NGO Legal Reform: Principles and Issues

1. NGO Legal Reform: Principles and Issues ICNL Douglas Rutzen

2. 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

3. 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

4. ECHR, Article 11 • “Prescribed by law” • “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. • “Convincing and compelling reasons” for restriction, which must be “proportionate to aim” pursued.

5. 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

6. 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

7. 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

8. 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Cooperation • Macedonia (old law): Permission to join international associations • Serbia: Law on Donations (withdrawn) • Egypt: Approval from government for domestic and foreign funding

9. 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

10. 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

11. 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.

12. 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

13. Implementation • Identifying root causes • Training Often Isn’t the Answer • Many Countries – Institutional Reform • Non-exempt Foundations Don’t Pay • Watchdog organizations: Polish Commission

14. 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

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