WASHINGTON  - The U.S. Supreme Court upheld on Wednesday the most important parts of a landmark campaign finance law designed to restrict the influence of money in politics, keeping the fund-raising rules for the 2004 and future presidential and congressional elections.

By a 5-4 vote, the high court upheld provisions that ban unregulated "soft-money" contributions to political parties and federal candidates and that restrict some television and radio "issue ads" by corporations and unions right before elections.

"In sum, there is substantial evidence to support Congress' determination that large soft-money contributions to national political parties give rise to corruption and the appearance of corruption," the court majority declared.

The ruling, one of the most important this term, means the key provisions of the law that took effect in November 2002 have survived the legal challenge. The law marked the campaign finance system's biggest overhaul in about 30 years.

The law may end up hurting Democrats more than Republicans, some political analysts said, although they acknowledged no one can yet say for sure.

Signed by President Bush in 2002, the law was sponsored in the U.S. Senate by Arizona Republican John McCain and Wisconsin Democrat Russ Feingold, and in the House of Representatives by Reps. Christopher Shays, a Republican from Connecticut, and Marty Meehan, a Democrat from Massachusetts.

"This opinion represents a landmark victory for the American people in the effort to reform their political system. Now that the court has spoken, we must make sure that the law is properly interpreted and enforced," the sponsors said in a statement.

White House spokesman Scott McClellan said the ruling "will help bring some clarity to the process."

Those challenging the law included Republican Sen. Mitch McConnell of Kentucky, the Republican Party, the California Democratic Party, the AFL-CIO labor federation, the National Rifle Association, the American Civil Liberties Union, and the Chamber of Commerce business group.

The court rejected their arguments that the law violated First Amendment rights of free speech and association, and infringed on the perogatives of the states to control their own elections.

The opinion upholding the constitutionality of the two key provisions was jointly written by Justices John Paul Stevens and Sandra Day O'Connor, a swing vote on the divided court.

It was joined by Justices David Souter, Ruth Bader Ginsburg and Stephen Breyer, who, along with Stevens, make up the court's liberal wing.

The majority concluded the law's two principal, complementary features -- Congress' efforts to plug the soft-money loophole and its regulation of electioneering communications -- must be upheld.

NOT THE LAST WORD

"We are under no illusion that (the law) will be the last congressional statement on the matter. Money, like water, will always find an outlet. What problems will arise and how Congress will respond are concerns for another day," O'Connor and Stevens wrote.

Mary Boyle, a spokeswoman for the Common Cause citizen activist group that supports campaign finance reform, said the ruling "severs the toxic link between donors who write six-figure checks and people in power at the highest levels of government."

Cato Institute scholar John Samples said he thought the law had been "probably worse for the Democrats. They supported the ban on soft money but came to believe later it was a mistake. Generally speaking, it hurts Democrats more than Republicans."

Chief Justice William Rehnquist and Justices Antonin Scalia, Anthony Kennedy and Clarence Thomas dissented.

Kennedy said the decision "breaks faith with our tradition of robust and unfettered debate." Scalia called it "a sad day for the freedom of speech."

© 2003 Reuters Ltd

###