NSW Premier Barry O'Farrell is confident his electoral donation laws will withstand a High Court challenge mounted by unions.
The laws, passed by parliament in 2012, limit donations to individuals and ban unions from paying affiliation fees to political parties.
As hearings began in Canberra on Tuesday, a High Court spokesman confirmed Justice Stephen Gageler had been forced to recuse himself, reportedly because he has previously given legal advice on the validity of the laws.
Mr O'Farrell has dismissed claims the laws favour wealthy individual donors and conservative politicians.
He's "confident" the laws will survive the legal challenge.
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"Union bosses are squealing because one of the unintended consequences of this legislation, which gives unionists the power to choose whether to make a donation, is it strips union bosses of their influence within the ALP," he told reporters in Sydney.
The state's peak union body, Unions NSW, says its challenge will serve as a test case on the concept of freedom of political expression.
"Political participation comes in different forms, both individual and collective," Unions NSW secretary Mark Lennon said.
"That needs to be protected."
Mr O'Farrell said he'd been contacted by a number of premiers who were disturbed by testimony about Labor and union identities that had surfaced recently through the NSW Independent Commission Against Corruption.
"I think we've all been concerned about some of the revelations that came out of NSW about decisions, donations and fundraising by the Labor party," he said.
"(But) there's nothing wrong, within appropriate rules, with individuals deciding to make a donation to a candidate or a political party and that's ultimately what this legislation allows."
