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PUBLIC POLICY ACTIVITIES OF NOT-FOR-PROFIT ORGANIZATIONS
Prepared by the International Center for Not-for-Profit Law
Regulating Civil Society Conference
Budapest, Hungary ñ May, 1996
• . Introduction
This study presents a theoretical and practical overview, from a comparative perspective,
of the regulation of public policy activities undertaken by not-for-profit organizations
(NPOs) in both common law and civil law ju risdictions. In the broadest sense, most
activities of NPOs have implicat ions for or are the result of existing policy. Moreover, the
decision to grant benefits of any sort to NP Os is public policy related as it involves a use
of state resources. For purposes of this discussion, however, public policy activities will
be defined as supporting or opposing candidates for public office, supporting particular
political parties, lobbying for or against sp ecific laws, engaging in public advocacy, or
pursuing issue-oriented litigation. NPOs will be deemed to include charitable institutions
in their widest sense under the common law, as well as foundations and associations not
organized for private benefit under the civil la w, or what are generically referred to in
popular parlance as non-governmental organiza tions (NGOs). The study is divided into
two parts. The first section surveys the re levant laws in a number of significant
jurisdictions, generally dis tinguishing between civil law and common law. The second
section analyzes the differences identified, and looks at the theoretical basis therefor, in
an effort to provide general guidance fo r legislators, government officials, legal
practitioners, and members of the NGO sector.
The Universal Declaration of Human Rights an d the International Covenant on Civil and
Political Rights recognize that all individuals possess the rights to freedom of opinion and
expression, and freedom of peaceful assembly and association. 1 According to these
widely respected internat ional pronouncements, both rights may be limited in
conformance with the “interests of national security or public safety, public order, the
protection of public health or morals or the protection and the rights and freedoms of
others” in a democratic society. 2 While ther e is consensus that individuals have these
rights, there is some debate, at least in th e United States, concerning the extent to which
they apply to organizations of individuals united for ch aritable purposes or public
benefit, particularly when they act in the publ ic policy realm. 3 At any rate, as a matter of
fundamental human and civil righ ts, NPOs should be able to participate to some degree in
the process of public policy.
Naturally, restrictions upon the public polic y activities of NPOs depend to a certain
extent upon the system of law in each country. As a general proposition, restrictions are
most thoroughly articulated and strictly enforced in countries applying the concept of
“charity”, as defined under the common law. In these jurisdictions, there is greater
emphasis upon the purposes of NPOs, and their c onformity to historically derived (but

often differently defined) notions of acceptable charitable purposes. Civil law
jurisdictions generally lack specific provisions restricti ng the public policy activity of
NPOs. Political parties are usually governed by distinct legislation, separate from that
covering foundations and associ ations, and/or handled separately in the Civil Code.
(However, certain countries, particularly th e Newly Independent States of the former
Soviet Union or NIS, permit political parties to be formed pursuant to the general law on
Public Associations). Genera lly speaking, the civil law em phasizes classification of
organizational forms, which must be strictly followed in order to obtain legal personality.
This justifies differentiation between politic al parties and other collective entities.
In fact, the primary basis for this divergent treatment of the public policy activities of
NPOs appears to be classification in common law countries on the basis of charitable, or
public benefit purposes, in contrast w ith civil law classification focusing upon the nature
of legal personality . 4 When an organization is cla ssified as charitable, common law
countries are inclined to rest rict public policy activities be cause many such activities are
perceived to be inherently partisan, and thus in actual or potential conflict with the public
benefit purposes of the organization. Furthe r, public policy activities should not be
improperly subsidized so that they undermine the justification for tax or other related
benefits. Where public benefit is not th e primary purpose of the NPO, common law
countries tend to be less restrictive.
Civil law countries generally treat the issue as a threshold, organizational matter, which is
governed by the range of permi ssible activities for the particular form of organization. In
contrast to common law ju risdictions, there are two preferred forms for NPOs.
Associations are primarily membership organizations. Foundations are non-membership
organizations, with a patrimony or endowment devoted to a particular cause (although
“operating” foundations are more prevalent th an traditional “grant-making” foundations
in some countries with limited philanthropic resources). There is no justification for
distinguishing between associations and f oundations with respect to regulating their
public policy activities.
The legal systems of Centra l and Eastern Europe (CEE) are based in the civil law
tradition. Nonetheless, there is a trend towards recognizi ng different organizational forms
in the region. For example, Hungary and the Czech Republic have Public Benefit
Companies, Hungary has Public Chambers, Lithuania has Community Organizations, and
several countries allow or plan to allow Public Foundations. In any event, the principle
concern is that NPOs not circumvent the legislation or civil code provisions governing
political parties.
In spite of these different approaches, even ci vil law jurisdictions may consider the extent
to which an NPO engages in public policy activi ties when public benefit status is at issue.
Therefore, it is possible to identify an element of convergence between the two legal
systems. Tax status still depends to a large degree upon the organizational form in civil
law countries (for example, successful registration as a foundation in Belgium
automatically results in tax preferences, subject to periodic review ). However, there is

also a tendency towards having this issue reviewed separately, subsequent to registration,
by specialized tax authorities or an appropriate ministry (particularly in the CEE
countries). In this case, tax preferences may be contingent upon an analysis of the public
benefit derived from the activities of the orga nization, not unlike the process utilized in
common law countries.
The threshold question for emerging democracies such as the countries of Central and
Eastern Europe (CEE) or the Newly Independent States (NIS) is whether it is necessary
to impose restrictions upon the public policy ac tivities of NPOs at all. They need to
consider what dangers might result from NPOs entering the public policy arena and
whether this would constitute an evasion of the requirements for establishing political
parties. They also need to consider whethe r there might be problems for the not-for-profit
sector as a result of public pol icy activities conducted by some of its members. Analysis
of the practices and experience of the various civil law countries is a beneficial first step.
To the extent that some form of restrictions or scrutiny is warranted, and only in this case,
serious study of the practices in common law jurisdictions may be interesting and
instructive. In any event, it is appropriate to take a look at the different legal regimes
covering the political activiti es of NPOs in both civil law and common law countries.
II. Comparative Survey
A. Civil Law Countries
It has been said that in civil law countries the “rule of law is conceived as a rule of
conduct intimately linked to id eas of justice and morality”, in which the development of
doctrine plays a prominent part. 5 As a general proposition, there are no specific
provisions regarding the public po licy activities of NPOs in the civil codes. Instead, their
activities are limited by the prohibition agains t contravening the public order or morals,
as defined by the socio-cultural and/or religious norms of each jurisdiction. For example,
France, Belgium, Holland, Finland, Italy, Spain, Germany, Switzerland, and Denmark do
not place any restrain ts whatsoever upon the public polic y activities of NPOs. This is
consistent with the practice in Latin Ameri ca, the other region of the world adhering
almost exclusively to the civil law.
As a matter of fact, some civil law countries go so far as to encourage public policy
activities by NPOs. In Belgium, there is an explicit right entitled the “droit de critique”
(right to criticize) which permits associations to use all legal means to defend the interests
and ideas which are identified in their organizational objectives. In Bolivia, the
Constitution enables civic associat ions that represent a collective interest and have legal
personality, such as syndicates, trade asso ciations, and grass-roots organizations, to
present candidates for national public office, provided that they ally themselves with a
political party. 6 Further, political parties in both Bolivia and Germany set up foundations
specifically for the purpose of channeling re sources into partisan activities. And in
Switzerland, associations play an important role in fostering participatory democracy, by
mobilizing and representing citizens in th e political decision-making process.

Similarly, Public Associations in Russia can engage in lobbying and take part in electoral
campaigns, provided that they are authori zed to do so in their founding documents.
Chapter Three, Article 27 of the Federal Law on Public Associations grants such entities
the following rights:
• “to participate in the generation of decisions of organs of state authority and local
self-governing bodies according to proce dures and within the scope [of federal
law]; to set up mass information media and to conduct publishing operations; to
represent and defend their ow n rights and the legal interests of their members and
participants and of other citizens before the organs of state authority, local self-
governing bodies and public associations; to present in itiatives in regard to
various issues of public life and to su bmit proposals to the organs of state
authority; to participate in election campaigns (in the event of the state
registration of the public association and with the presence of a provision
concerning participation in elections in the charter of the public association in
question).”
However, both the Federal Charity Law a nd the Moscow Charity Law prohibit using
funds to support political parties or conduct electoral campaigns. Religious organizations
in both Russia (under the Law on Freedom of Conscience) and the Central Asian
Republics are precluded from engaging in politic s. Interestingly, in all of these countries
political parties fall under the jurisdiction of the laws govern ing other associations. This
may at least in part explain not only the lack of restrictions on political activities, but also
a certain degree of hostility on the part of governments to NPOs and the not-for-profit
sector as a whole.
In line with the general pract ice in civil law jurisdictions, many of the CEE countries do
not regulate public policy activ ities undertaken by NPOs. In Poland, Croatia, and Estonia,
for example, the laws impose no limitations whatsoever. In Hungary, the only limitations
pertain to foundations which receive state s upport or money from abroad. In practice,
however, they are quite easily circumvented by establishment of an “intermediary” NPO.
7 In both Poland and Hungary, NPOs are widely seen to play a dynamic role in public
life.
On the other hand, some CEE countries do re gulate the public policy activities of NPOs.
In Bulgaria, Article 12 of the Constitution prohibits associat ions from “having political
purposes and engaging in political activities , typical only for political parties”. 8
However, according to Stephan Kyutchukov, an attorney and expert on non-profit legal
issues, this prohibition is cons trued narrowly in practice merely to ban associations from
sponsoring candidates for public office. NPOs have been allowed to finance and endorse
candidates, lobby for and against legislati on, engage in public advocacy, and undertake
issue-oriented litigation. 9 In Lithuania, the Law on Foundations contains a provision
prohibiting political activity, which is not defined in this legislation. In Romania,
according to Lucian Mihai, another aut hority on non-profit legal issues, “NPOs are
prohibited from engaging in poli tical activities, but no legal definition of ëpoliticalí
exists. Several NPOs have taken advantage of this ambiguity and have conducted various

types of political activities.” 10 In the Czech Republic, asso ciations (but not foundations)
can not be “established to conduct political ac tivities”. 11 In practice, however, NPOs in
both Romania and the Czech Republic engage in all of the activities undertaken by
Bulgarian NPOs listed above.
While these examples appear to suggest a dichotomy concerning the regulation of public
policy activities of NPOs in CEE countries, it is important to note that in practice the
public policy realm is quite accessible to NPOs, especially in comparison with common
law countries. In other words, actual pract ice is close to the norm in civil law
jurisdictions, even if it does not go as far as Bolivia and Germany. One explanation for
this situation is competition between two contradictory goals: the desire to open up the
political process, and the desire to set lim its upon political opposition (which in certain
CEE countries finds a home in the not-for-pro fit sector). Another factor tending to keep
the public policy process open in practice may be the fact that regulation and enforcement
often lag behind reality when countries are in a state of transition. In any event, current
practice regarding regulation of public pol icy activities by NPOs places the CEE
countries and the NIS within the civil law tradition.
B. Common Law Countries
The common law legal system developed in crementally over a number of centuries,
greatly influenced (if not actually determ ined) by the decisions of judges resolving
individual disputes, applying the rationales e nunciated in previous cases (precedent) and
principles of equity. Both the concept of “cha rity” and its application cannot be separated
from this socio-legal context, particularly in the Anglo-American experience. Over the
centuries since the Preamble to the Statute of Charitable Uses in 1601, the courts of
England and all other common law countries have interpreted charitable activity to
encompass service for the public benef it or good. 12 Thus, in most common law
countries NPOs are classified by virtue of their charitable purposes, and not their specific
organizational form or type of legal personal ity. Accordingly, the categories of activities
which qualify as public benefit are often codifi ed and/or delineated in court decisions.
Both tax authorities and judge s interpret these categories more broadly than under the
traditional civil law practice. The general premise which underlies the historical concepts,
the codifications, and the decisions which interpret and apply them, is that much public
policy activity is outside the realm of charity , particularly when it takes the form of
partisan politics, explicitly or implicitly.
1. England
The charitable sector in E ngland has long-standing roots going back to the middle ages,
but developed extremely rapidly in the ninet eenth century. Traditionally, the concept of
charity has been more broadly construed than in the civil law (although there are
exceptions now). This is in great measure due to the role of the courts in delineating the
boundaries of the concept: “it is not for the gove rnment to precisely define the activities
that a charity may pursue, only that it lega lly exclude those activities which a charity

should not pursue.” 13 The primary responsibility of the government is to assure that
charities are trustworthy, a nd what they claim to be.
Accordingly, the government has transferred mu ch of its responsibility for regulation and
oversight of NPOs to the Charity Commissi on for England and Wales. The goal of the
Charity Commission is to promote the effectiv e use of resources for charitable purposes,
by registering charities, providing information concerning their activities, and
investigating and controlli ng abuse. While the Charity Commission is ultimately
accountable to the Home Ministry, it has a large degree of autonomy, and practically
speaking extends to the sector many characteristics of self-regulation. Indeed, one of the
main functions of the Charity Commission is to ensure that the law is obeyed by Trustees,
who are actually responsible for th e administration of charities.
For many years, the courts struggled with defi nitions and principles concerning the public
policy activities of charities. For example, the 1981 case of
McGovern and others v. A.G.
involved the right of charities to lobby for changes in the law. The following conclusion
was reached:
“…the court will not regard as charitable a tr ust of which a main object is to procure an
alteration of the law of the U.K. for one or both of two reasons. First, the court will
ordinarily have no sufficient means of judging, as a matter of evidence , whether the
proposed change will or will not be for the pub lic benefit. Second, even if the evidence
suffices to enable it to form a prima facie opin ion that a change in the law is desirable, it
must decide the case on the principle that the law is right as it stands, since to do
otherwise would be to usurp the function of the legislature.” 14
However, application of the latter principle results in a tautology, since if the law is
presumed to be right as it stands, no efforts to lobby for a change could fall within the
concept of charity or public benefit!
In response to these difficulties, and also a growing scandal over the electoral campaign
activities of charities (such as Oxfam) during the late 1980ís, th e Charity Commission
issued Revised Guidelines on public policy activities in 1994. The Guidelines were
finalized in 1995, following extensive consul tations. Based upon general principles
enunciated by the courts, the Guidelin es distinguish between public policy objects
(purposes) and public policy activities. They state that although charities cannot have
public policy purposes, they may nevertheless engage in activities which are directed at
securing, or opposing, changes in the law or in government policy. In order to do so, the
trustees of the charity must show that there is “a reasonable expectation that the activities
will further the purposes of the charity effectively and so benefit the beneficiaries”
(charitable objects). Similarly, campaign activ ities are permissible, as long as they
promote the purposes of the charity, and provide d that they are based upon reliable data
and a well-founded case. These activities must also be independent of the positions taken
by political parties, since purely pa rtisan activity is circumscribed.

Most examples of permissible public policy activity given by the Charity Commissioners
are similar to those allowed in the United States under the Internal Revenue Code. The
major potential exception concerns grass- roots lobbying, which the Charity Commission
prohibits completely. However, sometimes the examples are problematic, since it is
difficult to draw a precise line separating the promotion of charitable purposes via public
policy activities, and undertaking activities with public policy purposes. For example,
charities are supposedly allowed to spend funds for the promotion of legislation, provided
that they are authorized by thei r statutes to do so, and reasonably believe that this would
further legitimate charitable purposes. But prom oting or opposing legislation can also be
interpreted to have partisan political motives, particular ly during electoral periods.
2. Canada
Canadian law distinguishes be tween charities and other NPOs. Jurisdiction over charities
in Canada has generally been seen as a pr ovincial matter, with the subject of public
policy activities covered by comm on law rather than statute or fiscal regulation, although
Revenue Canada has overall supervision. 15 In order to qualify as a charity, enabling its
donors to enjoy tax privileges in the form of deductions from gross income, an
organization must be devote d exclusively to purposes defined as charitable by the
Canadian courts, refrain from distributing profits or engaging in self-help, and limit its
involvement in public policy. Acceptable charitable purposes include the relief of
poverty, the advancement of education, the a dvancement of religion, and activities which
benefit the community.
If an organization does not qualify as a char ity under the Canadian Income Tax Act, it
can still obtain not-for-profit status if it is organized and operated exclusively for social
welfare, civic improvement, or recreation, doe s not actually make a profit, and does not
distribute benefits to insiders . In this case, however, it would not be subject to the
regulations governing charitie s, and donations would not have any special tax status.
NPOs in Canada are extended a great deal of autonomy, including the ability to influence
their tax status, and, if unincor porated, may not even be requir ed to file a tax return.
Regulations covering charitable organizations in Canada are not dissimilar to those in
England and the United States. Revenue Cana da has issued guidelines which define
impermissible public policy activities to include:
•
o 1) supporting a particular party or candidate for political office;
2) promoting a general political ideology
3) supporting or opposing changes in th e law or in governmental policy;
4) advocating that the public adopt a particular attitude toward a divisive
social issue.

The only public policy activities which do not contravene charitable status are those
which serve educational purposes. They must fu rther the goals of the charity by providing
factual information and expert opinions in a sincere effort to enable the public or
government officials to fully and reasonably consider an issue. As in the both England
and the United States, it is necessary to pres ent a full and fair exposition of the facts.
Other activities which are prohibited in Cana da (and the United States as well) include
directly or indirectly suppor ting or opposing political partie s, politicians, or candidates
for public office, purchasing tickets to fund-ra ising events which benefit political parties
or candidates, and using the property or pe rsonnel of the charity to benefit political
parties or candidates.
In Canada, not only are such public policy activ ities limited to furtherance of the goals of
the charity, and required to be non-partisan in nature, but they must also be minor in
relation to overall activities. The Ca nadian Income Tax Act requires that substantially all
resources be devoted to charitable purposes or activities, and th at any public policy
activities be ancillary and incidental th ereto. In the opinion of Revenue Canada,
substantially all means ninety per-cent, although th is interpretation should not be
considered universally binding throughout the provinces.
One area where Canadian and American law diverge concerns sanctions. Whereas the
Internal Revenue Service can impose a tax on funds devoted to public policy activities
which are considered improper, the only sanc tion in Canada is the loss of registered
status. This may result in a slightly higher le vel of tolerance, until circumstances actually
warrant such a harsh measure.
3. The United States
In the United States, NPOs must be legally constituted under the laws of a particular
state, which will exercise jurisdiction over many of their activities, and collect local
taxes. State laws concerning public policy activities by NPOs , and the tax consequences
thereof, can diverge markedly from federal pr actice, and in many instances are closer to
the common law model. However, federal ta xes are applied uniformly, by the Internal
Revenue Service, in accordance with the provis ions of the Internal Revenue Code. As a
general proposition, it is not the organizational form of the NPO which controls federal
tax issues, but the category of the Code into which its activities and purposes fit.
Political speech has long been placed at the core of the constitutional right to freedom of
speech in the United States. Although this right has generally been regarded as belonging
to the individual, the constitutional analysis may also be applied to individuals acting
collectively. 16 Generally speaking, any law or regulation which burdens an
organizationís right to engage in political sp eech must be narrowly tailored to serve a
compelling state interest.
Since 1934, charitable organizations in the United States have been prohibited from
lobbying the government. And since 1954, they have been prohibited from participating
in political campaigns for public office. Provi sions in the Internal Revenue Code amply

demonstrate that Congress has intended to clearly separate partisan politics from
charitable activities. 17 Two justifications fo r this policy have been advanced by scholars
and judges. First, the principl es of “non-subvention” and “neutrality” posit that the cost of
public policy activities by NPOs should not be borne by the taxpayer through a
government subsidy, albeit indirect in the form of tax benefits. This is considered to be
particularly inappropriate when other individuals or groups may not be afforded the same
benefit, or may not agree with the ideas bei ng espoused. This view was first expressed in
the American courts by Judge Learned Ha nd in 1930. Denying a charitable deduction for
contributions to an organization that lobbied for birth control legislation, he wrote:
“Political agitation…however i nnocent the aim…must be conducted without public
subvention; the Treasury stands aside from them.” 18
The principles of “non-subvention” and “neutr ality” have been criticized for several
reasons. First, it has been suggested that the pr inciples fail to take into account the fact
that “almost every congressional appropriation w ill to some extent involve a use of public
money as to which some taxpayers may object.” 19 That NPOs which take diametrically
opposed positions concerning controversial issues can receive tax benefits is
demonstrative of this fact. Additionally, the Government undermines non-neutrality in
the tax laws by distinguishing between differe nt types of NPOs, and by applying different
rules concerning lobbying activities to them. 20 However, there is general consensus in
favor of these two principles with respect to partisan political activity, such as
participation in electoral campaigns, and the deductibility of expenditures related thereto.
This may be seen at least in part as a re sult of traditional American antipathy to public
financing of political campaigns.
The second argument advanced in support of the proposition that politics and charity
should be separated is that politics is “by definition inconsistent with charity.” 21
Political interests, by their ve ry nature, are competitive and divergent. The public benefit
should be, at least in theor y, general and not partisan. While specific examples of
activities which are accepted as public intere st are often rather specialized, the idea
remains that there is some definite benefit to the general public, or that at a minimum
there are no competing interests wh ich are harmed by the activity.
In a certain sense, a contradiction arises si nce many organizations may be able to best
serve their charitable purpos es by supporting a friendly candi date, or opposing legislation
which might harm their constituents. Howeve r, such activities would necessarily be
controversial, and the organization may fi nd itself promoting ideas or taking actions
which are not generally accepted as charitab le by the public or even by individual
members of the organization. The defining i ssues, then, are whether an organizationís
right to political expression s hould be limited 1) by virtue of the benefits or subsidies
conferred by the government for its charitable operation, or 2) because public policy
activity would be tantamount to using benefits from authorities to influence those very
same authorities, or 3) because the promotion of charitable purposes necessarily excludes
activity in the political arena.

An organization or corporation in the United States is eligible for exemption from federal
taxation if it qualifies under Section 501 or Section 521 of the Internal Revenue Code.
Distinguishing between differe nt kinds of organizations, each provision codifies both
acceptable purposes and permissible activit ies. For example, most charitable
organizations falling under Secti on 501(c)(3) can not dedicate a substantial part of their
activities to carrying on propaga nda or otherwise attempting to influence legislation, and
are prohibited from becoming involved in pol itical campaigns for public office. 22 They
are nonetheless allowed to spend a limited amou nt of money to influence legislation, and
can always publicize the results of nonpartisan research or provide technical assistance to
legislative bodies. However, civic league s and business leagues regulated in other
subsections face no such limitations. Political parties, which receive an exemption for
contributions, membership dues, and fundr aising events (when used for exempt
functions), are covered under Section 521. Thus, the scope of permissible public policy
activities for NPOs is directly related to th eir stated purposes (organizational test) and
actual activities (operational te st), and the section under which they fall. As a general
proposition, the distinctions between organizations under thes e various provisions and the
public policy activities which they may undertake without losing their tax-exempt status
are extremely complicated, beyond the scope of this paper, and of limited relevance to
other jurisdictions.

• . Theoretical Analysis
The rights extended to NPOs to engage in public policy activities depend upon both the
legal system and the specific laws which ar e in effect in each country. The survey of
national practices above indicate s that the system of law plays a significant role in the
approach to public policy activities of NPOs , with divergence between civil law and
common law jurisdictions. However, while th e system of law establishes the framework
for handling this issue, and sets the historic al precedent, it is by no means determinative.
Thus, there are exceptions. For example, Queb ec, despite its firm civil law traditions,
imposes controls on the public policy activity of NPOs which are comparable to its
common law neighbors. And several CEE c ountries, while following the civil law
approach in practice, have a number of significant restrictions in the law, the meaning of
which remains to be fully developed. Thus, while the analysis necessarily begins with the
system of law, it can not stop there. Other socio-political and legal factors must be
considered.
First, the analysis should dis tinguish between direct involvement in electoral activities
and general involvement in public policy de cision making. With respect to electoral
activities, it is up to the i ndividual nation to determine the access of NPOs to the electoral
process. In some countries, such access is comp letely open to NPOs while in others, there
are restrictions. A common restriction is the requirement that NPOs either register as a
political party or seek affiliation with a registered party. This d ecision is a matter of

constitutional and electoral law and should be left to the discretion of a nationís
legislature. However, whatev er restrictions are incorporated into the law should not
unduly hinder the democratic process.
With respect to NPO involvement in public policy decision making, there is a distinction
between informing and advising members of Parliament and involvement in decisions of
the executive branch, either at the local or national level. There should be no objection to
NPOs making contact with parliamentarians. Th is is part of the democratic process.
Providing information to the parliament is a valuable service that will usually be
appreciated by its members.
There are valid arguments for NPO involve ment in decision and policy making by the
executive branch. There are risks as well, including corruption, conflict of interest,
manipulation, and misuse in general. These ri sks, however, are not specific to NPOs. The
law should provide for a controlling mechanis m, but it also should not be specific to
NPOs. For example, gross corruption is a matter of criminal law. Several controlling
mechanisms are available, including ge neral legal provisions, self regulation,
governmental supervision, a nd judicial supervision.
Another important factor is the approach towards the NPO sector in general, and the
concept of charity in particular. The traditional concept of charity in the common law
countries, despite the broad interpretation given to enum erated categories, is not
amenable to public policy activity. This is particularly the case when such activity is
partisan in nature, and/or involves electoral pr ocesses. Therefore, charitable organizations
are directed towards the provision of informa tion relevant to their statutory purposes, and
involvement in the legislative process. Further, strict attention must be paid to the amount
of such activity, and the interests of member s and beneficiaries. Charities in common law
jurisdictions can face the loss of their ta x benefits if they venture too far.
This treatment of charities under the common law finds theoretical justification in the
belief that they are supposed to serve the public benefit, while politics is competitive, and
a clash between often conflicti ng interests. Tax concessions for NPOs engaging in public
policy activity are seen as an improper form of subsidy. NPOs which are not deemed
charitable are essentially free to engage in public policy activities, presumably because
they do not receive the same level of tax benefits, and because the members share the
political views of the organization and are willing to pay to disseminate those views.
Under this approach, it is not the organiza tional form which is determinative, but the
actual goals and activities of th e NPO, and whether they fit into the concept of charity.
In the majority of civil law countries, there are few restrictions upon the public policy
activities which may be undert aken by NPOs. Often, obtaining legal personality is the
threshold issue, with the types of permi ssible activities and the tax consequences
determined by the form of organization. While the civil law approach to the concept of
charity has traditionally been more limited, most European countries now recognize and
list as public benefit many of the same activities as the common law countries. The
different attitude towards public policy activities may be due in part to a more organic

perspective of society. Political life may be viewed more as an expression of the society
itself, and less as a clash of interest groups. Also, historically speaking, philanthropic
organizations have played a more limited social role in the civil law countries. Finally, it
is possible that under a civil law framew ork, regulation of the legal forms for
organizations is considered to constitute suffi cient control over the not-for-profit sector.
One aspect of the common law approach to ch arity that bears emphasis is its historical
role and development. The common law concept of charity is intimately intertwined with
British constitutional and parliamentary practic e. Going back to Queen Elizabeth and the
Statute of Uses, and traditional efforts by the monarchy to limit ecclesiastical privilege,
the common law has sought to permit charitie s a defined range of social functions outside
of the political sphere. Judges have play ed a prominent role in determining the
boundaries of charitable activity. And the practices and principles of “equity” have left
their imprint. In contrast, the civil law count ries, looking to the order which the civil code
supplies, within a society not defined by dive rse interest groups, may be satisfied with
employing legal personality as the mechanism which structures NPO participation in the
political process. In short, ch arities may not be seen to occupy a defined sphere in the
same sense that they do under the common law.
One interesting result of this dichotomy is re vealed by transplantation of the concept of
charity. It is possible that to the extent that the concept of charity is adopted, even in civil
law jurisdictions, restrictions upon public policy activity undertaken by NPOs follow.
This seems to be the case with the laws in Moscow and Russia. Further development of
the legal systems in the CEE countries and the NIS will give a better indication if this is
indeed the case.
With regard to politics, some of the same distinctions identified above apply. What
constitutes the “rough and tumble” of politic s under the common law, where government
subsidies must be carefully scrutinized, may under the civil law be seen more as an
extension of the rights of juridical persons. Thus, the public polic y activities of NPOs
may be viewed as a legitimate form of par ticipation in public life, and useful for the
political development of the country. Additionally, the tendency to focus upon individual
rights in common law countries may lead to a concern that public policy activities on the
part of NPOs, as collectives, may not fully represent or actually even contravene the
wishes of certain members. The represen tative nature of associations, from the
perspective of the civil law, may render such concerns unnecessary.
Furthermore, attitudes towards the political process itself play a significant role. For
example, certain countries make a deliberate choice to encourage the political
participation of individuals and organizations which seek to represent dissident voices in
the population, or interests which have been hi storically marginalized from the political
process. This seems to be the case in Bolivia, which enables indigenous grass-roots
organizations to present candidates for public office, and Switzerland, which has a long
tradition of mobilizing the electo rate. It is little surprise that in Poland, the home of
Solidarity, NPOs may nominate candi dates for political office.

The issue of public confidence in NPOs must also be considered. NPO involvement in
public policy activities, particularly policy making, might confuse the public which could
lose confidence in the sector. This result would be to a great extent related to the statutory
purpose or goal of a particular NPO. If its st atutory objectives are to be actively involved
in public policy making (e.g. trade unions or special interest organizations such as
environmental groups), there should be little reason for the public to be confused. The
risk with regard to public confidence in NPOs should not be a reason to limit their role in
the policy making process. The controlling mechanisms such as legal provisions, self
regulation, and judicial oversight can be implemented. Moreover, as NPOs become more
active they will learn from their mistakes.
Of course the specific nature of the pub lic policy activities must be taken into
consideration. If there is one definite lesson to be learned from the common law
approach, it is that truly educational activit ies undertaken by NPOs should be permitted,
even if they have consequences for public policy. The standard applied, that the evidence
must be fully and fairly presented, and fact ual in nature, seems not only appropriate but
enforceable as well. When direct involvement in electoral activities is in question, then
potential evasion of the requirements for po litical parties must be more seriously
evaluated.
One final issue concerns the tax treatment of NPOs. Different nations treat NPOs active
in public policy differently with respect to ta x benefits. The question is more important in
common law countries where the tax benefit st atus is linked to a certain public benefit
status. It may be less important in systems where the tax benefits are governed in separate
tax laws, where the nature or source of the income generating activity determines the tax
treatment. It is up to the national legislature to decide whether or not to grant tax benefits
to NPOs active in public policy or their donors. Given each nationís tradition and legal
system there are good arguments for either choice. NPOs should expect restrictions on
public policy activities in exchange for tax benefits. When restrictions are placed on
public policy activities, it is important to de fine clearly what activities are considered
related to public policy and what are not. For example, electoral activities are clearly
public policy related while educational activities are less easy to qualify.
A proviso to this analysis must be added, with reference to the former socialist states in
Europe. Neither NPOs nor public policy activities as defined herein existed in these states
during the last four decades. Therefore, it ma y be too early to draw firm conclusions. In a
very short period of time, the CEE countries, an d some of the NIS, have made incredible
progress towards re-creating civil society, and also towards democratizing/opening the
political process. But the relationship between these two trends has not been definitively
established. Since the right to lobby in a form al sense is relatively new, and not yet
widely practiced, the rights of NPOs to e ngage in this process have not been fully
addressed. On the other hand, the (perhaps more perceived than actual) use of NPOs in
certain countries as a vehicle for political forces which are out of power has led to
politicization of the sect or, and a backlash against NPOs in general.
• . Conclusion

As these trends take shape in the former socialist states, over time it is possible that more
limitations will be placed upon the public polic y activities of NPOs. The regulation of
economic activities on the part of NPOs may offer an example. After an initial period of
relatively little control, following the fall of the Soviet Union, well publicized cases of
abuse have led to the imposition of more restrictions on the range of permissible
economic activities in a number of countries. It would be inappropriate to assume that the
same process will apply to public policy activities. The point here is that practices in this
regard are still fluid and developing, and definitive conclusions are premature.
Nonetheless, it is hoped that the new demo cracies in Europe will benefit from the
experiences of other countries. The civil la w approach to public policy activities on the
part of NPOs should be carefully studied, since this is wher e comparable legal principles
are most likely to be found. To the extent th at limitations are deemed necessary, it is the
common law which offers the most experience and concrete examples. Additionally, it is
necessary to analyze the historical and so cio-political factors which temper these
systemic differences. In this fashion, it will be possible to determine the best approach in
particular countries
.

1. Universal Declaration of Human Rights, G.A. RES. 217 (III 1948), Art. 19, 20; International
Covenant on Civil and Political Rights, 999 U.N. T.S. 171, 6 I.L.M. 368, Art. 21, 22.

2. International Covenant on Civil and Political Rights, Art. 22 (2).
3. For further analysis concerning the role of NPOs in public debate, and guidelines concerning the
legal regulation of NPOs in gene ral, please see the Open Society Institute Handbook on Laws for
Civic Organizations, prepared for the Open Societ y Institute by ICNL, in particular Section 22.

4. For a more complete discussion of the meaning and significance of “public benefit”, please see the
ICNL Issue Paper devoted to this topic.

5. David and Brierly, Major Legal Systems in the World Today , Second Edition, The Free Press,
1978, p. 21.

6. Baptista, Rosario, Legislación Vigente para el Sector Privado y sin Fines de Lucro en Bolivia , p.
5.

7. Ibid. Hungary Country Report, Page 11, prepared by Gabor Gyorffy.
8. Select Legislative Texts and Commentaries on Central and East European Law , edited by Douglas
Rutzen, published by ICNL, the European Foundation Centre Orpheus Programme, and the Union
of Bulgarian Foundations, Bulgaria Country Report, Page 2, prepared by Stephan Kyutchukov.

9. Ibid. Bulgaria Country Report, Pages 2 and 9.
10. Ibid. Romania Country Report, Page 7, prepared by Lucian Mihai.
11. Ibid. Czech Republic Country Report, Page 8, prepared by Petr Pajas.
12. “The essence of charity…is that charities exis t for the public benefit.” Richard Fries,
Commissioner, Charity Commission for England and Wales.

13. Kevin Bales, A Brief Guide to British Charity Law , Ethics Development Initiative, p. 3-4.
14. [1981] 3 All E.R. 493 at 506 (Ch.D.)
15. See Re Public Trustee and Toronto Humane Society et al. (1987) 60 O.R. (2d) 236 and Section 92
(7) of the 1982 Constitution Act, 1985 R.S.C., Appendix II.

16. See First National Bank of Boston v. Belotti , 98 S.Ct. 1407; see also, Austin v. Michigan Chamber
of Commerce , 494 S.Ct. 652, 657 (“The mere fact th at the Chamber is a corporation does not
remove its speech from the ambit of the First Amendment.”)

17. See, in general, Chisolm, Politics and Charity: A Proposal for Peaceful Coexistence , 58 Geo.
Wash. L. Rev. 308; Galston, Lobbying and the Public Interest Rethinking The Internal Revenue
Codeís Treatment of Legislative Activities , 71 Tex. L. Rev. 1269.

18. Slee v. Commissioner , 42 F2d 184, 185 (2d Circ. 1930)
19. Buckely v. Valeo, 424 U.S. 1, 91-92 (1976)
20. See 26 I.R.C. 162 (e)(2); see also Regan v. Taxation With Representation (461 U.S. 540).
21. Chisolm, supra, at 337.
22. Provisions of the United States Tax Laws Affecting Not-for-Profit Organizations , Published by
ICNL.

•
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