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Key Takeaways:

  • Federal campaign finance law and seminal United States Supreme Court holdings have long distinguished certain ballot initiatives from more-intensively regulated candidate elections.
  • A recent Federal Election Commission decision just confirmed the distinction, but has stirred controversy.
  • Specifically, the FEC dismissed a complaint by a 4 to 2 decision that was filed against an Australian mining company and its subsidiary that alleged a violation of the “foreign contribution” ban.
  • For those seeking to be active in federal, state and local candidate elections and ballot initiatives should keep up to date on applicable laws governing their activity.

This article is a guest post from the experts at Kelley Drye & Warren.

Federal campaign finance law and seminal United States Supreme Court holdings have long distinguished certain ballot initiatives from more intensively regulated candidate elections.  A recent Federal Election Commission (FEC) decision just confirmed the distinction but has stirred controversy.  Specifically, the FEC dismissed a complaint by a 4 to 2 decision that was filed against an Australian mining company and its subsidiary that alleged a violation of the “foreign contribution” ban.  In 2018, Sandfire Resources NL and Sandfire Resources America, Inc. contributed two donations totaling $287,857 to two state-level committees that opposed a Montana ballot initiative for new and stricter standards for mine permits.  In response, activists and officeholders have called for new restrictions.

The Federal Election Campaign Act (FECA) prohibits foreign nationals from making a contribution or expenditure in connection with a Federal, State, or local election.  Whether this prohibition extends to foreign contributions to ballot initiative committees remains controversial.  The FEC has prohibited foreign contributions in cases where the spending on a ballot initiative has a “connection with” the elections or where a candidate is “inextricably linked” to the ballot initiative committee.  States remain free to impose their own limits.

More specifically, in dismissing the complaint against the Australian mining company and its subsidiary, the Commission noted that FECA generally does not prohibit foreign national spending on a ballot initiative unless the ballot initiative has a “connection with” the election.  In this case, the Commission found no connection to the election because no candidate was involved in the operation of or fundraising for the Montana ballot initiative committees, nor was any candidate linked to the success or failure of the ballot initiative. 

Commissioner Weintraub disagreed with the majority and urged Congress and states to “act quickly and decisively to protect all ballot initiatives from foreign influence.”  The Commissioner echoed the same sentiments in her 2015 dissenting opinion when the FEC deadlocked along party lines and did not proceed with an enforcement action against two foreign corporations that made contributions in connection with a California state ballot initiative.  The Commissioner further reiterated that the “in connection with” an election test is a “distinction without a difference” and that Congress expanded the foreign national provision to ban spending on ballot measures when it amended federal campaign finance law in 2002 from prohibiting foreign spending “in connection with an election to any political office” to the current law’s prohibition on foreign spending “in connection with a Federal, State, or local election.

In other instances, the Commission has ruled that FECA prohibited a foreign national’s contribution to a ballot initiative committee.  In Advisory Opinion 1989-32, the Commission found that a state candidate was “inextricably linked” to the ballot initiative committee because the candidate was involved in organizing and controlling the committee that was working on passing a state ballot initiative sponsored by the same state candidate on the ballot. 

The debate whether foreign spending on ballot initiatives should be prohibited is ongoing on the state and federal level.  Immediately after the FEC issued its recent decision, a bipartisan group of U.S. House members introduced federal legislation that would impose a uniform nationwide ban on foreign national contributions to ballot initiatives.  A companion Senate bill has also been introduced.  At the state level, in late September, California enacted legislation, AB 319, that prohibits a foreign government or other foreign principal from making contributions or expenditures in connection with state or local ballot initiatives in that state.  Certain other states, such as Maine and Massachusetts, have been considering their own laws to prevent foreign nationals from influencing ballot measure elections.

In the meantime, those seeking to be active in federal, state, and local candidate elections and ballot initiatives should keep up to date on applicable laws governing their activity.