Parliament Bans Political Donations from Legal Entities

On December 15, the Georgian Parliament adopted in its third reading amendments to the Electoral Code and the Law on Political Associations of Citizens, which prohibit legal entities from making donations to political parties. The amendments, which passed with 82 votes in favor, also lowered the cap on annual spending by a political party, reducing annual expenditure from 0.05% to 0.04% of the previous year’s GDP.

Representatives of the ruling party claim that restricting legal entities from making political donations is one of the nine conditions of the European Commission. The changes were also prompted by the “Fight Against Corruption” condition, which states that further measures are needed to de-oligarchize, in particular to address the challenge of large vested interests and their influence in both the political, judicial and economic spheres.

The Venice Commission’s report on the Georgian Dream’s first attempt to draft a de-oligarchization law, clearly emphasized that the ruling party should, among other changes, develop corrective legislation and measures to strengthen the rules on political financing. In the new De-Oligarchization Action Plan, the government included perhaps one of the few steps in the area of monitoring the financial activities of political parties. The plans only included the adopted amendments to the law and regulation on the publication of reports on political party spending.

The opposition members believe that these changes do not meet the conditions set by the Commission. They claim that the legal entities were already reluctant to fund the opposition parties because the ruling party would intimidate them. They also claim that Georgian Dream will find a way to get the donations, which means that this law is passed directly against the opposition.

In particular, the previous United National Movement government banned donations from legal entities in 2011, ahead of the upcoming 2012 elections. After the Georgian Dream government came to power, there was a “liberalization” of this procedure, and the government legalized legal entities, including companies, to donate a maximum of GEL 120,000 (about USD 72,500) annually to political parties.

According to reports from international organizations and local watchdogs, the problem with party funding was not donations from legal entities, but weak oversight of party and campaign financing. The OSCE/ODIHR report assessing the 2020 election notes: “The State Audit Office (SAO) exercises party and campaign finance oversight and identifies potential violations. Overall, most ODIHR LEOM interlocutors expressed a low level of confidence in the transparency of campaign finance”.

In September 2023, the oversight function was transferred to the Anti-Corruption Bureau. The International Society for Fair Elections and Democracy (ISFED), a local watchdog, points out that the main problem with the State Audit Service’s mandate over the years was that it did not have criminal investigation powers, which made it extremely ineffective in investigating cases of political corruption. Since the Anti-Corruption Bureau does not have this function either, it will face the same problem, predicts ISFED.

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