical Group of Independents, mainly composed of rightwing MEPs not affiliated to any other
group; this group no longer exists in the European Parliament.
32
See ‘Report on the proposal for a Council regulation on the statute and financing of European
political parties’, Debate May 16 2001, verbatim report available on the EP website <http://www.
europarl.eu.int>.
33
Commission Proposal for a Council Regulation on the statute and financing of European politi-
cal parties, COM(2000) 898, [2001] OJ C 154 E/283.
34
Commission proposes statute for European political parties Press Release IP/01/106, Brussels, (25
January 2001).
302 Stephen Day and Jo Shaw

● The application of transparent procedures for the disbursement of funds

from the EU budget and the expenditure of the euro-parties.

During 2001, the European Parliament’s Constitutional Affairs Committee

worked on the proposal, and Ursula Schleicher (EPP-ED—rapporteur) drafted a
report proposing a series of 25 amendments to the Commission draft which were
adopted in Committee in May 2001,35 perhaps the most significant of which con-
cerned the threshold for what constitutes European party entitled to financial sup-
port. With enlargement in view (and consequently what was then an uncertain
number of future members), the Committee adopted an amendment requiring
any putative euro-parties seeking financing under the budget to be present in one
third of the Member States. In the event, the parliamentary plenary in its vote on
17 May 2001 opted for a threshold of one quarter of the Member States.36
Many of the amendments were concerned with issues of democracy and trans-
parency, in particular the requirement that not only should a party’s statute pro-
claim the organisation’s adherence to democracy and rule of law but also that
these commitments should appear in the party programme. The Committee also
sought to ensure that, once recognised, the European political parties would have
legal personality which would enable them to ‘purchase and dispose of movable
and immovable assets and bring legal actions.’37 In addition, the Committee
wanted to see the scope of certain budgetary aspects extended, including the
requirement to publish a list of donors and the prohibition on all anonymous
donations.38
The report was eventually forwarded to the plenary session by the Con-
stitutional Affairs Committee after a vote of twenty members in favour, four
against and five abstentions. A minority opinion was presented by José Ribeiro e
Castro (UEN) who argued strongly against the proposal:

I consider the adoption of this report to be premature and the approval of any reg-
ulation intended to finance European political parties to be inappropriate.39

The motion supporting the proposal was passed in the plenary session of the
European Parliament, but not without doubts being expressed in some quarters.
Speaking on behalf of the Greens/EFA group, Professor Sir Neil MacCormick said:

Any proposal for public funding of political parties is open to serious risks, and may
add to the suspicion many people feel towards politicians. Above all, this must not
become a device whereby big or established parties use tax payers’ money to protect
35
See also Report on the proposal for a Council regulation on the statute and financing of European
political parties (A5-0167/2001), Committee on Constitutional Affairs, Rapporteur: Ursula Schleicher,
3 May 2001.
36
Texts adopted by Parliament, Thursday 17 May 2001, Statute and financing of European political
parties, P5_TA(2001)0272.
37
Above n 35, Amendment 12, Article 1a (new).
38
Above n 35, Amendment 15, Article 3 para 2.
39
See Report, Minority Position by José Ribeiro e Castro, included in the Report above n 35 at 22.
 Political Parties in the EU: Towards a European Party Statute? 303

their near monopoly of Parliamentary representation. A democratic system

must always be open to new voices, and new entrants. The tendency of the
Schleicher report to revise thresholds for recognition of European Parties discrimi-
nates actively against new voices. It also discriminates against parties which are by
their nature based in small regions and countries of the EU that are part of large
member states.40

After approval by the European Parliament, the Commission reconsidered its pro-
posal and adopted the majority of the Parliament’s amendments.41 The amended
draft went before the General Affairs Council at the end of October 2001. Three
main areas of concern had emerged by this stage concerning representational cri-
teria, democratic criteria and financial criteria. Moreover, it was becoming appar-
ent by this stage that there was a significant danger that the draft as approved by
the Parliament and amended by the Commission was going to be substantially
watered down during its passage through the Council legislative machinery. A
number of significant reservations about what was happening to the draft were
expressed by the heads of the five transnational parties in a letter addressed to
Belgian Presidency in October 2001.42 These concerns coalesced around the crite-
ria to qualify for funding, the timetable associated with the implementation of any
measure adopted which appeared to require a complete separation of the euro-
party from the Party Group within 20 days of the publication of the Regulation in
the Official Journal of the European Communities, and the levels of funding par-
ticularly in relation to initial start-up costs. Even so, the existing euro-parties did
not waver in their general support for the measure.
Despite this consensus of the actors affected, the requirement of unanimity in
Article 308 saw the proposal fall in particular as a result of two key disagreements.
The Austrian and Italian governments found themselves under pressure from
smaller coalition partners over the question of what, in representational terms,
constitutes a euro-party. They argued for very low thresholds. France and
Germany (then two PES governments) disagreed between themselves sharply over
the question of allowing or prohibiting sponsorship and donations. The propos-
al went back to the Committee of Permanent Representatives (COREPER) after
preliminary discussion in Council on 29 October 2001,43 but in COREPER the
problems concerning the definition of a European political party and issues relat-
ing to funding failed to be resolved by the Belgium Presidency at the end of 2001.
The proposal was therefore shelved, and it would appear that by this stage some
of the euro-parties may have been content that the proposal was lost because the
effect of unanimous voting under the pre-Nice arrangements had resulted in an
unacceptable watering down of the proposals. They preferred to wait for the

40
Press Corner Greens-EFA, Calls for Openness, inclusiveness and transparency on financing of
European Political Parties Press Release Strasbourg (16 May 2001).
41
COM(2001) 343, 2001 OJ C 270 E/103.
42
See letter of 10 October 2001, sent to the Belgian Presidency (Council Document 12738/01, PE-L
100 INST 86, 26 October 2001); document held on file by authors.
43
See Presidency press release PRES/01/390 (29 October 2001).
304 Stephen Day and Jo Shaw

maturing of the EU political system in the sense that qualified majority voting
would be available for the party statute initiative once Nice was ratified.44
Thus the failure to secure the adoption of the proposal was even turned into a
positive. PES Secretary General Ton Beumer took the line that,

the Presidency proposals, in particular the threshold for recognition and funding,
had been watered down so much, that the non-decision gives a chance for an agree-
ment on a better basis in the near future . . . This is against the spirit of Article 191
of the Treaty and would have led to a total between 15 to 20 ‘European Parties’. The
majority of these parties would be constructed for financial reasons and would have
no representative character at EU level.45

Once the Treaty of Nice had been finally ratified by Ireland after its second refer-
endum in late 2002, and had entered into force on 1 February 2003, this changed
the terrain. It enabled the issue to be dealt with on the basis of co-decision proce-
dures between the Council and the European Parliament and qualified majority
voting (QMV) within the Council.
However, one final piece in the political jigsaw needs to be considered before
the focus is placed on the 2003 proposal, and that concerns the Declaration on
Article 191 EC issued by the Member States at the same time as they agreed the
amendment to Article 191 EC through the Treaty of Nice. This Declaration pro-
vides:

The Conference recalls that the provisions of Article 191 do not imply any transfer
of powers to the European Community and do not affect the application of the rel-
evant national constitutional rules.
The funding for political parties at the European level provided out of the budget of
the European Communities may not be used to fund, either directly or indirectly,
political parties at national level.
The provisions on the funding for political parties shall apply, on the same basis, to
all the political forces represented in the European Parliament.

In other words, notwithstanding the strengthening of the terms of Article 191,

through the addition of a operational clause, the Member States still wanted to
signal their concern to protect the autonomy and interests of national constitu-
tions and their fear that subventions through the EU budget might be re-directed
towards national political forces, thus giving rise to the accusations of interfer-
ence. Paradoxically, it is hard to see how the further institutional and political
development of the euro-parties inevitably can avoid the outcome where euro-
parties gradual develop their sovereignty vis-à-vis their member parties.

44
The proposal was only finally withdrawn on 31 December 2003, after the subsequent proposal
had been adopted in accordance with the revised post-Nice legislative process.
45
See Ton Beumer, The European Party Statute: how to proceed after the Council’s failure to decide, 13
December 2001, p1; document on file with authors.
 Political Parties in the EU: Towards a European Party Statute? 305

The 2003 Regulation on European Political Parties:

Negotiation, Adoption and Implementation46

The Commission wasted little time after the coming into force of the Treaty of
Nice on 1 February 2003 before introducing a new proposal for a Regulation.
From certain political perspectives there was only a short and a restricted window
of opportunity to finalise the Regulation. The EU Presidency in the first half of
2003 was held by Greece. Greece had a history of giving support to supranational
political initiatives such as the development of Article 191. Greece’s Presidency
was to be followed by that of Italy in the second half of 2003, and Italy was known
already to be a sceptic, if not an opponent of regulating political parties at
European level, having opposed the 2001 proposal. It could hardly have been
expected to be an enthusiastic broker of an agreement between a majority of
Member States during its Presidency. Thereafter the Presidency passed to Ireland
in early 2004, and Ireland likewise had never been a driving force in the matter of
euro-parties. Consequently, if developments were not to be furthered delayed
until well into 2004, there remained only a short five month window of opportu-
nity between the coming into force of the Treaty of Nice and the end of the Greek
Presidency. Matters were further complicated by other developments expected
and unexpected which occurred to crowd the agenda the Greek Presidency, such
as the completion of the work of the Convention on the Future of Europe in
June/July 2003 and the war in Iraq from March 2003 onwards.
Officially, the co-decision procedure between the European Parliament
involves a Commission proposal, a European Parliament first reading, and then a
Council common position. At that point, if the three institutions are agreed on the
text, the measure can be already adopted at that point in the procedure, but if
not—as normally happens—a second European Parliament reading will follow.
There may also be a period of conciliation between the Parliament and the
Council to reach a final agreed text. All this takes more time than was available.
Some liberties had to be taken with the process. Consequently, once the
Commission’s proposal was published in March 2003,47 both the European
Parliament and the Council, in the form of Working Groups, immediately started
work on the text, both separately and in close collaboration. The process was
actively facilitated both by the Greek Presidency, and also by the Commission.
The task of preparing the crucial Report for the European Parliament was given
to PES member Jo Leinen, a German MEP. His report to the Constitutional Affairs
46
Much of the data which is used to inform the analysis in this Section is derived from presenta-
tions and interventions made by key practitioner informants from the EPP, the PES, the ELDR and the
Greens at a European Science Foundation funded workshop on the future of Transnational Parties
organised by Stephen Day, and held at Goodenough College, London, 17–18 December 2003. We are
grateful to these practitioners for sharing their views about the 2003 Regulation and the task of imple-
menting it so frankly. For the final workshop report see <http://www.esf.org/generic/1654/EW02163
Report.pdf>.
47
Proposal for a Regulation of the European Parliament and of the Council on the statute and
financing of European political parties, COM(2003) 77 final.
306 Stephen Day and Jo Shaw

Committee was accepted on 20 May 2003,48 suggesting 24 amendments to the

original Commission proposal. As a result of the regular contacts with Council
and national officials, the MEPs were by then already sanguine about what could
be achieved in this phase of the legislative evolution of the system of European
political parties, and much of the emphasis of the amendments was upon scaling
down expectations which the wording of the Commission proposal might have
given rise to, as well as trying to secure the Parliament’s position on what it saw as
some of the crucial questions. In particular, the Parliament wished to see the
Commission take responsibility for disbursing the funds available for euro-
parties, rather than this being the responsibility of the Parliament.
At this point, the Council took the relatively unusual step of engaging in a
detailed political procedure leading to a specific political agreement before the for-
mal first reading in the European Parliament (scheduled for 19 June 2003).
Alongside the regular contacts that took place with key MEPs involved in the
Parliament’s work, at the initiative of the Greek Presidency the Working Party on
General Affairs had discussions on the proposed Regulation at 10 meetings
between 7 March 2003 and 10 June 2003, which produced a compromise agreed
text49 and identified five issues which could only be resolved at ministerial level.
These did not include the European Parliament’s wish to be relieved of responsi-
bility for the disbursement of funds. That point was lost even below the ministe-
rial level. After a final meeting of COREPER on 11 June 2003, just below the level
of the ministers, which likewise failed to find a consensus, the Greek Presidency
put forward a number of proposals to the meeting of the General Affairs Council
on 16 June 2003 specifically on the disputed points.50
These concerned the level of representativity of a European political party, the
threshold for declaring the sources of donations, the maximum limits on donations
from individual donors, the maximum level of contributions from national political
parties to euro-parties as a proportion of the euro-party’s budget, and question of a
reference to the financing of (European Parliamentary) election campaigns in the list
of permissible or impermissible activities for euro-parties. In contrast to 2001, with
the shadow of qualified majority voting and of the impact of Council-European
Parliament co-decision hanging over the legislative process, agreement could be
reached at the political level51 on a text based closely on the Presidency compromise.52
This in turn was forwarded to the Parliament as the hoped for basis for the Parlia-
ment plenary first reading of the proposed Regulation on 19 June 2003.
The Council’s political agreement was then converted into a series of compro-
mise amendments to the text approved by the Constitutional Affairs Committee,
put forward in the name of Jo Leinen, the Rapporteur, to the plenary. This allowed
48
Report of the Committee on Constitutional Affairs on the proposal for a European Parliament
and Council regulation on the statute and financing of European political parties (A5-0170/2003),
Rapporteur: Jo Leinen, 21 May 2003.
49
Council Document 10296/1/03 REV 1, 10 June 2003.
50
Council Documents 10451/03, 12 June 2003 and Council Document 10530/03, 16 June 2003.
51
General Affairs Council, Council Press Release 10370.03 (Presse 167) 16 June 2003.
52
Council Document 10601/03, 16 June 2003.
 Political Parties in the EU: Towards a European Party Statute? 307

the Parliament to avoid endangering the effective conclusion of the legislative

process before the end of June 2003, although possibly at the expense of failing to
exercise the full extent of its political powers under the co-decision procedure.
Certainly, the co-decision process was peculiarly truncated on this occasion. On the
other hand, as there had been regular contacts all along between Council and
Presidency officials and MEPs, it can be assumed that the Presidency text itself was
designed to meet the minimum expectations of MEPs. There were certainly some
key areas of difference between the original Leinen Report and the agreed Council
text. For example, the latter contained references to ‘alliances of political parties’,
which means ‘structured cooperation between at least two political parties’, which
had been in original Commission proposal. Many MEPs had earlier expressed objec-
tions to the idea that a euro-party could be formed through an ‘alliance’ of political
parties, which they felt opened the way for too much opportunism through parties
coming together for the precise objective of securing EU level funding, rather than
because of some shared ideological objectives. However, this Council-inspired word-
ing survived into the final Regulation (Article 2(2) and (3)) because it was adopt-
ed—albeit a little reluctantly—by the European Parliament in its first reading.
Furthermore, the Council text was structured in a rather simpler way distin-
guishing the ‘essence’ of a political party at European level (Article 3), from the
question of application for funding, which in turn required the applicant to satis-
fy the conditions in Article 3 (Article 4). Crucially, however, the European
Parliament majority view on the representativity of euro-parties largely carried
the day, with the following key thresholds being eventually adopted:

– representation in the European Parliament, or national or regional legislative

assemblies in at least one quarter of the Member States; or
– receipt of at least three per cent of the votes cast in one quarter of Member
States at the most recent European Parliament elections.53

In respect of the latter condition, the Leinen Report indicated that the majority of
MEPs would probably have preferred a five per cent threshold.54 The reduction to
three per cent was undoubtedly intended to be a gesture towards the situation of
the regionalist party-based European Free Alliance, which would not be contest-
ing elections on a nationwide basis.
On the fraught question of donations, positions very close to the Leinen
Report were adopted in the Presidency compromise and the eventual Regulation.
Thus euro-parties are prohibited from receiving any anonymous donations, any
donations from the budgets of the political groups of the European Parliament,
donations from state-controlled public bodies, and donations exceeding €12,000
per annum from any one donor.55 Euro-parties must declare all sources of income,

53
Article 3 of Regulation 2004/2003, above n 3.
54
Leinen Report, above n 48 at 12.
55
Article 6(c) of Regulation 2004/2003, above n 3; the Leinen Report had suggested capping indi-
vidual donations at €15,000, above n 48 at 14.
308 Stephen Day and Jo Shaw

with the exception of donations under €500.56 The compromise text introduced
one limitation not included in the Leinen Report, namely a capping of the ceiling
of the possible contributions of national member parties to euro-parties at 40 per
cent of the annual budget of the euro-party. It is worth noting that the proportion
of the funding charged to the general budget of the EU must not exceed 75 per
cent of the budget of any given euro-party, so that in practice national party fund-
ing cannot fall below 25 per cent of the annual budget (Article 10(2)).57 This is
because the likelihood of any euro-parties receiving donations or payments other
than national party membership subscriptions remains, in almost all cases, rather
remote. This means that membership subscriptions are likely to be important
sources of revenue in the medium term. Article 10(1) of the Regulation also main-
tained the longstanding compromise between the parties that the distribution of
the budget for euro-parties should be based on equal shares for each eligible euro-
party of the first 15 per cent of funding, plus distribution in proportion to the
number of MEPs for the residual 85 per cent.
One final controversy divided the parties involved in the legislative procedure,
namely the question of what purposes the funding of euro-parties could be devot-
ed to. In accordance with the requirements of the Declaration appended to Article
191, the parties were all agreed from the beginning that the contributions to euro-
parties should not be used to finance, directly or indirectly, national parties.58
There was no such agreement on whether there should be any reference to elec-
tion campaigns, notably European Parliament election campaigns, in the list of
permissible activities. The Leinen Report had inserted a specific reference to
financing European Parliamentary election campaigns,59 but the compromise text
and the eventual Regulation opted for a vaguer formulation, referring to appro-
priations being used for the purposes of the political programme which each
euro-party must put forward as part of its funding application package, and refer-
ring to an non-exclusive list of possible activities which euro-parties might pursue
such as meetings, research, cross-border events, studies information and publica-
tions.60 This formula did not opt for any of the contradictory alternatives put for-
ward by various parties which included explicitly including EP election campaigns,
and explicitly excluding any election campaigns. Presumably EP election cam-
paigns are included so long as the proviso in Article 7 on national parties is
observed. In other words, they must be genuinely European campaigning activities.
One element which was no longer a matter of controversy and dispute between
the majority of parliamentarians, the Commission and the overwhelming major-
ity of Member States was the inclusion in the Regulation of an explicit statement
56
The Leinen Report, above n 48 at 14 had suggested €1000, while the original Commission pro-
posal suggested a rather unrealistic €100 (see above n 47, Article 5(3)(b)). The Presidency text was a
true compromise between the two!
57
Euro-party insiders had long—and ultimately unsuccessfully—argued for this figure to be 85%,
requiring them only to raise 15% of their revenue from other means.
58
Article 6 of the proposal, above n 47; Article 7 of Regulation 2004/2003, above n 3.
59
Leinen Report, above n 48 at p 16.
60
Article 8 of Regulation 2004/2003, above n 3.
 Political Parties in the EU: Towards a European Party Statute? 309

requiring euro-parties to respect the fundamental principles on which the

European Union is founded (ie liberty, democracy, respect for human rights and
fundamental freedoms, and the rule of law61) in both their programmes and acti-
vities. This is to be found in Article 3(c) of the new Regulation, and verification of
compliance with this condition is passed under Article 5(2) to the European
Parliament. If the issue is raised by one quarter of the MEPs, then successful ver-
ification that the condition continues to be met requires an absolute majority of
MEPs (ie 50% + 1). Before carrying out such a verification, natural justice must
be observed, with the Parliament giving hearing rights to any euro-party affected.
Furthermore, it also must ask for the opinion of a committee of independent emi-
nent persons.62 However, there is no reference in the body of the Regulation to the
Charter of Rights, although it is referred to in paragraph 4 of the Preamble.
The approach to the legislative process taken to secure this rather hasty agre-
ement upon a compromise text unsurprisingly perturbed opponents of the
Regulation on euro-parties in the European Parliament. At the beginning of
the Parliament’s first reading debate on 18 June 2003, objections were raised to the
presentation of more than 50 additional amendments just one day before the
plenary session, which arguably challenged the Parliament’s capacity to act demo-
cratically and openly. Some therefore called for the text to be referred back to the
Committee—a tactic which would obviously have had the effect wrecking the deli-
cate political compromise.63 Although the compromise text was passed by an over-
whelming majority (when only a simple majority was required),64 the results of
the roll call vote recorded on the Parliament’s website show that a number of Party
Groups were split by the proposal. This was the case in particular for the compos-
ite Green/EFA Group, with the Greens being largely in favour, and the EFA MEPs
being overwhelmingly against. The reason for this lay for the most part in the ‘sta-
tist’ nature of the criteria of representativity (Article 3), even though they includ-
ed representation in regional parliaments and legislative assemblies. Professor Sir
Neil MacCormick (Greens/EFA) referred during the debate to the nine stateless
nations from just three Member States from which members of the EFA in the
European Parliament were drawn. He went on to argue for rejection of the com-
promise on the grounds that:

61
This list is drawn from Article 6 of the Treaty of European Union.
62
This echoes the informal procedure used to settle the dispute within the EU under which 14 of
the Member States purported to apply ‘sanctions’ at a political level against Austria, when the Austrian
conservative People’s Party entered into a coalition with the far-right Freedom Party (FPÖ) at the end
of 1999. Three ‘wise men’ (Martti Ahtisaari, former President of Finland, Jochen Frowein, eminent
international lawyer, and Marcelino Oreja, former Spanish Foreign Minister, European Commissioner
and Secretary General of the Council of Europe) were given a mandate by the President of the
European Court of Human Rights to examine a number of key questions about the nature of the FPÖ.
They reported at the end of September 2000, giving Austrian politics a broadly ‘clean’ bill of health and
allowing the lifting of the ‘sanctions’.
63
See contribution of Ribeiro e Castro (UEN) at the Plenary Debate, supported by Berthu (NI), ver-
batim report available on <http://www.europarl.eu.int>.
64
354 MEPs voted in favour; 102 against; and 34 abstained. See European Parliament legislative res-
olution, P5_TA-PROV (2003) 0289 of 19 June 2003.
310 Stephen Day and Jo Shaw

The European Free Alliance has been recognised for a long time as one of the orig-
inal Europe-wide political families, and yet we stand on the margins of being exclud-
ed and de-recognised under these proposals.65

The formal first reading of the measure by the Council did not come until after
the summer, in September 2003, and although this was under the Italian
Presidency there were no further political compromises to make and consequent-
ly no political role for the Presidency to adopt. Even so, it is worthy of note that
the decision in the Council was indeed taken by a qualified majority, with the
Danish, Italian and Austrian delegations voting against.66 The text was signed off
by both the Parliament and the Council on 4 November, and the Regulation was
published in the Official Journal in mid November 2003, to come into force three
months after its publication with the exception of Articles 4–10 (on funding),
which applied only as of the date of the opening of the first session after the
European Parliament elections in June 2004 (ie 20 July 2004).67
It is worth noting the key differences in Regulation 2004/2003, compared to
both the proposal made by the Commission and—especially—the predecessor
proposals of 2001. In the first instance, the scope of the proposal is much narrow-
er. All references to the term ‘statute’ have been dropped, except as something
which a party must provide as part of its application for funding, rather than
something which EU legislation is offering to euro-parties. It follows from this
that legal personality is required under the law of the Member States in which the
seat of the party is located (Article 3(a)). This means, in practice, Brussels,
although it is true that the European Green Party has only just relocated its seat
from Vienna to Brussels as part of its latest round of reorganisation and restruc-
turing with a view to benefitting from the Regulation. In practice, this also means
that the legal personality framework for euro-parties must be organised around
the rather constraining possibilities provided under Belgian law on non-profit
making bodies corporate, especially the ASBL (association sans but lucratif) and
the AISBL (association internationale sans but lucratif). The constraints of the
ASBL, which is the chosen legal form of the EPP under the title ‘Concordia’, which
is a legal person which holds the physical assets and issues the employment con-
tracts of the EPP, is that it requires a high percentage of the board members to be
Belgian. The ELDR and the Greens formed new AISBLs in the first months of
2004 in preparation for the rules coming into force,
The eventual compromise view was that since it was clear that the Regulation
was not going to provide a ‘real’ statute, in the sense inspired, for example, by the
model of the European Company Statute or societas europaea, then all references
to the term ‘Statute’ should disappear from the text of the Regulation. The
Regulation is a limited, baseline, mechanism for regulating some rules relating to
political parties at European level and the rules regarding their funding (Article

65
See the verbatim report of the debate available on <http://www.europarl.eu.int>.
66
Formal Council First Reading Press Release PRES/03/251, (29 September 2003).
67
Regulation 2004/2003, above n 3.
 Political Parties in the EU: Towards a European Party Statute? 311

1). Equally it does not provide an exhaustive or complete set of rules, and many
MEPs wish there to be further developments in the context of a review and report
in 2006 (Article 12).68 Certainly, it would be true that a genuine European Party
Statute would provide as a minimum a common legal personality valid across all
Member States, rather than requiring reliance upon the vagaries of national law,
and the mutual recognition of legal forms across the EU. On the other hand, this
has not prevented euro-parties themselves and other political actors consistently
referring to the Regulation—in shorthand—as the ‘European Party Statute’.
Second, the measure is more tightly drafted, especially in so far as it refers to ter-
minology drawn from Article 191 such as ‘political party at European level’, rather
than ‘European political party’. On the other hand, it is interesting to see that it
uses a fiction relating to the euro-party in the text of the Regulation as well as in
the implementing rules which are discussed further below. The Regulation
requires, as noted already, that ‘it’ (ie the euro-party) must be represented in at
least one quarter of the Member States. The Regulation does not say ‘must be rep-
resented by its constituent members.’ The same applies in respect of the phrase
‘must have received at least three per cent of the vote in EP elections’ (Article 3).
This clearly articulates a fiction of citizen linkage between euro-party and citizen,
since it is clear that in almost all cases the citizens will have thought they were vot-
ing for a constituent national member party, and not a euro-party. On the whole,
however, the final Regulation resembles quite strongly the recommendations of
the Tsatsos Report and the 2001 proposal, and it avoided much of the watering
down which the 2001 proposal faced once it entered the negotiating phase within
the Council of Ministers.
Four of the five main euro-parties (EPP, PES, ELDR and Greens) warmly wel-
comed the adoption of the Regulation, issuing positive press releases. For the
Greens, for example, the adoption of the Regulation opened the way for the co-
ordination of ‘substantive and meaningful European election campaigns.’69 The
EPP went perhaps furthest in talking of the contribution of the Regulation to the
creation of ‘a European polity’.70
However, in addition to fervent support from some quarters, Regulation
2004/2003 also attracted fervent opposition from elsewhere in the European
Parliament. The European Free Alliance condemned the Regulation as ‘unfair and
discriminatory’ against small and regionally-based parties.71 Jens Peter Bonde
(EDD) had referred regularly to his wish to see a challenge to the legality of the
Regulation on the grounds that it breached, in particular, the principle of equal-
ity, arguing that it was a system structurally biased against euro-sceptic parties.
Indeed a coalition of MEPs from a number of euro-sceptic groups and national
68
See, eg, the contributions from Leinen (Rapporteur, PES) and Marinho (PES) in the Plenary
Debate on 18 June 2003 (<http://www.europarl.eu.int>).
69
‘European Political Parties’, Press Corner, 18 June 2003 <http://www.greensefa.org/en/press/
detail.php?id=1448&1g=en> (14 April 2005).
70
Towards a European Polity EPP Press Release, Brussels, (19 June 2003).
71
European Free Alliance in the European Parliament, ‘Proposed Statute for European Political
Parties “unfair and discriminatory”’, 18 June 2003, Brussels.
312 Stephen Day and Jo Shaw

parties, including not only Bonde, but also a number of members of the UK
Conservative group in the European Parliament,72 have mounted an action for
annulment of Regulation 2004/2003 on the basis of Article 230 EC.73 In breach of
the common convention of the confidentiality of legal proceedings, Bonde is also
pursuing a policy of revealing all the key documents from the case on his website.74
However, it seems unlikely in view of the Court of Justice’s refusal of standing
under Article 230 EC to a group of MEPs seeking to challenge a measure of the
Parliament concerning the terms and conditions governing internal investigations
in relation to the prevention of fraud,75 that the case will pass an initial scrutiny of
admissibility raised by the defendants—the Council and the Parliament. In the
Rothley case, the Court indicated that the requirement of effective judicial
protection—including the possibility to challenge general measures (such as the
measure on fraud prevention at issue, and doubtless also the Regulation on euro-
parties in the Bonde case)—can be ensured under the legal order of the EU by
means of an indirect challenge to such a measure in the event of judicial proceed-
ings arising under an individual implementing act. Consequently, it can be antic-
ipated that at a later stage a more fruitful line of legal challenge may lie in actions
against individual disbursement decisions, or refusals.

The Implementation of Regulation 2004/2003

Veteran EPP MEP Giorgos Dimitrakopoulos was entrusted on behalf of the

Committee on Constitutional Affairs with drawing up a report on the necessary
amendments to the Parliament’s Rules of Procedure in order to give effect to the
Parliament’s obligations under the Regulation.76 These were substantially accept-
ed by the European Parliament, meeting in Plenary on 9 March 2004.77 The
72
See eg, D Hannan, ‘Why I am Going to the European Court’, EClub/Campaign for the Truth
About Europe, <http://www.campaignfortruth.com/Eclub/210404/>.
73
Case T-13/04 Bonde et al v Parliament and Council, [2004] OJ C71/34 pending.
74
See <http://www.bonde.com>, specifically the section devoted to SOS Democracy. This is an offi-
cial ‘intergroup’ in the European Parliament, which works for openness, decentralisation and demo-
cracy in the EU. Article 4(2) of Regulation 1049/2001 regarding public access to European Parliament,
Council and Commission documents, [1991] OJ L 145/43 provides that:
The institutions shall refuse access to a document where disclosure would undermine the protection
of . . . court proceedings and legal advice . . . unless there is an overriding public interest in disclosure.
This provision has been interpreted by the Court of First Instance in T-105/95 WWF UK v
Commission [1997] ECR II–313 and Case T–191/99 Petrie et al v Commission [2001] ECR II–3677.
75
See Case C–167/02 P Rothley et al v Parliament, judgment of 30 March 2004.
76
Report on the amendments to the European Parliament’s Rules of Procedure following the adop-
tion of the Regulation governing the statute and the financing of political parties at European level,
A5–0071/2004, 19 February 2004. This was a typical example of European Parliament bipartisanship
and ‘balance’. Note that it was a joint Dimitrakopoulos/Leinen Report on proposals for the Nice IGC
which firmly placed the issue of operationalising Article 191 EC on the agenda (A5–0058/1999, PE
231.873/fin, 10 November 1999).
77
European Parliament Decision on the amendments to the European Parliament’s Rules of
Procedure following the adoption of the Regulation governing the status and the financing of politi-
cal parties at European level, P5_TA–PROV(2004)0144.
 Political Parties in the EU: Towards a European Party Statute? 313

changes to the Rules of Procedure,78 in accordance with a wide consensus within

the European Parliament, passed the role of implementing the Regulation in large
measure to the Bureau of the European Parliament. The Bureau consists of the
President of the Parliament, and the 14 Vice-Presidents, the role of which—in
essence—is to ‘take financial, organisational and administrative decisions on mat-
ters concerning Members and the internal organisation of Parliament, its
Secretariat and its bodies’ (Rule 22(2) of the Rules of Procedure). However, appli-
cations for funding are made—nominally—to the President of the Parliament
who is now officially entrusted with the Parliament’s relations with euro-parties
and thus will sign contracts disbursing funds. The next and final stage of general
implementing rules required a Decision of the Bureau of the Parliament, laying
down the procedures on calls for proposals and funding applications, as well as
grant award agreements.79 Simultaneous calls for proposals to access the budgets
for 2004 (€6.5 m) and 2005 (€8.4 m) were issued on 18 June 2004, with an initial
deadline for the 2004 call for proposals of 23 July 2004.80 By that time, each party
would know what its likely share of the pot would be. This is a calculation to be
made on the basis of how many euro-parties were formally in existence and able
to apply for funding on 23 July 2004, combined with the results of the European
Parliament elections of June 2004, and the consequential formation of political
groups within the European Parliament themselves allied to one or more euro-
parties.81
Before dwelling in more detail on these rules, it is first worth noting that
back in 1996, the Tsatsos Report helpfully articulated the basic principles under
which it would be acceptable and legitimate to use public funds to finance the
euro-parties82:

The contributions must

(a) be based on explicit authorization granted by a Community legal act passed
specifically for this purpose and be shown separately in the Community budget;
(b) be distributed in accordance with the principle of equality of opportunity,
with newly established parties given a fair chance, with account being taken of
the number of Member States in which the parties are represented;

78
The 16th Edition of the Rules of Procedure (July 2004 edition) is available from the European
Parliament’s website (<http://www.europarl.eu.int>).
79
See Decision of the Bureau of the European Parliament laying down the procedures for imple-
menting Regulation 2004/2003 governing political parties at European level, etc [2004] OJ L155/1.
80
See Call for Proposals, Budget Line 3710, Contributions to European Political Parties, [2004] OJ
L161/2 and L161/5.
81
It is interesting to note that since the basis of the distribution of amounts is already pre-
determined by legislation, those parties passing the basic thresholds for funding will not as such be
competing for funds. The difficulty will be in working out in advance what a party’s putative share
would be (based on the number of eligible parties, and the number of MEPs assigned to each party),
and then planning the budget around that, bearing in mind the residue must come from other sources
such as donations (limited both by legislation and also in practice) and fees from member parties. As
the budget for 2005 is €8.4 m and there are expected to be seven parties eligible to apply (rather than
the current five) then each party would get just €180k basic as their equal share of the first 15%.
82
See Tsatsos Report, above n 12 at para 16.
314 Stephen Day and Jo Shaw

(c) be tied to the fulfilment of the mission at European Union level resulting from
Article [191] of the EC Treaty;
(d) be linked to the requirement that the recipients disclose their financial cir-
cumstances; such mandatory disclosure includes all other revenue (Members’
contributions, donations, etc);
(e) give the recipients a financial incentive to strengthen their roots in society and
seek greater financial autonomy.

These constitute a useful reference point against which to judge the composite
system comprising Regulation 2004/2003 itself, the amendments to the European
Parliament’s Rules of Procedure, and the Decision of the Bureau. It is worth not-
ing that there is a potential ‘bad press’ for the euro-parties associated with the
receipt of ‘taxpayers’ money’, not only in Member States where parties are not so
funded (eg the United Kingdom), but even in Member States where they actually
are (eg Germany). Consequently, every element of the rules is focused on finan-
cial probity and transparency—doubtless to some extent at the expense of sim-
plicity, with heavy bureaucratic requirements now placed on euro-parties wishing
to apply for funding. At the same time, euro-parties themselves have many more
practical tasks associated with ‘cutting the umbilical cord’ linking them to the
European Parliament Groups, in particular tasks associated with the running of
separate premises and the employment of staff under contracts governed by
Belgian law. This is problematic for euro-parties, whose staff were previously pre-
dominantly employed on contracts as fonctionnaires within the European
Parliament. Contracts governed by Belgian law mean employment subject to
Belgian law, with all the taxation, social security and employment law conse-
quences which follow from that. In practice, employees employed under Belgian
law require gross pay which is double that of fonctionnaires to receive the same net
pay, because of the level of mandatory deductions.
Budgetary autonomy brings responsibility. Not only must euro-parties apply
for funding, they must also report before they receive a final tranche of their fund-
ing (20 per cent)—normally in arrears after the end of the financial year. That
suggests they must have reserves to bridge them from one financial year to the
next. They must produce financial statements for the previous year verified by an
external auditor in order to qualify for funding for the following year, and yet the
deadline for funding for each year falls before the end of the calendar year.
Although Regulation 2004/2003 refers to certain documents being produced for
the first application only (eg statute and political programme), in practice the
Calls for Proposals appear to require these documents on each and every occasion
an application is made.83 The approach of the Regulation and the implementing
rules seems to constrain the freedom of manoeuvre of the euro-parties which
must notify changes in their political programmes to the European Parliament.
Furthermore the Bureau Decision84 refers to a ‘programme of activities’ (Article
83
See above n 80 at point 2.5.
84
See above n 79.
 Political Parties in the EU: Towards a European Party Statute? 315

6(3)), which is a much more specific and constraining concept than a ‘political
programme’ and seems calculated to prevent euro-parties responding in a flexible
way to political developments by planning new activities. To obtain all the fund-
ing it is awarded, the euro-party will be required to demonstrate that the pro-
gramme of activities promised in the application for funding has actually been
carried out.
The requirements associated with applying for funding and then reporting to
secure the full payment of budgetary appropriations together mean that verifica-
tion of euro-parties’ compliance with the conditions in Article 3 of the Regulation
on what constitutes a ‘political party at European level’ will in practice and at a
basic level be constant and ongoing, rather than ‘regular’, as is proposed by Article
5(1) for Article 3(a) and (b) (legal personality and representativity), and episodic
on request of one quarter of MEPs, as is proposed by Article 5(2) for Article 3(c).
Rather the obligations imposed—largely for reasons of budgetary propriety—on
the Bureau under its own Decision require constant checking of the compliance
of the euro-parties with every element of the conditions. In addition, the Article
3(d) condition will have to be verified (intention to participate in European
Parliament elections), even though somewhat strangely no verification mecha-
nism is provided in respect of this condition in the Regulation.85
The condition relating to legal personality was introduced to ensure the
permanence and formal legal status of all euro-parties; the condition on repre-
sentativity was introduced to secure a minimum concept of what constitutes a
euro-party; the condition on EU principles was introduced to ensure that anti-
democratic parties could not secure funding as euro-parties; the condition relat-
ing to participation in the European Parliament elections was introduced to
ensure that euro-parties would address European integration issues—in what-
ever way—in their political activities. In practice, compliance with two of the
conditions can be demonstrated as a simple matter of fact (legal personality and
representativity); regarding participation in the European Parliament election,
this is also either a matter of fact (in the event of a party that has existed during a
time period when such an election has been held) or alternatively, for a new euro-
party, must be a matter for self-certification regarding a future intention. Only the
application of the fourth condition regarding liberty, democracy, human rights
and the rule of law will involve political judgment, and it is likely to be hugely con-
troversial in practice to apply. Thus it is rather hard to see the Bureau actually
applying that condition to deny funding at the application stage—since it would
prefer presumably that formal verification should take place under the provisions
of Article 5(2) of the Regulation. Even so formal compliance with the condition,
in the sense of production of relevant documents and statements will nonetheless
constitute a continuing burden on all parties which must prove their democratic
credentials every time they apply for funding. However, in all cases, all these
85
Richard Corbett (PES) drew attention to what he assumed to be an oversight in his contribution
to the Plenary First Reading debate in the European Parliament on 18 June 2003, verbatim report on
<http://www.europarl.eu.int>.
316 Stephen Day and Jo Shaw

burdens will fall disproportionately and more heavily upon the smaller parties,
where administrative back-up will be much more limited than it is for either the
EPP or the PES, or even for the ELDR.
The requirements on the parties comprise, in sum, a combination of one-off
set-up costs, and ongoing bureaucratic constraints and frameworks, which will
imply higher operating costs for the euro-parties, and may make their operation
less efficient in the future. On the other hand, they will operate on a substantially
more transparent and open basis, and their activities will be more immediately
visible as autonomous and separate activities of ‘political parties at European
level’. The question is: with the level of funding available, and the requirements
which they must satisfy, what level of activities will they be able, in practice, to
undertake? Moreover, with such bureaucratic and budgetary constraints, it is hard
to see in practice how and why the availability of funding will be an overwhelm-
ing incentive for national parties to set up a political party or alliance of parties at
the European level, absent other strong reasons for creating such an arrangement.
This would seem to suggest that there is some risk that EU budgetary funding
for euro-parties will indeed increase the risk of the emergence of the so called ‘car-
tel party’ in the EU context. Katz and Mair argue that

by operating as a cartel, by attempting to ensure that there are no clear ‘winners’ and
‘losers’ among the established alternatives, and by exploiting their control of the
state to generate resources which can be shared out among themselves, the cartel
parties are often unwittingly providing precisely the ammunition with which the
new protesters of the right can more effectively wage their wars.86

One of the amendments to the 2001 proposal brought before the European
Parliament Constitutional Affairs Committee by Olivier Dupuis (TGI) highlight-
ed those fears. The amendment, which was rejected, suggested that

it is necessary to stress the perverse effects which the public funding of political par-
ties has had in a number of countries of the European Union, notably Italy, both
from the point of view of corruption and from the point of view of the functioning
of the institutions.87

Funding was also an issue picked up by members of the British Conservative

Party, who would find themselves unlikely to be able to benefit from the EU fund-
ing of political parties as the Party is not a member of the EPP.88 Frances Maude
claimed that:

86
R Katz and P Mair, ‘Changing Models of Party Organisation: The Emergence of the Cartel Party’
(1995) 1 Party Politics 5–28 at 24.
87
See ‘Amendment 21’ in Amendments 11–78 Draft Report by Ursula Schleicher on the proposal for
a Council regulation on the statute and financing of European political parties, PE 294.765/11–78.
88
British Conservative MEPs do, however, sit with the broader EPP-ED group in the European
Parliament, although their generally euro-sceptic tinge contrasts strongly with the federalist heritage
of the Christian Democrat core of the EPP-ED.
 Political Parties in the EU: Towards a European Party Statute? 317

People will be highly suspicious of this attempt to increase the European Union’s
control of political parties. This cannot be good for freedom of speech or democra-
cy . . . It will increase the pressure on all EU political parties to dance to the tune of
EU bureaucrats rather than voters.89

Whether, on the contrary, as Tsatsos earlier suggested they should, the new rules
will ‘give the recipients a financial incentive to strengthen their roots in society
and seek greater financial autonomy’90 seems more doubtful. In many respects,
Tsatsos’ contribution must be seen as prescient in respect of the types of con-
straints which the receipt of public funding would be likely to result in bringing
about for euro-parties.

Conclusions: Pathways and Crossroads

These reflections lead neatly into an attempt to draw together some of the threads
of this chapter into a concluding section. There are, of course, clear advantages for
the euro-parties and for the probity of EU budgetary affairs overall stemming from
the conclusion and implementation of Regulation 2004/2003. The adoption of this
measure, albeit limited and indeed limiting in its effects, did at least bring to an end
a period of considerable legal and budgetary uncertainty. There will be no more
criticisms, it is to be hoped, from the Court of Auditors, on the budgetary front.
It is commendable—if politically disappointing for strong partisans of the idea
of supranational European parties placed on a common legal basis—that the mis-
leading language of the ‘Statute’ has effectively been eradicated from the
Regulation, if not from political discourse. Urged in this respect by the Leinen
Report,91 the final Regulation declared its modest scope in Article 1 to be that of
establishing ‘rules on the regulations governing political parties at European level
and rules regarding their funding.’ It is hardly surprising, given that it took more
than thirty years to agree a common framework for incorporation of the so called
European Company or societas europaea, that no political agreement could be
reached on rules which might provide even the embryo of a genuine ‘party statute’
in the very limited time available. On the contrary, a party statute is something
provided under the Regulation and the implementing rules by the euro-party itself
in the course of applying for funding, and it must define,

in particular the bodies responsible for political and financial management as well
as the bodies or natural persons holding, in each of the Member States concerned,
the power of legal representation, in particular for the purposes of the acquisition or
disposal of movable and immovable property and of being a party to legal proceed-
ings’ (Article 4(1)(c)).
89
‘Tory furore over EU party funds’ BBC News, 17 January 2001, <http://news.bbc.co.uk/1/hi/
uk_politics/1121785.stm> (16 May 2005).
90
See above n 82.
91
Above n 48.
318 Stephen Day and Jo Shaw

Legal personality is to be obtained under national law alone.

The swiftness with which agreement was reached on the Regulation between
the three key parties—European Parliament, Council and Commission—showed
the overwhelming value and flexibility of the co-decision procedure in facilitating
decision-making at the EU level. Without co-decision, it is hard to imagine that
any type of agreement would have been reached, and consequently the legally
uncertain situation pertaining hitherto would inevitably have continued, with all
the attendant difficulties that it raised in budgetary terms.
On the other hand, as the previous section highlighted, there are clear disad-
vantages for the euro-parties. One of the ironies of the change in the funding
arrangements is that there will doubtless be a need—so far as possible—to
increase funding from membership fees received from the member parties. This
means that during the transitional phase and the process of breaking the umbili-
cal linkage with the European Parliamentary Groups there is likely to be increased
financial reliance on the national member parties.
Furthermore, the changes have introduced considerable upheaval. Only the EPP
had premises outside the European Parliament buildings before July 2004. The other
parties—with the exception of the Greens—made their moves to temporary or per-
manent premises in July 2004. Several of the parties changed their legal status in the
run up to the coming into force of the Regulation both in terms of the adoption of
forms of legal personality which would satisfy the requirements under Article 3 of the
Regulation, and in terms of moves toward less confederal92 and perhaps rather tighter
frameworks as ‘Parties’ rather than ‘Confederations’ or ‘Alliances’. This was the case
with both the Greens (Rome, February 2004)93 and the EFA (Barcelona, March
2004),94 and both parties each acquired new statutes. A party of the far left was found-
ed in Rome in May 2004,95 and in July 2004, shortly after the European Elections,
much was made in the press of the announcement of a new party of the Centre, in
which both Commission President Romano Prodi and François Bayrou, leader of the
French centrist UDF were said to be involved.96 This party then immediately entered
into a new alliance to form a joint Group within the European Parliament in the
2004–2009 term around an explicitly pro-European platform, the Alliance of Liberals
and Democrats for Europe (ALDE). The UEN Parliamentary Group (Europe of
Nations) is said to have drawn up a set of provisional party statutes so as to be eligi-
ble for funding and the former leader of the Austrian Freedom Party, Jörg Haider has
also continued to pursue the goal of some form of far-right transnational entity,97
92
See T Dietz, ‘European Federation of Green Parties’ in Johansson and Zervakis, above n 4 at 125.
93
‘Greens meet to start up a Europe-wide party’ International Herald Tribune, 21 February 2004;
‘Green launch “first real European party”’, EU Observer, 23 February 2004, <www.euobserver.com>.
94
New European Political Party to be founded in Barcelona EFA Press Release (17 March 2004); ‘Regional
parties to form a European Party’ EU Observer, 10 March 2004, <http://www.euobserver.com>.
95
‘Communists found EU-wide party’ EU Observer, 10 May 2004 <http://www.euobserver.com>.
See its embryonic websites at <http://euroleft.org and http://sozialisten.de/sozialisten/el/index.htm>.
96
‘Prodi to help create centrist party’ Financial Times, 10 May 2004; R Heuzé, ‘Avec le PDE, Bayrou
veut faire échec au PPE’ Le Figaro, 17 July 2004. Details of the new party can be found on the website
of a national member party, the UDF, at < http://www.udf-europe.net/ >
97
‘Haider plant EU-Liste der “populistischen parteien”’ Kurier online, 19 May 2002.
 Political Parties in the EU: Towards a European Party Statute? 319

although other evidence points in the direction of a rightwing party not emerging
before 2009.98 All this certainly appears to suggest a changing in the party landscape
within the EU as a whole, including perhaps most significantly the creation of the
strongest centrist Party Group in the history of the European Parliament with near-
ly 90 MEPs at the outset of the new Parliamentary term. It could therefore be sug-
gested that some of the most significant developments, including the strengthening
of euro-sceptic forces within the European Parliament and thus the enhancement of
their already vociferous opposition to the idea of euro-party funding (although not
necessar-ily the reality . . . ), not to mention the increased press attention that has
been given to the spectre of parties of the far right including transnational coopera-
tion amongst them, are all products of political realignments of one type or another
within both the nascent European political sphere and the national political spheres.
These include, of course, EU enlargement itself. Certainly in the new landscape of
potentially more diverse euro-parties, it is interesting to question what might become
in the future of the dominant shadow of positive ‘visions of Europe’ as important cat-
alysts for change often mentioned in earlier studies of the euro-parties. Such a vision
was, for example, one of the raison d’êtres of the EPP as an explicitly federalist party,
although according to critics it has found it increasingly difficult to sustain a com-
mon political platform as more traditionally conservative, rather than Christian
Democratic, parties have joined its ranks. In recent years it has found that it has
increasingly had to share the middle ‘pro-European’ ground with forces such as the
ELDR and more recently the ALDE.99
In sum, it is clear that the effects of cutting the umbilical cord to the party
groups are that the euro-parties must ‘sink or swim’ and they must work to prove
their value-added. It is ironic that the moment of greatest opportunity for the
euro-parties is simultaneously the moment of greatest risk. This is in part because
of the bureaucratic constraints outlined in particular in Section V. It is also
because, with the completion on 1 May 2004 of the first and largest round of post-
Cold War EU Enlargements, one of the most important catalysts for the political
significance of the euro-parties, namely the project of democracy promotion in
the accession states has largely come to an end. The disagreements between
national governments over the war in Iraq, moreover, also increased the stresses
and strains on the euro-parties, as they struggled to find common ground and
useful frameworks for discussion for their traditional pre-European Council party
leader summits during 2003 and 2004. Other strains included the effective dis-
mantling of the stability and growth pact, as a result of an alliance between France
and Germany at the end of 2003 to evade effective sanctions for their budgetary

98
‘European rightwing party perhaps in 2009’ EU Observer, 31 July 2002, <http://www.euo
bserver.com>.
99
‘Les partis manœuvrent pour construire une majorité au Parlement européen’ Le Monde, 15 June
2004; ‘European federalists try to regroup’ EU Observer, 8 March 2004, <http://www.euobserver.com>;
‘EPP is not swinging towards the right’ Letter from EPP President Wilfried Martens to European Voice,
11–17 March 2004; ‘Political groups in European Parliament exchange fire’ EU Observer, 7 April 2004,
<http://www.euobserver.com>; ‘EPP risks split over fate of UK Conservatives’, <http://www.eura
ctiv.com>, 13 February 2004.
320 Stephen Day and Jo Shaw

indiscipline.100 Moreover, the euro-parties remained almost entirely invisible in

the European Parliament elections of 2004, with the exception of the Green Party,
which pushed hard its case that unity as a party also boosted election hopes101
based on something approaching a common electoral platform. Its campaign
attracted praise from the Financial Times.102 After the elections, however, prospects
for effective transnational parties improved again, as the party groups in the
Parliament combined with euro-party interests to block the Italian government
nominee to the Barroso Commission, Rocco Buttiglione, on the grounds of his
highly traditionalist views on women, the family and lesbians and gays. Euro-
party cooperation also offered itself as one constructive way out of the crisis
which arose for the EU as a result of the French and Dutch no-votes in referen-
dums on the Constitutional Treaty in May/June 2005, and the failure of the gov-
ernment leaders at the European Council meeting in June 2005 to agree a budget
for the EU for the financial perspective 2007–2013.
Overall, therefore, the outlook for euro-parties in the mid-2000s did not
appear particularly positive, despite the tremendous optimism, at least for insid-
ers, associated with securing agreement on Regulation 2004/2003, just a few years
earlier. It is clear that Regulation 2004/2003 did provide some important concrete
steps towards the institutionalisation of the normative content of Article 191 in
relation to the role of political parties at the European level. There is no necessary
assurance that this will have strengthened the hand of those arguing for a more
supranational vision of euro-parties as genuinely autonomous political actors
within an emergent European public sphere, as portrayed in the three fold typol-
ogy of euro-parties outlined in Section II of this chapter. On the contrary, just as
the messages regarding the future of EU integration in 2003 and 2004 were high-
ly ambiguous, so the future of euro-parties remains uncertain for the foreseeable
future.

100
Eg ‘France, Germany have “killed” stability pact: EU’s Monti’ EU Business, 3 December 2003,
<http://www.eubusiness.com/afp/031203080655.gjxog0cz>.
101
‘European Greens unite to boost election hopes’ Reuters, 21 February 2004.
102
See Update, Newsletter of the European Green Party, June 2004, <http://www.europeangreens.
org/news/update/june2004.pdf>.
 Index

advertising: Political Education Fund, 105

agenda setting, 88–9 problems, 117
broadcasts see political broadcasting reform
Canada, third parties, 271–87 debates, 109–16
effectiveness, 86–9 proposals, 111–4
government advertising, 116, 163 regulation
negative advertising, 22 federal laws, 119
New Zealand, 17, 19–20, 22 history, 102–4
Quebec, 165 limitations, 116–8
United Kingdom, 38 model, 2, 6, 9
US issue advocacy, 193–4, 209 state laws, 119–22
Amnesty International, 84 Tasmania, 114
Australia: transparency
broadcasting, 79, 104, 106 associated entities, 107, 109–10, 113
campaign spending limits, 103–4, 114–5 issues, 118
case law, 8 leaky system, 102
corruption, 103 lobby groups, 107
donations loopholes, 109–11
anonymous donations, 108 media disclosures, 108
corporate donations, 102, 110–4 requirements, 106–9
disclosure, 106–8 third parties, 108
disclosure thresholds, 108, 111–12 two-party system, 99
identification of donors, 30, 62n29, 108 Austria, 303
limits, 113
returns, 101 BAE Systems, 66
tax relief, 105–6, 112 Barendt, E, 84–5
Electoral Commission, 7, 100–1, 109, 111 Baril, Gilles, 178
empirical research, 100–1 Barrette v Canada, 244, 256–9, 263
enforcement regime, 103–4, 109 Bayrou, François, 318
federal system, 100, 101–2 BBC, 77, 79
fundraising techniques, 110 Belgium, 303
incumbency abuses, 102, 115–6 Berlusconi, Silvio, 94–5
money politics, 99–101 Beumer, Ton, 304
political culture, 115 Blair, Tony, 63–4, 66, 93, 179
political finance, 9, 99–122 Bonde, Jens Peter, 311
political parties, status, 99–100 Bouchard, Premier, 165
public funding, 9, 104–6, 114 Bowman v UK, 45–7
introduction, 103 broadcasting:
New South Wales, 105 agenda setting, 88–9
322 Index

Australia, 79, 104, 106 judicial interpretation, 270

Canada, 259–65 judicial procedure, 276–7
case against, 77–96 ‘notwithstanding clause,’ 245
check on inequality, 91–5 and political finance legislation,
costs, 91 243–67
definition of political, 81–6, 92 rights relevant to democracy, 245–8
difference from other media, 89–91 and third party expenditure, 271–87
discounts, 85–6 Constitutional system, 2, 245, 285
effectiveness, 86–9 corruption, 277, 280–1
and freedom of expression, 77, 78–81 donations
future, 95–6 ban on corporate donors, 276
Germany, 85 identification of donors, 30, 61
Japan, 140 limits, 75, 255, 276
New Zealand, 23–5, 28–30 tax relief, 40
Quebec, government advertising, 163–5 Electoral Commission, 7
Switzerland, 78, 89 equal treatment principle
United Kingdom see United Kingdom broadcasting allocation, 259–65
United States, 79, 86, 88–9 case law, 247–53
Buckley v Valeo, 8–9, 51, 154, 183, 186–8, Charter of Rights, 243, 245
199–201, 203–4, 209, 211, 214–6, 287–8 and competition, 266–7
Burrows, S, 102, 114 deliberative equality, 244, 249, 251–3
Bush, George W, 191 Figueroa v Canada, 244, 251–3, 258,
Buttiglione, Rocco, 320 264–5
Byers, Stephen, 63 and freedom of expression, 250
judicial review, 8, 248–65
campaign spending limits: public funding of candidates, 253–9
Australia, 103–4, 114–15 and third party expenditure, 278
Canada, 4, 8, 114, 248, 255, 271–2, federal system, 153
278–80 freedom of expression, 245, 246
core issue, 4 and broadcasting allocation, 263
and ECHR, Bowman v UK, 45–7 and equal treatment, 250
Japan, 139–41 and public funding thresholds, 256–9
New Zealand, 13–4, 16–7, 19–23 restrictions on third party spending,
Quebec, 155, 162–5 275–7
United Kingdom see United Kingdom incumbency abuse, 260–1, 266
United States see United States issue advocacy, 249, 273
Canada Lortie Commission, 248–50, 274, 283,
see also Quebec 286
1988 election, 273–4 Manitoba, 162
1993 election, 274–5 political parties
broadcasting equal treatment, 251–3
allocation, 259–61 preferential treatment, 284–5
Broadcast Arbitrator, 260–1 registration, 251–3
Reform Party of Canada v Canada, prisoners’ right to vote, 246
244, 261–5, 266–7 public funding, 5, 8, 75, 250, 276
campaign spending Barrette v Canada, 244, 256–9, 263
limits, 8, 114, 248, 255, 271–2, 278–80 structure, 253–6
reimbursement thresholds, 253–6 regulation model, 2, 6, 9
third party restrictions, 243–4, 248–50, right to vote, 246–7
269–87 third party expenditure
Canada Elections Act, 243 Constitutional challenges, 272–87
Charter of Rights, 9, 164 and corruption, 277, 280–1
declarations of invalidity, 245 critique of regulation, 275–6
 Index 323

and democratic principles, 277–80 United Kingdom, 39

empirical studies, 274–5 Conservative party, 72
and equality principle, 278 Liberal Democrats, 73
evidence of effects, 281–6 shareholder consent, 50, 59–60
and freedom of expression, 275–7 SNP, 74
good faith defence, 272–3 US ban, 160, 215
Harper v Canada, 9, 244, 248–50, 270, corruption:
277, 281, 285–9 Australia, 103
jurisprudence, 269–70, 276–87 Canada, 277, 280–1
justification for restrictions, 277 Germany, 55, 58
legislation, 272–3 Italy, 55, 94–5
libertarian approach, 281 Japan, 124, 128, 130–1, 133, 143,
limits, 243–4, 248–50, 269–87 148
preferential treatment of parties, New Zealand, 16
284–5 Quebec, 154, 178
transparency, 276 United Kingdom, 41, 51–2
and US FTA, 273–4 United States see United States
voter turnout, 5 Côté, Pierre-F, 177–8
Cass, D, 102, 114 Czech Republic, 66
Chou en Lai, 184
Cohen, Richard, 70 Delay, Tom, 229
competition, and egalitarianism, 266–7 demand side options, 4, 9
Conservative Party (UK): deregulation, 3, 5
cash for honours, 66 Desmond, Richard, 63, 67
and disclosure of donors, 40–1, 57–8 Dimitrakopoulos, Georges, 312
donations to, 54, 62, 71–3 donations:
and Euro-parties, 316–17 Australia see Australia
Constitutions: Canada, limits, 75, 255, 276
Canada see Canada corporate see corporate donors
and electoral commissions, 8 Euro-parties, 307–8
and funding issues, 2, 9 identification see identification of donors
Japan, 133 Japan see Japan
New Zealand system, 14 Quebec see Quebec
South Africa, 4 reporting by donors, 62n29
United States see United States United States see United States
contributions see donations Drayson, Paul, 65, 74
core issues: Duhaime, Yves, 176, 178
enforcement, 7–8 Duplessis, Maurice, 154
factors, 1–2 Dupuis, Olivier, 316
laissez-faire, 2–3 Duverger, M, 5
private v public funding, 4–5 Dworkin, Ronald, 278–9
regulation models, 6–9
supervision, 7 Eccleston, Bernie, 52, 58–9
supply and demand side options, 3–4 election campaigns see campaign spending
transparency see transparency limits
corporate donors: electoral commissions:
Australia, 102, 110–14 Australia, 7, 100–1, 109, 111
camouflaged donations, 175–6 Canada, 7
Canada, 276 creation, 7
Japan see Japan New Zealand, 17
Quebec, 158, 160, 175–6 powers, 8
shareholder control, 50, 59–60, 113–4 United Kingdom, 7, 42–3, 48, 52, 54–5,
techniques, 110–11 59–60
324 Index

United States, 7, 43 Fabian Society, 75

electoral systems: Figueroa v Canada, 244, 251–3, 258, 264–5
Germany, 17 Fiss, Owen, 250
Japan, 150 Fleming, Robert, 72
New Zealand, 14–15, 17, 20–1, 31 Fleming, Roderick, 72
United Kingdom, 15 Forza Italia, 94
enforcement: Fowler, Norman, 58
Australia, 103–4 France, 39, 161–2, 303, 319–20
conflicts of interest, 8 free elections, right to, 46
importance, 7–8 freedom of association:
New Zealand, 21 and donation limits, 52
United Kingdom, 41, 42–3 and public funding, 56
Enron, 65 US Constitutional right, 9, 213–4
Euro-parties: freedom of expression:
2003 Regulation Canada, 245, 246
implementation, 312–17 broadcasting allocation, 263
negotiating history, 305–12 and public funding thresholds, 256–9
reception, 311–12 third party spending limits, 164, 275–7
compliance mechanisms, 295 and political broadcasting, 77–81, 263
constitutional legitimacy, 293, 296–7 private shopping centres, 80
development of legal framework, Quebec, third party spending, 164
298–304 and spending limits, 46, 48
donations, 307–8 US Constitutional right, 9, 186–8, 213–4,
European Green Party, 310, 318, 320 223–4
fundamental principles, 301–2, 309
funding, 295–6, 300, 302–4, 308 Garrard, David, 70
conditions, 314–16 Geddis, Andrew, 79
popular feelings, 314 Germany:
purposes, 308, 313–14 alliance with France, 319–20
thresholds, 302–3 broadcasting, 85
legal personality, 294–5, 302, 310–11, 315, Bundestag President, 43
318 Constitution, 297
Leinen Report, 305–8, 317 corruption, 55, 58
list, 295–6 electoral system, 17
outlook, 319–20 and Euro-parties, 303
procedure, 294 identification of donors, model, 61
regulation model, 2, 6 public funding, 55–6
role, 297–8 tax relief, 40
staff, 314 Getty, Paul, 72
thresholds, 311 globalisation, 3
transparency, 302, 307–8, 314–5 government contractors, US, 69
Tsatsos Report, 296, 299, 311, 313, 317 Graeff, Corin, 72
European Convention on Human Rights, Greebfields Foundation Trust, 109
45–7 Greece, 305–6
European Free Alliance, 296, 311 Greenpeace, 84, 89
European Union: Grumman, 130
CEE enlargement, 319
Constitutional Treaty, 297 Haider, Jörg, 318
democratising, 301 Hamlyn, Paul, 62, 70
fundamental principles, 309 Harper, Sephen, 270
parties see Euro-parties Harper v Canada, 9, 244, 248–50, 270, 277,
expenditure see campaign spending 281, 285–8
limits Hashimoto, Ryutaro, 123, 149
 Index 325

Haughey, Edward, 72 limits, 124, 138–40

Haughey, William, 70 loopholes, 139, 149
Hosokowa, Morihiro, 132 proscribed donors, 137–8
Hukuda, Premier, 130 thresholds, 136
Hutton, John, 65 electoral system, 150
fundraising techniques, 137
identification of donors: Kanemaru Scandal, 137
Australia, 30, 62n29, 108 Koso incident, 150
Canada, 30, 61 Lockheed Scandal, 130
Euro-parties, 307 participation of individuals, 145
front organisations, 28 political finance, 123–52
German model, 61 political parties
New Zealand, 18, 20, 25–8 income, 146–8
Quebec, 158–62 legal status, 133–5
United Kingdom public funding, 9, 125–6, 141–4, 146, 148
company donations, 39 Recruit Scandal, 125, 131
PPERA reforms, 59–62 regulation
pre-reform position, 40–1, 57–9 history, 125–33
United States, 30 limits, 149–52
ideology, end of ideology, 2–3, 99 loopholes, 123–4
international mechanisms, 2 major legislation, 125
Iraq war, 305, 319 models, 2, 6, 9, 125–6
Ireland, 304–5 Sagawa Scandal, 137
issue advocacy: sanctions, 149
Canada, 249, 273 scandals, 123–5, 128–32, 134, 137, 141,
New Zealand, 23 149
United Kingdom, 82–3 self-regulation, 126, 130
United States, 193–4, 209 structural reform, 126, 132–3, 150
Italy, 55, 94–5, 303, 305, 320 trade unions, 138–9
transparency, 123, 128, 149–52
Jacobs, Lord, 73 1994 reforms, 132, 135–7
Japan: loopholes, 139, 149
1948 legislation, 127–9 US influence, 127, 128
1975 reforms, 129–30 Yahata Seitetsu case, 128
1980 amendments, 130–1 Johnston, Richard, 274, 283, 286
1994 reforms, 124–5, 131–3 judicial review see Canada; United States
evaluation, 144–8 Jurgensen, Jean-Daniel, 161n23
main features, 133–44
Black Fog Scandal 1966, 128–9 Kaifu, Toshiki, 132
broadcasting, 140 Kalms, Stanley, 72
campaign spending, 124 Katz, R, 316
limits, 139–41 Kay, Barry, 275
corporate donations Kenwright, Bill, 70
1994 reforms, 133, 136–7 Key, V O, 225–6, 233
decrease, 145–6
LDP dominance, 134 Labour Party (UK):
limits, 130 annual accounts, 40, 57
proposed prohibition, 128–9, 132 and disclosure of funding, 58–9, 61
corruption, 124, 128, 130–1, 133, 143, 148 and donation limits, 52
donations donations to, trends, 69–71
1994 reforms, 125, 132–3 Ethics Committee, 68
decline, 145–6 sleaze, 62–9
disclosure, 123, 135–7 structure, 75–6
326 Index

trade union funding, 2, 38–40, 52, 69–70, electoral system, 14–5

75–6, 178–9 closed party lists, 31
laissz-faire, 2–3 Mixed Member Proportional voting,
Lakeman, F, 73 14–5, 17, 20–1, 31
Lavallée, March, 161n23 Royal Commission, 17, 27–8, 31
Laxton, D, 73 government system, 14–5
Leinen, Jo, 305–8, 317 identification of donors, 18, 20
Lemieux, Vincent, 173 anonymous donations, 25–8
Lesage, Jean, 155 front organisations, 28
Lévesque, Catherine, 176 issues, 25–8
Lévesque, René, 158, 160, 162n26, 177 issue advocacy, 23
Levy, Lord, 64, 68 political finance, 13–32
Lewis, G M, 73 increased public funding, 30–2
Liberal Democrats (UK), 73, 87 low-cost environment, 13, 25
LNM Holdings, 64 problems, 25–32
lobby groups, Australia, 107 public funding
Lockheed Scandal, 130 election broadcasts, 23–4
reform, 30–2
MacArthur, Douglas, 127 regulation model, 2, 6, 8–9, 13–32
MacCormick, Neil, 302–3, 309 Norway, 39
Mair, P, 316
Manchester Airport, 71 Ohira, Premier, 130
Marr, Andrew, 92 Ondaatje, Christopher, 62, 70
Maude, Francis, 316–17
Maugham, George, 72 Parizeau, Jacques, 161n23
McAlpine, Lord, 57 Parkinson, Cecil, 40–1
McConnell v FEC, 9, 184–5, 188, 191, Perot, Ross, 284
194–211, 234 Plaid Cymru, 74
McDonnell Douglas, 130 political finance:
Mediaset, 94, 95 Australia, 9, 99–122
Miki, Premier, 129–30 campaign spending see campaign spend-
Mittal, Lakshmi, 64–5, 70 ing limits
Miyazawa, Premier, 132 Canada see Canada
Muraoka, Kanezo, 123 donations see donations
Japan, 123–52
Nadir, Asil, 50n83 New Zealand, 13–32
Nakajima, Yohiro, 143 public funding see public funding
Netherlands, 320 Quebec, 153–79
New Zealand: United Kingdom
broadcasting post-reform, 42–54
fairness of allocation, 28–30 pre-reform position, 35–42
regulation, 23–5 United States see United States
campaign spending political parties:
advertising, 17, 19–22 Canada
individual candidates, 19–21 equal treatment, 251–3
limits, 13–4, 16–7, 19–23 preferential treatment, 284–5
returns, 18, 20 registration, 251–3
sanctions, 21 European Union see Euro-parties
statistics, 13 influence on funding structures, 2
third parties, 21–3 membership decline, 5
corruption, 16 New Zealand, closed party lists, 31
Electoral Act 1993, 14 Quebec
Electoral Commission, 17 dominant parties, 165–8
 Index 327

revenues, 166–73 corruption, 154, 178

status distinctiveness, 153
Australia, 99–100 donations, 158–62
Euro-parties, 294–5, 302, 310–11, 315, ban on corporate donations, 158, 160
318 camouflaged corporate donations,
Japan, 133–5 175–6
Quebec, 155 effectiveness of regulation, 165–73
United States, 2 foreign donations, 161
corruption by parties, 221–2 French finance, 161
corruption of parties, 219–21 individual contributions, 161
federal level, 226–7 limits, 159
formal/functional dimension, 228–31 possible solutions, 176–9
ideological coherence, 233–4 profile of donors, 174
nature, 205–6, 223–4, 225–31 returns, 159
power over candidates, 236–8 sources, 168–73, 174
and separation of powers, 227–8 tax relief, 159–60, 172–3
three dimensions, 225–6 election agents, 155–6
voters’ identification with, 234–6 freedom of expression, 164
weakening effect of BCRA, 232–8 legislation, 154
Powderject Pharmaceuticals, 65 political finance, 153–79
private funding, v public funding, 4–5 assessment of system, 162–76
privatisation, 3 originality of system, 153, 160, 176–7
Prodi, Romano, 318 reform options, 176–9
public funding: political parties
Australia, 9, 103–6, 114, 117 main parties, 165–8
Canada see Canada revenues, 166–73
critics, 114 status, 155
and deregulation politics, 5 public funding, 9, 159
Euro-parties see Euro-parties increasing dependence, 173–5
France, 39 origins, 155
Germany, 55, 56 Quiet Revolution, 153–4, 158
Japan, 9, 125–6, 141–4, 146, 148 regulation
and limits on campaign spending, 4 effectiveness, 162–76, 177–9
New Zealand, 23–4, 30–2 model, 2, 6, 9, 153, 162
Norway, 39 origins, 153–4, 160–1
political parties, 4 scandals, 154
v private funding, 4–5 trade unions, 158, 160
Quebec, 9, 155, 159, 173–5 transparency
Sweden, 39 donations, 158–62, 175–6
tax relief see tax relief election expenses, 155, 163
United Kingdom see United Kingdom
United States, 53 Rawls, John, 2, 249–50, 267
and voter turnout, 5 Recruit, 125, 131
referendums, Quebec, 157, 163–7
Quebec: Reform Party of Canada v Canada, 244,
Anglophone economic power, 161–2 261–5, 266, 267
broadcasting, government, 163–5 regulation:
campaign spending, 154–8 demand side, 4, 9
effectiveness of regulation, 162–5 effectiveness, 7–8
limits, 155 and end of ideology, 2–3
referendums, 157, 163–5 models, 6–9
reimbursement, 155–7 national and international, 2
third parties, 155, 157–8, 164–5 supply side, 3–4
328 Index

Reid, Dr John, 67 Canada, 40

Ribeiro e Castro, José, 302 Germany, 40
Romania, 64 Quebec, 159–60, 172–3
United Kingdom, 39–40, 54
Sagawa Company, 137 United States, 40
Sainsbury, Lord, 62–3, 70 Tham, J, 112–13, 114
Sato, Eisaku, 154 third party expenditure:
scandals: Australia, 104, 107–8
Black Fog Scandal, 128–9 Canada see Canada
Japan, 123–5, 128–32, 134, 137, 141, 149 limits, 4
Kanemaru Scandal, 137 New Zealand, 21–3
Lockheed, 130 Quebec, 155, 157–8, 164–5
Quebec, 154 United Kingdom, 37, 44, 45–7, 82
Railway Scandal, 154 United States, 46–7, 230, 275
Sagawa Scandal, 137 trade unions:
Scandale des Tanneries, 154 funding of UK Labour Party, 2, 38–40,
Watergate, 8 52, 69–70, 75–6, 178–9
Schleicher, Ursula, 302 Japan, 138–9
Scotland: Quebec, 158, 160
‘Keep the Clause’ campaign, 84 United States, 184, 215
Scottish National Party, donations to, transparency:
73–4 Australia, 102, 106–11, 113, 118
Scott, Andrew, 82–3, 86 Canada, 276
Society of Labour Lawyers, 75 coercive laissez-faire, 3
Soros, George, 209 Euro-parties, 302, 307–8, 314–15
sources of funding: Japan see Japan
appropriateness, 3–4 New Zealand, 18, 22–3, 25–8
donations see donations options, 3
identification see identification of donors Quebec, 155, 158–63, 175–6
Japan see Japan United Kingdom
New Zealand see New Zealand campaign returns, 37
public funding see public funding continuing problem, 62–9
Quebec, 168–73 donations, 57–76
United Kingdom see United Kingdom large donations, 51–2
Souter, Brian, 84 post-reform, 43–4, 59–62
South Africa, 4 pre-reform system, 40, 57–9
spending see campaign spending limits United States, 152, 188
spin, 93–4 Tsatsos Report, 296, 299, 311, 313, 317
Steinberg, Leonard, 72
Sugar, Alan, 70 United Kingdom:
Sullivan, David, 63 advertising, 38
supply side regulation, 3–4 ‘big bang’ model, 9, 35–56
Sweden, 39 broadcasting, 40, 48, 77–86
Swift Boat Veterans, 209 balance, 84–5, 88
Switzerland, 78, 89 definition of political, 81–6
Neill Committee, 90
Tachibana, Takashi, 130n23 party v issue advocacy, 82–3
Takeshita, Noboru, 131 spin, 93–4
Takigawa, Toshiyuki, 123 campaign spending limits, 4, 55, 114
Tanaka, Kakuei, 129–30 Bowman case, 45–7
Tanguay, Brian, 275 constituency level, 36–7, 45, 48–9
tax relief: national campaigns, 37–8, 44–5, 48
Australia, 105–6, 112 national level, 37
 Index 329

post reform, 44–9 Policy Development Grant, 53–4

pre-reform, 36–8 Short system, 40, 59
regulated periods, 47 regulation model, 2, 6, 8
returns, 37 sleaze, 35–6, 52–9, 58
third parties, 37, 44–7, 82 tax relief, 39–40, 54
Tronoh Mines case, 37–8 third parties
corruption, 41, 51, 52 limits on campaign spending, 37,
donations 44–7, 82
cash for honours, 66 recognised third parties, 46
company donations, 39, 50, 59–60, transparency
72–4 continuing problem, 62–9
conflicts of interest, 68–9 donations, 57–62
continuing problem, 62–9 election spending, 37
disclosure, 57–62 large donations, 51–2
donors’ response to reform, 68–9 post-reform, 43–4, 59–62
foreign donors, 49–50 pre-reform system, 40, 57–9
identification of donors, 39, 40–1, voter turnout, 5, 36
57–62 United States:
large donations, 51–2, 62–6, 70, 75 1992 presidential election, 284
limits, 49–52, 60 America Coming Together, 209
permissible donors, 50, 69 Bipartisan Campaign Reform Act, 183–5,
political sleaze, 35–6, 58, 62–9 190
post-reform position, 59–62 campaign finance, 207–9
pre-reform position, 57–9 critique, 228
Statement for Donors, 67–8 Democrats as losers, 232, 238
trends, 69–74 scope, 191, 217–19
union funding of Labour Party, 2, section 527 Committees, 208–9,
38–40, 62, 69–70, 75–6, 178–9 229–30, 238
Electoral Commission, 7, 42–3 soft money restrictions, 194–5, 201,
budget, 60 204, 217
composition, 43 weakening effect on political parties,
creation, 59 232–8
powers, 8, 43 broadcasting, 79, 86, 88–9
reports, 48, 52, 54–5 Campaign Reform Act 2002, 9
website, 59 campaign spending
electoral system, 15 coordinated expenditures, 215
enforcement mechanisms, 41–3 expenditure-contribution distinction,
and Euro-parties, 300–1 214–15
Houghton Committee, 39, 54, 56 future, 209–11
law reform limits, 4, 46–7, 209–11, 214
constitutional reforms, 36 presidential campaigns, 4
major reforms, 42–54 third parties, 46–7, 230, 275
PPERA 2000, 35, 42–54 Constitutional freedoms, 9, 183–90, 210,
reasons, 35–42 213–15, 223–4
Neil Committee, 41, 43–4, 46, 48, 50, 52, corruption, 9, 55, 185, 196–7, 200–7, 211
60–1, 75, 90 and Constitutional freedoms, 213, 238
political tradition, 55–6 corrupt exchange, 204–6
PPERA 2000, 35 corruption by parties, 221–2
assessment, 54–6, 74–6 corruption of parties, 219–21
major reforms, 42–54 corruption through parties, 222–3
pre-reform position, 35–42 doctrinal issues, 219–25
public funding, 39–40, 53–4 evidence requirements, 206–7
opposition, 55–6, 59, 71–2 extension of concept, 200–7
330 Index

jurisprudence, 223–5 public funding, 53

meaning, 215–6 regulation model, 6, 9
parties v individuals, 215, 219 separation of powers, 227–8
primacy of fight against, 215–17 soft money, 191–211
special access, 201–4, 216 BCRA restrictions, 194–5, 201, 204, 217
donations effect of ban, 237
ban on corporate donations, 160, 215 federal candidates and officeholders,
expenditure-contribution distinction, 200
214–5 and federal system, 226–7
government contractors, 69 McConnell v FEC, 195–200
identification of donors, 30 national party soft money ban, 195–8
large donations, 201, 228 rise, 192–4
limits, 51, 196–201, 214, 217–19 state and local party restrictions,
shadowy interest groups, 239 198–200
trade unions, 184, 215 tax-exempt organisations, 199–200
Federal Election Commission, 7, 43, 152 Supreme Court decisions, 2, 183–90
federal system, 192, 195, 213, 226–7 Buckley v Valeo, 8–9, 51–2, 164, 183,
FTA with Canada, 273–4 186–8, 199–201, 203–4, 209, 211,
hard money, 217 214–16, 287–8
incumbency abuse, 184, 190 Constitutional rights, 185–7
influence on Japan, 127–8 deference to political judgments,
issue advocacy, 193–4, 209 187–9
liberty framework, 2 Florida 2000 presidential election, 190
McConnell v FEC, 9, 184–5, 188, 190–1 integrity of political process, 189–90,
application, 208 210
concept of corruption, 200–7, 222 McConnell v FEC, 9, 184–5, 188,
effect of BCRA, 237 190–1, 194–211, 234
effect of informal interest groups, 234 overturning 1970s reform, 8
and future of campaign finance, Swift Boat Veterans, 209
209–11 tax relief, 40
generally, 194–211 transparency, 152, 188
soft money, 195–200 Watergate scandal, 8
Media Fund, 209 Uno, Premier, 132
PACs, 183–4, 205, 228–9
political finance voter turnout, 5, 36
BCRA, 207–9, 217–19
doctrinal issues, 219–25 Wheeler, John, 72
expenditure-contribution distinction, Wheeler, Stuart, 62
214–15
legal development, 214–25 Yeldon, F, 73
legislation, 213–39 Young, Hugo, 64
political parties see political parties Young, S, 115