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Investing in Destabilisation: How Foreign Money Is Used to Undermine Democracy in the EU

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Investing in Destabilisation: How Foreign Money Is Used to Undermine Democracy in the EU STUDY Requested by the INGE committee Investing in destabilisation: How foreign money is used to undermine democracy in the EU @Adobe Stock Author: Edoardo BRESSANELLI (Sant’Anna School of Advanced Studies) European Parliament Coordinator: Policy Department for External Relations Directorate General for External Policies of the Union EN PE 653.631 - April 2021 DIRECTORATE-GENERAL FOR EXTERNAL POLICIES POLICY DEPARTMENT STUDY Investing in destabilisation: How foreign money is used to undermine democracy in the EU ABSTRACT Foreign interference has become a major security threat for democracies. The European Union (EU) provides no exception and, in the last few years, has significantly stepped up its efforts to counter this threat. A specific type of foreign interference is the foreign funding of political parties. At the national level, regulations banning or limiting foreign funding are currently in place in most member states, but there is still significant variation across them. At the EU level, the recent reforms of the regulation on the funding of the Europarties and their associated foundations have banned contributions from abroad. Notwithstanding such welcome changes to party regulations, cases of foreign funding are still being reported in several member states, with foreign actors exploiting regulatory loopholes to channel funds or provide other types of support. To tackle this issue more effectively, regulatory convergence at the national level should be promoted, the transparency of party accounts should be enhanced, and the monitoring and sanctioning powers of the relevant control authorities strengthened. EP/EXPO/INGE/2020/01 EN April 2021 - PE 653.631 © European Union, 2021 AUTHOR • Edoardo BRESSANELLI, Assistant Professor, Sant’Anna School of Advanced Studies, Italy This study was originally requested by the European Parliament's Special Committee on Foreign Interference in all Democratic Processes in the European Union, including Disinformation. The content of this document is the sole responsibility of the author(s), and any opinions expressed herein do not necessarily represent the official position of the European Parliament. CONTACTS IN THE EUROPEAN PARLIAMENT Coordination: Ulrich JOCHHEIM, Policy Department for External Policies, with support from the Policy Department for Citizens' Rights and Constitutional Affairs Editorial assistant: Daniela ADORNA DIAZ Feedback is welcome. Please write to [email protected] To obtain copies, please send a request to [email protected] VERSION English-language manuscript completed on 12 April 2021. COPYRIGHT Brussels © European Union, 2021 Reproduction and translation for non-commercial purposes are authorised, provided the source is acknowledged and the European Parliament is given prior notice and sent a copy. This paper will be published on the European Parliament's online database, 'Think tank'. ISBN: 978-92-846-7978-2 (pdf) ISBN: 978-92-846-7979-9 (paper) doi:10.2861/097565 (pdf) doi:10.2861/864638 (paper) Catalogue number: QA-02-21-463-EN-N (pdf) Catalogue number: QA-02-21-463-EN-C (paper) Investing in destabilisation: How foreign money is used to undermine democracy in the EU Table of contents Executive summary 5 1. The challenge of foreign interferences 7 1.1. Foreign interferences and the threat for democracy 8 1.2. Foreign interferences and EU responses 9 1.3. Foreign funding of political parties and campaigns 11 1.4. Disinformation and political advertising 13 1.5. Protecting EU democracy against foreign interferences 14 2. Party regulation at the national level 15 2.1. Tackling foreign funding: a comparative framework 15 2.2. Party regulations: recent debates and reforms 18 2.3. A not so rosy picture: regulatory loopholes 21 2.4. Through the backdoor? Cases of foreign funding to parties 22 3. Party regulation at the EU level 26 3.1. Regulating Europarties since Maastricht 27 3.2. Funding Europarties: tightening regulations 28 3.3. Funding Europarties from abroad 33 3.4. The role of the Authority 36 4. Conclusions and recommendations 38 References 41 Annex 46 3 Policy Department, Directorate-General for External Policies LIST OF TABLES Table 1: Foreign funding to political parties and candidates .......................................................................... 18 Table 2: Evidence of covert foreign funding or support to parties in targeted EU countries .............. 23 Table 3: Regulating the funding of Europarties (2003-2020) ........................................................................... 31 Table 4: Third party funding to Europarties and their foundations............................................................... 34 LIST OF FIGURES Figure 1: The funding of Europarties and their foundations (2014-2017) .................................................. 33 Figure 2: Sources of third country funding ............................................................................................................ 36 4 Investing in destabilisation: How foreign money is used to undermine democracy in the EU Executive summary The foreign funding of political parties is a tool that states have traditionally used to interfere in the politics of another country. Recently, the foreign funding of political parties has become one of the means through which autocracies are seeking to upset and disrupt the democratic process of other countries or the European Union (EU). Within the broader set of tools often catalogued as hybrid threats, party foreign funding emerged as a salient and worrying issue ahead of the 2019 European Parliament (EP) elections, when several attempts to provide support from abroad to anti-EU parties were documented. In the last few years, evidence of foreign funding to parties has been collected across the democratic world, in several EU member countries, former members, and beyond. From the Leave.EU campaign organization in the Brexit referendum to the financial support offered by Russia to right-wing parties, financial resources from abroad have been used to finance political campaigns and the political activities of parties in several EU member states. By supporting political parties abroad, foreign states can nurture political allies, defending their interests when important political decisions are at stake (e.g. sanctions). Coupled with the spread of disinformation, and targeted cyberattacks against election infrastructures, such foreign interferences are designed to damage trust in democracies and their institutions. In the context of a pandemic crisis, the risks are magnified, and the necessity to protect democratic processes and values stronger than ever. The objective of this study is to provide an empirical map and identify key policy issues in the regulation of party funding from third countries. The study also aims to explore possible avenues to counter foreign interferences with legislative and non-legislative actions at both the EU-level and in member states. The study is organised in three substantive chapters, and a conclusive chapter providing policy recommendations. Chapter one introduces the issue of foreign interference and its impact on democratic politics and societies. After a brief contextualisation of the topic and a review of some recent reforms implemented by democracies outside the EU, the chapter presents the key actions taken by the EU to tackle hybrid threats. It shows that the EU has chosen a wide-ranging approach to confront the many destabilisation tools used by foreign states, stopping short of using military force. Finally, the chapter moves its focus to the issue of foreign funding of political parties and the regulation of online political advertising, introducing the European democracy action plan of December 2020 and the legislative proposals expected in 2021. Chapter two presents a comparative overview of party regulations in EU member states, based on the Political Finance Database (International IDEA) and other sources. To illustrate the trend towards tightening the legal framework on foreign funding of parties, it reviews in detail a few selected cases of recent reform of party regulations or, at least, cases in which there has been discussion about reform, even in countries where, so far, a ban on foreign funding has been resisted. The chapter then explores the legal loopholes which, notwithstanding the existing legal frameworks, have been used to fund political parties and campaigns from abroad. Finally, an in-depth analysis of some prominent cases illustrates the different modes in which foreign support is provided to political parties, using legal or, allegedly, illegal channels. Chapter three moves the focus from the national to the EU level. It provides a detailed map of the changes in the legal regulations of European political parties, particularly regarding their funding. Based on empirical data, it reviews the donations received from abroad by all the Europarties and their associated foundations in the period 2014-17, when this practice was legal. Finally, it discusses the role of the Authority for European Political Parties and European Political Foundations (hereinafter, the Authority), the challenges it faces and its future prospects. 5 Policy Department, Directorate-General for External Policies Chapter four concludes with specific policy recommendations. It suggests that the issue of foreign funding of parties should be tackled both at the national and at the EU level. Even if the EU cannot regulate national parties, it should exert pressure
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