NGO Legal Reform: Principles and Issues

ICNLDouglas Rutzen

Scope of Discussion

• Guiding Principles and Motivations– Human Rights; Democratic and Economic Motivations

• NGO “Lifecycle” Issues– Registration/Incorporation– Internal Governance– Activities and Asset Management– Supervision– Termination

• NGO Tax Benefits• Process of Reform

Human Rights Context

• Universal Declaration– Articles 19 and 20

• International Covenant on Civil and Political Rights– Articles 19, 21, and 22; Optional Protocol

• African Charter on Human and Peoples’ Rights• ECHR

– Article 11

ECHR, Article 11

1. “Prescribed by law”2. “Necessary in a democratic society in the

interests of”:• national security or public safety, • the prevention of disorder or crime, • the protection of health or morals, or• the protection of the rights and freedoms of others.

3. “Convincing and compelling reasons” for restriction, which must be “proportionate to aim” pursued.

Additional Motives for Reform

• New NGO Legislation in Every Accession Country– Motivations: Human Rights and Legal

Commitments; Economic Development

• Employment and Economic Growth– Germany: 4% of Total Employment; 10% of

Service Employment– 1 of 7 New Jobs in France; 1 of 8 New Jobs in

Germany

Registration

• Principle: Simple, inexpensive administrative act• Issues

– Overbroad Grounds for Refusal• Croatia: “lacking seriousness”• Egypt and Kenya: “security issues”; “national

interests”;• Korea: “reasonable”; • General references to violating “law and ethics”

• Other Burdens: Publishing bylaws, restrictions on founders (nationality, felons), endowments

Internal Governance

• Principle: Broad discretion to structure internal governance without government interference

• Issues– Egypt: appoint directors, revoke decisions.– Croatia: Constitutional Court Case– Requiring boards of directors and auditing committees

for associations– Restricting board membership

Activities

• Principle: Broad discretion to carry out activities consistent with Article 11

• Issues:– International Cooperation

• Macedonia (old law): Permission to join international associations

• Serbia: Law on Donations (withdrawn)• Egypt: Approval from government for domestic

and foreign funding

Asset Management

• Principle: Broad discretion vested in organization to prudently achieve return

• Issues:– Czech Republic (old law): Limited to state

bonds.– Bosnia (old law): Government control over use

and transfer of assets.– State Banks

Supervision and Reporting

• Principle: Narrowly tailored to meet state interests in benefits provided

• Issues – Programmatic and financial reports for PBOs– Simplified reporting for other organizations and

small entities– Argentina, Armenia: attendance at meetings– Compare to regulation of companies

Termination and Dissolution

• Principle: Article 11 requirements apply not only to formation but also termination: European Court

• Issues – Intermediate sanctions for organizations and directors.– Termination if activities no longer “useful,” or

“necessary” for public interest.– Goals “impossible” to obtain.– Distribution of assets: reversion to state or NGOs

controlled by state.

Tax Benefits for NGOs

• Organizational Tax Benefits– All organizations exempt on grants, donations,

dues, etc.– Public Benefit Status (PBOs)– PBOs exempt on additional sources, such as

passive investment income and profits from economic activities

• Incentives for Philanthropy– Hungarian 1% law

Implementation

• Identifying root causes– Training Often Isn’t the Answer– Many Countries – Institutional Reform

• Non-exempt Foundations Don’t Pay

• Watchdog organizations: Polish Commission

Process

• New Legislation in Every CEE Country

• The NGO Sector Plays an Active, Leading Role– Encouraging Cross-Sectoral Working Group– Principles, Broader Participation, Paragraphed

Version, Participation

Summary

• NGO “Lifecycle” Issues• Tax Legislation• Implementation• Focus on Reform Process