Govt’s foreign donation ‘ban’ leaves loopholes untouched

The Government has trumpeted a“ban” on overseas donations as a vital step in tackling foreign interference. But there is less to the law than meets the eye, and good reason to be concerned about the process, Sam Sachdeva writes.

Andrew Little is clearly a man in a hurry - but he might do well to remember the maxim, “Act in haste, repent at leisure.”

Fresh on the heels of fast-tracking terrorism legislation in the face of criticism from human rights groups, the Justice Minister on Tuesday announced electoral law changes designed to address foreign interference would be pushed through Parliament under urgency.

At first glance, the changes seem reasonable: a ban on foreign donations is a topic on which nearly all political parties agree, and the threat of foreign interference in elections (such as the Brexit vote and the United States presidential elections) is a growing concern around the world.

On closer reading, though, the changes seem to create as many problems as they solve.

The “ban” is not in fact a ban, but a reduction in the overseas donation limit from $1500 to $50, designed to protect smaller fundraising efforts such as whip-arounds.

But in 2017, overseas donations of the type being curtailed made up less than a quarter of a percent of all party donations that year (or $26,272 out of a whopping $11.4 million).

Even the Ministry of Justice concedes (in its regulatory impact statement for the bill) that the rationale for a ban is not about the amount of money being donated, but “the implicit message that allowing foreign donations sends to domestic political parties and prospective candidates, and those who are not part of New Zealand’s electoral system” - virtue signalling, if you will.

Little’s argument is that this may be just the tip of the iceberg, with other money potentially trickling or flooding into New Zealand politics without any form of disclosure.

That may be true, but this legislation does almost nothing to address that.

"Good law and swift law are often at odds, and Little may have been best to take a breath, conceal his frustration and make all-encompassing changes after 2020 rather than rushing through subpar law."

The $150,000 donation to National from the New Zealand-domiciled but entirely foreign-owned Inner Mongolia Rider Horse Industry Ltd, which Ardern pointedly described as being against the spirit of the law, would remain legal under the proposed changes.

That loophole remains intact, along with the risk of overseas donations to third-party campaigners despite justice officials describing it as a “potential weakness” in 2020 due to the referendums on assisted dying and the legalisation of cannabis.

In fairness, Little and his officials have been stymied by Parliament’s justice committee and its torturously delayed review into the 2016 local elections and 2017 general election.

Launched in July 2018 and expanded that October to explicitly cover foreign interference, the inquiry has been labelled “a shambles” by some committee members and is yet to produce a report more than a year later.

The delay essentially means none of the recommendations - whenever they are released - can be adopted in time for next year’s election, putting any change in the minister’s hands. 

But good law and swift law are often at odds, and Little may have been best to take a breath, conceal his frustration and make all-encompassing changes after 2020 rather than rushing through subpar law.

The Ministry of Justice warned of weaknesses in his plans, saying any discrepancy between the overseas donation limit and the anonymous donation threshold (which will remain at $1500) would be less effective in stopping foreign donors from circumventing disclosure rules while placing an excessive burden on parties.

“Option 1 [Little’s preference] would likely impose greater compliance costs for parties, without providing much real reassurance that a donation is not a foreign donation."

There are good grounds for New Zealand to protect its democratic processes from foreign interference - but it's not clear the Government's legislation will actually do that. Photo: Getty Images.

The Electoral Commission also noted the new approach would make it impossible to ensure an anonymous donation is not being accepted in breach of the overseas ban.

In short, one of the biggest potential sources of foreign money remains untouched, the benefits of what little restrictions there are seem mixed at best, and the public are unable to share their views.

Even a separate change requiring name and address details to be included on all election advertisements - dealing with the threat of what Little called “an avalanche of fake news social media ads” - is not all that significant, given disclosure is already required for election ads that promote or oppose a candidate or party.

For the avoidance of doubt, foreign interference is a genuine concern and the Government is right to prevent it where possible - it’s just that what it is proposing seems unlikely to make a meaningful difference.

The legislation looks particularly inadequate coming one day after the Australian government announced a new $88 million “foreign interference taskforce”.

A cynic might wonder whether New Zealand’s announcement was designed to head off any suggestion we were not doing our fair share as a Five Eyes partner (although Little said there had been no joint discussions between the two countries).

Parliamentary urgency should be used sparingly, and with good cause, not just to be seen to do something.

Introducing the legislation to Parliament, Little said the Government had to act urgently to close gaps in the law.

But many gaps remain, and it would be the worst of both worlds should our politicians and public be lulled into a false sense of complacency, without making the deeper structural changes that are so sorely needed.

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