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The NSW political donations case: the implied freedom of political communication strikes again (after 21 years)


On Wednesday, 18 December, the High Court handed down its decision in Unions NSW v New South Wales, in which it unanimously ruled that two NSW laws concerning political donations and expenditure were unconstitutional and therefore invalid. The laws were found to breach the implied constitutional freedom of political communication. This freedom has been a part of our constitutional landscape since 1992. However, this is in fact the first time since 1992 that a law has been struck down for breach of that principle.

NSW law imposes caps on political donations to as well as election expenditure by political parties. It also mandates public reporting requirements to allow for public scrutiny and transparency in the funding of political parties. These laws were not at issue in the case. In any case, the High Court suggested that they are in fact constitutional and valid.

Section 96D was introduced into Part 6 of the Election Funding, Expenditure and Disclosures Act 1981 (NSW) in 2012. It prohibited political donations by persons who are not on the NSW electoral role. Hence donors cannot be corporations or trade unions, or foreigners (or children).

Section 95G(6), known as an “aggregation” provision and also introduced in 2012, changed the way that the cap on election spending was calculated. Absent that provision, the cap applies only to spending by a political party. Section 95G(6) factored into a political party’s cap any election spending by organisations affiliated with that party.

The implied freedom exists in the federal Constitution and is designed to promote a free flow of information that might influence one’s opinion of the federal government. Therefore, NSW tried to argue that the freedom played no role in relation to “speech” which was essentially about NSW State issues. However, the court found that State political issues could not be meaningfully separated from federal issues. Therefore, the implied freedom was relevant.

Did the implied freedom apply to restrictions on political donations and expenditure? Much of the argument evidently focused on the rights of donors and the characterisation of donations and expenditure as “speech”. However, such arguments were misguided. The implied freedom is not in fact a personal “right”. Hence, questions regarding the rights (or lack of them) of corporations and other artificial persons (like unions) were irrelevant. The real question was whether the laws restricted the flow of political communication, which they clearly did. Restrictions on political donations and expenditure will reduce the amount of political advertising conducted by a party, and the amount of information conveyed to voters and others.

The key to the case was whether the laws constituted reasonable and proportionate limitations on the implied freedom. That is, laws which restrict political communication will only be valid if they pursue legitimate ends via proportionate means. The court unanimously decided that they did not. Five judges found that the laws had no obvious legitimate purpose. Given they lacked a legitimate end, no question of legitimate means actually arose.

NSW tried to argue that the ban on donations by non-voters reduced the possibility of corruption and undue influence in government. The Court accepted that caps on donations and spending, which were not being challenged, could be justified on that basis. However, the prohibition on certain donations but not others could not be. NSW introduced no evidence that donations by non-voters had a greater corrupting influence than other donations. General appeals to the occasionally malevolent interventions of corporations were of no use to NSW, as the donation law extended to all non-voters, not simply “big business”.

Regarding s 95G(6), the measure was unjustified as it was based on a blithe and wrong assumption that affiliated organisations were essentially the same as the party to which they were affiliated, according to five of the six judges.

Keane J concurred in a separate judgment. He focused on the fact that the discrimination evident in the provisions was unjustifiable. Regarding s 96D, the discrimination in the law between non-voters (eg corporations and unions) and voters was not justified. After all, the relevant government could still influence the interests of the former as well as the latter. Nor was the discrimination between affiliated organisations (who were caught by the “aggregation” provisions in s 95G(6)) and other supporters of political parties (who were not) justifiable.

Another discriminatory aspect to the laws, unmentioned by Keane J, can be noted. Given these laws were passed under the auspices of the O’Farrell LNP government, it is perhaps unsurprising that they had a greater debilitating impact on the ALP. Reportedly, ALP donations would have shrunk by 98% compared to 75% for the LNP. The “affiliation” provision clearly targeted the structure of the ALP. The obvious example of such affiliations is union memberships of the ALP, reflecting its collectivist traditions. No such “affiliations” exist in the Liberal party to my knowledge, given its historical focus on the individual. Given the blatantly unequal political impact of the laws, which would disproportionate reduce the conveyance of information from one side of the political spectrum in NSW, I welcome the decision which invalidates them. (However, it must be noted that “unfairness” is not itself a ground of unconstitutionality in Australia).

However, there are, arguably, troubling aspects to this decision. Professor George Williams of UNSW has criticised the court’s failure to acknowledge the possibility of increased corruption entailed in donations from artificial persons. The decision, in this respect, “is strikingly at odds with public debate”, given the revelations in NSW’s ICAC hearings and allegations of major union corruption.

The Court was careful to frame its decision as being about political communication rather than personal speech rights, in accordance with precedent. Therefore, it was able to sidestep a key philosophical question of whether artificial persons like corporations and unions have “human” rights to free speech. Yet the decision undoubtedly delivered a boost to the rights and interests of artificial persons. The court’s methodology essentially treats human rights and corporate rights as equals. Neither are directly relevant, but both are indirectly relevant.

Indeed, the methodology, in focusing on to “the flow” of political speech might even elevate certain corporate rights, as impacts on powerful entities might disrupt and distort that flow more than more impacts on less powerful individuals. It may therefore be no coincidence that artificial persons have been the most successful litigants in the area of constitutional free speech freedoms.

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