Preliminary Report Of The Ifes Moscow Office On Cec Draft Legislation On Campaign Finance Reform
As of 14 February 1997
The State Management Institute has been contracted by the Central Election Commission of the Russian Federation to establish a team to prepare draft legislation on campaign financing. This team includes legal and public administration experts and CEC members. According to the concept paper which accompanies the current draft, the experience of the 1995 parliamentary and 1996 presidential elections shows that «vast monetary resources actually spent on campaigns are unaccounted for» and that «widely varying sums are publicly cited.» «The only common feature about these sums is that they fail to correspond in any way to the figures provided in official reports.»
In an attempt to enhance compliance with the law as well as to improve the enforcement capabilities of responsible institutions and to clearly establish accountability for violations of the law in this area, the CEC along with the Legislative Reform Committee of the State Duma, advocates the adoption of stand alone legislation on campaign financing. Below is an overview of the current draft of the CEC's variant of the campaign finance law. The State Duma Committee on Public Associations is also intent upon draft legislation on campaign financing but is significantly behind the CEC and the Committee on Legislative Reform in its effort. The Office of the Deputy Speaker of the State Duma has also expressed keen interest in the process. The current momentum behind draft legislation on campaign financing and reform of existing federal election laws is reported to be a wide-spread anticipation of early presidential elections and even the event of early parliamentary elections, should a new President and the existing State Duma not reach an agreement concerning the head of the Government.
IFES overview of the main provisions of the draft law, commentary on select provisions, and notations concerning the incorporation of IFES recommendations (as found in the final version of IFES' «Election of President of the Russian Federation: A Technical Analysis with Recommendations for Reform,» copies of which were provided to select members of the working group and to the CEC), are included.
Main Provisions:
The draft law, which would govern the funding of all federal elections and would take precedence over campaign financing and election funding provisions of other federal laws and the Civil Code of the Russian Federation, seeks to:
1. To recognize pre-registration campaign activity and to introduce a legal mechanism to monitor and regulate fundraising and spending by political entities during the pre-registration period and to extent the range of entitled entities to open special accounts for campaign purposes. The draft law proposed that special funds be established by federal political parties, electoral associations and blocs whose candidates were elected to the State Duma of the current convocation via proportional representation, and electoral associations and blocs whose candidates won at least 10 seats in the State Duma of the current convocation via majoritarian representation as of the first of the year in which a general election is slated to occur;
IFES Recommendation: 7.2
2. To substantially raise the ceilings of allowable contributions to political entities' and candidates' campaign funds;
IFES Recommendation: 7.6
3. To more clearly stipulate prohibitions on the sources of campaign funds and to enumerate disallowed funding outside the scope of the law, particularly cash contributions, in-kind contributions, and special discounts;
IFES Recommendations: 7.1, 7.5
4. To reduce state subsidization of election campaigns and to introduce a proportional system of subsidization based on previous electoral performance. The draft law contemplates that only those candidates and political entities achieving 5% of the vote or better in the preceding election will be eligible for funding. If a political entity or candidate qualified for state subsidies, the amount of the subsidy will be tied to the actual number of votes received in the previous election;
5. To require periodic reporting by candidates and political entities according to a specific schedule, which according to the draft law would include an initial report within 2 weeks days of establishing the special account, subsequent monthly reporting, an additional report as of the suspension of campaign activities, and a final statement no later than 30 days after the official publication of election results;
IFES Recommendation: 7.7
6. To expand the number of persons liable for campaign finance violations, most notably the inclusion of enterprises or persons providing contributions outside the scope of the law or otherwise not in compliance with the law;
7. To enhance public disclosure of campaign finance sources and expenditures by requiring publication in the mass media as directed by the responsible election commission;
IFES Recommendation: 7.12
8. To improve the enforcement capabilities of responsible election commissions through the establishment of a special Control and Auditing Service within the CEC, the 89 SECs, and (as appropriate) the 225 DECs which should be empowered not only to review campaign finance reports provided by the State Bank and the candidates or political entities, but to conduct investigations, render positions (non-binding) about presumed guilt, and instigate administrative proceedings in courts of law;
IFES Recommendation: 7.8 (while the provision appears to speak only to functions
associated with monitoring and enforcement of camapgin financing, the law should
expressly denote that the activities of the CAS will be distinct from those of the election
commission department responsible for election funds, that is funding provided by the
federal budget for the purposes of preparing for and administering elections.
9. To introduce a graduated system of penalties for violations of law, the most sever of which would be cancellation of a candidate's registration;
IFES Recommendation: 7.10 (although IFES did recommended that sanctions not be
candidacy based, as cancellation of a candidate's registration serves no purpose it
findings of violations cannot be determined or upheld in court until after the election).
10. To adjust judicial practice to meet the needs of legitimate and prompt settlement of disputes.
11. To specify deadlines by which the Central Election Commission must receive funding (and the percentage of each allocation) from the Federal Government and by which it must provide funds (and the percentage of each allocation) to subordinate election commissions and political entities/candidates eligible for state subsidies;
IFES Recommendation: 7.13
IFES Commentary:
 The law is somewhat convoluted with respect to what are two distinct issues: (1) funds raised and expended by political entities for campaign purposes and (2) the allocation of funds to cover costs associated with conduct of the elections. The intermingling of references within the text of the draft law to each and the similarity of terminology applied to each exacerbates this problem. In Article 1, «Main Definitions,» the authors should consider using the terms «campaign financing, and «special campaign account» to refer to funds received, spent, and accounted for through the Savings Bank of the Russian Federation by political entities/candidates in conjunction with conduct of their campaign for public office. «election funding» or «election funds» should appear as a separate entry and refer to the funds earmarked within the federal, subject, OTHER budgets and allocated to election commissions for the preparation and conduct of elections. Consequently throughout the draft law references to campaign financing and campaign funds should be discussed in separate articles from references to election funding and election funds.
The draft law does not include a definition of «campaign.» Such a definition, consistently applied to all election legislation is necessary to better clarify what constitute campaign activity and therefore to enhance compliance by participants in the campaign process. For example: Political activity and expenditures by candidates, their agents or supporters including affiliated political parties, electoral associations and blocs, such as political expression through the mass media or other public means (other than legitimate news stories or commentary by mass media entities), that is clearly intended to influence or has the clear effect of influencing the election of candidates.
The definition of candidate offered in the draft law is inadequate, one alternative might be: a person who has been nominated or registered as a candidate to federal, subject, district, or municipal office, or who is seeking to be nominated and registered as a candidate to said office.
The draft law does not include definitions of political entities referred to in the text and to be governed by the draft law, including political parties, electoral associations, electoral blocs, and voter's initiative groups.
Article 5, «Authorities to Create Electoral Funds,» refers to the right of political parties and electoral association to establish electoral (campaign) funds as of the first of the year in years. To facilitate compliance and enforcement, this should be listed as a «requirement» of the law. Leaving any possibility of an «option» to open a special account increases the likelihood that political entities would refrain from opening accounts until the last possible moment on order to reduce the amount of required. This is consistently referred to as a «right» and not an obligation through the entire text of the law.
Article 5, «Authorities to Create Electoral Funds,» includes a provision that the President of the RF may determine in writing those parties or electoral associations entitled to establish electoral (campaign) funds in advance of parliamentary elections. As the draft law stipulates the criteria which must be met by political parties or electoral associations to qualify for the creation of electoral (campaign) funds, it is not clear why the President must, in effect, endorse which entities are eligible. The clause creates an opportunity for politically motivated bureaucratic delays and questions of eligibility. As the President may be informally associated with certain political entities, it would be best simply to delineate the prerequisites for establishing an electoral (campaign) fund in the law.
Article 6, Designation of Electoral Funds,» makes a fairly successful attempt to outline the general expenditures that might be associated with the conduct of an election campaign, although it fails to include costs associated with operation of a campaign headquarters and regional affiliates such as equipment, supplies, utilities, and communications. These could be built into section (d) which allows leasing of premises from which to prepare and conduct an election campaign.
Article 7, «Prohibited Spending of Electoral Funds,» the prohibition of payment for services of international observers is an interesting inclusion as instances of Russian political entities paying foreign entities to observe has not been raised in previous elections, although payment of domestic of observers (or failure to pay for services rendered) has been an issue. Does the prohibition apply to all observers or solely international? Also, payment of journalists for «news» is speculated to be a pervasive problem and should probably be listed as an exclusive prohibition rather than being coupled with language on observers.
Article 8, «Payment of Expenses Exclusively from Electoral Funds,» is just one of many examples of intermingling of references to campaign financing and election funding. It begins «Any election related expenses (meaning campaign expenses), less those of election commissions (meaning election funds) shall be paid exclusively from electoral (campaign) funds.» This confusing construction would not be necessary if exclusive terms were applied to campaign financing and election funding.
Article 9, « Prohibited Funding of Organizations Bypassing Electoral Funds,» stipulates that «free of charge work or services that are either directly or indirectly related to elections shall be prohibited.» It would seem that this is an inadequate attempt to disallow in-kind contributions, which are more successfully addressed in Article 61, «Responsibility for Illegitimate Funding of Elections,» parts of which should be applied in article 9 and 10, the aims of which are to define funding of campaign activities outside the scope of the law. Article 61 then identifies responsible entities or persons for such violations. These are the only two articles dealing with in-kind contributions.
Articles 11 & 12 , «Procedures for Forming the Electoral Funds of Candidates (and Parties),» the restriction of state subsidies to political candidates and entities receiving at least 5% of the vote in previous elections responds to Federal budget realities and attempts to eliminate state subsidization of what are perceived to be «frivolous» campaigns. At the same time, this adjustment works to the advantage of established parties and runs counter to the principle of equal opportunity in an environment where political party development is still at a fluid stage. Thus, while a number of presidential candidates received in excess of 5% of the vote in the 1996 and would, under the draft law be eligible for public funding if they chose to compete in future presidential elections, only political parties, electoral associations, and blocs with mandates (proportional) in the State Duma would be eligible for subsidies in 1999, thereby further enhancing their incumbent advantage. At least during a transition phase, the authors might consider extending subsidies to political parties, electoral associations, and blocs that receive at least 4% of the votes via the party list ballot (IFES has recommended elsewhere that that the threshold for obtaining a mandate via the party list in the State Duma be lowered to 4%). Also, the draft law makes no reference to indexing the ruble per vote formula for determining state subsidies to inflation.
Articles 11 & 12 also address the widespread observation that campaign contribution limits were set too low (as was also the case with campaign spending limits) to be realistic and therefore encourage compliance. At the same time adjustment of ceilings on various contributions and on overall expenditures will require concurrent changes to existing election legislation to ensure the uniformity of all laws on this point.
Article 27, «Returning Part of Budget Fund,» While this article attempts to recoup moneys lost as a result of the withdrawal of candidates without compelling reason, it does not go far enough in guaranteeing accountability. In the case of Aman Tuleyev, for example, the CEC was unable to secure a refund from the candidate. The draft law should outline the course of action and subsequent penalties should the candidate or political party refuse to refund its state subsidy, in whole or in part, as directed by the registering election commission.
Article 44, «Funding of the CEC,» the provision of this law which stipulates that the CEC will fund «expenditures related to free mass media statements by a candidate . . .» may potentially contradict the proposals forwarded by the Intra-Governmental Working Group on Election Reform (of which the CEC is an active participant) which suggests that the question of payment for free media time, ie. whether the CEC or the State media outlet, is still open to question.
Article 61, «Responsibility for Illegitimate Funding of Elections,» as previously noted this article does a good job of defining campaign contributions outside the scope of the law, particularly in-kind contributions for which an entity provided such goods, services, and discounts. However, the listing of illegitimate contributions should be built into Article 9, which actually (and only partially) stipulates prohibited contributions of this nature, whereas Article 61 provides for liability of violators. It is interesting to note that providing entities will be held accountable, but that receiving entities such as candidates or political parties do not appear to bear responsibility under the law. Also of interest is the fact that although Article 61 appears to generally disallow in-kind contributions and Article 13 prohibits campaign donations from «local government, state, and municipal institutions,» there is no article of the law which directly speaks to the illegality of utilizing public office at all levels, in particular public funds, civil servants and other government employees, government office space and equipment, nor other perks of office such as free mail services for campaign purposes. Give wide-spread perceptions of significant abuse in the area, a separate article would seem in order.
It is not entirely clear, given the current construction of the draft law which speaks only to the «right» of certain political entities and persons to establish their electoral (campaign) funds as of the 1st of the year in which a general election is slated and absent stand-alone legislation on political parties which would significantly facilitate public disclosure of financial activities of the parties between elections, whether compliance and enforcement would be improved in practice despite the intent of the law. Moreover, under the current draft and keeping in mind the current election cycle, the provision that such entities and persons establish electoral (campaign) funds as of the first of the year of a general elections, means that the financial activity of political entities and certain individuals in preparation for parliamentary elections could be monitored for nearly a full year in advance of the elections, while similar activities for presidential elections would be monitored for less than six months. It is likely that significant spending could still take place prior to the date by which an electoral account should be formed for presidential elections. If there was an attempt to regulate such financial activity a full year out from the presidential election, there would need to be instructions on how to proceed (as the current draft law disallows any person or entity from having more than one account and as accounts are still tied to campaigns for specific office) if a political party, for example will be running candidates for parliament in December 1999 and a presidential candidate in June 2000 (and overlap of nearly 6 months).
While cognizant of the CEC position that it is most likely to secure reform of procedures pertaining to election funding in a law on campaign financing, which has significant support within the Duma, it seems more logical to amend existing laws on elections with regard to election funding from the federal budget. The draft law, by attempting to address two distinct issues, one political and the other administrative, is often confusing or disjointed. If the working group decides to proceed according to the current strategy, a chapter specifically speaking to election funding should appear at the end of the law and all provisions pertaining to election funding to be incorporated therein, rather than mixing references throughout the text of the law.
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