Political Funding Regulations in Armenia and Georgia

Political party financing has always been and probably will remain for the foreseeable future a hot topic in multiparty democracies. In the United States money is seen by many as the decisive factor in election campaigns as hundreds of millions of dollars are spent every year for that purpose.

In the older democracies of Europe such massive amounts are not devoted to elections but there have, nevertheless, been numerous scandals bringing to the open corrupt and illegal practices to fund parties and their election campaigns.

In many cases state resources have been used to solicit campaign contributions and often there is still an unhealthy relationship between business and politics.

So although unethical actions still occur, with the introduction of state financing and transparency rules in many European countries, they have become much less frequent.

Loopholes in party funding

Political parties need money to operate and generally not all expenses can be covered by membership fees. In many parts of the world it is an accepted practice that the state has taken over part of the funding - in some cases without any special conditions, in other cases earmarking the money for certain activities – and parties are obliged to provide information about campaign donations, that can also be subject to legal limits.

Nevertheless, loopholes remain since watertight systems are difficult to establish. A recent debate in the Dutch parliament about party funding led to a tightening of the disclosure rule for donations to the central party-offices, but did not (yet) lead to a better regulation of local party funding.

The Netherlands still does not fully implement the Council of Europe’s anti-corruption Group’s (GRECO’s) recommendations on regulations for party funding.
Creating a level playing field

But this is just one part of the story. The Dutch practice scores much higher than a number of European countries that have better regulations in place but do no apply them properly as the research of Ketevan Bolkvadze makes clear.

Internal party rules, general accountability and media scrutiny have created an informal electoral context in which money is not the dominant factor in Dutch politics. The level of campaign spending is relatively low and voters rely on the free media to get the information they want.

Public debates also help the voters to make up their minds. There will of course always be complaints about media access or the advertising budgets of opponents but the very high turnout in Dutch national elections can be considered as evidence of a high level of political trust. Regulations are important – to help promote level playing fields – but they will only have the desired effect if they are respected in practice and seen as part of a set of informal rules to protect the democratic quality of a given society.

Challenges of hybrid democracies

This paper analyses the party funding systems of Armenia and Georgia. These countries have been labelled as hybrid democracies where dominant single parties or party coalitions almost have a monopoly of power.

In these countries the lack of a (paid) membership basis – and therefore of an important source of independent funding – forces parties to find revenues from either the state or from private donors. Since state funding is limited – these are relatively poor countries – parties have to rely on physical or corporate donors.

Although there are disclosure rules and limitations in both countries, only parties with access to oligarchic or other rich private sources have a chance to challenge parties in power, that often have access to additional, administrative resources. In October 2012, the ruling party of Georgia, the United National Movement (UNM), lost the parliamentary elections with one of the main explanations being that its opponent, the Georgian Dream Coalition, had been able to rely on the financial support of a local billionaire to compensate for ample resources of the ruling party.

Implementation is key

Often party funding rules are manipulated to serve those in power. Take the disclosure rules in Armenia that make it hard to trace where the money of the richest parties comes from, or the sudden adaptations to the Georgian law when the ruling party saw itself confronted with a very rich contender.

Through GRECO there is a set of campaign financing rules for Europe, but as this paper shows, the implementation leaves much to be desired for, especially in the hybrid political systems that we have seen developing in some post-soviet countries.

The OSCE/ODIHR fortunately adds strength to the work of GRECO by including assessments of campaign financing in its election observation reports. The EU has set up so called Eastern Partnerships for six countries that are somewhere in between authoritarian, half democratic and more or less democratic.

By offering these states association and deep free trade agreements, the EU also hopes to be able to promote better democratic conditions. It has introduced the ‘more for more’ principle – the more an Eastern partner does to enhance democracy and human rights, the more (financial) support it will receive. The EU should certainly also apply this principle to party funding.

An EU-wide problem

This study offers a lot of recommendations on how to improve the situation in at least the two countries dealt with in this paper. To avoid being accused of hypocrisy, the EU should also look at itself.

Corrupt party financing practices still occur within its own territory. Under the justice-for-growth approach, promoted by the European Commission, the fight against corruption is one of the priorities and thus a tool to tackle illegal party funding.

• Primary Source

ESO Background Information: GRECO http://www.europeansources.info/record/website-group-of-states-against-corruption-greco/

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