Political funding and external interference: limits on donations, transparency, and controls

In Italy, the abolition of public funding for politics has made political actors more dependent on private subjects and potentially more vulnerable to interference. It is therefore urgent to adjust the legislative framework and introduce measures that reduce these vulnerabilities and ensure actual transparency. Some reflections and concrete proposals

The issue of foreign funding to political parties, movements, or individual candidates as an instrument of external interference in democratic processes has received much attention in recent years, even in cases where funding has not actually materialised.

The loan by a bank with ties to the Kremlin  to Marine Le Pen's Front National in 2014 caused a scandal, although it was not technically prohibited by law. In Austria , a video showing the willingness by key figures of a government party to accept dubious funding linked to Russia led to the fall of the government in May 2019. In Italy, revelations published first by weekly L'Espresso and then, in a more extensive form, by BuzzFeed news , showed the efforts of people close to the League to obtain illicit funds to support the election campaign of Matteo Salvini's party. In view of the European elections, Steve Bannon, former advisor to Donald Trump and a well-known exponent of the American right, had announced his intention to contribute to the success of nationalist and populist political forces in the Old Continent by providing them with financial support. The plan collapsed miserably , among other things because laws protecting electoral processes from external interference would have made his effort illegal in nine of the 13 countries in which he intended to operate , but the issue had media and political resonance.

 

In Italy, foreign funding for parties has only been forbidden since 2018 , but, according to an analysis by Transparency International Italia , donations from abroad to Italian parties between 2014 and 2017 were however completely absent or of negligible entity.

Much ado about nothing?

If the potential funding at the centre of some of the big scandals that have attracted media attention in recent years has not materialised, and if in Italy the funding from abroad to parties – before being banned – was virtually non-existent, is there really cause for so much concern?

The reasons, as we will see, do exist, and even the widespread suspicion of external interference is enough to pollute the public debate and the peaceful development of democratic processes. The seemingly most direct measure to mitigate the risk of external interference is to ban funding from abroad to the parties altogether, as per the Italian law prohibiting financing by companies "based in a foreign country not subject to tax obligations in Italy" and by "natural persons of age not registered on the electoral roll".

This rule has its own logic, but is problematic from various points of view. First, in a context in which some transnational political forces are slowly taking hold at EU level, limiting donations "from abroad" can become questionable. Such problems have emerged, for example, when the liberal Europeans of the ALDE highlighted how a new Facebook regulation introduced to counter external interference limited their chances of campaigning at EU level. It is therefore important to ensure that measures introduced to limit external interference do not hinder the formation of a shared political space at European level, which is increasingly needed to face the great challenges of the twenty-first century.

Secondly, defining what is actually "foreign" is increasingly complex in a context in which the ownership of large companies is often mixed, or in the hands of a holding company with a complex structure. With the current law, the decisive criterion for companies is whether or not they pay taxes in Italy, but there are no particular limits for companies with local offices controlled by foreign interests. If the question of what is meant by "foreign" is complex for legal persons, it is not necessarily easier for natural persons. If the source of a citizen's wealth is foreign, should their donations be considered "national" or "from abroad"? Such questions quickly become concrete in a context of market globalisation and strong economic interdependence, as emerged from the debate on the role of Arron Banks, a British businessman who allegedly donated almost 10 million pounds to political forces that supported Brexit. Writing for OpenDemocracy.net , Alastair Sloan and Iain Campbell commented: "To preserve the democratic fabric in the UK, it is essential to understand where the big donors made their money and, just as importantly, how". The recent British experience therefore reminds us of how issues linked to the opacity of funding for politics are certainly not a case of "much ado about nothing", but a central issue of democratic processes to be carefully regulated in a context in which the problem lies not only in the origin of funding, but also in the disproportionate impact that the very existence of "large donors" entails.

Limits to donations, transparency, and adequate controls

Determining which funding should be considered "foreign" and which is actually harmful to democratic processes in European countries is not easy. Given the significant presence of companies from various parts of the world in every European country, many of them with strong ties to the governments of their country of origin, it is not difficult to imagine how a "local" actor can be used as a carrier to transfer resources, eluding limits on direct foreign financing to political organisations. The complexity of defining, regulating, and actually controlling the phenomenon must not be a pretext to downplay its relevance, but rather an opportunity to introduce measures that are actually able to mitigate the risks of interference in this context.

No donation by legal persons

In France, private companies can in no way finance political organisations since 1995. It is a measure that could also be introduced in Italy, thus removing any doubts regarding the nationality of the donor company and limiting spaces for donations by companies that under certain circumstances have a clear corruptive purpose (for example, donations in exchange for contracts or favourable laws). In the end, it is the people, not the companies, who vote and are at the heart of a country's democratic processes: forbidding companies to finance politics would therefore not be detrimental to any rights.

In Italy, the impact of this measure on the parties' balance sheet would also be limited: according to 2017 OpenPolis data , less than 5% of private donations to parties come from legal persons. Instead, they would have a significant impact on political initiatives such as the founding of the "Cambiamo!" movement by the president of the Liguria region Giovanni Toti, financed between May and July 2019 almost exclusively by large donations from companies .

Limiting the amount of donations

In Italy, the current limit to donations by an individual (or a company) is € 100,000 on an annual basis. It should be reduced considerably, again taking example from beyond the Alps: in France, the limit is currently 7,500 Euros. This measure would make it much more difficult for an external actor to transfer large sums of money using a local channel and avoid the "big donors" problem.

In Italy, where individual donations from MPs make up an important part of the party budget, it would probably be necessary to include an exception for elected representatives, while maintaining the current limits. Excluding those elected from this scope, the impact on traditional parties could be limited. As emerges from the analysis of the data published by OpenPolis , however, it would have a significant impact on some foundations and political startups, such as for example the Civil Action Committees of Matteo Renzi, funded in large part by a small number of large donors.

Actual transparency

The new rules on the transparency of financing to political organisations in force since 2019 oblige organisations to publish data on donations. It is a good step forward, but a single centralised register, with data that can be read directly by both people and computer systems, would greatly simplify the work of citizens, journalists, and analysts interested in the issue. Leaving it to individual organisations to identify the method of disclosure of these data leads to very different results: for example, the Democratic Party makes the data available on its website , but the file (by the way, in PDF format) can only be downloaded by subscribing to LinkedIn. Currently, the only centralised source available is a PDF file of hundreds of pages published on the website of the Chamber: it is a useful reference, but difficult to consult – yet another example of how the application of transparency laws remains problematic in this sector.

It is essentially a matter of actually following the recommendations of GRECO – the anti-corruption body of the Council of Europe – which officially invited the Italian authorities to introduce "a coordinated approach for the publication of information on the financing of political parties and election campaigns" and to "ensure that such information is made available in a coherent, understandable and timely manner".

Adequate resources for control bodies

As Aaron Swartz argued , there is often a risk that "transparency shifts work from government to ordinary citizen, who has neither the time nor the competence to investigate these issues in detail, let alone the possibility of doing something about it". Transparency is important to allow journalists and scholars to analyse the data independently, but it cannot be a pretext by the State to abdicate its responsibilities.

In Italy, the "Commission for guaranteeing the statutes and for the transparency and control of statements of political parties" does not have sufficient resources to adequately carry out its mission, as reported by the Commission itself and highlighted by OpenPolis . To ensure the integrity of the system, the supervisory bodies must have adequate resources to carry out their work and be able to coordinate properly.

Conclusions

The matter of political funding is complicated and, as also emerges from the regulatory efforts expressed by the current legislature, it is not easy even to narrow the circle and define which organisations should actually be considered political. Currently there are a number of criteria  that determine when foundations, associations, and committees must be assimilated to parties, and it will reasonably take some time to see how in practice these criteria are functional to the purpose.

Beyond better regulation of financing to political organisations, other initiatives in favour of the transparency of political propaganda and online advertising   could mitigate the risk of interference.

On the other hand, it is important to stress how political forces in a democratic context need adequate resources to manage their activities and strongly participate in public debate and electoral challenges. Rules aimed at increasing transparency and reducing the risk of external interference must not therefore create unnecessary obstacles to raising funds. Accompanying new obligations and limits with adequate tools for finding or distributing resources is therefore appropriate, also considering the limited impact of "2 per thousand" as a compensatory measure for the removal of direct public funding (parties' revenues in fact more than halved between 2013 and 2017 ).

The measures outlined here – prohibition of donations by companies, limitation of the amount of donations, transparency, and greater resources for the control bodies – would significantly contribute to ensuring the integrity of democratic processes in Italy and reducing the risks of external interference, without incurring unsustainable costs for political organisations. If introduced, they would make the current total ban on foreign donations from EU citizens redundant, thus avoiding hindering the birth or growth of transnational political movements in the context of the EU's common political space (extra-EU donations would remain prohibited, or possibly regulated separately and strongly limited). Governments of different colours have taken useful initiatives in recent years to increase transparency in this sector. This is a path in the right direction that should not be interrupted.