Depending on the
country, campaign finance regulations may be contained in the constitution, and/or
elaborated in a specific law on campaign finance or in broader laws on
elections or political parties. Additionally, criminal legislation, such as the
penal code, as well as legislation governing anti-corruption measures,
auditing, media, gender equality or taxes, may also contain provisions about
campaign finance. Relevant constitutional/ judicial case-law may also clarify
some legal provisions on campaign finance. Most campaign finance laws allow the
oversight body to provide further clarification of campaign finance regulation
through the publication of instructions.
Practice varies
throughout the world, with different institutions tasked with the supervision
of campaign finance regulations. Institutions may include an Election
Management Body (EMB), a specialized body, a Ministry, a Court, or a
government/ auditing institution. Of the countries with oversight bodies
responsible for enforcing campaign finance rules, the most common institution
taking over this supervision task is the election management body (47% of the cases). This Focus On is limited
to countries in which the electoral management body is responsible for campaign
finance regulation, which means that most case studies will address specific
aspects of campaign finance regulation in countries where the EMB is
responsible for campaign finance monitoring.
Figure 2: Different types of campaign
finance enforcing bodies[1]
The EMB is considered in many
countries as the best suited institution to enforce campaign finance
legislation since it is generally a permanent state body which is supervising
and managing the whole electoral process. On the other hand, the EMB might not
have the specialized personnel, sufficient institutional and financial resources,
or enough time to carry out such a task. In addition, in instances where the
EMB has some representatives from different political parties, it might be seen
as partial or susceptible to take political-biased decisions.
For ease of understanding, and in
order to review the existing methodologies and approaches to regulation of
campaign finance, the three sets of regulations mentioned above - i.e.
regulation of income, regulation of spending, and regulation of control
mechanisms - will be considered in greater detail.
Sources
of financing
Most countries
around the world use a mixed campaign finance system that allows for both
public financing, allocated by the State, and private financing, given by
individual and/or legal entities. Both types of financing allow
for monetary and in-kind contributions.[2]
Public campaign financing
Public
funding is a widespread practice of campaign finance regulation,3] and a common aim is to contribute
towards a landscape where parties and candidates can compete equally.
A potential upside is that it may encourage compliance with campaign finance
rules because of the threat to withhold public funds if electoral contestants fail
to abide by them. Public financing also implies the need for transparency
regarding the use of these funds, since the public is the ultimate source of
these funds and should be allowed the possibility of meaningful scrutiny. The level
of public funding disbursed is also another critical factor to take into
account. If there is too little money or if the number of eligible recipients is too important,
the allocation of public funding will have a limited impact, if any at all, and
could be seen as a waste of taxpayer money or will make no difference to
political parties which will be granted a fairly small amount of public funds. On
the other hand, in instances where the level of public financing is high and
constitutes the dominant funding source, there is a risk that electoral
contestants become increasingly dependent on public funding and lack grass-roots support
bringing about the weakening of the link between political parties/ candidates
and their electorate.
Public
campaign financing can be both direct and indirect. Direct financing refers to monetary
contributions in the form of both annual subsidies covering
parties’ routine functioning, as well as electoral campaign subsidies granted to candidates
and political parties for the purpose of contributing to campaign and election costs. Indirect financing includes
non-monetary contributions, which can range from providing candidates and/or
political parties with services for free or at a reduced rate – such as access
to public media or use of
billboards in order to display the electoral materials – to allowing the use of state
property for the purpose of campaigning, to printing of electoral materials, or
to tax relief
based on campaign contributions.
Public financing can either be allocated before the election or after in
the form of reimbursement of electoral expenditures once electoral actors have
complied with reporting requirements. It is typically
based on objective criteria, such as parliamentary representation, percentage
of votes cast for the party or the candidate, the number of candidates put
forward by the party in an election, or a combination of these criteria. Most countries
use some kind of threshold for receiving public funding which is often lower
than the electoral threshold for the allocation of a mandate in parliament.
The
allocation of public funding can be made contingent on compliance with requirements
for women’s participation.4] According to International IDEA’s political finance database, 27 out
of the 180 countries listed have adopted reforms that directly target gender
equality.5]
One
approach is to create financial incentives in the form of additional
public funding for political parties meeting legal criteria such as including a
certain number or percentage of either sex on their candidate lists or reimbursing
for example, some specific expenditure related to childcare services. Another
approach is to reduce, deny or withdraw public funding for political
parties which do not include a certain number or percentage of women
candidates. The last approach is to earmark
a certain share of
the public funding to activities related to gender equality within the party,
such as the training of women candidates or the support of women’s wings.
Figure 3: Examples of approaches to connect campaign
finance with gender equality
Private campaign financing
Private funding includes contributions6]
from individuals or legal persons, self-financing and in some instances, loans
taken out by political parties and candidates to finance their campaign,
depending on the states’ legislation. Private campaign financing is a form of
political participation and it is important that all individuals have the right
to freely express their support of a political party or a candidate of their
choice through financial and in-kind contributions. Private
funding can be limited by amount (quantitative limitations) and/or by source (qualitative
limitations), as private financing can distort
the political process in favour of wealthy interests.
According to International
IDEA’s political finance database, 38 % of countries cap the amount that
individuals and/or legal entities can contribute to a political party in
relation to an election, while 30% of countries limit the amount a donor can
contribute to a candidate.
Qualitative limitations, which restrict the sources of contributions, aim
to limit the ability of particular groups or wealthy contributors to gain
political influence on candidates or political parties. These restrictions
often apply to non-citizens, companies, unions, government contractors, and
anonymous persons. The graphic below (figure 4) shows the different types of
contribution bans to electoral contestants in relation to election campaigns.7]
Figure 4:Contribution bans
Besides private contributions,
electoral contestants are also permitted to finance campaigns by taking out
loans to equalize access
to private funding among candidates regardless of individual wealth. This
source of financing is considered private campaign financing. When loans are allowed, electoral contestants can take out
loans from financial institutions (banks, credit card companies), and sometimes
from legal entities or individuals. For transparency, legislation should require
that all bank loans and loan details be reported and disclosed, including: identity
of the lender, total amount of loan, interest rate, repayment period, and any
contingency which may impact the initial conditions agreed for the loan in
question.
Campaigning
Campaign spending regulations usually aim at
restricting the amount of money that can be spent and the kinds of expenditures
that political parties and/or candidates can incur for electoral purposes. This
common form of regulation consists of setting a ceiling on the permissible
electoral expenditures that individual candidates can incur and/ or the total
amount spent by a political party during a campaign and/ or setting out rules
prohibiting the use of administrative resources for electoral purposes.
Spending limits
The rationale behind a ceiling on expenditures is twofold: levelling the playing field by ensuring that
candidates with more financial means are not unfairly advantaged, and keeping the total campaign costs at a moderate level, and thus minimizing
the need for additional fundraising and subsequent political dependence on
donors. The spending limit has to be realistic enough to allow candidates and
political parties to effectively campaign and reach out to voters. The spending
limit is usually determined by factors such as the voting population, the geographic size of constituencies, the length of the campaign
period, and other factors such as the cost of inflation. Whether
electoral contestants are provided with free media time by law is another
important factor in setting spending limits, given the high cost of paid
advertising.
However, setting a ceiling on expenditures
can be undermined if third parties such as interest groups, trade unions,
corporations, associations, or individuals spend money on behalf of or in
opposition to a particular political party or candidate and do not have to
abide by the spending limit. Most countries have no regulations on third-party
spending,8] which remains an area of
concern, and “gives interest groups a significant role in political spending,
although campaign spending by parties and candidates is subject to statutory
limits.”[9]
To
make the spending limit effective, it is important for regulations to define
two things: electoral expenditure and the campaign period. These
inform electoral contestants of both the types of expenditure that must be
reported in the financial reports and the
timeframe, respectively.
The definition of electoral
expenditures must encompass both monetary and in-kind expenditures. In-kind
expenditures, such as use of the candidate’s personal car or the supply of
personnel by the political party for electoral purposes, should count towards the spending
limit according to their market value to prevent circumvention of spending
limits. The definition of electoral expenditures
should also take into account the issue of illegal expenditures (such as vote
buying10])
which have to be reported in financial reports but cannot be financed through
legal sources. Indeed, while those expenditures are illicit by nature, they are
nevertheless incurred to get electors’ votes. In this
regard, they have to be counted against the spending limit when such a limit
does exist.
Besides capping electoral expenditures,
some campaign finance systems also limit or ban certain types of expenditure; most
notably on paid political advertising.
Paid political advertising is
statutorily forbidden in a significant number of Western European countries
such as: Belgium, Denmark, France, Germany, Ireland, Malta, Norway, Portugal,
Switzerland, and the UK and in some central and Eastern Europe, such as the
Czech Republic and Romania. In these countries, electoral contestants are usually granted free airtime, generally on public
service broadcasters, to present their programs. Other countries, such as Australia,
Argentina, Canada, or South Africa, do not have a blanket ban, but have restrictions
regarding the use, content and amount of political advertising (either the
amount of money spent on political advertising or the number of advertisements).
The rationale behind this ban is to constrain growth of
campaign spending and to prevent the domination
of public debate and electoral campaigns by wealthy parties and to maintain the
presentation of balanced views. In addition, it is believed that bans on
paid advertising safeguard the quality of political debate. With bans on more
expensive and financially intensive campaigns, less expensive means – such as
social networks, door-to-door campaigning, and campaigning through networks of
volunteers – become more popular.
However, a ban on political advertising may make it more
difficult for new parties and candidates to make their views known to voters. The
key issue regarding potential limitations or bans on paid political advertising
during the campaign period is to assess whether or not political parties and
candidates are able to get their messages to voters and whether voters have
full access to receiving political and electoral information.
Abuse of administrative/ state
resources
The misuse of
administrative resources refers to the use of state (or public) legal,
institutional, financial, and coercive resources for campaign purposes when
these are not provided by law. The misuse of administrative resources during
electoral processes, including in countries with a long-standing tradition of
democratic elections, is a widespread phenomenon and represents one of the most
crucial and recurrent challenges as regards campaign finance regulation
enforcement.11] The misuse
of public resources is particularly damaging because it typically benefits the
incumbent party.
If misuse of state resources is mostly addressed through formal
regulations civil society and the media must be vigilant in monitoring
compliance to ensure that the state
institutions involved in administering and regulating the electoral campaign treat
all parties and candidates equally, impartially, and fairly. The political will of the state authorities remains a
key factor to ensure free and fair elections and effectively implement measures
to prevent the misuse of administrative resources.
Administrative resources can be classified in
four main categories:12]
|
Type of administrative resources
|
Definition
|
|
Legal resources
|
The abuse of
legal resources involves passing politically-oriented laws and enforcing
biased existing regulations to benefit incumbent parties/ candidates and
hinder opposition parties/ candidates
|
|
Institutional resources
|
Institutional
resources are the material, technical, human and communication resources of
the state. The abuse of these resources includes the use by incumbent
political forces for campaign purposes of state office space and equipment,
employees, vehicles, or state-owned media.
|
|
Financial resources
|
The misuse of financial resources comprises the use
of the state or local budgets to benefit incumbent political forces, such as the launch of
social benefits or welfare programs in the election campaign period by the
ruling party.
|
|
Coercive resources
|
Coercive resources, which include the
police and other law enforcement institutions, may be used to intimidate,
harass, obstruct, arrest political opponents and prevent opposition
candidates from campaigning.
|
The
misuse of administrative resources during electoral processes may threaten some
of the basic requirements of free and fair elections, i.e. equality of
opportunity between electoral contestants, transparency of the campaign, and
freedom of expression of opposition parties/ candidates. Legislation
pertaining to the use of administrative resources varies considerably throughout
the world. Different ways of regulating the issue may be considered; from
banning civil servants from actively participating in campaign activities, to
requiring public servants to resign from their position before running in an
election. Whatever the regulations, the principle of neutrality that guarantees
a level playing field for all political contestants and that entails impartial
behaviour by civil servants and authorities at all levels should prevail
throughout the election campaign period.
Enforcement/
sanctions/ disclosure
To maintain the
integrity of the electoral process, strengthen public confidence in political
actors, and hold both political parties and candidates accountable, proper
enforcement of laws and regulations on campaign finance is critical. To do so,
the oversight body needs to have at its disposal an array of sanctions which
are deterrent, effective and proportionate to the gravity of the violation. Campaign
finance reporting and disclosure are important measures to inform the public of
the financial support given to electoral contestants, thereby promoting
transparency in the campaign finance system.
Reporting
Campaign finance reporting is the main policy instrument for achieving
transparency in campaign finance regulation and refers to the timely submission
of information about contributions received by parties and candidates (and
third-parties when applicable), as well as their expenditures. A common requirement
for political parties
and candidates is to appoint a financial agent who is responsible for all campaign
finance aspects of the campaign, such as collecting contributions, paying expenditures
through a campaign-specific bank account opened for this purpose, and keeping
an accurate and detailed account of all transactions made for electoral
purposes. This rule aims to increase the transparency of a campaign’s sources
of financing, to enhance the comprehensiveness of financial transactions
reported in the financial report, and to ease the supervision task of the
oversight body.
The
OSCE/ODIHR Handbook for the Observation of Campaign Finance recommends that “It
is good practice for authorities to introduce a standard template and guidance
for reporting, which enables timely analysis and meaningful comparison between
different parties and candidates. (…) Reporting formats should include the
itemization of all contributions and expenditures into standardized categories
as defined by the regulations. Itemized reporting should include the date and
amount of each transaction, as well as copies of proof of the transaction.”[13]
Although reporting
rules are crucial to ensure that all political actors comply with campaign finance
legislation, maintain the required records, and report on all direct
and in-kind contributions and campaign expenditures, they should not be
burdensome for political actors. This is why some countries (such as Canada,
USA or Australia) use thresholds under which resources and expenditures do not have
to be reported.
The frequency
of financial reporting depends upon each state’s legislation. Only a few
countries require electoral contestants to report on their assets and
liabilities at the start of the campaign or during the campaign (such as
Armenia, Belarus, Croatia, Russia, Uruguay or the USA). The deadline to submit (final)
financial reports to the oversight body should be precisely defined in the law
in order to allow electoral contestants to gather all supporting documents
within the legal allocated time. It is also critical that the timeframe for the
oversight body
to issue its decisions is sufficient to allow for a thorough and comprehensive
audit of financial reports.
Disclosure
The United Nations
Convention against Corruption (Article 7-3) calls on State Parties “to enhance transparency in the funding of
candidatures for elected public office and, where applicable, the funding of
political parties.” Disclosure is the key principle allowing the dissemination of
information about electoral contestants’ finances and enabling public scrutiny regarding
the sources of financing and campaign spending, thereby promoting
accountability of electoral actors and transparency of the whole campaign
finance system. Disclosure rules should clearly define:
- what has to be
disclosed (reports including sources of financing and notably the identity of donors and types of
expenditure along with the decisions of the oversight body);
- when it has to be
disclosed (the timeframe);
- how it must be
disclosed (on the internet, in media outlets);
- who has to
disclose (political parties, candidates, or both);
- and to whom electoral
contestants, and third-parties, must disclose (to the oversight body and/or to
the public).
Moreover, in countries where
political finance regulation is used to promote gender equality, disclosure
mechanisms can help assess whether measures—such as electoral quota enforcement
and earmarked funds for female candidates—are being adequately implemented. Indeed,
the publication of political parties’ financial reports allows other electoral
contestants, civil society organizations and citizens to check whether funds
earmarked for gender-equality initiatives have been used for that purpose. Gender disaggregated reports are important tools to assess the effect of
financing regulations on women’s participation in electoral contests, to determine
how women’s fundraising and spending compares to that of men and whether party
funds are equally allocated to male and female candidates.
It is
noteworthy to underline that financing disclosure rules differ throughout the
world. In some countries, data and information included
in electoral contestants’ financial reports are not published either by the
candidates and the political parties themselves or by the oversight body, while
in some other countries, disclosure rules require the publication
of information contained in the financial reports. Some oversight bodies have developed
very interesting detailed databases to allow for public scrutiny (Australia,14]
Canada,15]
and the USA16]).
The question
of the disclosure of donors’ identity is dealt with in different manners the
world over. In some countries, the identity of donors is not made public as
this is seen as a violation of privacy or because of the risk of intimidation
or physical threat. In some other states, disclosure of donors’ identity is required
above a certain threshold. Finally, in some countries, all information relating
to the donor’s name and address is made public. In the last two instances, the
rationale is to enhance transparency of financing sources and to allow for
public scrutiny.
Supervision and enforcement
To
ensure impartial enforcement of and compliance with campaign finance
regulations, it is crucial that the oversight body is independent of political influence. Moreover,
it must have the authority to detect and investigate infringements, as well as
to apply sanctions. The oversight body must also have the necessary financial and staff resources to
carry out its duties. The members of the oversight body should be appointed on the basis of
neutral, objective and non-partisan criteria and given the security of tenure.
Regarding the mandate of the oversight body, the OSCE/ODIHR Handbook for
the Observation of Campaign Finance has underlined that “Responsibilities should be clearly
defined in the law and may include: providing guidance on how to comply with
requirements and informing other electoral stakeholders of the rules;
establishing reporting forms and reporting procedures; receiving, auditing and
publishing financial reports; initiating inspections and public investigations;
handling and adjudicating complaints; imposing sanctions; and publishing
decisions on adjudicated complaints.” Besides enforcing campaign finance rules, the oversight body
should also play a supporting and advisory role by providing guidance on how to
comply with reporting requirements, holding trainings for electoral contestants,
publishing compliance guidelines, and establishing financial report templates to
help parties and candidates comply with the regulations. In order to help
electoral contestants understand the rules they have to abide by, some oversight
bodies have developed some guidance policies.
Civil Society Organizations (CSOs) can also play a very
important role in monitoring campaign finance and estimating campaign costs
(such as the costs of billboards, political/ electoral advertising, and of
renting campaign venues or cars) to assess whether a candidate or party has
reported accurately and has complied with campaign finance rules.
Sanctions
To maintain the integrity of the campaign finance system, strengthen
public confidence in the political sphere, and hold both political parties and
candidates accountable, proper enforcement of campaign finance regulations is
critical. Indeed, the best conceived system is of little value unless it is
implemented and enforced effectively, and a full range of legal sanctions
serves little purpose if the oversight body is not endowed with sufficient
powers to apply them.17]
To support campaign
finance regulations, the oversight body needs to have at its disposal a range
of sanctions. These sanctions may be administrative, financial,
electoral or criminal and have varying degrees of severity. Sanctions must be objective,
enforceable, effective and proportionate to their specific purpose.
While
regulatory authorities can determine sanctions, there should be an opportunity
for a party to request that the final decision regarding sanctions should be
made by the appropriate judicial body, in accordance with judicial principles.
In any case, the principles of effective remedy and due process must be
strictly respected.
[1] Figure
based on 151 countries. The sum is greater since some countries have multiple
oversight bodies dealing with campaign finance regulation.
[2] In-kind contributions can be defined as all gifts, services, or property provided free of
charge or accounted for at a price below market value for which there is no
financial transaction.
[4] Public funding can
also be earmarked for types of activities such as youth wings or for measures
to encourage the political participation of national minorities and persons
with disabilities.
[5] Albania, Bosnia and Herzegovina, Brazil, Burkina
Faso, Cape Verde, Colombia, Costa Rica, Croatia, Ethiopia, Finland, France,
Georgia, Haiti, Honduras, Ireland, Italy, Kenya, Korea (Republic of), Mali,
Mexico, Morocco, Niger, Panama, Papua New Guinea, Portugal, Romania and Togo.
[6] A contribution
is defined as any deliberate act to bestow advantage, economic or otherwise, to
a political party or a candidate.
[7] See questions 2, 4, 6, 8 and 10 of
the International IDEA political finance database.
[8] Third-party financing can be defined
as all campaign expenditures made independently of a candidate or party with
the aim of promoting or opposing a candidate or party, either directly or
indirectly.
See OSCE/ODIHR, Handbook for the Observation of
Campaign Finance, 1st edition, 2015.
[10] Vote buying can be defined as a form of electoral malpractice that is intended to increase the
number of votes that a particular candidate or political party receives in an
election by providing money or other benefits to constituents in exchange for
their vote.
[11] See European Commission for Democracy through
Law, Report on the misuse of administrative resources during electoral
processes, adopted by the Council for Democratic Elections at its 46th
meeting (Venice, 5 December 2013) and by the Venice Commission at its 97th
plenary session (Venice, 6-7 December 2013), p.8: “the conduct of elections according to the rule of law involves the
setting of a mechanism that would ensure the respect of democratic principles,
the guarantee of equal treatment in the exercise of the right to vote and to be
elected, the development of a political culture, as well as transparency in the
exercise of rights and duties by the electoral actors, preventing therefore any
kind of abuse.”
[12] This classification of the administrative resources
and the definition thereof are based upon the categorization set out by the
Open Society Justice Initiative in Monitoring Election Campaign Finance: a
handbook for NGOs, 2004.
[17] Para. 158 of the Thematic Review of
GRECO’s Third Evaluation Round, available at: http://www.coe.int/t/dghl/monitoring/greco/general/DOUBLET_EN.pdf
