4.1
The amending Bill contains provisions that were not in the original Bill examined by the Committee in April 2018. This Chapter examines the new provisions governing how Commonwealth electoral law will interact with state and territory laws, and the new definition of political entity.
Relationship with state and territory laws
4.2
The Government’s summary of how it has addressed the Committee’s prior recommendations indicates that the amendments relating to State and Territory laws are part of the response to previous Recommendation 11. Recommendation 11 proposed that the Government ensure greater transparency where foreign funds are moved through multiple organisations. In response, the Government noted that application of Commonwealth laws exclusively to amounts that are used or available for use in federal elections should ensure that foreign donations cannot be shielded by ambiguity about the jurisdiction in which those funds were intended to be used.
4.3
The government has also expressed a policy intention of ensuring that donations given for state and territory elections are subject to the laws of those jurisdictions. The Committee considers that such objectives need to be reflected appropriately in how the relevant provisions are drafted.
Section 302CA
4.4
The new proposed s. 302CA sits within the Division of the Electoral Act that regulates gifts made to registered political parties, candidates, groups, political campaigners and third parties.
4.5
The intention is that any State or Territory laws that may restrict the giving or accepting or any donation for federal purposes will be invalidated to the extent of that restriction.
4.6
According to the explanatory memorandum, this new section will ensure ‘that provisions of State and Territory laws that relate to political donations cannot restrict the making or receipt of donations that could be used for Commonwealth electoral purposes’. That is, donations that may be used for federal elections will not be covered by state or territory laws.
Section 314B
4.7
The new proposed s. 314B sits within the Division of the Electoral Act that governs, inter alia, general provisions relating to returns under the Act. The effect of this provision is to remove the requirement to disclose a gift (either as provider or receiver) that exists under state or territory electoral laws, if that gift is or may be used for Commonwealth electoral expenditure or to create or communicate Commonwealth electoral matter. This exemption only applies to political entities, political campaigners, third parties or associated entities as defined in the Electoral Act.
4.8
According to the explanatory memorandum, this provision is intended to prevent state or territory laws discouraging the making or receiving of small donations, and to remove the duplication of reporting requirements.
Constitutional mechanism
4.9
To the extent of any inconsistency, these provisions would apply instead of State and Territory laws through the operation of s. 109 of the Constitution, which states:
109 Inconsistency of laws
When a law of a State is inconsistent with a law of the Commonwealth, the latter shall prevail, and the former shall, to the extent of the inconsistency, be invalid.
4.10
The effect of s. 109 is not to invalidate the state or territory legislation, but to result in the state or territory legislation not operating to the extent of the inconsistency.
Evidence received
4.11
As a general point, some submitters questioned the need for these provisions, and whether there was any evidence-based problem that the amendments were intended to prevent.
4.12
Professor Anne Twomey observed that the Awabdy case in Queensland has recently brought into focus the fact that Commonwealth and State laws can operate in parallel, giving rise to questions about whether the interaction of these laws is designed on an uncoordinated basis or could be designed to produce a clear result.
I do understand that there has been some controversy in Queensland about this, because of the Awabdy case. There was a case about a potential conflict between the Commonwealth law and the state law. The court held that the two could actually subsist. … I sit in the middle on this one—I think it's fine. If the Commonwealth wants to object to state laws requiring disclosure at a lower level when the donation goes to the Commonwealth, then that is a degree of interference by a state into the Commonwealth's matters. I think the Commonwealth can rightly legislate to exclude that kind of interference. Equally, the Commonwealth shouldn't be interfering with the state decisions as to how to regulate their own electoral systems. That's where this law has gone over the edge; it's trespassed too far.
4.13
When asked for the impetus behind these new provisions, Dr Stein Helgeby from the Department of Finance responded:
In the interests of clarity and of removing confusion, those amendments are there in order to clarify for an actor who might be affected by this how the provisions will operate and work. They're there for consistency and clarity, largely in response to the kinds of calls for clarity that have been coming through from this committee and submissions to the committee.
[…]
So, there are six states, two territories and the Commonwealth, each of which has the ability to set up their own arrangements. Some have chosen to do so and others have chosen not to do so. In the Federation, it is not uncommon for different jurisdictions to take often divergent paths in how they frame particular pieces of legislation which ostensibly are dealing with the same thing. This is about clarifying the relationship between any approach taken by a state or territory and the federal approach, and it deals only with federal matters. The states and territories remain entirely able to choose different paths, supplementary paths or whatever.
Broad scope of potential invalidity
4.14
Some submitters raised concerns about the breadth of the potential application of the provisions to donations that are not pledged by a donor at the time of donation to a specific election campaign, but which are subsequently directed towards a state campaign. Under both sections, the state or territory laws will not apply when the donation ‘is required to be, or may be, used’ for electoral purposes.
4.15
Professor Joo-Cheong Tham advised:
What is crucial to note is that the sections will be enlivened even when the connection is loose – the immunity from State and Territory laws will apply when ‘gifts’ or amounts may be used for Commonwealth electoral purposes.
4.16
Professor Graeme Orr had similar concerns:
In either case, the State law would be excluded merely if the donation ‘may’ be used for federal electoral expenditure or electoral matter. That is a low if not tenuous connection to federal elections. Parties simply have to encourage (or avoid asking) donors to attach caveats on the use of their gifts.
4.17
In practice, this would mean that only donations that were expressly made for the purposes of state or territory elections would be subject to state or territory electoral legislation. The Committee heard witness concerns that linking the operation of the laws to the time of the donation removed consideration of the actual use of the funds in those jurisdictions where a State has not used its legislative powers to the fullest extent to ring-fence all funds that are directed towards a state purpose. This means that in some jurisdictions the exemptions could cover donations that were, in the end, actually used to campaign in State or Territory elections.
4.18
Professor Anne Twomey described the practical effect of this arrangement:
Thus a property developer in NSW could avoid the ban on making political donations with respect to State elections merely by contributing to the State branch of a political party but leaving the terms relating to the purpose of the donation open, even though the amount was in fact used for funding political expenditure with respect to a State election.
Constitutional legality
4.19
Submitters questioned the constitutionality of these provisions if funds received under the Act were then actually used in a state election. Professor Twomey argued:
Where the amount is actually used to fund State political expenditure, the purported application of the Commonwealth law to avoid disclosure would involve inappropriate and arguably unconstitutional interference by a Commonwealth law with a State election.
4.20
In her evidence at the public hearing, Professor Twomey emphasised that this raised both legal and policy concerns:
If the provisions in this bill—the two that deal with federalism—are used in such a way as to effectively prevent states from having laws that do things like cap political donations or ban certain political donations in relation to state political campaigns, this would be a very, very serious problem. It would be a problem both constitutionally and, indeed, in terms of good policy and good government.
4.21
In its submission to the original Bill, the Law Council of Australia raised concerns over the legality of the Commonwealth legislating for money that would go to funding state or territory legislation:
…Doubts were raised in Australian Capital Television v Commonwealth as to whether this was permissible, but as the legislation was struck down, it was not finally decided.
Therefore, it is uncertain whether the Commonwealth has the power to interfere with State elections in this way, and whether the Commonwealth has a head of power that extends to matters concerning State elections.
4.22
Without commenting on the specific provisions, the Department of Finance was of the view that the legislation was not contrary to the Constitution:
It is the view of governments—for a very long time—that they do not deliberately put forward legislation with a view that they understand it to be unconstitutional. Quite the contrary, governments of all persuasions, for many years, have put forward legislation in the view that it is constitutionally valid.
4.23
The Committee heard that it is also important that State and Territories are able to set up their own electoral expenditure and disclosure regimes, which may validly target different donors for different policy reasons than the Commonwealth regime. Mr Paul Oosting, GetUp, expressed this concern:
I think all Australians have seen the corrupting influence of gifts going to the state government MPs, parties and so forth. Rightly, if not belatedly in many cases, those governments are acting and I think will continue to act to try to safeguard their democracy and should have the right to do so.
4.24
Witnesses were not able to provide evidence to the Committee on how these provisions would interact with existing state and territory disclosure regimes. It is not clear how these provisions would affect donations that may flow through to state use, and how they would interact with the differing requirements for campaign accounts, and caps on electoral expenditure in the states and territories.
4.25
In its submission, the Department of Finance clarified that state and territories would still be able to legislate to control their own electoral expenditure regimes:
It would be possible for the States and Territories to follow the NSW approach of requiring that State election campaigning funds be credited to an account that was dedicated exclusively to that State’s electoral purposes and provide further that all State electoral expenditure must come from such dedicated accounts. The State and Territory political donation regulatory regimes could apply to amounts that are to be paid into such dedicated accounts. Sections 302CA and 314B would not have any application in relation to amounts paid into such an account, as they could only be used for State or Territory electoral purposes.
Electoral Commission of Queensland v Awabdy [2018] QSC 33
4.26
The recent Awabdy case decided in the Queensland courts considered the interrelationship between the Electoral Act 1992 (QLD) and the Electoral Act 1918 (Cth). In summary, the question was whether the Queensland Liberal National Party (LNP) was required to submit a return of gifts under both Acts. The Commonwealth legislation only required gifts over $13 500 to be reported, where the Queensland legislation required disclosure of gifts over $1 000.
4.27
The court rejected the LNP’s argument that the State’s requirement to disclose gifts of less than $13 500 was inconsistent with Commonwealth law within the meaning of s. 109 of the Constitution. Jackson J found that the subject matter and operation of the Commonwealth laws did not support an implication ‘to exclude a State law requiring disclosure of gifts made for the Commonwealth electoral purpose’.
4.28
Professor Tham explains the link to the new provisions in the current bill:
Central to his Honour’s reasoning was ‘the absence of express provision’ to support the negative implication. It is such express provision that proposed sections 302CA and 314B of the Commonwealth Electoral Act 1914 (Cth) seek to provide.
Re-setting the boundary for interaction of laws
4.29
The Committee heard that there had been no specific consultation with the states and territories about these provisions. The Department of Finance confirmed that it had not undertaken any direct consultation with state Attorneys-General or governments. However the Department viewed the committee’s inquiry as an open consultation process that allowed all issues to be appropriately considered, including issues pertaining to inter-jurisdictional law.
4.30
Those submitters who did address the issue of the interplay of commonwealth and state and territory electoral laws considered that the area of overreach could be drawn back to a more appropriate boundary, in relation to donations that are initially untied but subsequently purposed for state and territory elections (or for local government elections which are also under the jurisdiction of state and territory law).
Committee comment
4.31
The Committee notes the concerns by submitters that these provisions are complicated and raise significant legal and functional questions which concerned many. The Committee considers that the Commonwealth has an important role in bringing clarity to this complex area by expressly delineating the boundaries of its disclosure regime.
4.32
The Committee notes the concerns about the potential breadth of the two proposed provisions, and the potential for Commonwealth disclosure requirements to apply to untied funds that are subsequently used in state or territory elections.
4.33
While it is a legitimate policy objective to protect the operation of the Commonwealth’s laws to prevent avoidance behaviour and ensure certainty on a national basis about how laws of different jurisdictions interact, the drafting could be improved to avoid an undue overreach into State and Territory jurisdictions where there are applicable electoral laws with other legitimate policy objectives.
4.34
In order to create greater certainty in these provisions, and to avoid any questions of unconstitutionality, the Committee considers that these provisions should be amended to expressly exclude the application of the Commonwealth law to any funds that are used in a state or territory election. The proposed amendments should be included in the amendments to be moved in Parliament, so that the interaction of laws works appropriately from the commencement of the foreign donations regime.
4.35
The following recommendation was supported by the government members of this Committee. The Committee notes that the recommendation was not supported by the non-government members, who considered that the Committee should have additional time to inquire into these proposed provisions. After considering the differing opinions, the Committee’s view is that these provisions form an important part of the disclosure regime, and should be included in this Bill and implemented as soon as possible.
4.36
The Committee recommends that proposed sections 302CA and 314B are amended to ensure that Commonwealth laws would not apply to money that is directed towards non-federal campaigns (including state, territory and local government campaigns).
New definition – political entity
4.37
A new definition is inserted at s. 4–political entity–meaning a registered political party, a state branch or a registered political party, a candidate in an election or by-election, or a member of a group. This definition is relied upon extensively within the amendments.
4.38
However, the new definition creates a conflict with the existing meaning of ‘political’ entity’ under s. 193(4) of the Act. This appears to be a simple drafting oversight but, nonetheless, should be rectified.
4.39
The Committee recommends definitional conflict regarding the term ‘political entity’ be rectified.
Concluding comment
4.40
Subject to revisions to reflect the recommendations for amendments in this report, the Committee considers that the proposed amendments would meet its recommendations on the Electoral Legislation (Electoral Finance and Disclosure Reform) Bill 2017. It is therefore recommending that the Bill be passed subject to amendments consistent with this report.
4.41
Subject to adjustment of the amendments to reflect the recommendations in this report, the Committee recommends that the Parliament pass the Electoral Legislation (Electoral Finance and Disclosure Reform) Bill 2017, as amended.
Senator the Hon James McGrath
Chair
12 October 2018