New Regulations for Political Parties

Darejan Paatashvili, Interpresnews

New regulations set up for political parties. The Organic Law of Georgia on Political Unions of Citizens was discussed very quickly and on December 28 it was passed by 81 votes vs. 8 votes. The discussion of the draft-law with the involvement of non-governmental organizations finished with surprise. The law was granted with retroactive effect though it was not written in the law; but certain regulations, which were envisaged in the law, have retroactive power.

As a result of the law discussed and passed within two weeks, in the near future the political parties will have to play new a game though the opposition thinks the new regulations deprived them of  the right to play the game. They think the results of the new game will be “mass detention” of their members.

The draft-law was initially sent to the Venice Commission, though the new regulations were added to it after the Venice Commission had approved it. The following amendments might become basis for the detention of mass detention or restriction of political parties’ activities: “A new article 5/1 appeared in the law which lists set of restrictions for political parties. A party cannot give money, presents and other material or immaterial values directly or indirectly via candidate or other person (except accessories of the party campaign – t-shirts, caps, hats, flags, etc), cannot sell or provide goods or other services at a low price, cannot purchase goods or services at a higher price, to provide any goods or services (except the ones envisaged by the law) free of charge, or attract citizens of Georgia by financial sources, stocks, material or immaterial values, services (including fraud labor or other relations), and cannot promise any of the abovementioned services (except the promise connected with future distribution of budget resources).

The following amendment was worked out for the property of a political party. Until now, the property of the political party could be a donation of any legal entity; however, according to the amendment, political parties cannot receive donations from legal entities. So, according to the new norm, the property of a political party is: membership payments; contributions, funds allocated by the state in occasions estimated by the law.

Besides that, the funds earned by creation and distribution of the party’s symbols, by lectures, exhibitions and other related events organized by the party, by publishing or other activities related with the party’s statute which does not amend the status of a political party as a legal entity are the property of the political party. Here go the contributions received from public events. However, the lawmakers estimated the limit for the general income and resoluted that general revenue shall not be more than 60 000 GEL per year. According to the new regulation, parties will be able to take loans though only from commercial banks. Initially, the lawmakers intended to estimate loan limits – 100 000 GEL but according to the final version the limit was increased up to one million GEL. During the preliminary discussion, lawmakers stated that since the state allocates one million GEL to a political party after elections, the party should be able to take the same amount of loan from the bank. The majority considered the notice and added that not only a party but an electoral body will be able to take out a loan only after registering as an electoral body. Thus, if an electoral block was registered before the elections, it will be able to take out a loan of one million GEL regardless the number of political parties unified into the block.

Common Revenues and Expenditure

The new regulations estimated a limit of common revenues and income for a political party. It was resoluted that the annual state funding for the political party, together with donations and other legal incomes shall not exceed 0, 2% of the official GDP of the previous year. And general expenditure shall not exceed 0,2 % of GDP of the previous year. The party is entitled to transfer additionally accumulated funds to the donator within 3 days or, if the requirement is breached, the funds will be transferred to the state budget.

Expenses for the expert-consultation service of the party shall not exceed 10% of the amount envisaged by part I of the same article. 

Before the third hearing, a new regulation was added to the draft-law – a party is authorized to distribute gifts of small value to celebrate various holidays with total value of no more than 5 000 GEL.

A day before the draft-law was passed, similar limits were to be regulated in relation with the electoral block too and lawmakers resoluted that general amounts of revenues and expenditures of bodies going into electoral block shall not exceed 0,2% of GDP of the previous year. Namely, if a party has not breached a law and meets the limit requirements, it will not be able to create a block if their common revenue and expenses exceeds 0,2 %. According to the regulation, the year is from November 1, 2011 to November 1, 2012.

What about details about donations?  Before, the amount of financial and material donations from each individual person was not allowed to exceed 30 000 GEL per year and from each legal entity no more than 100 000 GEL. Before, the transfers were to be made only by bank accounts. However, if the donation of an entity does not exceed 300 GEL, the party could accept the money in cash.

According to the new regulation, financial and material donations per year shall not exceed 60 000 GEL from an individual person and donations from legal entities were prohibited. Annual membership payment for each party member shall not exceed 1 200 GEL. Additionally, it is new that a citizen of Georgia, who has more than 15% of his or her income from an enterprise created individually or with other partners, cannot donate to any political party.  A citizen can donate to a political party several times throughout a year though total amount shall not exceed 60 000 GEL.

The limits are estimated for any donation including the services provided for party purpose. Membership fees, as well as funds donated by citizens, shall be transferred by bank. The following regulation was not written in the initial draft-law and it was not sent to the Venice Commission for discussion – donations shall be transferred only through commercial banks licensed in Georgia from personal accounts of donators. The detail appeared in the bill only during third hearing. The following obligations were also added to the draft-law during the third hearing: donation via third persons avoiding the restrictions estimated by the law shall be transferred to the state budget and violators will be responsible under the law. And if the donator is an individual persons receives all or part of their income from one source (physical or legal persons or entities related with them), the total amount of annual donation shall not exceed 500 000 GEL though portion from  each person shall not exceed 60 000 GEL.

According to the new law, parties have one more new obligation. A similar requirement did not exist in the Georgian legislation before. According to the new law, a party is obliged to provide the Chamber of Control of Georgia with the information about donation within three days. If the donation procedures breach the law, the party is required to return the money to the donator within three days or if it does not do it, the money will be transferred to the state budget. Liabilities for the authoritative representative of the political party are clarified in a different article of the law if she/he breaches the corresponding requirement.

It is noteworthy that transfer procedures to the state budget were simplified unlike the initial version of the draft-law which was sent to the Venice Commission and which was passed by the second hearing. Namely, there was a norm before which transferred the money to the state budget if the political party did not return the illegally accumulated funds to the donator within 7 days. According to the approved version, the seven-day obligation was removed and general notice is included.

Another innovation which appeared during the third hearing was before, special funds allocated funds for political parties and NGOs only for researches, trainings, conferences, business-trips and regional projects. The new regulation added new purposes of funding like projects for the civil and electoral education. According to the old provision, the funding for an NGO could not exceed 5% of total grant for the civil society organizations; today the limit was increased up to 10%.

Political parties have new obligations due to their transparency purpose and are required to include the expenses of the related NGOs in their financial report. Namely, before February 1 each political party shall send their financial report of the previous year together with the Auditor’s Report to the Chamber of Control of Georgia. The copies of the financial reports and auditors’ reports shall be sent to the local tax-department according to the legal address of the party. The declaration shall reflect annual income [membership fees and donations, names of citizens who pay membership fees, information about donator citizens,  funds allocated by the state budget, as well as funds received from publishing or other activities of the party] and expenditure [spent on elections, on various events, on salaries, business-trips and other expenses] of the party. The expenses for the elections shall be reflected in separate reports.

The Chamber of Control is allowed to provide any interested party with the information concerning the financial report of another party and publish the report on the corresponding website within 5 working days.

The political party is obliged to document the expenses of the legal entity which is in direct or indirect relations with it or is controlled by it by other means. The Georgian Control Chamber establishes the form of annual financial declaration of the political party and standards of the audit. The political party is obliged to keep the financial declaration and all related documents for 6 years, also to fulfill the obligations set by the tax legislation related to the production and preservation of tax documents.

The fact that three weeks after the date of elections was announced all political unions which participate in the elections independently or as a member of an election block are obliged to present their financial report to the Control Chamber is an innovation. The Control Chamber of Georgia establishes the rules to ensure transparency of data related to the financial state of political unions and donations. Besides, if a political party could address any independent audit to conduct the financial audit before, now only the auditor who sets the standards of the Control Chamber can conduct the financial audit.

Privileges

Up until today, if the political party had not published its financial declaration on time, it would have lost the state financing for the next year. According to new regulation, the political party will have an opportunity to receive extra time. Particularly, if the party does not present the financial declaration to the Control Chamber on time, the Chamber must give a written warning and request that the fault is corrected in five days. If the political party does not present the financial declaration within five days, then it loses the right of state financing for a year. The Control Chamber will be the one who will control the political parties instead of the Central Election Commission.

The legislative amendments establish that the Control Chamber of Georgia will monitor the legality of financial activity of political party and its transparency. The Control Chamber is authorized: A) to elaborate on the form of financial declaration; B) to determine the relevant standard of an audit on the finances of political parties C) to check the completeness, correctness and legality of the financial declaration and report on the election campaign financing D) to conduct an audit on financial activity E) to request information regarding financing the political parties from the parties, administrative bodies and commercial banks when necessary  F) to request information from the individuals on the origins of the property given out to the political parties and individuals envisaged by article 261 or received from them as necessary  G) to consult the interested individuals on the issues of financing political unions of citizens H) to react on the violations regarding the financing of political parties and use the sanctions envisaged by law I) to address the bodies of the Office of the Prosecutor when the crime elements are revealed. When there is a reasonable doubt that this law is violated, the Control Chamber gives information to state bodies.

Sanctions

The part about sanctions was added to the Law on Political Unions of Citizens. According to article 43/2, receiving or hiding the donations prohibited by this law will give rise to imposing a fine ten times bigger than the amount donated. The fine will be transferred to the state budget.

If the natural or legal person transfers financial or material donations prohibited by law to the political union, the donor will be fined ten times greater than the amount donated.. The same amount of fine is envisaged when a person receives the financial or material donations prohibited by law for the benefit of a political party or hides the information regarding the donation.

If the obligations established by the Law on Political Unions of Citizens are not fulfilled, the fine of 5000 GEL will be imposed.

At the request of the Control Chamber, if the political union violates the term of disclosing information, the fine of 5000 GEL will be imposed. The sanction envisaged by this law can be imposed up to six years after the relevant act is committed. If the provisions of this article are violated more than once or the Control Chamber deliberately avoids fulfilling the request of the law or if the violation caused significant damage, the Control Chamber of Georgia is authorized to stop the registration of the electoral contestant if the violations are related to the actions that have occurred no more than a year before the elections.

The Control Chamber sequestrates the property of the political union, natural or legal person (including their bank accounts). The sequestration can be appealed in the court along with the decree issued about the violation. The appeal does not stop the process of sequestration.

The Control Chamber elaborates on a protocol regarding the violations envisaged by this article and makes a decision regarding the imposition of fine. The rules of the proceedings envisaged by the Code of Administrative Violations of Georgia are used in these cases.

Retroactive Force Announced on December 27th and Adopted on December 28th

On December 27th, during the second hearing of the draft law, the member of majority Koba Khabazi requested that retroactive force is given to the law. In the second part of the day the announcements were made that the retroactive force cannot be given, since the Constitution establishes that the provisions which set the stricter regulations cannot have retroactive force. However, on December 28th during the third hearing the retroactive force was given to the law. However, the word retroactive was not written down, though, the content of the law was.

Another innovation from December 28th is that, “Political unions of citizens and the electoral contestants envisaged by article 26/1 who have received financing by violation of the regulations of this law and have not spent these sums for the moment when the law takes effect are obliged to give back these sums to the donor  in no more than 3 calendar days after the law takes effect. If this obligation is violated, the money will be transferred to state ownership.”

As for the article 26/1, it states: “Restrictions set according to this chapter can also apply to: A) a legal entity if it is directly or indirectly connected to a political party or is under the control of political party B) a legal entity which calls on the voter through a representative or another individual to support certain political movements or restrain from support. C) a legal entity is directly or indirectly connected to a political party when its expenses are directly or indirectly connected to the work and aims of political party.”

The law explains that direct or indirect connection is when the expenses of the political party are in direct or direct connection with the activity and goals of the political party.

Taking Effect

The date of the day when the law will go into effect is vague. The document reads that “This law, except for the first and 7th paragraphs of the article 34/2 of the law, takes effect at the time of publication. The first and 7th paragraphs of article 43/2 envisaged by paragraph 15 of the first article of this law take effect on the 15th day from the publication.”

It should be noted that the article 43/2 is not part of the paragraph 15 of the first article. It belongs to paragraph 17. However, the fact is that the whole law will take force at the time of publication except for the paragraphs which determine new sanctions.

On December 28th the Parliament made changes to the Criminal Code and expanded the consequences for bribery and made the sanctions stricter.

According to the decision of Parliament, bribing voters means offering, promising (except for the promises which are connected to the annual distribution of the budget resources), transferring money, securities (including financial instruments), other property, property rights or services or other advantages, with political goals directly or indirectly. Requesting, receiving and rendering such rights and services are also included in the definition. Signing hypocritical or other agreements to avoid the restrictions envisaged by law is also considered bribery.

The items of insignificant value like T-shirts, caps, flags and similar things are not considered property.

The penalty for bribing a voter will increase to three years and relevant fine which will replace a one-year sentence. Such sentences can be applied not only towards the political parties and politicians but ordinary citizens as well who receive some gifts and something valuable for “political goals.”