Bundesverfassungsgericht

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Increase of the “absolute limit” applicable to state funding of political parties is unconstitutional

Press Release No. 9/2023 of 24 January 2023

Judgment of 24 January 2023
2 BvF 2/18

Funding of political parties – absolute limit

In a judgment pronounced today, the Second Senate of the Federal Constitutional Court held that a provision increasing the annual total of state funds for the financing of political parties to EUR 190 million is incompatible with Art. 21(1) first sentence of the Basic Law (Grundgesetz – GG) and is void.

An application for judicial review was brought by 216 members of the German Bundestag from the parliamentary groups of the FDP, BÜNDNIS 90 / DIE GRÜNEN and DIE LINKEchallenging Art. 1 of the Act to Amend the Political Parties Act and other Acts of 10 July 2018 (Gesetz zur Änderung des Parteiengesetzes und anderer Gesetze – PartGuaÄndG 2018), which established an increased amount of EUR 190 million as the so-called “absolute limit” (i.e. the annual total of state funds available for payment to all political parties combined as partial state financing) for the year 2018.

The challenged provision does not satisfy the constitutional requirements for state financing of political parties. It violates the principle that political parties be sufficiently free from state interference because the legislator did not sufficiently substantiate during the legislative process that the parties’ need for additional funding that could not be met by their own funds necessitated an almost EUR 25 million increase in the absolute limit.

The decision was reached with a vote of 6:1 on the remaining open question as to whether the challenged provision was enacted in compliance with formal requirements; in all other respects, the decision was unanimous.

Facts of the case:

Since 1994, political parties have received partial financing from the state in order to fulfil their constitutional mandate of facilitating the formation of the political will of the people. The distribution of state funds is determined based upon the election results of each individual party, the contributions of its members and the funds that each party is able to raise on its own. The amount of state financing may not exceed the amount of funding a party is able to raise on an annual basis (the so-called “relative limit”). The total annual amount of state financing that is payable to all parties combined (absolute limit) was initially set in 1994 at 230 million German Marks. This limit has been raised several times in the following years. Since 2013, the increase of the absolute limit has been linked to a price index. Based on this index, the absolute limit would have been approximately EUR 165 million for the year 2018. Upon the entry into force of Art. 1 PartGuaÄndG 2018 in July 2018, the absolute limit for state financing that was to be set in the year 2019 (and first applicable to claims made for the year 2018) was increased to EUR 190 million.

The applicants were, at the time of the initiation of these proceedings in September 2018, members of the 19th German Bundestag. They challenge the increase of the absolute limit and claim a violation of the principle that political parties be sufficiently free from state interference that is enshrined in Art. 21(1) GG.

Key considerations of the Senate:

The application for judicial review is admissible and well-founded.

I. The manner in which Art. 1 PartGuaÄndG 2018 was deliberated and enacted raises questions concerning the constitutionality of the law’s adoption. The law, first introduced on 5 June 2018, was adopted by the Bundestag only 10 days later (15 June 2018) in the third reading. The reasons for the unusually accelerated deliberations have not been given; nor are they apparent. It cannot be ruled out completely that the sequence of events and the brief 10-day duration of the deliberations violated the constitutional right of Bundestag members and parliamentary groups to equal participation in the parliamentary formation of political will and the constitutional principle of the public nature of parliamentary deliberations. However, the question of whether the legislative proceedings satisfied constitutional requirements need not be decided here.

II. This is because Art. 1 PartGuaÄndG 2018 in any case fails to satisfy the constitutional requirements for state financing of political parties and, in this respect, violates Art. 21(1) first sentence GG.

1. a) Political parties shall participate in the formation of the political will of the people. In the parliamentary democracy envisaged by the Basic Law, they function as mediators between state and society. Art. 21 GG expresses this by recognising political parties as institutions that are necessary for the formation of the political will of the people and by elevating them to the rank of constitutional institutions.

b) The state is not prevented from providing funding to political parties in order for them to fulfil their constitutional mandate, nor is it limited to reimbursing expenditures made during elections.

c) In providing financial means to political parties, the state must comply with the principle that political parties be sufficiently free from state interference. This prohibits the state from exerting any influence on the formation of the political will of the parties or on the overall process of the formation of the political will. For in the parliamentary democracy envisaged by the Basic Law, the formation of the political will must flow from the citizens to the organs of the state and not vice versa. Political parties must remain not only politically, but also economically and organisationally reliant on the approval and support of citizens. The provision of financial support to political parties can therefore violate the principle of the freedom from state interference when political parties are relieved of the need to make efforts to seek financial support for their activities from their own members or citizens affiliated with the party, which runs the risk of the political party losing its ties with the electorate.

aa) The principle that political parties be sufficiently free from state interference permits state funding only to the extent of the relative limit. According to this, the total amount of state funding given to a party may not exceed the sum of the funding that the party receives through its own means.

bb) It also follows from the principle that political parties be sufficiently free from state interference that an increase in the amount of a party’s self-generated funding should not automatically lead to an enlargement of the scope of the party’s financing from the state. The state should not provide a political party with more than what the party requires to fulfil its activities within the limits imposed by the mandate to make economical use of public funds. Thus, in addition to the relative limit, the Basic Law imposes an absolute limit on state financing of political parties. This limit is determined by what is necessary to maintain the functional capabilities of the political parties and to fulfil their constitutional mandate, but which cannot be obtained by the parties’ own means.

cc) The Second Senate reaffirms its case-law with regard to the content and extent of the absolute limit on state financing of political parties (cf. Decisions of the Federal Constitutional Court, Entscheidungen des Bundesverfassungsgerichts – BVerfGE 85, 264 <290 f.>). The criticism directed at this case-law is not convincing.

(1) The argument that an absolute limit cannot even be claimed to exist without departing from the framework of permissible constitutional interpretation because the necessary normative basis is lacking in the text of the Basic Law overlooks the fact that the mandate of political parties to participate in the formation of the political will under Art. 21(1) first sentence GG contains an explicit constitutional directive that is inextricably linked with political parties having a sufficient degree of independence from state financing. In order for political parties to fulfil their ascribed role as mediators between the state and society, the people must have a sufficient amount of trust in the independence of parties from state influence. This trust is impaired when political parties could make unlimited use of state funds to cover their financial needs.

(2) Against this background, the arguments put forward by the Federal Government and the Bundestag in these proceedings to the effect that the absolute limit is subordinate to the relative limit are erroneous. The relative limit and the absolute limit pursue different objectives. While the relative limit is aimed at maintaining sufficient ties between political parties and the electorate and at preventing parties from becoming predominantly or exclusively dependent on state funds, the absolute limit is directed at the overall system of political parties and is intended to prevent the electorate from irreparably losing trust in the financing system as a result of a perception that political parties are inappropriately helping themselves to public funds. The absolute limit and relative limit thereby complement one another in enabling political parties to fulfil their mandate of participating in the formation of the political will of the people.

d) The principle of freedom from state interference must also be observed when increasing the absolute limit for state financing for political parties.

aa) Developments in monetary value (inflation or deflation) must be taken into consideration when setting the absolute limit. The legislator may establish an index that corresponds to the development of costs that political parties incur in fulfilling their constitutional mandate. Based on this index, necessary adjustments reflecting changes in monetary value can be made to the absolute limit.

bb) If outside circumstances affecting the participation of political parties in the formation of the political will of the people change in a decisive manner and if such changes justify a sustained increased financial need that the parties cannot meet through their own means, the legislator may take this into account in raising the total amount of state funding. By keeping increases in the absolute limit restricted to a sum that is unavoidable due to a change in the conditions for fulfilling the constitutional mandate, the legislator leaves no room for any perception that political parties are taking an inappropriate amount of public funds.

A decisive change in circumstances capable of justifying an increase in the absolute limit only exists when, in comparison to the point in time when the last absolute limit was set – disregarding adjustments based on general changes in monetary value – events have occurred that affect all political parties, whose effects are the result of factors outside the parties themselves, and that discernibly and sustainably increase the amount of personnel and material resources required by the parties to fulfil their functions under Art. 21(1) first sentence GG to an extent beyond their ability respond with their own means.

cc) If such a decisive change in circumstances occurs, then an increase of the absolute limit can only be enacted to the extent necessary to maintain the functional capacity of the political party system. It must also be taken into consideration whether, due to potential opportunities for saving that arise in connection with the decisive change in circumstances, the existing absolute limit is adequate as it is. Thus, in setting the absolute limit, the increased financial need must be offset against any potential opportunities for savings.

dd) If the prerequisites for an increase in the absolute limit are met, it is left to the legislator to ascertain the additional financial need of the political parties and to increase the total amount of state financing accordingly. The legislator has considerable leeway in this regard, given that no quantifiable standards for setting the absolute limit in the sense of exact numerical formulae can be derived from the principle of freedom from state interference. As a result, procedural safeguards relating to an increase in the absolute limit are necessary in order to take the constitutional directives of Art. 21(1) first sentence GG into account. First and foremost, the provision results in an obligation on the part of the legislator to state reasons, thereby making it possible to determine whether the legislator has observed the constitutional requirements when exercising its leeway to design. Accordingly, the legislator must plausibly demonstrate how it identified and assessed the factors relevant for determining whether a decisive change in circumstances necessitating a change in the absolute limit has occurred. The enhanced insight into the legislator’s rationale that this procedural safeguard is intended to provide can only be achieved if the necessary fact-finding and assessments are made as part of the legislative proceedings and are documented as such.

ee) The legislative determination and adjustment of the absolute limit on state financing of political parties is subject to constitutional review, which is limited to a review of whether the provisions of ordinary law are tenable.

2. Under this standard, Art. 1 PartGuaÄndG 2018 violates Art. 21(1) first sentence GG.

a) It is discernible from the representations made by the legislator during the legislative proceedings that a decisive change in circumstances had occurred that was capable of justifying an increase in the absolute limit.

aa) The digitalisation of communications cited in the legislative proceedings as grounds for the increase in the absolute limit is a circumstance that has decisively changed the framework for the participation of the parties in the formation of the political will since the beginning of the 1990s. It can furthermore be assumed that this gives rise to a sustained increase in the financial requirements of the parties that cannot be met with the existing funds and that in principle justifies an increase in the absolute limit. The reasoning from the legislative proceedings is sufficient in this regard.

bb) Insofar as the draft law also views the increased use of party-internal instruments of participation as a further decisive change in circumstances that requires an increase in the absolute limit, this is also not subject to constitutional objection. The legislator has tenably shown that a development affecting the overall political party system, which is external to the political parties and results in significantly increased financial needs has taken place in the form of the increased use of party-internal means of participation (conventions for members instead of party delegates; member questionnaires and referendums) during the relevant time period. In this sense, there has been a change in the political-cultural framework of the activities of the political parties.

cc) By contrast, to the extent the legislator cites stricter transparency and accountability obligations and the increase in the relative limit associated with the 2015 amendment to the law as reasons for the increase in the absolute limit, these are not tenable arguments.

dd) The additional grounds submitted in the course of the present proceedings for a decisive change in circumstances (in particular, higher costs of campaign posters, a decrease in the number of volunteers and difficulties in coalition building) also cannot be taken into account. These constitute an impermissible after-the-fact justification.

b) The determination of an absolute limit for state financing of political parties in the amount of EUR 190 million for claims from the year 2018 does not satisfy constitutional requirements of substantiation. The legislator has not explained how the increase in the absolute limit is restricted to the required amount necessary to cover the increased financial need due to changed circumstances and to keep state financing of political parties limited to maintaining the proper functioning of the political party system.

aa) Neither the draft law, nor the subsequent deliberations on the law provide tenable indications supporting an increase because of an increased financial need of political parties due to decisively changed circumstances.

In regard to the financial effects of digitalisation, the explanatory memorandum to the draft law makes passing reference to the need for “increased initial and ongoing capital investment”. The amount of the investments in question and the expected costs associated with them remain unclear. The discussion in the draft law relating to party-internal participatory instruments is similarly deficient. In the explanatory memorandum, the legislator refers only to “costs involved due to changes in the political-cultural and legal framework”. There is no explanation as to what financial costs have resulted from the challenges therein referenced or to what extent they might support an increase in the absolute limit. Nor were the financial costs associated with the changed circumstances specified in the subsequent legislative proceedings.

The legislator should have, at a minimum, provided information regarding the amount of the additional financial costs relating to the political parties’ participation in the formation of the political will that result from digitalisation and party-internal participatory expectations. Only with this factual basis can it be tenably determined whether the legislator has properly observed the constitutional mandate of freedom from state interference in raising the absolute limit of state financing of political parties.

bb) In addition to the insufficient explanation concerning the additional financial need of the political parties, a discussion of the potential savings that might be achieved through digitalisation is also lacking. This must also be taken into account when determining the amount of state financing necessary for the maintenance of the political party system. It is obvious that digitalisation might also bring potential opportunities for savings with respect to inter-party communications as well as for the public dissemination of the parties’ political platforms. In determining the absolute limit, an explanation as to potential opportunities for savings, including their quantification, should have been included in the legislative reasoning.

cc) Here however, the explanatory memorandum to the draft law indicates that the legislator, in raising the absolute limit on state financing, did not base its decision on increased financial need due to digitalisation and the increased use of party-internal participatory events and instead reached its decision based on the relative limit. The explanation of the draft law’s primary content includes the statement that an increase in the absolute limit was necessary to ensure that the increase of the relative limits adopted in 2015 would not be “thwarted”.

This statement indicates that the intention was to carry over the increase in the relative limits from the year 2015 to the absolute limit. This does not satisfy constitutional requirements.

dd) The deficiencies in the legislative reasoning cannot be cured through the extensive information concerning the costs associated with digitalisation and participation-related activities that were submitted by the Bundestag during these judicial review proceedings, as this would constitute an impermissible after-the-fact justification.

III. The violation of Art. 21(1) first sentence GG by Art. 1 PartGuaÄndG 2018 results in the provision being void ab initio, with the consequence that the previous version of § 18(2) first and second sentence of the Political Parties Act remains in effect.