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The International Journal
of Not-for-Profit Law

Volume 4, Issue 2-3, March 2002

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

Table of Contents

Letter from the Editor

Articles

Charity Law and Alienation in Northern Ireland: The Findings of a Research Project and the Resonance Between Events in New York and Belfast
By Kerry J. O'Halloran

Freedom of Association in a Nigerian Community - Old Usages, New Rules
By Emeka Iheme

Liability of Not-for-Profit Organizations and Insurance Coverage for Related Liability
By Jerold Oshinsky and Gheiza M. Dias

El Proceso de Reforma del Heptaedro Legal del Tercer Sector
By Antonio L. Itriago Machado y Miguel Angel Itriago Machado

Reviews

American Foundations: An Investigative History
By Mark Dowie
Reviewed by Robert O. Bothwell

Case Notes

Central and Eastern Europe:
Poland

North America:
Canada

European Court of Human Rights:
Stankov and the United Macedonian Organization Ilinden v. Bulgaria (European Court of Human Rights: October 2001)

Country Reports

Asia Pacific:
China
| Japan | Vietnam

Central and Eastern Europe:
Regional | Bosnia and Herzegovina | Croatia | Poland | Slovakia | Republic of Srpska

Latin America and the Caribbean:
Regional | Brazil | Nicaragua | Venezuela

Middle East and North Africa:
Egypt

Newly Independent States:
Armenia | Moldova | Tajikistan

North America:
Canada

South Asia:
India

Western Europe:
Regional
| Austria | France

- - - - - - - - - -

Editorial Board

Country Reports: North America

Canada

Recent Legal Developments Affecting the Not-for-Profit Sector

By Robert Hayhoe *

1. Charities Registration (Security Information) Act

In the spring of 2001, the federal government introduced Bill C-16, the Charities Registration (Security Information) Act.  Bill C-16 apparently was in response to media reports that Canadian registered charities were being used to fundraise for foreign terrorist organizations.  Bill C-16 proposed to give the government the power to issue a certificate revoking the registration of a registered charity that was involved in fundraising for terrorist organizations. 

While, even in the spring of 2001, nobody was suggesting that registered charities should be permitted to use the fundraising vehicles for terrorist organizations, there were significant problems with the structure of Bill C-16.  If the Minister thought that national security required it, charitable registration could be revoked after only an in-camera hearing by a Federal Court judge.  More seriously, Bill C-16 contained no definition whatsoever of terrorism.  In addition to these objections, which could be characterized as technical in nature, there was a more serious policy objection to the proposal.  Critics suggested that if terrorist fundraising was viewed as a serious problem, it was hard to understand why it was being dealt with as a charities registration matter instead of as a criminal law matter.  This was viewed as inappropriate because it both failed to prevent terrorist fundraising and because it suggested inaccurately that fundraising in Canada for foreign terrorism was largely carried out by registered charities.

As a result of these concerns, a number of organizations, including the Canadian Bar Association and the Canadian Centre for Philanthropy, made submissions to the Minister of Justice outlining the technical concerns with the legislation and suggesting that it was based on a flawed concept.  Until September 11, it appeared that the criticisms of Bill C-16 might be given effect and that the legislation might not proceed.  However, one of the many things that changed as a result of September 11 was the Canadian federal government’s approach to terrorist fundraising

In short order, Bill C-36 was introduced in Parliament, which revived the Charities Registration (Security Information) Act.  However, unlike Bill C-16, Bill C-36 addressed terrorist fundraising by charities as part of a much broader context.  The definitions of terrorism contained in various U.N. Conventions were imported into Bill C-36.  However, more importantly, Bill C-36 criminalizes terrorist fundraising, whether carried on through a registered charity, through any other organization or by an individual.  Thus, Bill C-36 downplays the implications that terrorist fundraising is a charity problem and that charities are more likely to fund terrorists than other types of organizations.

These conceptual level changes in approach, especially in the post September 11 context, were enough to satisfy some of its former critics of Bill C-16.  However, prominent members of the Canadian charity law bar continue to take approaches ranging from cautious optimism to deep-seated hostility towards Bill C-36.

 Turning specifically to Bill C-36, section 4 provides as follows:

4.  (1) The Minister and the Minister of National Revenue may sign a certificate stating that it is their opinion, based on security or criminal intelligence reports, that there are reasonable grounds to believe

  1. that an applicant or registered charity has made, makes or will make available any resources, directly or indirectly, to an entity that is a listed entity as defined in subsection 83.01(1) of the Criminal Code;
  2. that an applicant or registered charity made available any resources, directly or indirectly, to an entity as defined in subsection 83.01(1) of the Criminal Code and the entity was at that time, and continues to be, engaged in terrorist activities in support of them; or
  3. that an applicant or registered charity makes or will make available any resources, directly or indirectly, to an entity as defined in subsection 83.01(1) of the Criminal Code and the entity engages or will engage in terrorist activities as defined in that subsection or activities in support of them.

Upon the issuance of a certificate for the reasons described above, the Solicitor General (Canada’s chief law enforcement officer, who is the “Minister” referred to in Bill C-36) must bring the certificate before a Judge for review.  Bill C-36 continues to provide for in-camera hearing of the evidence against the charity without even the charity or its counsel being permitted to be present if the Judge determines that disclosure to the charity or its counsel would injure national security or endanger the safety of any person.  The decision of the Judge in the matter is final and not subject to appeal.  However, it is possible for an organization that has been refused charitable registration or that has had its registration revoked on the grounds that it funds terrorism, to reapply to the Canada Customs and Revenue Agency for registration on the grounds that the reasons for the revocation of the original certificate are no longer valid.

It is obvious that the procedure described above is not consistent with the common law traditions of full disclosure and open justice.  The Canadian Federal Minister of Justice has indicated that in the post-September 11 context, the procedural approach described in Bill C-36 is not a violation of fundamental freedoms to which the Canadian Charter of Rights would apply.  Since a court challenge is almost inevitable, time will tell.

Leaving aside procedure, one serious concern which remains with respect to section 4 described above is that it provides for the denial or revocation of registration for an organization that indirectly makes funds available to a terrorist organization.  Since there is no explicit knowledge requirement in this portion of Bill C-36, an organization such as a relief organization which provided food or medical aid in a war zone could potentially be found to have made resources available indirectly to a terrorist organization.  The portion of Bill C-36 that criminalizes fundraising for terrorism provides that allowing resources to be used for terrorism is only a criminal offence if done “willfully and without lawful justification or excuse”.  This modifier would provide a criminal law defence for an organization that inadvertently permitted its resources to be used for the benefit of a terrorist organization.  There is no such explicit qualifier in the charities registration portion of Bill C-36, although it is to be hoped that Federal Court Judges applying the Charities Registration (Security Information) Act would imply one.

As of the beginning of December 2001, Bill C-36 has passed the House of Commons (but not the Senate).  Bill C-36 provides that the Charities Registration (Security Information) Act will only come into force upon a future date to be fixed by order-in-council.
 
2. Voluntary Sector Initiative

As described in the Volume 2 Issue 4 Canada country update, the Canadian federal government and the voluntary sector are engaged in a fairly substantial review process which is designed by the federal government to enable it to work better with the voluntary sector.  The Voluntary Sector Initiative has just released its one year progress report where it outlines where it has been and where it is going.  While many aspects reported on in the update do not relate to legal matters, the report suggests that the Joint Regulatory Table has made progress in implementing a simplified tax return for registered charities.  Apparently discussions continue with respect to the carrying on of a related business by a registered charity, the appeal process for organizations that are refused charitable registration, the adoption of an intermediate sanctions system and institutional reform in the context of the federal registration of registered charities in Canada.

3. Future Directions Initiative

Parallel to the Voluntary Sector Initiative, the Canada Customs and Revenue Agency is in the process of performing an administrative review called the Future Directions Initiative.  One of the client service areas under review is the charitable sector.  In this context, the Canada Customs and Revenue Agency has been holding consultations across Canada to obtain the views of the sector and of professional advisors with respect to how the administration of the Income Tax Act (Canada) could be improved for charities.  Since the Canada Customs and Revenue Agency only administers the law and does not propose changes to the law (this being the purview of the Department of Finance), the consultations are limited to administrative improvements.

It is hoped that one result of the Future Directions Initiative will be a dramatic improvement in the slow turnaround at the Canada Customs and Revenue Agency Charities Directorate.  For example, many applications for charitable registration do not appear to even be looked at for as many as six months after submission.  Requests for input on proposed corporate changes are backlogged for over a year.  Canada Customs and Revenue Agency audits of registered charities only result in audit reports being issued years later (if ever).  It has been suggested that new financial and human resources are being devoted to the Charities Directorate; the new resources should soon have an impact on delay.

4. IMPACS

In the context of the Voluntary Sector Initiative described above, the Institute for Media, Policy and Civil Society (IMPACS) has been carrying on a series of consultations called “The Charities and Advocacy Project.”  IMPACS met with focus groups across Canada to obtain their views on how the law could be changed to permit more advocacy by registered charities.  Not surprisingly, given that the status quo does not appear to have been presented to consultation participants as a viable alternative, the interim conclusion of IMPACS is that there is a wide spread desire for registered charities to have a broader ability to perform political advocacy.

5. New Draft Canada Customs and Revenue Agency Publications

The Canada Customs and Revenue Agency has released three draft publications for public comment:

The second draft of RC4107E is a helpful description of the rules governing registered charities that are engaged in education and advocacy activities and represents an improvement over the previous draft which sought to explain the same item. 

For a description of a recent case involving the AIDS Society for Children in Ontario, see the North American Case Notes Section.

* Robert Hayhoe is Barrister & Solicitor at Miller Thomson LLP in Toronto. He also serves as Regional Coordinating Editor (North America) for IJNL.  He can be contacted at rhayhoe@millerthomson.ca

 

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