Pl. ÚS 26/94 “Financing of political parties and inspection of their management” Headnote: 1. The Constitution of the Czech Republic is based on representative democracy, in which the creation of political will and formation of state power is the result of free competition of political parties (art. 5 of the Constitution) within a democratic state based on the rule of law. The result of this competition is a certain resulting political profile of the state power. Therefore, intervention by state bodies back into the life of political parties is undesirable, as soon as it could affect the course of the free competition between parties – e.g. by labeling the behavior of particular parties as “uneconomical” or “unpurposeful”. This would conflict with the constitutional principle that political parties and political movements are separate from the state (art. 20 par. 4 of the Charter of Fundamental Rights and Freedoms). 2. Separation of parties from the state does not mean, however, that the parties are private associations. The Czech Constitution, like most European constitutions, is based on the idea that although political parties and political movements are not institutions of public power, and are not public law entities, on the other hand they do fulfil, in accordance with the Constitution, certain tasks in the public interest which are essential for the life of a state based on representative democracy. In particular, the democratic state based on the rule of law (art. 1 of the Constitution1)) must also be legitimated in a democratic manner, i.e. in elections based on the competition of political parties. This general interest also gives rise to a claim for the state to enable and support the fulfillment of these tasks which are essential to the state. Regulation of financing of political parties by the state, guided by the effort to partially cover their expenses for an activity which is in the public interest, also corresponds to this. However, the Constitutional Court, in the reasoning of its judgment, rejected the idea that state contributions should become the fundamental source of income for political parties. Financial support of parties by the state may not exceed the limit in art. 20 par. 4 9) of the Charter of Fundamental Rights and Freedoms, protecting parties’ autonomy and independence from the state. 3. The financial management of political parties is a sensitive question. The Czech Republic has not yet established a requirement for parties to publish their financial reports and thus make their financial management more “transparent” for the public. In contrast, the amendment of the Act, in provisions which are annulled by this judgment, tried to subject the financial management of parties to intensive supervision by and state body – the Supreme Audit Office. Inspection of their finances and evaluating the “economy” and “purposefulness” of the means used, may not be a matter for state bodies with jurisdiction to inspect state property . Authorization for the property of political parties and political movements to also be considered state property for purposes of the Act on the Supreme Audit Office, in conflict with the general understanding, is also formally constitutionally unacceptable, because it expands the meaning of art. 97 par. 1 4) of the Constitution through an ordinary law, i.e. it circumvents the Constitution. 4. The idea that any activity based on an entrepreneurial principle, including publicity and promotion, would be forbidden to parties, and thus their “equality” and “morality” in political competition would be achieved, by its formally- equal approach to factually unequal entities, conflicts with the very principle of equality, because the various means of legally financing their expenses also correspond to the nature of various political parties. General annulment of participation by political parties and political movements in conducting business is an intervention which is in conflict with the principle of reasonableness of law in a state governed by the rule of law, in the sense that it is a measure neither appropriate nor necessary for the achievement of aims which the legislature expects from the measure. 5. It cannot be permitted that a motion aimed at stopping a political party’s activities or dissolving it could arise on grounds of inconsistencies and defects in a party’s annual financial report. Defects in an annual financial report cannot be classified either as violation of the principles of art. 5 and art. 9 of the Constitution2) 3), nor as fulfillment of the requirements for prohibiting the activities of political parties under § 4 of the Act on Association in Political Parties and in Political Movements12). All these requirements concern a serious deficit of a principal nature in the sphere of democratic affairs. Section 4 letter a) – violation of the Constitution and laws – is also aimed in this direction. This provision too punishes an activity which affects the democratic bases of the state. This is also why the activity of parties which not only violated (a particular) law, but those which violate the laws [generally] is also unacceptable. This formulation expresses the element of the duration of repeated actions by a political party which, precisely by this repeated violation of laws, acts in a manner which threatens the democratic foundations of the state. Judgment: The Constitutional Court of the Czech Republic decided on 18 October 1995, by a judgment in the matter of a petition from a group of 44 deputies to the Parliament of the Czech Republic, that the Constitutional Court of the Czech Republic begin proceedings to annul § 17 par. 2 14) and the part of § 18 of Act no. 424/1991 Coll. on Association in Political Parties and in Political Movements, as amended by Act no. 117/1994 Coll.,15) insofar as it governs the jurisdiction of the Supreme Audit Office towards political parties and political movements and the ability to dissolve them or stop their activity due to shortcomings in management found by the Supreme Audit Office, as well as § 3 par. 4 of Act no. 166/1993 Coll., on the Supreme Audit Office, as amended by Act no. 117/1994 Coll.,16) as follows: 1. As of the day this judgment is promulgated in the Collection of Laws of the Czech Republic, § 18 par. 2, 3, 4 and 5 of Act no. 424/1991 Coll., on Association in Political Parties and in Political Movements, as amended by Act no. 117/1994 Coll. are annulled. As of the same day, the words “and the Supreme Audit Office” in § 18 par. 1 of the same Act are annulled. 2. As of the day this judgment is promulgated in the Collection of Laws of the Czech Republic, § 3 par. 4 of Act no. 166/1993 Coll., on the Supreme Audit Office, as amended by Act no. 117/1994 Coll. are annulled 3. Section § 17 par. 2 and par. 3 of Act no. 424/1991 Coll., on Association in Political Parties and in Political Movements, as amended by Act no. 117/1994 Coll., are annulled as of 1 January 1997. Reasoning I. A group of 44 deputies of the Parliament of the Czech Republic turned to the Constitutional Court with a petition to annul certain provisions of the above-mentioned laws. The complainants justified their objections to the cited laws by reference to the fact that § 17 par. 2 of Act no. 424/1991 Coll., on Association in Political Parties and Political Movements, as amended by Act no. 117/1994 Coll. (the “Act on Association as amended by Act no. 117/1994 Coll.), which prohibit parties from conducting any sort of business activity and the regulations on the jurisdiction of the Supreme Audit Office to inspect the management of parties and movements (§ 18 of the Act on Association as amended by Act no. 117/1994 Coll.), as well as § 3 par. 4 of Act no. 166/1993 Coll., on the Supreme Audit Office, as amended by Act no. 117/1994 Coll., violated the Constitution of the Czech Republic in art. 5, 9 par. 2 and 97 par. 1 and the Charter of Fundamental Rights and Freedoms, contained in art. 4, art. 17 par. 1, 2, 4 and in art. 20 and 22. The complainants state the opinion that, by the amendment of the Act on Association, the management of parties and movements was subjected to inspection by the Supreme Audit Office, which conflicts with art. 97 par. 1 of the Constitution of the Czech Republic, under which the Supreme Audit Office is authorized to inspect exclusively management of state property and fulfillment of the state budget. The response of the Chamber of Deputies states that the purpose of the amendment proposals was to create prerequisites for political parties and political movements to be able to devote themselves to their mission, i.e., so that the exercise of the right to assembly implemented through them would truly serve citizens for their participation in the political life of the society and political parties and political movements could free themselves of activities which burden them and distract from their mission. The position also states the opinion that by acceptance of these amendment proposals political parties and political movements are provided funds from the state budget under conditions set by law, and thus the heretofore often essential need for their involvement in business activities of various forms, which citizens evaluate very sensitively and critically, is eliminated. The necessity for the Supreme Audit Office to inspect use of contributions from the state budget then logically arises from the fact that this is state property and the citizens have an inalienable right to have the state ensure, in the necessary extent, inspection of management of such property. II. The Constitutional Court also considered the substantive content of the petition by the group of deputies and divided the appealed provisions of the laws into three substantive groups: 1. The existence and scope of financial inspection of political parties and political movements by the state (state bodies). 2. The permissibility of dissolving, or stopping the activities of, and political party or political movement due to failure to submit, or shortcomings in, their annual financial report. 3. The permissibility of involvement of political parties or political movements in business activities. 1. The existence and scope of financial inspection of political parties or political movements by the state (state bodies) To evaluate this question, it is essential to determine what is the constitutional status of political parties or political movements and what relationship they have to the state. Political parties, as associations of natural persons, are identified in § 3 par. 1 of Act no. 424/1991 Coll., on Association in Political Parties and Political Movements, as amended by later regulations (the Act on Association) as legal entities, and are therefore subject to the definition of a legal entity under § 18 par. 2. letter a) of the Civil Code. Political parties and political movements are corporations on a private law basis, membership in which is not the result of an act of the public power, but of free decisions by individuals; they do not have public law status, and therefore enjoy the protection arising from the fundamental rights and freedoms in the extent to which fundamental rights and freedoms can be applied to legal entities. Political parties are not institutions of public power, nor are they in a superordinate or subordinate position toward it; they are partners of the state, and under the Act on Association they: a) are separate from the state, b) may not perform the function of state bodies or replace these bodies, c) may not direct state bodies or impose obligations on person who are not their members. However even toward their members, parties may enforce only fulfillment of those obligations which were accepted in a manner and scope which the state legally recognizes as binding. Party commitments or obligations which are outside these sphere are not legally enforceable. In this concept the law corresponds to the regulation in other European states, which is also based on and strict separation between the public power and political parties. For example, the French constitution formulates the independence of political parties’ activities from the state in art. 4, and in Germany the Federal Constitutional Court repeatedly identified the separation of parties from the state as and “fundamental principle” (Grundsatz der Staatsfreiheit) of the constitutional order. Despite this, however, the constitutional law status of political parties can not be defined only as the simple result of the determination that parties do not have the status of a state body and, as a result, are nothing more than private associations. Their status at this time is not that simple. After World War II, a number of constitutions overcame pre-war constitutional prudery and also expressly regulated the status and role of political parties in the constitutional order. For example, the French role highlights the role and participation of parties in elections (art. 4), and the German the participation of parties in the creation of the political will of the people (art. 21 par.1 of the German Grundgesetz). This constitutional “unveiling ” of the public role of political parties and attempts to make them “public law subjects” was accommodated in some west European countries by recognition of and certain public status, i.e. the role which the parties have in the state and toward the state, without, however, themselves being the state (had the character of a state, of a public law entity). This ambivalent nature of political parties gives rise to and number of problems connected with interpretation of their status, function, and relationship to the state. The European regulation in individual countries is mostly based on recognition that political parties fulfill, in accordance with the constitution, certain public roles essential for the life of the state based on representative democracy. Undoubtedly society has a public interest in the state, which is, under the constitution, a democratic state governed by the rule of law, also being legitimated, in a democratic manner, i.e. in elections based on the competition of political parties. From this general interest derives a claim for the state to permit and support the fulfillment of these tasks essential for the function of the state. This corresponds to the current regulation of financing political parties by a democratic state, which is guided by the effort to contribute to the activities of political parties, as well as an effort to partially cover their election expenses. The Constitution of the Czech Republic is based on the principle of a representative democracy and the primacy of the citizen before the state, which are expressed in art. 2 par. 1, 3 and 4 of the Constitution and art. 1 and 2 par. 2 and par. 3 of the Charter of Fundamental Rights and Freedoms and in the principle that there should only be as much of the state as is absolutely necessary. The Czech Republic is also among the states which recognize the constitutional role political parties and contribute to its implementation. The political system is based on “free competition of political parties, observing fundamental democratic principles” (art. 5 of the Constitution), where the parties function as an intermediary link between the citizens and the state: they serve for their participation in the political life of the society, in particular the formation of legislative assemblies, and local government bodies. In this basic function, political parties precede formation of state bodies by their role in the creation of political will in the state. In order for democratic state bodies to be created at all, they must be preceded by the free competition of autonomous political parties independent of the state, because it is only in the results of this competition that the political contours and dimensions of the state are formed. In this basic function political parties move in a sort of foreground of the state, and therefore intervention by state bodies, whose composition is a product of this process, into the process itself is undesirable if it can politically affect the course of free competition of parties, e.g. by describing the actions of particular parties as “uneconomical” or “unpurposeful.” A state body, endowed with the authority of a state decision, and actively entering the sphere of competition between political parties with its evaluation, is in principle a potential risk for democracy in general. Support for denial in principle of financial support to political parties from the state can not be found in the Constitution of the Czech Republic, the Charter of Fundamental Rights and Freedoms, or in international treaties under art. 10 of the Constitution. However, this does not mean that financing political parties or political movements by the state does not have limits. Political parties and political movements are institutions constituted on the basis and within the framework of a constitutional state, whose principles and rules are binding both on the parties and on the state. They include the free and voluntary creation and free competition of political parties (art. 5 of the Constitution), also art. 2 par. 3 of the Constitution of the Czech Republic, under which “the state power serves all citizens,” art. 20 of the Charter of Fundamental Rights and Freedoms, which guarantees the right to assemble freely and also establish political parties and political movements and provides that political parties and political movements are separate from the state (art. 20 par. 4). These principles are followed by § 5 of Act no. 424/1991 Coll. as amended by Act no. 117/1994 Coll., which provides for the separation of parties and movements from the state and § 3 of that Act, which forbids state bodies from intervening in the status and activity of political parties and political movements. A constitutional state is required to protect individuals in the exercise of their right of association not only from others, but also from itself. A state which made financial support for political parties and political movements and means of its influence on their activity or even and tool for their manipulation could easily stop fulfilling the role of supporting parties and movements in fulfilling their constitutional and statutory functions. Therefore, financial support for political parties and movements may not exceed an amount which observes the general limit in art. 20 par. 4 of the Charter of Fundamental Rights and Freedoms, under which political parties and political movements are separate from the state. European experience confirms that the assumption formulated in the position of Parliament, according to which increasing state subsidies to political parties will eliminate these parties’ need to secure other financial resource by business and other activities, is erroneous. Partial support for political parties is undoubtedly acceptable in view of the need to partially equalize their chances. Generally speaking, however, it is necessary to begin with the idea that the more political parties are subsidized by the state, the less they feel a need to seek sources and support for their activities in the civic structure of society. Therefore, the contribution to the activities of political parties should not weaken political parties’ efforts to obtain political and material support from their voters and followers. Political parties cannot fulfil their function if they are left to the mercy of the state or rely on support from the state more than on support from the citizens. However, not only financial support of parties by the state, but also financial inspection of them on the part of the state must respect the autonomy of political parties and political movements and their management of their finances. Therefore, the great majority of European countries consider the requirement that political parties publish annual financial reports in official papers or publications a basic means of inspecting the financing of political parties. The purpose of this measure is to increase the transparency of political parties, which is especially important for the public in a given country. This means is generally considered more important than any sort of inventory of the property of political parties by the state, the effectiveness of which is estimated at over 50 %. Most European Union countries, but also neighboring Hungary and Poland, prescribe the requirement for political parties to publish their financial reports. The Czech Republic has not yet introduced obligatory publishing of the accounting reports of political parties or political movements. In the Czech Republic the inspection level for annual financial reports of parties and movements is Parliament, and under the Act on Association, as amended by Act no. 117/1994 Coll., also the Supreme Audit Office. In this connection, the complainants also claim unconstitutionality of the newly introduced § 3 par. 4 of Act no. 166/1993 Coll., on the Supreme Audit Office, under which political parties and political movements’ management of state funds is considered management of state property for purposes of Act no. 166/1993 Coll.. However, the legislature itself was clearly not convinced about the “state” nature even of political parties’ property which the parties acquired from the state, when it awkwardly stated that it considers parties’ management of state contributions to be management of state property somehow only “for purposes of Act no. 166/1993 Coll..” More likely it attempted, by this construction, to expand the jurisdiction of the Supreme Audit Office above the constitutional framework of article 97 of the Constitution. Unlike our arrangement, in European Union countries it is not permissible for bodies comparable to our Supreme Audit Office (Supreme Accounting Chambers) to inspect the financial management of parties. Regarding the claim of the Chamber of Deputies, we can recognize at most the authority to inspect whether the allocation and distribution of state contributions to political parties and political movements took place in a legal and materially correct manner, the consequences of which can not mean anything other than state inspection which moves within the organization framework of the state and establishes the reviewability of the procedures of the Ministry of Finance in allocating state contributions on the basis of §§ 20 and 20a of the Act on Association. In evaluating this question Constitutional Court concluded that the defining moment is definition of the activity of the Supreme Audit Office in art. 97 of the Constitution of the Czech Republic, under which the Supreme Audit Office does nothing less and nothing more than “inspection of management of state property and fulfillment of the state budget.” This unambiguous constitutional definition cannot be amended otherwise than by a constitutional act, and therefore, just from a procedural-constitutional viewpoint, the amendment made by § 3 par. 4 of Act no. 166/1993 Coll.16) is unconstitutional. However, from a substantive-constitutional viewpoint this amendment is also not acceptable, because making the inspection of the management of political parties or political movements and “state business” would be interference which endangers the principle of the separation of political parties and political movements from the state. The Constitutional Court is of the opinion that, after state contributions were allocated to political parties and political movements, there can no longer be “management of state property” under art. 97 of the Constitution of the Czech Republic, but that use of these contributions is then an internal matter of the entities to which they were allocated. Therefore, inspection of management of state property can apply only to the phase which preceded allocation of the contributions, i.e. the process which, within the state (particularly in the Ministry of Finance) preceded the state decision to allocate them. Therefore, the Constitutional Court considers justified the objection of the complainants that state contributions are not restricted by purpose and that their provision does not create any financial relationship between the state budget and the budget of parties or movements, and after payment of the state contribution by the Ministry of Finance it becomes the property of the party or movement. The fact that records about management of it are kept separately changes nothing about this. Where the Act speaks of payment of election expenses, contributions to and mandate and to the activity of parties, the state thereby explains primarily why and for what reason it supports political parties. The purpose of these provisions can not be defining the role of the state as a supervisor, which prescribes for parties what is and is not economical or purposeful. For thoroughness it must be added that the inspection jurisdiction of the Supreme Audit Office cannot be ruled out, and, on the contrary, must be accepted in matters of inspection of financial management within and in the framework of the state, even if this management is directly related to the activity of political parties. This is the case, for example, in the course of proceedings at the Ministry of Finance, the purpose of which is setting state contributions to individual political parties or in relation to the amounts which the clubs of individual political parties receive from the Parliamentary budget, because these institutions fulfil certain tasks and are endowed with certain rights and obligations within the state structure, in this case in the framework of the supreme legislative assembly. 2. The permissibility of dissolving, or stopping the activities of, a political party or political movement due to failure to submit, or shortcomings in, their annual financial report Another objection of the group of deputies is aimed against the permissibility of dissolving, or stopping the activity of, a political party or political movement if they have not submitted their annual financial reports or these reports had shortcomings (§ 18 par. 4 of Act no. 424/1991 Coll., as amended by Act no. 117/1994 Coll.). In considering these objections, the Constitutional Court begins with the constitutional position of political parties and movements. The Czech Republic, as a modern state with representative democracy, takes care that political parties can perform their role in the constitutional order. For that reason it protects the autonomy of parties from state interference both with the general principle of separation of parties and movements form the state, and with a direct prohibition of state bodies interfering in the status and activity of political parties and movements outside express authorization by law and its limits. This approach of the state is expressed in the sui generis privilege of political parties and political movements, which, in accordance with the presumption of constitutionality, provides them increased protection and makes dissolving them more difficult, compared to other organizations. Dissolving a political party or political movement is subject first of all to the general limits which arise from the constitutional establishment of the role of political parties and political movements. Above all, this is a definition of the nature of representative democracy, presuming the free and voluntary creation and free competition of political parties, respecting fundamental democratic principles and rejecting force as a means of promoting their interests (art. 5 of the Constitution). On that basis, political parties which do not respect fundamental democratic principles and do not reject force as a means of promoting their interests do not meet the essential defining requirements set forth by the Constitution. In the Act on Association in Political Parties and in Political Movements, § 4 further specifies the conditions for the creation and activity of political parties and movements in the sense that activity can not be conducted by those: a) which violate the Constitution and the laws or whose aim is to remove the democratic foundations of the state, b) which do not have democratic articles of association or do not have democratically constituted bodies, c) which aim at seizing and holding power and restrict other parties and movements in seeking power through constitutional means or which aim at suppressing the equal rights of citizens, d) whose agenda or activity endanger morality, public order or the rights and freedom of citizens. We can conclude from this list that in all the stated reasons for dissolving political parties there is also in the end a relationship to the constitutional requirement that political parties respect fundamental democratic principles. Each of these reasons in its particular way also expresses a certain not insignificant level danger to substantial features of a democratic state based on the rule of law, protected by article 9 of the Constitution.3) A new reason is added to these reasons in § 18 of the Act on Association in Political Parties and in Political Movements, because under paragraph 4 § 18, if shortcomings found by the Supreme Audit Office in the annual financial report of a political party or political movement were not removed in the period provided by law or in a period extended with the consent of the Supreme Audit Office, the Supreme Audit Office is required, without further delay, to notify the Chamber of Deputies, the President of the Republic and the government, with this notice being grounds to file a petition under § 15, i.e. a petition to dissolve or stop the activity of a party or movement. The formulation of § 18 par. 4 of the Act is milder, and does not mean that the Chamber of Deputies, the President of the Republic or the government must file a petition to dissolve or stop the activity of a political party or political movement on the grounds from the Supreme Audit Office. No legal duty in this regard is indicated On the other hand, however, the circumstance that a petition could be filed on the basis of this provision requires that the Constitutional Court consider whether a petition to dissolve or stop the activity of parties or movements on grounds of discrepancies in their management, determined during inspection of their annual report, is constitutionally permissible and relevant. Defects in an annual financial report can hardly be classified as shortcomings which violate the principles provided in art. 5 and art. 9 of the Constitution. However, as far as the impermissibility of activity of political parties or political movements in terms of shortcomings provided in § 4 of the Act on Association12) (violation of the Constitution and laws) is concerned, the Constitutional Court is of the opinion that the formulation of § 4 under letter a) covers activity which also affects the democratic foundations of the state: that is also why activity can not be conducted by parties and movements which not only violated (a particular) law, but also those who violate the laws [in general]. This formulation expresses an element of permanence, repeated behavior of a political party or and political movement which precisely by this repeated violation of laws acts in a manner which threatens the democratic foundations of the state. After comparing the reasons which, on the basis of failure to submit and financial report or shortcomings in the financial report of these entities establish grounds to submit a petition to dissolve or stop the activity of a political party or political movement, we find that these reasons are, by their nature, new and different from those which are permitted by the Constitution in art. 5 2) and by the Act on Association in Political Parties and in Political Movements in § 4.12) Construction of the statutorily defined grounds, i.e. recommendation to submit a petition to dissolve or stop activity is paradoxical, because this is an instruction based on reasons which neither the Constitution nor the Act on Political Parties permit. The shortcomings determined by the Supreme Audit Office are not specified anywhere and can be of various kinds and often also of quite secondary importance. Act no. 424/1991 Coll., as amended by Act 117/1994 Coll., in § 18 par. 2, identifies potential shortcomings which can lead to stopping the activity of or dissolving political parties as follows: a) the annual financial report was not submitted by the stated deadline, or b) was incomplete, or c) was untrue. This indicates that § 18 par. 2 of the Act the authority in the hands of a state office which is an “independent inspection body,” a body, unlike the government, not politically answerable to the Parliament, which has the right to rebuke a political party for any shortcomings concerning its annual financial report in the vague definition under a), b), and c). Under the Act on the Supreme Audit Office, this office also has jurisdiction to evaluate whether the “inspected activities” ... “are purposeful and economical.” This formulation expands the jurisdiction defined in § 18 of the amended Act15) all the way to the sphere of discretion, which, can in a certain constellation, become arbitrary decisions. Leaving § 18 in full would introduce a system turned upside down, because it is much more the task of political parties represented in Parliament, to rebuke the state apparatus about what is purposeful and economical than the other way around. In this regard, it is also not negligible that the basis for determining shortcomings, which authorizes a motion under § 15 of the Act, is not an auditor’s report verifying the annual financial statements, but exclusively a determination reached by Supreme Audit Office, which is a state body. Let us note that in European democratic states inspections of political parties’ annual financial reports are generally not entrusted to the state, but to independent private-law organizations and testing institutions. The purpose of a contribution from the state budget is primarily partial payment of election expenses already incurred by parties. This corresponds both to the overall concept of arrangements in European countries and to the wording of § 20 par. 4 and par. 6, as well as par. 7 of the Act on Association. The contribution is tied to election results achieved in the last elections (number of votes, number of mandates). Nothing about this is changed by the fact that payment of the contribution is divided chronologically over the entire election period. In any case, a connection to election expenses arises from § 17 par. 3 letter a). “A contribution for activity under § 17 par. 3 letter b) is identified in § 20 par. 2 as a Spermanent contribution” and a “contribution for a mandate” and in par. 6 and 7 both contributions are again tied to election results. It thus appears from the nature of the matter that the purpose of these contributions should not be subject to the free discretion of the Supreme Audit Office, but is provided directly by the law, as, after all, partial payment of expenses already incurred. It is intended for the activity of political parties, which is described in the Constitution and in the law primarily as participation in elections. A no less significant circumstance is that parties’ financial resources flowing from the state budget and all other financial resources of political parties are mixed into one in § 18 of the Act for purposes of the inspection function of the Supreme Audit Office. By the amendment of § 3 of the Act on the Supreme Audit Office, the legislature attempted to re-classify– and only for purposes of this Act – political parties’ management of contributions from the state budget as some sort of “management of state property.” However, under the Act, all aspects of political parties’ annual financial reports are subject to objections by the Supreme Audit Office, regardless of the origin of the financial resources. The dilemma of the supporters of this arrangement lies in the fact that they want to allow inspection of political parties’ management of funds from the state budget, while the Act goes much further, and permits state inspection of political parties’ management in full, and also from the viewpoint of purposefulness and economy, whereby it interferes unacceptably into the exercise of ownership rights, as under art. 11 par. 1 of the Charter of Fundamental Rights and Freedoms "each owner´s property right shall have the same content and enjoy the same protection". However, even if inspection by the Supreme Audit Office were permitted only for those resources of parties which come from the state budget, the practical effect would be zero. It is evident that political parties would classify precisely the expenses which could be criticized into the categories of non- state provenance. For all these reasons, the Constitutional Court also considers the petition from the group of deputies to annul the regulation of dissolving or stopping the activity of a political party or political movement, in connection with shortcomings determined in their annual financial report (§ 18 par. 4 of the Act on Association, as amended by Act no. 117/1994 Coll.), to be justified. 3. The permissibility of involvement of political parties or political movements in business activities The petition by the group of deputies also contests annulment of the permissibility of participation of political parties or political movements in business activities, which was done by amendment of § 17 par. 2 of the Act on Association in Political Parties and in Political Movements. The previous regulation provided that a party or movement may not conduct business activity in its own name, but may take part in the establishment of a legal entity or participate as a member of an already-established legal entity. Under the new regulation in § 17 par. 2 of the Act, a party or movement may not conduct business activity in its own name and may not establish a legal entity which conducts business activity or participate as a member of such a legal entity. After considering this issue the Constitutional Court reached the conclusion that banning any participation by political parties or political movements in business activity does not have sufficient basis in either the Constitution, the Charter of Fundamental Rights and Freedoms, or international treaties under art. 10 of the Constitution. The Constitutional Court considers one-sided the idea formulated in the position of the Chamber of Deputies, that state contributions would eliminate the parties’ need to acquire additional funds, including by participation in business activity. The issue of financing political parties in Europe confirms that the growing needs of political parties lead individual parties to constant efforts to obtain new sources of financing, through gifts and participation in business activity, in addition to state contributions. The structure of financial resources for individual political parties varies, and some draw funds more from the regular contributions of their members, others to a greater degree from gifts; permanent annual and state contributions and contributions for mandates also differ considerably. The idea that political parties would be forbidden any activity, including publishing and promotional activity, based on a business principle, and that this would achieve their equal “starting positions” and “more moral behavior” in political competition conflicts, by its formally equal approach to factually unequal entities, with the very principle of equality, as the various means of legal financing of political parties’ expenses also correspond to the nature of the various political parties. This issue cannot be dismissed by reference to the state contributions provided. Therefore, the Constitutional Court considers general annulment of the involvement of political parties or political movements in business to be interference which conflicts with the principle of reasonableness of law in a state based on the rule of law in the sense that it is a measure neither suitable nor necessary for attaining the goals which the legislature expects from this measure. On the other hand, however, a general relaxation permitting any kind of business activity of political parties or political movements without restriction, also does not reflect the basic guidelines of the Constitution and the Act on Association in Political Parties and in Political Movements, concerning the purpose and role of political parties in a democratic society, nor does art. 4 par. 4 of the Charter of Fundamental Rights and Freedoms, permitting limitation of fundamental rights on the condition (and also thereby), that their substance and purpose are preserved. Unrestricted involvement of parties in business would not rule out the formation of political parties which would be more involved with business activities than with their constitutional mission. In their petition to annul the second and third paragraph of § 17 of the cited Act, the petitioners rely on the previous provision of § 17 par. 4 of the Act on Association, which recognized a right of participation of parties and movements only in the following extent: a) operating radio and television stations, publishing and printing, b) publicity and promotional activity, c) lotteries and drawings, d) manufacture and sale of items promoting the agenda and activity of a particular party or movement, e) holding cultural, social, sporting, recreational, educational and political events. The petitioners consider this regulation, which existed before the amendment, to be reasonable. It was also the basis for the government draft of the amendment, later changed in a joint report from Parliamentary committees. In connection with it, they propose that § 17 par. 2 and 3 of the amendment be annulled as of a later date in an attempt “to permit the Parliament of the Czech Republic to newly regulate the management of political parties and movements by that time.” The Constitutional Court considers the petition of the group of deputies justified in this regard as well. Immediate annulment of the prohibition of business activity would conflict with the principle of reasonableness in a material state based on the rule of law, because the benefit arising from this decision could be overshadowed by undesirable consequences of absolute deregulation of business activity of political parties and movements. Therefore, the Constitutional Court decided to postpone the effect of annulment of § 17 par. 2 and par. 3 of the Act on Association as amended by Act no. 117/1994 Coll., for a sufficiently long time, a period of ca. 14 months from the promulgation of this judgment, to provide the Parliament of the Czech Republic time for reasonable regulation of the scope and limits for the business activity of political parties and political movements. The existing absolute prohibition of business activities for a period of 14 more months appears more acceptable to the Constitutional Court than immediately opening the field for business activity without any restrictions. Therefore, after the proceedings, the Constitutional Court reached a decision to annul § 17 par. 2 and par. 3 of the Act on Association, as amended by Act no. 117/1994 Coll.14) as of 1 January 1997. Section 17 par. 2 and par. 3 of the Act on Association, as amended by Act no. 117/1994 Coll., is annulled due to conflict with article 5 of the Constitution, which guarantees the free competition of political parties, article 4 par. 4 of the Charter of Fundamental Rights, under which, when applying provisions on the limitations of fundamental rights and freedoms, their substance and purpose must be preserved, and due to conflict with article 20 par. 3 and par. 4 of the Charter of Fundamental Rights, under which the exercise of the right to association through political parties or political movements can be restricted only if it is necessary in a democratic society for the security of the state, the protection of public security and public order, the prevention of crime, or the protection of the rights and freedoms of others. Par. 2 and 3 of § 17 of the cited Act – in addition – is not a measure reasonable or suitable for permitting and protection the free competition of political forces, to which the legislature is bound by art. 22 of the Charter of Fundamental Rights and Freedoms. As far as § 18 par. 4 is concerned, the right to make a motion to dissolve or stop the activity of a political party or political movement is also in conflict with the requirement of legal stability and certainty in a material state governed by the rule of law, because it authorizes the Supreme Audit Office to submit a motion for reasons which the Act itself, in § 4, does not permit. The provision of § 18 par.1, expressed by the words “and the Supreme Audit Office” and also § 18 paragraphs 2, 3, 4 and 5 of Act no. 424/1991 Coll., as amended by Act no. 117/1994 Coll., are annulled as of the day of promulgation of this judgment in the Collection of Laws of the CR due to conflict with the constitutional principle of separation of political parties or political movements from the state (art. 20 par.4 of the Charter of Fundamental Rights and Freedoms), and due to conflict with art. 97 par.1 of the Constitution of the ČR, under which the constitutional role of the Supreme Audit Office is inspection of management of state property and fulfillment of the state budget, and finally also due to conflict with art.11 par.1 of the Charter of Fundamental Rights and Freedoms, which provide equal protection to all owners. As of the day this judgment is promulgated in the Collection of Laws of the ČR § 3 par. 4 of Act no. 166/1993 Coll., on the Supreme Audit Office as amended by Act no. 117/1994 Coll., is also annulled, due to conflict with article 97 par.1 and par.3 and article 9 par.1 of the Constitution of the CR.