Better regulation of all political finance would help control foreign donations

There is growing controversy surrounding foreign political donations in Australia. Contributions made by Chinese companies to the major parties have received the most attention, recently through reports of donations made by the Yuhu Group and Chinese billionaire Chau Chak Wing (and his company, Kingson Investment) to the Western Australian Liberal Party.

Foreign Minister Julie Bishop, the most senior federal MP from WA, has reportedly singled out three key Chinese donors for praise.

And, this week, revelations of the payment by the Top Education Institute, a company with links to the Chinese Communist Party, of Labor senator Sam Dastyari’s travel expenses have also prompted concern. Especially in light of Dastyari having contradicted Labor policy in relation to the South China Sea dispute.

Controversies over foreign donations are nothing new. Barely a fortnight before the October 2004 federal election, British Lord Michael Ashcroft donated A$1 million to the federal Liberal Party. And, earlier this year, links between the Italian Calabrian mafia and key Liberal Party MPs – facilitated by political contributions – were exposed.

These incidents have prompted calls for a ban on foreign political donations. Together with the claim that Canada, the UK and US have adopted such a measure, the case for such a ban in Australia seems irresistible.

This, however, puts the cart before the horse. Before we jump straight into “how” we should regulate foreign political donations, two questions need to be answered. First, what is meant by a “foreign” political donation? And why should such donations be better regulated?

How do we define ‘foreign’?

There seems to be two understandings of “foreign” in this context: a narrow one that refers to overseas-based donors, and a broad one that extends to all non-citizens, whether or not they are residing overseas.

The “what” connects to the “why”. The concern with overseas-based donors or foreign-sourced donations is one of compliance; enforcement of Australia’s electoral laws overseas is all but impossible.

There is a clear and compelling case here to severely restrict – if not ban – foreign-sourced donations. Queensland has banned such donations; the UK has done similar.

But what the UK has not done is ban “foreign” political donations in the broad sense – that is, ban donations from all non-citizens. Neither, for that matter, has Canada or the US.

“Permissible donors” under UK law include companies carrying out business in the UK. In Canada and the US, permanent residents are not banned from making political donations.

A ban on political donations from all non-citizens would be unconstitutional in Australia; the High Court has previously struck down such a ban. A central part of its reasoning was that non-citizens residing in Australia are entitled to voice their concerns in the political process by virtue of being subject to the laws of the land.

Why should they be more regulated?

A blinkered understanding of Australian society seems to inform some calls for a ban on donations from all non-citizens.

Being exclusively focused on Australian citizens, it fails to recognise how our richly multicultural society includes those who are not citizens, notably permanent residents and long-term residents on temporary visas. These people should not be denied their legitimate role in the democratic process.

Worryingly, this understanding sometimes tips into xenophobia; that “foreigners” should have no role in our political process. More specifically, there seems to be a strand of Sinophobia. Fears of the “yellow peril” has formed an undercurrent of the debate over donations from Chinese companies.

The misdiagnosis runs even deeper. A distorted focus on “foreignness” results in a failure to appreciate how “foreign” political donations simply highlight broader problems with how political money is (not) regulated at the federal level.

The absence of caps on political donations and spending – like those in New South Wales – has allowed unsavoury fundraising practices to thrive. A laissez-faire culture within political parties has left systemic conflicts of interest unaddressed. Both have undermined public confidence in the political process.

Foreign-sourced donations should be banned. But, more importantly, federal political finance laws need broader reform to protect the integrity of Australia’s democracy.

Joo-Cheong Tham receives funding from the Australian Research Council. He has previously written commissioned reports for the New South Wales Electoral Commission. He is also the Director of the Electoral Regulation Research Network, an initiative sponsored by the Melbourne Law School, New South Wales Electoral Commission and the Victorian Electoral Commission.