New EPDE publication ‘Puzzling rules – equal game?’

This study compares political finance regulations across the EU and identifies common challenges and possible responses to those. The recommendations of this study seek to enhance EU-level regulation of political finance with the aim to replicate this at the national level.

This is part of the multi-country project “European voters – together for electoral integrity,” which aims to empower European citizens to improve democratic electoral processes on a local, national, and European level, and to protect the integrity of elections in Europe as a fundamental human right of European citizens.

Authors: Alexander Shlyk, Barbara Jouan Stonestreet, Septimius Pârvu

Executive summary

In this study we look at both the EU-level regulations and draw on a comparative analysis of how specific elements of political finance are regulated in individual Member States. In doing this, we particularly focus on Germany, Hungary, Lithuania, Poland, Romania, Slovakia, and Sweden to provide specific examples. Civil society organizations from this diverse subset of EU MSs are part of the project “European voters – together for electoral integrity.” This study is particularly focused on the comparison between national regulations across the EU and an analysis of the policy instruments at the EU level.

Throughout the EU, there is a wide variety of regulatory approaches to political finance, including the models used and extent of oversight practiced. It is natural to find less regulation where public trust is high and to opt for tighter regulation where trust is lower. However, the emerging trends, including the apparently under-regulated methods of online political activities, appear to be challenging the equilibrium of trust and regulatory extent.

Despite differences in the level of trust and regulatory extent, there are universally shared values and principles in the sphere of political finance. These include the principle of equality of opportunity, most applicable to the regulation of the sources of financing and of the types and ceilings of expenditure; the principle of transparency, related to provisions on reporting and disclosure of political finances; and the principle of accountability, to guarantee oversight and the possible use of sanctions so that equality of opportunity and transparency are protected.

Interestingly, though, these shared principles are being challenged by the newly emerging trends. Whether the EU MSs have regulatory tools in place or not, the opaqueness of money flows in relation to online advertising challenges the principles of equality and transparency. The ability to circumvent rules by engaging third parties helps political actors avoid accountability. Threats of foreign influence are mitigated not only by transparency and accountability mechanisms but also by the greater interest of foreign powers to attack some EU Member States and not others, and by informal resilience to disinformation.

In the absence of clear national-level responses to date, it makes sense to explore, therefore, possible EU-level regulatory options. This study reviews the national-level regulations regarding the three key principles and proposes EU-level responses.

The diversity of regimes for protection of equality of opportunity is vast, particularly with regard to private sources of funding. Emerging trends pose a challenge, though, for both established and newer democracies: donations through online platforms or in cryptocurrencies and possible ways to circumvent prohibition of anonymous donations all highlight that the new phenomena may require common responses. Equality of opportunity should thus be protected by more clarity with the definitions of sources of funding and actors engaged in spending for political purposes. Specific priority recommendations include:

• streamlining the definitions of contributions and donations to political parties between the EU and national legislation;
• addressing the issue of firewall between the EU and national political parties in the context of European Parliament elections with a view to strengthen cross-border political cooperation in the European Union and promote the common European political identity;
• establishing an EU-wide definition of third parties for either the European Parliament elections or more generally, including by drawing on comparative experience of Member States that regulate the matter, and setting an EU-wide register of third parties under the APPF (Authority for European Political Parties and European Political Foundations).

The level of transparency of political finance may differ based on various factors, such as legal frameworks, but in practical terms is also influenced by the local political and civic culture. There are different rules regarding reporting and disclosure among Member States, and a multitude of variations between what is reported and what is published. Some of the new trends mentioned in the study could improve transparency. The adoption of technological novelties, open data, or the development of online platforms by political parties and oversight bodies increases the potential of wider public coverage of the funding for political parties and election campaigns. At the same time, the increasing use of online media; advertising on a wide range of platforms and the discrepancies in regulating it; foreign financing; and the increasing role of third parties represent real challenges to transparency and integrity of elections. Specific priority recommendations include:

• revision of the legal framework could foresee the obligation for European political parties to submit campaign finance reports within two to three months after the EP elections;
• the EU regulation could impose that all financial information on European political parties be published in a centralized manner on a dedicated webpage of the APPF’s website;
• introduction of an electronic reporting platform, such as those available in some of the countries described in this study.

The major problem encountered by most oversight bodies in protecting the principle of accountability is the lack of or partial enforcement of regulations due to lack of authority or resources, which hinders the implementation of the political finance system. Good practices can be drawn from several EU MSs as some national oversight bodies have taken innovative approaches to address emerging issues such as third-party campaigning, online fundraising, institutional cooperation, social media advertising, and online/digital systems. Key priority recommendations include:

• requiring third parties – in countries where third-party spending is not regulated – to register in advance with the oversight body and subjecting them to a set of defined campaign finance regulations;
• establishing online systems of reporting and publication that allow for data analysis and public scrutiny. The APPF should take the lead and further its efforts in digitalizing its controlling tools;
• under the APPF’s control, establishing a network of oversight bodies – with the possibility to have bilateral cooperation agreements (or agreements between neighboring countries) – to ensure the uniform and consistent application of EU regulations.