Liability of Not-for-Profit Organizations

Country Reports: Western Europe

The International Journal
of Not-for-Profit Law

Volume 4, Issue 2-3, March 2002

Regional

Separate developments in Western Europe suggest that the recent spate of new legislation affecting not-for-profit organizations (NPOs) is bound to continue unabated for a few years.  Although other developments have been and will continue to be discussed at the country level, it is interesting to consider two Europe-wide initiatives, which can help to create an environment for comparative research and understanding of good practices with respect to the formation and existences of NPOs.  Such efforts are praise-worthy and deserve to be considered as important for reform efforts, even if there may be concerns about various aspects of the projects.

Foundation Law for Europe (EFC)

The European Foundation Centre (EFC) has begun a project to consider the development of a mechanism for recognition of foundations in Europe.  A “Legal Task Force” met in September 2001 to consider ways to enhance the legal and fiscal environment for foundations in Europe and decided that the aim should probably be to develop a “Model Foundation Statute” for Europe

The Draft Country Report Profiles (October 2001) of the Legal Task Force contain snapshot looks at the legal and fiscal regimes dealing with foundations in 9 European countries.  The intention is to provide information to support the aims of the project.  One of the most interesting aspects of the reports is the way in which they provide comparisons among the various countries and their view of foundations.  For instance, some countries permit foundations to be formed for private as well as public benefit purposes, while others do not.  Also, some countries permit foundations easy access to juridical personality, while others require advance permission for registration.  It appears that the rules differ in large part for historical reasons and the fear of private wealth and its access to political power.  There also appears to be a sense that new rules should enhance the public benefit work of foundations (similar to the reforms that are ongoing in Germany).  For further information on these developments, see Hanna Surmatz, Enhancing the Legal-Fiscal Environment for Foundations in Europe: The EFC Approach in SEAl, Vol. 4, #3.  Ms Surmatz is Legal Counsel to the EFC and can be reached at h.surmatz@efc.be.

Legal Status of NGOs in Europe (Council of Europe)

In October 2001 the Council of Europe issued a “Preliminary Draft Charter on the Legal Status of Non-Governmental Organizations in Europe.”  This was prepared by a committee headed by Prof. Jeremy McBride, Director of the Human Rights and Peace Programme at the School of Law of the University of Birmingham.  It was discussed in a November meeting in Strasbourg.  The draft covers many aspects of the ways in which NGOs operate and are governed, and it sets out a group of principles, without containing any explanation for them.  This effort is similar to other efforts with which ICNL has been involved (the OSI Guidelines, the World Bank “Handbook,” and the CIVICUS Principles), but there is no attribution to this earlier efforts to develop a set of rules to govern NGOs.

In addition, the lack of any supporting analysis is a weakness.  Although most of the principles make sense, without some explanation, it is difficult to imagine that all governments – even in Europe – will find them all to be acceptable.  In addition, this area of the law is exceedingly complex, and careful study would reveal greater nuances than the charter seems to be aware of.  For example, the rules for accountability and transparency seem to be too simplistic and, to some extent, impose greater burdens than necessary on NGOs (most countries do not require small NGOs to have independent audits, not should they).

In any case, however, both these efforts are worthwhile – but they should also be more fully collaborative than they presently are.  Not only should the two groups be talking with each other, they might even find it useful to consult with counterparts in other parts of the world.  Similar inquiries are being conducted in Canada, Australia, and have been conducted in South Africa.  Perhaps the comparative look at other solutions in other countries would be helpful. KWS

Austria

Reform of the Associations Law

Austria has been considering a proposal to reform the Associations Law since last autumn, when the government proposed new draft legislation.  The draft and its accompanying explanation are published here in German (VerG NEU) along with two sets of comments from bodies representing associations in Austria (comments one, comments two).

The government’s aim in proposing to amend the current legislation is to clarify the legal status of associations in Austria and to better protect the Austrian public in certain situations (insolvency of associations).  The proposed legislation is only 12 pages long, but the government’s detailed explanation takes up almost 60 more pages.  In particular the government aims to set up registers of associations, including a national register as well as to rewrite various procedures for associations operating in Austria.

One of the sets of comments comes from the IÖGV (the Representative Body of Austrian Public Benefit Associations), which seems to be fairly much against the proposal altogether.  This group does not want a central register; it thinks the proposals are too bureaucratic and ill-founded; and it objects that the associations in Austria are doing quite well and don’t need additional legislation to govern them.

The other comments come from Working Group 8 (Arbeitskreis 8), which represents some of the larger associations, including the Red Cross.  These comments are not quite so negative. But they also make the point that some of the government’s proposals, rather than simplifying the situation for associations, may make the legal environment more bureaucratic.  There is a point by point discussion of the government’s arguments that helps to clarify the issues.

As the process of considering the reforms continues, IJNL will report on developments.  KWS

France

New Relations Between the French State and NGOs:
The “State Association Charter”

By Caroline Loussouarn Newman *

On July 1, 2001, the French Government entered into a general agreement with the French NGO sector.  The event took place on the anniversary date of the French association law of July 1, 1901.  The agreement, referred to as the “State-Association  Charter” (Charter) was signed by the Prime Minister on the one hand and the President of the “Standing Conference of Associative Coordinations” (Conférence Permanente des Coordinations associatives – CPDA [1] ) on the other.

This agreement is not a legally binding document but a political and symbolic one, which grants public recognition to the NGO sector as a key social actor in French society.  Both parties to the Charter stipulate their future reciprocal commitments with the purpose of (i) strengthening democracy through greater public participation; and (ii) helping to ensure that “market economy [will not] deteriorate into a market society but instead will enable a greater solidarity”.

Commitments by the State include:

  • Promotion of volunteer work;
  • Improvement of public financing mechanisms, including better transparency;
  • Improvement of participation of NGOs in legislation drafting and decision making processes within their spheres of competence;
  • Promotion of charitable giving through greater tax incentives;
  • Promotion of understanding of the NGO sector by government officials, in schools, and in universities;
  • Promotion of the European statute for NGOs.

Commitments by the NGO sector include:

  • Respect of democratic principles within their governing organs;
  • Defining programs and projects in accordance with the needs of beneficiaries and members, taking into consideration the quality of relational service instead of the economic ends;
  • Developing methods for evaluations of projects;
  • Developing ethical financing practices, through greater transparency, diversification of funding, and the non-distribution constraint;
  • Establishing representative coalitions to ease the dialogue with public authorities.

Many of the above-mentioned reforms have already been underway since February 1999. For example:

  • With respect to the improvement of public financing mechanisms, a decree [2] of the Prime Minister established the possibility that state bodies may enter into multiple year agreements to subsidize the programs of NGOs.  A provisionary evaluation guide [3] for the implementation of such agreements was published in June 2001; the final evaluation guide is expected to be published in early 2002.
  • With respect to the promotion of voluntary work, several measures have been adopted.  For example, employees who were eligible for continuing education during working hours can now request that the training be related to their outside voluntary activities in addition to their professional careers. [4]   Another measure includes the possibility for employers to benefit from tax deductions for not having suspended the salary of their employees during employee time taken off (limited to 9 working days) in order to perform voluntary activities. [5]   A guide for volunteers was prepared by an inter-ministerial working group, describing the rights of volunteers. [6]
  • With respect to tax incentives for charitable giving, the finance law of 2000 had increased the tax credit for donations to charities of 50% of the amount of the donation for up to 6% of taxable income.  The finance bill for 2002 raises the tax credit to 10% of taxable income.
  • Other reforms include changes in the procurement rules, clarification of taxation of NGOs, etc.

Progress on the commitments stipulated in the Charter are to be evaluated every three years. The National Center for Associative Life [7] is to carry out the performance evaluation.

Although the new “Charter” has no binding force and mainly engages commitments of the current government, it’s symbolic nature is quite significant.  It is quite unlikely that future governments would denounce it, as it would be quite unpopular to do so.  It is also very likely that candidates to the upcoming presidential elections will use the commitments stipulated in the charter in their agenda.

For more information on the Charter and the reforms underway to implement it, please consult the following website: https://www.vie-associative.gouv.fr

*Caroline Loussouarn Newman is Project Manager in ICNL’s Washington office.  She can be reached at cnewman@icnl.org.

Notes

[1] The CPDA was created on February 21, 1992 and was established as an association on November 20, 1999.  It is an umbrella organization composed of fourteen French umbrella organizations representing the various sectors of activities of the NGO sector in France.

[2] Circulaire du 1er décembre 2000 relative aux conventions pluriannuelles d’objectif entre l’Etat et les associations.

[3] Ministry of Labour and Solidarity, Guide de l’évaluation, document proviso ire, June 21, 2001.

[4] Law n°2000-37 of July 6, 2000

[5] Since 1991, employees can request from their employers up to 9 days of leave to perform their duties as members of the governing body of a not-for-profit organization. If the salary of the employee was suspended by the employer, the employee would get a fixed stipend from the state. The new measure is an incentive for employers not to suspend the salary of the employee.

[6] The guide is available on-line on the site of the Ministry of Youth and Sports at: https://www.jeunesse-sports.gouv.fr/benevole/guide.htm

[7] The National Center for Associative Life – CNVA was established in 1983[7] as the first official body to represent the NGO sector.  The council works in coordination with national assemblies of NGOs and with members of the government committee representative of the NGO sector from the National Fund for the Development of Associative Life (FNDVA see Part II).  The council is composed of 72 members, 66 of which are representatives of the NGO sector, designated for a three year term by the Prime Minister upon proposition of the various competent ministries after consultation with the NGO sector.  The secretariat of the council is carried out jointly by the minister of Youth and Sport and the minister of Social Economy.  Its mission includes consultation on draft legislation affecting the NGO sector and preparation of proposals favoring the NGO sector.