Assessment of the System of the Financing Political Parties (LV0026)

Status quo: Law on Financing Politcal Organisations (Parties) stipulates that political organisations may be financed by the State budget and lays down certain conditions for receiving and using the funds.
To establish whether the allocation of the State budget funds has achieved the primary objective – the reduction of the impact of major donors in politics, as well as identifying which types of party expenditure can be funded by the State – the functioning of the system for financing political organisations and parties needs to be evaluated, the existing drawbacks and problems identified, and solutions offered to remedy the situation.
Main objective: Limit the power of money in politics.

The work to achieve the objective will be carried out in the frame of eight measures.
1. Assess the functioning of the system for financing political parties and political organisations in the wake of amendments to the Law on Financing Political Organisations (Parties) regarding the allocation of the State budget funds to political parties, and develop recommendations to ensure the functioning of parties in periods between elections, reduce the dependence of parties on large-scale donations, and promote the attraction of small-scale contributions.

2. Ensure the transparency of financial activities of political organisations (parties) by raising the effectiveness of the mechanisms of enforcing liability for violations and imposing less severe sanctions for lesser administrative violations in the field of political party financing, incl. considering a possibility of reducing the administrative burden.

3. On the basis of applications received and checks carried out by the Corruption Prevention and Combating Bureau (KNAB), to analyse the manifestations of covert pre-election campaigning in the earlier pre-election periods and provide recommendations for legislative amendments aimed at preventing the risk of covert campaigning.

4. Create and put into operation an electronic declaration system of political parties.

5. On the basis of earlier analysis on the issues of interest for parties and other election participants in the pre-election period and on the election days, to charge the CPCB/KNAB with producing a methodological material for political parties.

6. Produce recommendations for the reduction of an increasing impact of private interests on the legislative process and promotion of the transparency of lobbying, as well as publicising procedures for public officials’ (including members of the parliament) communication with lobbyists and other stakeholders who attempt to influence the process.

7. Assess the impact of lobbying on the Law on of the State Budget, the construction sector, bankruptcy procedures, and other sectors and provide recommendations for reducing the impact of disproportionate lobbying.

8. Assess the legal framework related to publicising the identity of a donor and set a limit to the amount of a donation, below which the donor’s information is not made public, thereby promoting the involvement of small-scale donors in providing financial assistance to political organisations.

9. Assessment of the system of financing of political parties

Commitment Text:

Status quo: Law on Financing Political Organisations (Parties) stipulates that political organisations may be financed by the State budget and lays down certain conditions for receiving and using the funds. To establish whether the allocation of the State budget funds has achieved the primary objective – the reduction of the impact of major donors in politics, as well as identifying which types of party expenditure can be funded by the State – the functioning of the system for financing political organisations and parties needs to be evaluated, the existing drawbacks and problems identified, and solutions offered to remedy the situation.

Main objective: Limit the power of money in politics. The work to achieve the objective will be carried out in the frame of eight measures.

1. Assess the functioning of the system for financing political parties and political organisations in the wake of amendments to the Law on Financing Political Organisations (Parties) regarding the allocation of the State budget funds to political parties, and develop recommendations to ensure the functioning of parties in periods between elections, reduce the dependence of parties on large-scale donations, and promote the attraction of small-scale contributions.

2. Ensure the transparency of financial activities of political organisations (parties) by raising the effectiveness of the mechanisms of enforcing liability for violations and imposing less severe sanctions for lesser administrative violations in the field of political party financing, incl. considering a possibility of reducing the administrative burden.

3. On the basis of applications received and checks carried out by the Corruption Prevention and Combating Bureau (KNAB), to analyse the manifestations of covert pre-election campaigning in the earlier pre-election periods and provide recommendations for legislative amendments aimed at preventing the risk of covert campaigning.

4. Create and put into operation an electronic declaration system of political parties.

5. On the basis of earlier analysis on the issues of interest for parties and other election participants in the pre-election period and on the election days, to charge the CPCB/KNAB with producing a methodological material for political parties.

6. Produce recommendations for the reduction of an increasing impact of private interests on the legislative process and promotion of the transparency of lobbying, as well as publicising procedures for public officials’ (including members of the parliament) communication with lobbyists and other stakeholders who attempt to influence the process.

7. Assess the impact of lobbying on the Law on of the State Budget, the construction sector, bankruptcy procedures, and other sectors and provide recommendations for reducing the impact of disproportionate lobbying.

8. Assess the legal framework related to publicising the identity of a donor and set a limit to the amount of a donation, below which the donor’s information is not made public, thereby promoting the involvement of small-scale donors in providing financial assistance to political organisations.

Responsible institution: Corruption Prevention and Combating Bureau (CPCB)

Supporting institution(s): NA

Start date: 2014.................... End date: 2020

Context and Objectives

In Latvia, there are only few government subsidies for political parties. Those subsidies began in 2012 and equal roughly Eur 0,3 per capita. The limited subsidies help explain why political parties are dependent upon private donations and susceptible to the influence of money. In response to this problem, NGOs suggested that the government assess the impact of its subsidies on political parties and propose changes in the OGP framework if needed. ^{Interview with Iveta Kažoka, Policy Centre “Providus,” 22 August 2016.}  NGOs proposed this as a commitment in the second action plan. In their view, additional government subsidies would enable more professional political parties to develop human resources for well-crafted long-term policy decisions. The government took up the NGO proposal, including it in the action plan along with other activities that are expected to take place before the completion of the assessment.

The objective of the commitment introduced by the government is to reduce the role of private money in politics, especially that of large private donors or of unclear origin. There are eight steps toward achieving the objective:
 

1.An assessment of how government subsidies to political parties have impacted the current situation;

2.More effective liability mechanisms for violating political party financing, including minimizing sanctions for less significant administrative violations;

3.Solutions for reducing covert pre-election campaigning;

4.An electronic system for party finances;

5.A handbook for political parties on the legal framework of their activities;

6.Increased transparency in lobbying;

7.An assessment of the impact of lobbying in various areas; and

8.A threshold for the size of anonymous donations.

On the whole, the specificity of the proposed measures is low. While there are some concrete deliverables, such as an electronic system for political party financial declarations and a handbook for political parties, most milestones are vague and lack detail. For example, many milestones aim to “assess” systems and regulations but do not indicate how this will be carried out or what the end product will look like. Other milestones aim to “provide recommendations.” In these cases, it is difficult to identify how these recommendations will be developed or implemented.

The potential impact of the commitment is also difficult to predict given its vagueness. For instance, depending on their content, measures to regulate lobbying could be effective or completely ineffective. The commitment’s activities could all lead to positive results, such as reducing the influence of money in politics, but they do not contain a public-facing element. The proposed actions are all internal to government and, as such, are not considered relevant to the value of open government.

Completion

After the first year of implementation, there are almost no tangible outputs of the commitment to analyze and discuss. The most important shortcoming is that there has been no analysis as to whether granting subsidies from the state budget to political parties is an effective policy.

Although the CPCB has prepared several legal amendments, none of the proposals are publically available or have been approved thus far by the Cabinet of Ministers or Parliament. Completion of the commitment is considered limited, therefore. Two milestones that should have led to new policies — assessments of existing government subsidies to political parties and of the impact of lobbying — are yet to begin. However, all the commitment’s activities are long-term policy measures, which the responsible agency considers to be on schedule.

The CPCB reports the following progress for each milestone:
 

• The CPCB set 31 December 2016 as the deadline for the assessment of the state’s financing of political parties. Instead of an assessment, however, the government developed amendments to the law on financing political parties, which states that a person must not donate all of their declared income. The government is attempting to keep large donors from distributing resources to false “small donors” who then donate to political parties. The amendments have been submitted to a parliamentary commission and are not public.
• Effective liability measures are meant to reduce sanctions to political parties for minor administrative offences. The deadline set by the CPCB is 31 December 2016. The CPCB elaborated draft guidelines that are not yet in force nor publicly available for comment.
• The CPCB has participated in parliamentary committee meetings and is developing amendments on covert agitation. Its deadline is 31 December 2016. Drafts are not yet publically available for comment.
• The introduction of an electronic declaration of political party resources is underway. It will not change the information political parties disclose or its public availability (the information has already been submitted and publicised by the CPCB). The measure will reduce the administrative burden on the Bureau and change how political parties disclose their financial information to the government. As a result, it does not make any additional information available to the public, but is aimed at improving the effectiveness of the Bureau. The deadline set by the CPCB is 31 December 2017.
• The CPCB has elaborated a methodology for political parties describing the laws and regulations that must be obeyed before elections. The material was presented to a parliamentary committee; it is not published or available to the public. This measure is not relevant to OGP and only explains the law to political parties. The CPCB’s deadline was 31 December 2015. The IRM researcher considers completion to be substantial since the material only needs to be released for public access in order for the milestone to be complete.
• The regulation of lobbying has a long-standing history in Latvia. It was one of the anti-corruption milestones included in the first action plan. The CPCB put forward a draft Law on Transparency of Lobbying, which was open for consultation with other ministries and NGOs on 14 July 2012. However, there was lack of agreement on the draft among ministries. The first self-assessment report suggested that the commitment was implemented, but the draft had actually not been approved by the Cabinet of Ministers and Parliament. As a result, the prime minister passed a resolution on 25 October 2014 that lobbying be regulated via amendments to the existing laws. A working group composed of experts from the CPCB and Ministry of Justice proposed amendments to the Law on State Order ^{Home page of the Cabinet of Ministers, http://tap.mk.gov.lv/lv/mk/tap/?pid=40390230. } and Parliament Rules of Procedure ^{Home page of the Cabinet of Ministers, http://tap.mk.gov.lv/lv/mk/tap/?pid=40390231.}  on 26 May 2016. Discussions among ministries and the parliamentary committee have not yet resulted in a viable solution. The deadline set by the CPCB is 31 December 2016.
• The CPCB committed itself to assessing the impact of lobbying on various policy areas, such as construction and development of the state budget. This activity has not begun. The CPCB’s deadline is 31 December 2018.
• The CPCB is currently working on setting a threshold under which donations to political parties would remain anonymous. However, there are no concrete results at this point. The deadline set is 31 December 2016.

Early Results (if any)

Since the activities have not yet been completed, there are no results to evaluate. The general observation of the IRM researcher and NGOs interviewed ^{Iveta Kažoka, Policy Centre “Providus,” 22 August 2016; Jānis Volberts, TI local Chapter “Delna,” 22 August 2016; Liene Gātere, TI local Chapter “Delna,” 22 August 2016; Jānis Veide, TI local Chapter “Delna,” 22 August 2016.}  is that the assessments of government subsidies and lobbying would assist in developing related policies. These policies would be based on an analysis of existing practices, which would strengthen arguments for their approval and implementation.

Next Steps

The IRM researcher recommends that the assessments of government subsidies on the state and the impact of lobbying on Latvian politics be prioritized. Policies that tackle the influence of money in politics should be based on the results and recommendations from these analyses. Without underlying studies, such measures as more effective liability enforcement mechanisms and thresholds for anonymous donations proposed in this commitment could be formulated in such a way as to worsen the status quo. The IRM researcher recommends focusing on fewer, higher-impact milestones that specify expected outcomes and how they will be achieved (rather than vague actions) in the next plan.

Commitment 9. Political Party Financing

Commitment Text:

Assessment of the system of financing of political parties

Law on Financing Political Organisations (Parties) stipulates that political organisations may be financed by the State budget and, at the same time, lays down certain pre-conditions for receiving and using the funds. To establish whether the allocation of the State budget funds has achieved the primary objective—to reduce the impact of major donors in politics, as well as to identify which types of expenditure can be funded by the State—the functioning of the system for financing political organisations and parties needs to be evaluated, by identifying the existing drawbacks and problems, as well as proposing solutions to remedy the situation.

Main objective is to limit the power of money in politics.

To achieve the objective, the work will be undertaken in the framework of eight sub-tasks, which are included in the “Corruption Prevention and Combating Guidelines for 2015-2020” (hereinafter—the Guidelines) approved by the Order of the Cabinet of Ministers of 16 July 2015:

1. Assess the functioning of the system for financing political parties and political organisations following the amendments to the Law on Financing Political Organisations (Parties) regarding the allocation of the State budget funds to political parties, and develop recommendations to ensure the functioning of parties in periods between elections, reduce the dependence of parties on large-scale donations, and promote the attraction of small-scale contributions (Deadline for the implementation of the task in the Guidelines: 31.12.2016)

2. Ensure the transparency of financial activities of political organisations (parties) by raising the effectiveness of the mechanisms of imposing liability for violations and imposing less severe sanctions for lesser administrative violations in the field of political party financing, incl. considering a possibility of reducing the administrative burden (Deadline for the implementation of the task in the Guidelines: 31.12.2016).

3. On the basis of applications received and controls carried out by the KNAB [CPCB], to analyse the manifestations of covert pre-election campaigning in the earlier pre-election periods and provide recommendations for legislative amendments aimed at preventing the risk of disguised campaigning (Deadline for the implementation of the task in the Guidelines: 31.12.2016).

4. Ensure the creation and implementation of the electronic declaration system of political parties in Latvia (Deadline for the implementation of the task in the Guidelines: 31.12.2016).

5. On the basis of earlier analysis on the issues of interest for parties and other election participants in the pre-election period and on the election days, the KNAB has to produce a methodological material for political parties to ensure proper interpretation and application of binding legislative acts while preparing for elections, as well as for publishing this information (Deadline for the implementation of the task in the Guidelines: 31.12.2015).

6. Assess the impact of lobbying on the Law on the State Budget, the construction, insolvency administration procedures, and other sectors and provide recommendations for reducing the impact of disproportionate lobbying (Deadline for the implementation of the task in the Guidelines: 31.12.2018).

7. Assess the legal framework related to publication of the identity of donors and set a limit to the amount of a donation, below which the information about the donor is not made public, thereby promoting the involvement of small-scale donors in funding of political organisations (Deadline for the implementation of the task in the Guidelines: 31.12.2016).

Responsible Institution: Corruption Prevention and Combating Bureau

Supporting Institution: N/A

Start date: 2014..................... ...................... End date: 2017

Editorial Note: The commitment text above is drawn from the updated version of the action plan, published in October 2016 and available at http://bit.ly/2EK34dH. The original version of the action plan is available at http://bit.ly/2ptZ0sq. To see the changes between the two versions, visit http://bit.ly/2FPvK4r.

Commitment Aim

The amount of government subsidies for political parties is low in Latvia. Subsidies began in 2012 and amount to 0.71 euros per vote received by political parties in the previous parliamentary elections. The limited subsidies help explain why political parties are dependent on private donations and are susceptible to the influence of money. In response to this problem, NGOs suggested that the government assess the impact of its subsidies on political parties and propose changes within the framework of OGP if needed. ^{Iveta Kažoka (Policy Centre Providus), interview by IRM researcher, 22 August 2016.} NGOs proposed these actions as a commitment in the second action plan. In their view, additional government subsidies would allow for more professional political parties that could develop human resources for well-crafted, long-term policy decisions. The government took up the NGO proposal, but it included the proposal in the action plan with activities that have no public-facing elements.

In general, the objective of the commitment is to reduce the role of private money in politics, especially that of large, private donors or donors of unclear origin. Eight steps are envisaged to achieve the objective:

• An assessment of how government subsidies to political parties have impacted the current situation;
• More effective liability mechanisms for political party financing violations, including the minimising of sanctions for less significant administrative violations;
• Solutions for reducing covert pre-election campaigning;
• An electronic system for declaring party finances;
• A handbook for political parties on the legal framework of their activities;
• Increased transparency in lobbying;
• An assessment of the impact of lobbying in various areas; and
• A threshold for the size of anonymous donations.

The only substantive change to the commitment text in the updated version of the action plan is the establishment of clear timelines for each of the milestones, reflected in the commitment text above.

Status

Midterm: Limited

Although the CPCB had prepared several legal amendments, none of the proposals were publicly available or approved by either the Cabinet of Ministers or Parliament. As a result, the completion of the commitment was considered limited.

The CPCB reported the following progress for each milestone:

• Instead of the assessment of government subsidies, CPCB reported on the development of amendments to the law on financing political parties, stating that a person must not donate all of their declared income. In this way, the government seeks to keep large donors from distributing resources to false small donors, who then donate to political parties. The amendments had been submitted to a Parliament commission, but had not been passed by Parliament by the midterm of the action plan (the amendments were passed and then adopted by Parliament after the close of the action plan on 26 October 2017).
• Effective liability measures are meant to reduce sanctions to political parties for minor administrative offences. The CPCB created draft guidelines that were not in force and were not yet publicly available for comment.
• The CPCB participated in Parliament committee meetings and was developing amendments on covert agitation. Drafts were not publicly available for comment.
• The introduction of a mechanism for electronic declaration of political party resources was underway. It will not change the information political parties disclose or the public availability of that information—the information is already submitted and made public by the CPCB. The measure will reduce the administrative burden on the bureau and will change how political parties disclose their financial information to the government. As a result, the measure is aimed at improving the effectiveness of the bureau.
• The CPCB had drafted a methodology for political parties, describing the laws and regulations that must be obeyed before elections. The material was presented to a Parliament committee. It was not published or publicly available by the midterm of the action plan (July 2016).
• On 25 October 2014, the prime minister passed a resolution that regulation of lobbying should be ensured via amendments to the existing laws. A working group was created, encompasing experts from the CPCB and Ministry of Justice. This group published for debate amendments to the Law on State Order ^{“Draft Law ‘Amendments to the Law on State Administration Structure,’” Legislative Proposals, Draft Legislation of the Cabinet of Ministers of the Republic of Latvia, http://tap.mk.gov.lv/lv/mk/tap/?pid=40390230.} and to the Parliament Rules of Procedure ^{“Draft Law ‘Amendments to the Saeima Procedural Roll,’” Legislative Proposals, Draft Legislation of the Cabinet of Ministers, http://tap.mk.gov.lv/lv/mk/tap/?pid=40390231.} on 26 May 2016. Discussions among ministries and in the Parliament committee had not resulted in a viable solution.
• The CPCB committed itself to assessing the impact of lobbying on various policy areas, such as construction and the development of the state budget. The activity had not been started.
• According to the CPCB, it was working on setting a threshold under which donations to political parties would remain anonymous. However, there were no concrete results during the midterm assessment.

For more information, see the 2015–2016 IRM midterm report. ^{“Latvia Mid-Term Progress Report 2015–2016,” Open Government Partnership, https://www.opengovpartnership.org/documents/latvia-mid-term-progress-report-2015-2017.}

End of term: Limited

• Parliament passed amendments to the Administrative Code of Latvia (Article 276) ^{“Latvian Administrative Violations Code,” Legislation of the Republic of Latvia, https://likumi.lv/doc.php?id=89648.} to ensure effective liability. As a result, political parties that commit minor administrative offences now receive less severe sanctions, which reduces the administrative burden for the enforcing institutions. The milestone is completed.
• Parliament passed amendments on covert agitation. ^{“Amendments to the Pre-election Campaign Law,” Legislation of the Republic of Latvia, https://likumi.lv/ta/id/283154-grozijumi-prieksvelesanu-agitacijas-likuma.} It set rules for the distribution of printed materials in private mailboxes, prohibited the use of publicly owned houses and institutions to distribute materials, and established pricing rules for advertising materials on privately owned spaces. The amendments were in force as of 15 July 2016. Therefore, the milestone is completed.
• The introduction of an electronic declaration system is linked to pending amendments to the Law on Financing of Political Parties in Parliament. ^{“Amendments to the Law on the Financing of Political Organisations (Parties),” Legal Projects, Parliament, http://titania.saeima.lv/LIVS12/saeimalivs12.nsf/webAll?SearchView&Query=([NumberTxt]=910/Lp12)&SearchMax=0&SearchOrder=4.} Therefore, the implementation of the milestone is limited.
• CPCB conducted a seminar for political parties on 21 December 2016 ^{“Information for Campaigners,” Pre-election Campaign, CPCB, https://www.knab.gov.lv/lv/finances/campaigning/media/.} and published the methodology for political parties, which contains guidelines for pre-election periods. ^{“Prieksvelesanu Agitacijas Likuma Piemerosanas Vadlinijas Atbilstosi KNAB Kompetencei,” CPCB, https://www.knab.gov.lv/upload/partijam_nesaistitam_personam/pofkn_reklamdevejiem_21.12.pdf.}
• The efforts for regulation of lobbying have not resulted in approved amendments, as described in the previous report. The CPCB developed new amendments to the Rules of Procedure of Parliament ^{“Amendments to the Saeima Procedural Roll,” Legal Projects, Parliament, http://titania.saeima.lv/LIVS12/saeimalivs12.nsf/webAll?SearchView&Query=([NumberTxt]=922/Lp12)&SearchMax=0&SearchOrder=4.} and submitted them to the Legal Committee of Parliament. However, the content of the amendments is not publicly available. According to information provided by the CPCB, ^{CPCB, written communication, 13 September 2017.} the proposed amendments regulate the communication of members of Parliament with lobbyists and other persons trying to influence draft laws and the legislative process. Given that there is no progress at this stage, the implementation of the milestone is limited.
• The assessment of the impact of lobbying has not started, since lobbying is still not defined under Latvian law.
• The CPCB developed amendments to the Law on Financing of Political Parties to set a threshold for the size of anonymous donations. The amendments were passed in the second reading in Parliament on 22 June 2017. However, the adoption of the amendments by Parliament and the proclamation of the law took place after the close of the action plan (26 October 2017 and 8 November 2017, respectively).

Overall, the implementation of the commitment is limited, since several activities were not started and there was little to no progress on two of the main activities that could change “business as usual” in terms of money in Latvian politics. Specifically, the analytical study of how government subsidies impact the work of political parties was not started and not on the agenda of the CPCB, and the regulation of lobbying led to several proposals but no results.

Did It Open Government?

Access to Information: Did Not Change

Civic Participation: Did Not Change

Public Accountability: Did Not Change

While the activities proposed by the government in this commitment are positive reforms, they are not directly relevant to open government. Hence, there was no change in the levels of access to information, civic participation, or public accountability.

Carried Forward?

The third action plan includes a commitment to “develop regulations requiring openness on lobbying draft laws and policies.” ^{Latvia National Action Plan 2017-2019, https://www.opengovpartnership.org/wp-content/uploads/2001/01/Latvia_National-Action-Plan_2017-2019_LAT.pdf} It will focus on holding discussions on the impact of lobbying in decision making and implementing public awareness measures.

For the future, the IRM researcher recommends prioritising the assessments of government subsidies to political parties and the impact of lobbying on Latvian politics. To ensure that these activities are relevant to open government, the government could commit to involving civil society organisations in the assessment, publicly disclosing the results of the assessment, and/or releasing data on the effects of lobbying. Policies that address the influence of money in politics should be based on the results and recommendations from these analyses. Without underlying studies, measures such as the more effective liability enforcement mechanisms and thresholds for anonymous donations proposed in this commitment could be formulated in a way that worsens the status quo. In addition, the IRM researcher recommends focusing on fewer, higher-impact activities that specify expected outcomes and how they will be achieved, rather than more vague actions.