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.