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Statements and Speeches

Appearance of
the Chief Electoral Office

before the Standing Committee
on Procedure and House Affairs

regarding Bill C-21,
An Act to amend the Canada Elections Act
(accountability with respect to political loans)

October 23, 2012


Mr. Chair,

I am pleased to appear before your committee to contribute to your review of Bill C-21. Appearing with me today are Sylvain Dubois, Deputy Chief Electoral Officer, Political Financing; Stéphane Perrault, Deputy Chief Electoral Officer, Legal Services, Compliance and Investigations; and François Bernier, Senior Advisor, Political Financing.

Overview of Bill

Bill C-21 builds on the 2004 and 2007 political financing reforms by seeking to curtail the undue influence that can arise from loans to political entities. To do so, it proposes a series of three measures.

First, it provides that only individuals, financial institutions, and political entities authorized to transfer funds under the Act, may make loans to political entities. Furthermore, in the case of individuals, it places a $1,200 overall limit on contributions, loans, guarantees and suretyships.

Furthermore, it requires the provision of more detailed information on such loans.

Lastly, it makes electoral district associations or, if none exist, the political party, liable for candidate loans that are written off by the lender. It requires the association or the party to assume the liability for repaying these loans as if they had guaranteed them.

Issues related to Bill C-21

Although the principle of the bill is laudable, I must, at the outset, note that the measures proposed raise a number of concerns.

First of all, the bill proposes an overly complex regime that will be very difficult to apply for political entities and their supporters.

Second, the proposed regime does not succeed in adequately eliminating loopholes to the political financing rules.

Lastly, the bill does not bring closure to the management of political entities' finances.

I would like, as a first step, to expand on these three concerns, which are actually closely interrelated. I will then speak to the elements that, in my opinion, should form the basis of a more effective reform.


First, I would like to express my concerns regarding the complexity of the proposed regime and the increased regulatory burden it would impose on all stakeholders, whether these be political entities, those willing to provide loans and make contributions, or even Elections Canada, which would need to administer the regime.

This complexity arises mainly from one specific feature of the proposed regime, namely the method of calculating the limit on individual loans, guarantees and contributions.

Under the bill, all loans, guarantees and contributions made by an individual cannot exceed, at any time during a calendar year, that individual's contribution limit. Excluded from this calculation are the amounts of a loan that were repaid during the year in which the loan was issued, as well as the amounts for which the individual has ceased to be liable in the year the guarantee was given.

This will create considerable uncertainty for political entities, as they will need to determine, at any given moment, whether an individual's limit has been reached. The amount of allowable loans and contributions will fluctuate over the course of the calendar year, depending on the amounts that have been given, repaid or loaned. This situation will be even more complex when limits are for contributions and loans made to a "family of entities" during a calendar year (for example, all of a party's candidates, nomination contestants and registered associations).

This level of complexity is equally problematic for both political entities and the individuals wishing to provide them financial support. There is also a risk that this would lead to a proliferation of cases of non-compliance and create an incentive to find ways to circumvent the rules. And that is my second concern.


By limiting loans of more than $1,200 to financial institutions, the regime seeks to curtail the influence of individuals who finance political entities through loans, and to eliminate the use of loans as a means to skirt contribution limits.

That being said, since the bill in no way affects credit sales, an individual could sidestep the new rules on loans by becoming a supplier of goods or services. For instance, while no longer able to lend $10,000 to the campaign, an individual or the candidate himself would still be able to acquire goods and then sell them on credit to the campaign. This transaction would not be governed by the new restrictions on loans.

I also note that, unlike the current provisions dealing with contributions, nothing in the bill specifically prevents loans from being funnelled through other individuals.

In addition, in order to be effective, the regime should bring closure to the management of political entities' finances, by precluding the possibility of loans remaining unpaid for extended periods. However, and this is my third concern, the bill does not allow for this closure to be achieved.

Lack of closure

As I already pointed out, the bill proposes a new provision whereby the registered association (or, if there is none, the candidate's political party) would assume liability for the unpaid portion of the candidate's loan that has been written off by the creditor. I welcome this type of measure – unfortunately, it is too often missing from the current law, which is based almost entirely on criminal sanctions.

The intent is to ensure compliance with the new three-year statutory deadline for candidates to repay their loans. But we must point out that the riding associations or the parties may only become liable for the unpaid loans of candidates, and not for those of leadership contestants or nomination contestants. In addition, that liability will take effect only in cases where a loan is written off, but not in all cases of loan default within the statutory deadline.

It is difficult to predict the likelihood of loans being written off so as to trigger the liability of the electoral district association. For the 39th and 40th general elections, according to the information reported by candidates after the 18-month statutory period, none of the $2.6 million in unpaid loans was written off by a creditor. This was also the case for the remaining $1 million in other unpaid claims.

Furthermore, the proposed regime for loans would latch onto the existing (and significantly flawed) regime for unpaid claims. I pointed out these flaws in my June 2010 recommendations report. This remains a complex and cumbersome regime that affords neither transparency nor closure.

The authorizations currently provided for to pay beyond the statutory deadline are largely unnecessary, except to allow the Chief Electoral Officer to impose as a condition the requirement to report financing sources, and thus address certain shortcomings in the existing statutory regime.

Currently, a candidate or leadership contestant who pays campaign debts after the filing of his return, but before the end of the statutory period, is not required to disclose the source of funding. The only way to ensure transparency is for the Chief Electoral Officer to impose disclosure as one of the conditions of an authorization for late payment.

Also, the current provision whereby a claim that remains outstanding after 18 months is deemed to be a contribution is a major source of confusion. Adopted at a time when the law did not limit contribution sources or amounts, this deeming entails no civil, administrative, or penal consequences. Deemed contributions do not, in and of themselves, entail a violation of the rules on contributions. Enforcement of the contribution rules and the imposition of criminal sanctions require an assessment based on the facts of each case; they cannot simply stem from the mechanical application of a statutory fiction.

By continuing to subject loans to the flawed regime governing unpaid claims, Bill C-21 serves only to perpetuate these difficulties. Even in the unlikely event that a riding association were to be made liable for a loan written off by the creditor, the unpaid claims regime would offer no reasonable guarantee that these loans would be repaid with diligence by the association.

A more effective reform

These concerns lead me to suggest the broad strokes of what I view as a more effective legislative reform.

First of all, such a reform must address not just loans, but all rules governing unpaid claims. Some of the key elements for a reform can be found in my June 2010 recommendations report, while others are already part of Bill C-21. However, they should not be enacted piecemeal, independently from one another.

On the one hand, we must simplify the regime on unpaid claims by eliminating the current presumptions and authorization mechanisms. The law should also give the Chief Electoral Officer the power to obtain documents, as I had recommended in 2010, and to examine entities that may have relevant information concerning a transaction.

On the other hand, in order to ensure closure, political parties should be liable for repaying any outstanding claim, including any loan that remains outstanding after a period of 36 months. This measure would be modelled after Bill C-21 while at the same time deviating from it in several respects. First, parties should be liable for the outstanding debts of all of their affiliated entities, with the possible exception of leadership contestants. Second, the party should be liable, whatever the reasons or circumstances for the payment default. Moreover, the parties should have a relatively short period (e.g. six months) in which to pay the outstanding debt; otherwise, the sum would fall due to the Receiver General and could be deducted from the public financing given to the party.

To be effective, political loans reform should also propose rules that are simple enough to be understood and followed by both the political entities and the electors supporting them. In this respect, I think it is absolutely essential to shelve the idea of a combined loans/contributions limit for which implementation would fluctuate in step with repayments and contributions made.

One solution would be to follow Ontario's lead and do away with individual loans, since the benefit that the political entities would derive would be, for all intents and purposes, dwarfed by the severe regulatory burden imposed on them.

If individual loans must be allowed, they should be subject to a limit that is separate from the contribution limit and, above all, applicable for one calendar year, regardless of the amounts repaid during the year.

This change could no doubt be made in the current bill. But as I indicated earlier, I think that a more in-depth revision is necessary, and I doubt that this could be done within the limited framework of this bill.

My colleagues and I would be pleased to answer any questions you may have.