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The International Journal
of Not-for-Profit Law

Volume 3, Issue 2, December 2000

A publication of the International Center for Not-for-Profit Law

Table of Contents

Letter from the Editor

Articles

Church and State Relationships in German "Public Benefit" Law
By Dr. Christine R. Barker

Evaluating Tax Incentives for Donations to Public Benefit Organizations
By Paul Bater

Freedom of Association: Recent Developments Regarding the "Neglected Right"
By Leon E. Irish and Karla Simon

The Government of Israel's Control of NGOs: Legal Dilemmas and Structural Constraints
By Nitza Nachmias and Amiram Bogot

Reviews

Introduction to the Non-Profit Sector in the Balkans
By Jenny Hyatt
Reviewed by Douglas Rutzen

The Third Force
By Ann M. Florini
Reviewed by Karla Simon

Weak Democracy and Civil Society
By Imco Brouwer
Reviewed by Sam Charron

Case Notes

Central and Eastern Europe:
Poland

Latin America and the Caribbean:
Venezuela

Middle East and North Africa:
Egypt | Tunisia

North America:
the United States

Newly Independent States:
Moldova
| Russia

Country Reports

Asia Pacific:
Regional
| Australia | the Philippines

Central and Eastern Europe:
Hungary

Latin America and the Caribbean:
Regional | Dominican Republic | Guatemala | Peru

Middle East and North Africa:
Bahrain | Israel | Palestine | Yemen

Newly Independent States:
Kazakhstan | Ukraine

North America:
the United States

South Asia:
India | Pakistan

Sub-Saharan Africa:
Ghana | South Africa

Western Europe:
Belgium | France | Germany | Ireland

International Grantmaking

Conducting Overseas Site Visits
By Victoria B. Bjorklund and Jennifer I. Goldberg  

- - - - - - - - - -

Editorial Board

Country Reports: Western Europe

Belgium

Belgian Non-Profit Associations and Belgian International Associations Lose Belgian Nationality and Residency Requirements for Their Members and Directors

By Bart Servaes
Attorney at Law (Brussels Bar)

Two Belgian laws, both dated June 30, 2000 and both promulgated on August 9, 2000, do away with the remaining nationality and Belgian residency requirements for members and directors of Belgian non-profit associations and Belgian international associations (see Law of June 30, 2000 “Amending the Law of June 27, 1921 granting non-profit associations and institutions of public interest the legal personality”; and Law of June 30, 2000, “Amending the Law of October 25, 1919 granting the legal personality to international associations with a humane, religious, scientific, artistic or educational purpose”).

The law on non-profit associations of June 27, 1921 (hereafter, the “NPA-law”) was issued at a time that pre-dates the “European” framework within which we live today. Nationality requirements were a standard tool to give organizations a “Belgian character.” That is why the NPA law required that the membership of a non-profit association should consist of at least 75% Belgian nationals; if not, the association was deprived of its legal personality.

For international associations, the Law of October 25, 1919 (hereafter, the “IA-law”) required at least one Belgian national in the management of the association. The purpose of this provision was to ensure the jurisdiction of the Belgian courts over the international associations created under Belgian law. The sanction was similar to the one imposed on non-profit organizations: the association would not be recognized by the Belgian government and therefore, could not obtain its legal personality.

The nationality requirement for the non-profit associations was first modified in 1984, whereby the nationality requirement was replaced by a Belgian residency requirement. However, the sanction for a non-profit association whose members did not consist of 75% Belgians or foreigners residing in Belgium remained the same. Although the IA-law was not amended at that time, the administration, dealing with the recognition of Belgian international associations, applied the same rule and moderated the nationality requirement with a residency requirement (see D. LONTINGS, “The International Non-profit Association”, I.B.L.J., 1994, (585), p. 598).

It is interesting to point out that in 1961, the Belgian-American Friendship Convention (February 21, 1961), gave American nationals the same rights as Belgians with regard to science, education, religion and charity, including the right to create non-profit associations. This means that presently there are no nationality or residency requirements applicable to U.S. citizens in order for them to create non-profit associations or international associations in Belgium (see M. DENEF, T.R.V., 1999, p. 324).

Notwithstanding those “moderations” to the nationality requirements in both laws, it was argued that for citizens of other E.U. Member States the nationality requirement remained a violation of the principles as developed by the European Court of Justice with regard to the rule against discrimination on the basis of nationality set forth in Article 6 of the EC Treaty. Originally, the European rule against discrimination on the basis of nationality was first and foremost applicable to economic activities with a profit motive. This implied that in principle non-profit associations and international associations would not fall under the protective scope of this rule against discrimination. Nevertheless, it appears from the decisions of the European Court of Justice that the freedom of establishment, which is a specific implementation of the non-discrimination principle, can also be applied to organizations that do not have a profit motive, provided that they are engaged in economic activities. The significance of the participation of associations in economic life can no longer be ignored (see M. DENEF, “De VZW: aan winstoogmerk en koopman voorbij, naar een economisch ondernemingsrecht?", in Knelpunten van dertig jaar vennootschapsrecht –zoeken naar oplossingen voor de 21ste eeuw, Kalmthout, Biblo, 1999, 455-458; see also P. ‘T KINT, “La limitation de nationalité dans les ASBL et le traité de Rome, Non-Marchand, 1997, 29-31; see also the Conclusion of Advocate General G. Cosmas of January 28, 1999 in this case: http://curia.eu.int, nr. 11-14, indicating that although not all non-profit associations or international associations might engage in economic activities, since some of them certainly do and, therefore, are affected by the Belgian rules, the NPA-law and the IA-law fall within the application of the EC Treaty (at the time of writing, the conclusions were only available in Spanish, Greek, French and Dutch)).

The European Commission first drew the Belgian government’s attention to the problems in Belgian law in March 1996. Although several initiatives were taken to do away with the nationality and residency requirement, the Belgian government’s reaction was too slow and Belgium was finally condemned by the European Court of Justice on June 29, 1999 (nr. C-172/98) for violation of Article 6 (presently Article 12) of the E.C. Treaty.

It is remarkable that the European Court does not specify in its decision which “freedom” has been violated by the nationality requirements. It simply avoids the issue and states that “one of the fundamental freedoms” protected by the EC Treaty has been violated; a reference to Article 6 is considered sufficient. In his conclusion for the Court, Advocate-General G. Cosmas, bases the violation on the freedom of establishment (see reference above).

The laws of June 30, 2000 finally bring Belgium in compliance with the EC Treaty.

France

Centenary of the 1901 Law on Associations

During 2000 France prepared for the centenary of the 1901 Law on Associations. During the year many documents were published and many plans were made for celebrations of the centennial. One of the most interesting of these was published by the Conseil d’Etat, France’s highest administrative court, entitled “Reflexions du Conseil d’Etat sur les associations et la loi de 1901, cent ans apres” (“Reflections of the Conseil d’Etat on associations and the law of 1901, a hundred years later”). The full report is accessible on the website of the Conseil d’Etat at www.conseil-etat.fr/ce-data/actus/rp))1.htm. This is a brief synopsis of the report.

The report, which was developed with contributions from both academics and government officials, make ten numbered points, all of which are relevant to the ways in which the Law of July 1, 1901, “On association” has had an impact on the growth of associational life (“la view associative”) in France. Remarkably, this law is only 100 years old, but its significance in French history cannot be understated 

  1. The 1901 law marks a real change in the attitude of French society toward associational practices. By permitting an association to come into being (obtain “la personnalité morale”) by simply making a declaration to the prefectural or sub-prefectural government, the French government recognized the significant contributions that associations can make to society. On the other hand, however, France remained and remains very restrictive with respect to allowing these same associations to obtain juridical personality.
  2. After the enactment of the 1901 law there has been spectacular growth of associations in France. This is true not only with respect to the growth in numbers of organizations and members, but also with respect to the spheres of activity in which associations engage. However, the law as conceived in 1901 contemplated relatively small associations, dealing in relatively limited spheres. As a result, the law as written does not necessarily deal appropriately with the modern associational life. A question arise whether the 1901 law has outlived its usefulness
  3. One way to answer that question is to say that for most of the existing associations in France the law works perfectly – it represents a “contract” for such associations, which do not need to have juridical personality. Thus, for the associations that interest a majority of the citizens, this law is enough – it fully protects their freedom to associate. But for the newer types of associations there may need to be other techniques for responding more efficiently to their needs.
  4. In looking at these issues it is important to look at the fundamental principles underlying the law of associations. In fact, the contract among the associates is the basis of an association. Objectively then, the members should be able to regulate their own relationships. But when the contract regulating the private relationships of the members inter se permits an association to engage in activities that affect the public, there is an impact on the public administration. It is therefore useful to develop a “charter for associations” that takes into account aspects of the contractual commitment among the members as well as to the public. The federations of associations should develop model charters and use this exercise as a means to create a “school for citizens” who engage in associational life. With respect to foundations, and in particular those that raise money from the public, they should have responsibilities consistent with the proposals developed by the Conseil d’Etat in 1997.
  5. Because the position of associations and their wealth has changed in the last 100 years, the focus of changes in the contractual approach should be on associations that have important public responsibilities and significant funds. The Conseil d’Etat is in fact developing recommendations on the role of public benefit associations (those recognized as being of “utilité publique”). In the same manner it is appropriate to establish proportionality between the capacity of associations and the breadth of their activities and the degree of regulation to which they are subject. In particular the major associations should be regulated with respect to their financial transparency (including their books of account and the publicity of those accounts) as well as their obedience to their statutory purposes.
  6. It is necessary to pay particular attention to the associations that have become partners in public service. The report recommends that the “charter” for associations contain a “charter of partnership” and codes of good conduct between the public sector and associations. This should serve to clarify those relationships.
  7. Another area that needs attention is associations that are established by the State. While these organizations are increasingly frequent, little attention has been paid to the legal rules that such apply to such organizations. One recommendation is that a new legal regime for such organizations should be considered.
  8. Associations that engage in economic activities are also of concern. At present there is a difference between societies and associations in French law. However, the current lack of regulation regarding economic activities of associations as such pose problems, and there have been abuses (associations which are really enterprises masquerading as associations). It is therefore necessary to clarify the ways in which associations should be permitted to engage in economic activities of varying types, and the relationships among different kinds of entities should be more clearly regulated.
  9. One question is whether the reform of the law on associations can draw inspiration from the European Community law. It might in fact be possible to develop a directive harmonizing the laws regarding associations in the EC. However, in looking at the laws of the member states in preparing the report, the authors discovered that there is incredible diversity among the states with regard to their laws on associations. One thing to consider is moving forward with the proposal for a “European Association.”
  10. There is no question that the 1901 law was instrumental in the development of the modern associational life in France. Its simplicity and openness have been hallmarks of the positive attitudes towards associations that characterize modern society. Despite the fact that the ideals of 1901 continue to this day, reforms are needed. It is important, however, for those reforms to remain faithful to the spirit that law behind the creation of the law “On association” of 1901.

Germany

Legal Reform in Germany: What Happened in the Year 2000?

bY Rupert Strachwitz*

The year 2000 saw phase 1 of the reform of the law on foundations and nonprofits successfully accomplished. Phase 1 concentrated on the reform of tax laws for foundations and their donors. Tax benefits for founders have increased considerably. Anybody may now deduct up to 600,000 DM from his or her taxable income once in every ten years provided the donation constitutes an endowment for a new foundation of which the donor is the founder. Also, up to 40,000 DM is deductable every year for any donation towards the endowment of a foundation – a rule clearly intended to benefit community foundations. Both of these options come on top of the existing deductions (a maximum of 5% or 10% deductable from taxable income of any taxpayer, corporate or individual, the percentage depending on the cause). The new law also contains a number of clarifications long overdue as to the tax situation of foundations – and of other nonprofits, which was somewhat astonishing since the bill was titled „for foundations“. The new law has most certainly resulted in a surge of new foundations, the new tax advantages being just one reason beside the awareness created by the impressive publicity the matter has got over the past two years.

When the bill finally became law in July 2000, all political parties agreed that a second phase of the reform process was to follow immediately. And indeed, a working group was assembled by the Federal Ministry of Justice to look into the relevant civil law issues. These, however, are predominantly related to state rather than federal law so that the working group had to include representatives from all 16 state administrations. The group was set up at an administrative level with not much political pressure. It is hardly surprising that no results have yet been seen, especially as the state representatives were not advocates of change in the first place.

There have been statements both from the Federal Chancellor and from members of the federal Parliament that a reform of the civil law on foundations is to be passed by the present Parliament. But since elections are due in 2002, doubts are growing as to whether this goal can actually be achieved.

On October 30, 2000, experts were given a first chance to discuss their views with the members of the working group. It was obvious that two principal issues would provide the core of the discussion. And it soon became very clear that two opposing views would be presented on either issue.

Firstly, it was argued that administrative supervision of foundations was to be examined. This supervision concerns all autonomous foundations-in-law under the federal civil code and the state laws. It implies that setting up such a foundation depends on a government concession and that the government exercises certain controls over the governance of these foundations. Contrary to the history of German foundations, this type of foundations has, over the past 200 years, come to be looked at as the "regular“ legal form a foundation should take.

Since 1997, advocates of reform have argued that it does not befit modern society that foundations should be subject to a government concession. However, some founders have always been attracted by the idea that government should control the actions of future boards. In any case, this issue is one that potential founders are more concerned with than existing foundations who have more often than not established a working relationship with the authorities. So, understandably, the association of foundations is not very outspoken on this matter. And while other experts, e.g. the Stifterverband fuer die Deutsche Wissenschaft, did advocate the total abolition of administrative (not, of course, fiscal) supervision, the Maecenata Institute suggested a compromise by arguing that if other forms of foundations (in particular non-autonomous trusts and incorporated foundations, both of which are not supervised) were accorded equal status and made to be seen as equally regular, and if the degree of supervision was more clearly and more narrowly defined, it could be left to founders to choose the form that appealed to them and thus incur as much supervision as they saw fit.

The other core issue is whether foundations – and indeed other nonprofits – should be legally obliged to publish financial statements and reports on their activities, as is the case in other countries. Again, the lobbyists sought to protect the interests of their members in pointing out all kinds of difficulties that might arise if publication was made obligatory. Here, independent experts were united in strongly advocating obligatory publication and offering solutions to the practical problems.

The Bertelsmann Foundation and the Maecenata Institute are continuing their programme of providing independent expertise and moving the issue by convening researchers, practitioners and administrators. Contrary to phase 1, their work in phase 2 will include several in-depth studies. These studies go beyond phase 2 and will attempt to tackle issues that are as yet unexplored.

It has been said that a reform of all regulations that touch on the involvement of volunteers and a fundamental review of the laws that govern nonprofit organisations are on the middle-term agenda of the present government. Indeed, a parliamentary commission on voluteerism that includes 11 members of the federal Parliament and 11 outside experts has been set up to examine the issues at stake. The commission will present its report in 2002, and it remains to be seen, whether the commission’s findings, and the other material that is currently being assembled will provide the basis for further amendments.

One thing is quite clear. Our current laws on all nonprofits are governed by concepts of a welfare state and strong government. They do not fit the modern idea of a strong civil society. So, if 14 heads of state and heads of government, including the German Chancellor, US President Clinton, British Prime Minister Tony Blair, are really serious about including civil society in their ongoing conference agenda on government in the 21st century (along with global economy and the role of the state), further changes will certainly have to be made, unimpeded by administrators‘ considerations for influence, control, and power.

* Rupert Graf Strachwitz is director of the Maecenata Institute for Third Sectors Studies, Berlin, and currently serves as member of the parliamentary commission on volunteerism.

Ireland

White Paper on a Framework for Supporting Voluntary and for Developing the Relationship Between the State and the Community and Voluntary Sector

Among other subjects, this document explores funding issues facing the voluntary sector, as well as forming partnerships in social and economic development between government and voluntary organizations.

 

Copyright © 2012 The International Center for Not-for-Profit Law (ICNL)
ISSN: 1556-5157