Case Summary and Outcome

The Australian High Court found that while provisions of the New South Wales’ Election Funding, Expenditure and Disclosures Act of 1981 (“EFED Act”) burdened the implied freedom to political communication, they were justified in furtherance of their goal to prevent corruption. The impugned provisions imposed caps on some political contributions, prohibited indirect campaign contributions, and banned political contributions from property developers. The case was brought by Jeffrey Raymond McCloy in relation to would-be illegal donations made to candidates in New South Wales. The Court concluded that EFED Act had a legitimate purpose in curbing clientelism, was the least restrictive means available to be effective and that the benefit of fighting corruption outweighed the harm from the limitations on political donations.

This decision contrasts with the Unions NSW v. New South Wales decision in 2013, in which the High Court of Australia struck down similar provisions as unlawfully burdening the implied freedom of communication on governmental and political matters.

Facts

The state of New South Wales (NSW, “the state”), Australia, enacted the Election, Funding, Expenditure and Disclosures Act 1981 (“the EFED Act”) to regulate campaign donations and elections.

Section 95A(1) of Division 2A of the EFED Act (“Division 2A”), capped acceptance of financial contributions in state elections and by elected members of Parliament at $2000 annually for a candidate, and $5000 annually for a political party. Another provision, Section 96E, prohibited listed “indirect campaign contributions” such as vehicles, cars, and office supplies, as well as their acceptance. A third provision of the EFED Act, Section 96GA of Division 4A (“Division 4A”), prohibited property developers, tobacco business entities, liquor or gambling entities, and representatives of those industries from making any direct or indirect political contributions.

In Union NSW v. New South Wales, the Australian High Court invalidated two provisions of the EFED Act for burdening the implied freedom of communication on governmental and political matters (the “freedom of political communication”) without being reasonably connected to a legitimate purpose. In light of the Unions NSW decision, the state amended the EFED Act to include an objects clause in Section 4A. The objects clause listed five objectives for the EFED Act, which included establishing election funding transparency and preventing state corruption.

In the March 2011 state election, Jeffrey Raymond McCloy made would-be illegal donations to candidates in New South Wales. McCloy and two other plaintiffs — one was a corporation for which McCloy is a director and the other was a property developer associated with McCloy (collectively “McCloy”) — brought a lawsuit against New South Wales. McCloy claimed that Division 2A, Section 96E, and Division 4A of the EFED Act (collectively “the provisions”) were unconstitutional under Australian law for violating the freedom to political communication provided in the Constitution.

The High Court of Australia had original jurisdiction for the case, which McCloy brought before the Court on January 28, 2015.

Decision Overview

The Australian High Court began by analyzing whether the provisions of the EFED Act indirectly burdened the freedom of political communication provided in the Constitution for the Australian Commonwealth. The freedom of political communication is an implied constitutional right that acts as a restriction on legislative power. The right is designed “to secure freedom of choice to the electors.” (para. 42) The infringements on the freedom of political communication in this case were indirect, in that they did not prevent direct political communication such as discussing political opinions. Rather, the provisions limited the exchange of “payment of substantial sums of money.” (para. 93)

The state may infringe on a constitutional right if it has a legitimate purpose and does so through legitimate means. A legitimate purpose “is one which is compatible with the system of representative government provided for by the Constitution.”(at para. 31) The state of New South Wales argued that the EFED Act had the legitimate purpose of preventing the occurrence of and limiting the perception of corruption in the electoral process. The Court examined two types of corruption: quid pro quo (using power in office to benefit a donor in exchange for their financial support) and “clientelism.”

Because the provisions were not related to quid pro quo corruption, the Court focused on clientelism. Clientelism occurs when a political donor asserts undue influence over a politician by essentially buying that power through past or promised future political contributions. For example, a developer gives a large political donation and, in return, the politician supports a new development by the developer or a favorable change in zoning laws. The Court noted how difficult this type of corruption is to recognize and prosecute, and thus prevention is the only practical way to reduce clientelism. A representative government has a legitimate interest in curbing clientelism as form of corruption. Thus, the EFED Act had a legitimate purpose.

Finally, the Court responded to McCloy’s argument that the contested provisions fail the proportionality test. The proportionality test is used to determine whether the legislative means are actually legitimate, and thus whether the infringement on the freedom of political communication is constitutionally permitted. There are three factors needed to pass the proportionality test in Australia: the law in question is (1) suitable; (2) necessary; and (3) adequate in its balance. To determine suitability, the Court must find a rational connection between the purported purpose and the means used. The Court found that the language of Divisions 2A and 4A have a rational connection to preventing corruption, satisfying the first factor. For the second factor, a law is “necessary” when there are no “obvious and compelling alternatives” that would achieve the same objective with “a less restrictive effect on the freedom.” (at para. 81) The Court dismissed McCloy’s suggested less restrictive means as ineffective. Finally, the infringement on the freedom of political communication was balanced in favor of the potential benefits of the legislation. The benefit of fighting corruption outweighed the harm from the limitations on political donations.

The Court concluded that while the EFED Act infringed on the implied freedom of political communication, the state of New South Wales had a legitimate purpose to prevent corruption and used legitimate means to do so with the contested provisions in the EFED Act.