Legal Entities Will No Longer be able to Finance Parties

The amendments to the Law “On Political Associations of Citizens” also envisage reducing the total amount of expenses incurred by the party during the year to no more than 0.04% (from 0.05%) of the previous year's gross domestic product.

The initiators of the bill are Mamuka Mdinaradze, Givi Mikanadze, Davit Matikashvili, Rati Ionatamishvili, and Irakli Shatakishvili. They explain the hasty change of party financing rules with the parliamentary elections of 2024 and the recommendations issued by the Venice Commission.

“Should the draft law is adopted, Georgia will thereby take into account the recommendation of the Venice Commission on “de-oligarchization”, where it is indicated that the possibility of financing political parties for legal entities is prohibited. Consequently, political parties can no longer be financed by legal entities. Also, the total amount of expenses incurred by the party during the year will be reduced, which, in turn, ensures the existence of only healthy competition between the parties and, accordingly, enables the possibility of maintaining a fair election environment and its further development. For the presented changes to take effect on January 1, 2024, it is advisable to consider and adopt the draft law in an accelerated manner,” the initiators of the draft law write in the explanatory note.

According to the draft law, for the implementation of a prohibited donation by a legal entity, their union, or another type of organizational formation, a fine of double the amount of the prohibited donation is provided.

Representatives of the opposition parties believe that the legislative changes have nothing to do with de-oligarchization.

Georgian Dream is trying to sell this initiative as a step towards deoligarchization. The only oligarch in the country is Bidzina Ivanishvili, and he finances the Georgian Dream through black money, undeclared money that cannot be traced. Therefore, whether it will limit the ability of legal entities to finance parties is of no practical importance. Deoligarchization for everyone, inside and outside the country, means limiting Ivanishvili's influence on state institutions. Of course, this initiative does not serve to weaken Ivanishvili's power, and therefore, it is an attempt to deceive our international partners,” says Giga Lemonjava, a member of the political council of the Droa party.

On June 12, 2023, the Venice Commission published a critical conclusion on the draft law “On Deoligarchization” and called on the Georgian authorities to introduce “systematic” approaches to the fight against oligarchy. One of the commission's recommendations was to strengthen the rules for the financing of political parties and election campaigns and the existing control mechanisms.

According to the current law, individuals and legal entities can finance a political party. The total amount of donations received from each citizen should not exceed 60,000 GEL per year, and the total amount of donations received from a legal entity should not exceed 120,000 GEL per year. A monetary amount deposited by a citizen to the party's account is considered a donation; the amount credited to the party's account by a legal entity; material or non-material value (including preferential credit) and services (except work performed voluntarily by a volunteer) received by the party from a natural or legal person free of charge or at a discount/favorable conditions.