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 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.

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Cooperation Macedonia (old law): Permission to join international associations Serbia: Law on Donations (withdrawn) Egypt: Approval from government for domestic and foreign funding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