Party Funding and Electoral Campaign Financing Amendments Tabled

With all the recent shake ups on the political scene recently the government is attempting to prepare an equal footing for all political parties in the upcoming elections. The parliament majority’s initiative regarding the funding of political parties has been followed up by the Ministry of Justice, which has developed a draft of legislative amendments tightening regulations for the funding of political parties.

According to the draft amendment to the law on political parties, which indeed has yet to be formally initiated, the amendment envisages banning any kind of legal entities, including business organizations, from donating funds to political parties.

However, the proposed amendment does not refer to a party’s electoral campaign funding, which is regulated by separate provisions from the electoral code.

If this amendment is adopted in its current form, it will mean that a party’s account and the same party’s election campaign fund will be treated separately, wherein a legal entity, or businesses will be allowed to donate to a party’s electoral fund, but will not be eligible to fund a party’s regular account during a non-electoral period.

As the current electoral code reads, a party can open its electoral fund account no later than five days after being registered for running in the elections (registration procedures should be no later than 37 days before the polling day).

In September the ruling party tabled a draft of the new electoral code, based on an electoral system reform deal reached with some of the opposition parties three months earlier. The draft, which has already been formally initiated, envisages increasing the maximum amount of donations from a single legal entity to a party’s electoral fund from current the GEL 100,000 to GEL 200,000.

Yet, the new draft law on party funding envisages doubling the donation cap that a single individual person can provide to a party from the current GEL 30,000 to GEL 60,000 (a similar provision is also envisaged in the proposed draft of the electoral code in respect of a party’s electoral campaign fund). According to the draft of the amendments a single individual can donate to several parties, but the total amount of these donations should not exceed GEL 60,000 annually.

The restriction in the draft also referred to a party’s eligibility to take a loan from individual persons or legal entities, other than commercial banks. The proposal also imposes restrictions on commercial banks, banning them from lending political parties a loan of more than GEL 100,000. A single commercial bank can lend money to several political parties, but the total amount of these loans should not exceed GEL 100,000 annually.

According to the amendment, the total amount of a party’s overall annual funding – received from all sources [donations, membership fees, or state funding] should not exceed 0.2% of Georgia’s GDP. Next year's forecasted nominal GDP is GEL 26.5 billion, which means that if the proposal is approved a party’s maximum annual funding should not be more than GEL 53 million. For comparison, the ruling National Movement party, which is considered to be the richest political party in Georgia, reported GEL 14.1 million in donations for last year’s local elections.

According to the draft the monitoring of party funding will be transferred from the Central Election Commission to the Chamber of Control. It will be in charge of auditing parties’ financial declarations, monitoring a political party’s electoral campaign funds and will have access to all sorts of financial information of the party; the state audit agency will have the right to request such information from any involved legal entity, including from commercial banks.

The government’s initiative to adopt new regulations first emerged late in October when the Justice Ministry’s officials voiced the idea during a meeting with representatives from Tbilisi-based watchdog groups. The written draft was tabled during a similar meeting of the anti-corruption inter-agency group on November 18.

According to various political analysts and politicians the idea of tightening party funding rules might be related to the entrance into politics of Georgian tycoon philanthropist Bidzina Ivanishvili, whose wealth according to official information is estimated to be USD 5.5 billion - almost half of Georgia’s total GDP. Ivanishvili, who runs several charitable organizations in Georgia, also owns Cartu Bank, the sixth largest bank in the country by assets, which appears to have become the victim of political struggle.