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Striking a blow against political donation corruption

12 October 2015
By settling lingering constitutional doubts, the High Court has opened the way for reform of political donations

By so comprehensively rejecting a challenge to political donation laws by a property developer this week, the High Court has opened the way for more comprehensive reform at the state and federal level, writes Anne Twomey.

Hands exchange a business card

The attempt by property developer Jeff McCloy to lure the High Court down the controversial US Supreme Court approach to political donations has failed.

The High Court this week upheld the validity of NSW laws that impose caps on political donations and ban donations from property developers.

The Independent Commission Against Corruption had heard evidence in public hearings that McCloy and an associated company had made direct and indirect political donations in excess of prescribed caps. At the time they were made, political donations to parties were capped at $5000, indirect donations were banned and political donations by property developers were banned.

McCloy challenged the constitutional validity of the cap on donations and the bans on indirect donations and donations from property developers. He claimed that they breached the implied constitutional freedom of political communication. He failed on all counts.

A "brazen" argument

McCloy's most audacious argument involved admitting that political donations are made to gain access to politicians, acquire influence and advance the interests of businesses.

His counsel argued that this is constitutionally protected by the implied freedom of political communication because it is a form of political participation in the system of representative government. This argument did not go down well with the Court.

Justice Gageler observed that the "argument is as perceptive as it is brazen" and that it "goes to the heart of the mischief to which the provisions are directed".

The point of the challenged legislation was to prevent donors from buying political access and influence as this is likely to lead to the reality or the perception of corruption or undue influence.

Chief Justice French and Justices Kiefel, Bell and Keane also commented that "guaranteeing the ability of a few to make large political donations in order to secure access to those in power would seem to be antithetical to the great underlying principle" of the equal sharing of political power within a system of representative government.

Rejection of the US approach

McCloy contended that the acquisition of influence through donations did not amount to corruption. In doing so, he relied on the very narrow view of corruption taken by the US Supreme Court in cases such as Citizens United, in which it was confined to cases of quid pro quo corruption, where a donation is made in direct exchange for a favourable decision.

The High Court, however, took a much broader view of corruption. It recognised the "more subtle kind of corruption" where office-holders who are dependent upon the financial support of wealthy donors make decisions "not on their merits or the desires of their constituencies, but according to the wishes of those who have made large financial contributions".

The High Court also recognised the risk that elections may become an auction where the party with the biggest war-chest dominates media advertising, squeezing out all other voices, reducing the free flow of political communication.

Their Honours gave strong indications that they will not go down the American path and will instead accept limitations on campaign funding that are directed at protection of the integrity of the electoral process.

The ban on donations by property developers

The most vulnerable of the challenged provisions were those that expressly ban property developers from making any donations at all.

They were introduced in 2009, while the caps on all political donations were imposed later in 2011. This raised the question of why the ban on donations by developers was necessary once all donations were made subject to a cap of $5000. Was a property developer's donation of $5000 any more likely to lead to corruption than the donation of anyone else?

This was McCloy's best point, but it was not pressed by him, because he had also allegedly breached the limits on caps and therefore was focused on bringing the whole system down - not just the ban on developer donations.

In any case, the High Court accepted that property developers were a special case because their profits are largely derived from government decisions on matters such as zoning and because of the history of corruption in NSW, as revealed by a number of ICAC reports.

It accepted that it was legitimate for Parliament to seek to reduce the risk of undue or corrupt influence in relation to planning decisions, where the risk may be greater than in other areas of official decision-making.

The Court also rejected an argument that the same aims could be achieved simply by greater transparency. It concluded that while disclosure was important, it "could not be said to be as effective as capping donations" in achieving the anti-corruption purpose of the legislation.

The future of reform

The High Court's decision in the McCloy case is a boost for electoral integrity and anti-corruption measures. Money might buy influence but the High Court has accepted that it is perfectly legitimate for Parliaments to legislate to limit influence-buying and influence-peddling by imposing caps on donations generally and bans upon donations by high-risk groups.

By settling any lingering constitutional doubts, the High Court has opened the way for more comprehensive reform of political donations at the state and federal level. The excuse that it "might be unconstitutional" no longer has legs.

The onus is now back on political parties and parliaments to clean up the campaign funding system and restore confidence in its integrity.

Anne Twomey is a Professor of Constitutional Law at the University of Sydney. This article was first published on The Drum

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