Proposal for a Legislative Initiative on Cross-Border Activities of Associations

FEEDBACK FROM FRANCE GÉNÉROSITÉS

The Social Economy Action Plan adopted on December 9th of last year establishes the potential of the social economy to promote democratic participation and the creation of an economy that serves everyone. The Council’s upcoming recommendations aimed at developing the framework conditions for the social economy should serve to harmonise the policy and legal frameworks of the various families of the social economy, in which non-profit organisations (including associations and foundations) are major players.

France générosités is the union of public-interest organisations appealing to the generosity of the public. It represents 131 of the largest French associations and foundations involved in all fields of general interest. It is the preferred counterparty of the French government authorities in all matters concerning the economic model as well as the legal and tax framework of non-profit organisations (NPOs). France générosités is committed to defending the specific attributes of non-profit models within the Social and Solidarity Economy in France and Europe.

The European Parliament’s legislative initiative resolution makes two proposals to the European Commission, which we believe are complementary, proposing a regulation instituting a new non-profit legal entity, “European association”, as well as a directive on minimum standards for NPOs. These proposals consolidate the action of non-profit organisations and invite us to propose that the first propose covers both associations and foundation (as an organisation not based on membership).

France générosités welcomes the initiative of the European Parliament and the ambition of its two proposals, which are the subject of this contribution. It is time for the European Union to act, both for reasons of consistency with its ambition for developing the social economy and to guarantee the protection of freedom of association in the 27 countries of the European Union.

1. The need for EU action and its impact

In light of its policy in favour of the social economy, the action of the European Union is expected (1) for reasons of consistency and efficacy of the European policy in favour of associations and foundations and (2) in order to guarantee the freedom of association in the 27 countries of the EU in a political climate where the freedom is the target of attempts to restrict it within the Union itself.

Since the 1980s, the Parliament, non-governmental organisations and the European Economic and Social Committee (EESC) have all been working towards recognising the role of associations at the community level, as well as towards recognising a European statute for associations and, more recently, a European statute for foundations.

In 2001, the statute for a European company[1] and then in 2002 the statute for a European cooperative[2] were adopted, demonstrating once again the value of creating supranational structures in a single market, but the statutes for a European association and a European foundation face opposition on principle from the Member States.

The Social Economy Action Plan grants political recognition to the Social Economy. It gives an inclusive definition of the Social Economy, including on one hand non-profit organisations (mainly associations and foundations), on the other hand profit organisations such as cooperatives, mutual societies and social enterprises.

Therefore, it is time to remove the obstacles that are currently hindering the activities of European associations and foundations within the single market, even though they represent more than 80% of structures of the social economy in France. That way, they will be able to contribute fully to the implementation of the European pillars of social rights and sustainable development goals and to future economic and social challenges.

The general trend of shrinking the space for civil society in the world and in Europe and the obstacles to funding (a fortiori cross-border funding) are having a significant impact on the ability of NPOs to pursue and fund their work and are threatening civil society as a whole. Restrictions have been imposed on important organisations that are involved in, for example, the consequences of the Ukrainian conflict, the reception of refugees at Europe’s gates, protection of minority rights or defence of the environment.

Therefore, in an own-initiative opinion of 19 October 2017, the EESC called for resuming talks on a European association statute in order to ensure the implementation of Article 11 of the Treaty on European Union on structured dialogue with civil society.[3] That call was repeated in 2021[4] in light of the current political climate, which, in its view, is propitious to such talks. Indeed, in view of the indispensable place of NPOs in the transformation of the European social, economic and civic space, it now seems essential:

to establish civil dialogue and create a real place for civil society in the European Union;
but also to act to protect the freedom of association that is enshrined in the Charter of Fundamental Rights and recognised, in French law, as a “fundamental principle recognised by the laws of the Republic”.

2. Comments on the conceivable options for solving the problems

The Parliament’s proposal for a regulation would address operational issues that stakeholders have wanted for many years by introducing rules to remove obstacles to actions and partnerships among NPOs of different Member States, thereby opening up access to the freedoms of the single market.

The Parliament’s proposal for a directive would guarantee freedom of association in the 27 countries of the European Union, a right provided for in the Charter of Fundamental Rights of the European Union, which could be reinforced by a harmonised legal and regulatory framework. This seems to us to be a major issue at a time when, as the European Parliament has pointed out, attempts are being made to restrict the freedom of association within the European Union.

No article of the TFEU would cover all of these issues. Therefore, Article 114 TFEU could a legal basis for adopting this legislation. Indeed, as the Court of Justice has repeatedly pointed out, Article 114 constitutes a legal basis for adopting measures to eliminate obstacles to the free movement of capital, goods and persons.

Nevertheless, in view of the specific nature of the organisations covered by the proposed legislation (non-profit organisations), the Commission must take a broad view of the internal market, beyond for-profit economic operators. The choice of Article 114 as the legal basis does not rule out the possibility of combining that article with other provisions of the TFEU, in particular Article 352.

We feel this legal basis is better suited to the issues at stake. However, Article 50 taken in isolation would considerably reduce the scope of the text, both in its objective and in its means. All the more since the sole use of Article 50 is the reason of the failure of this status for 30 years.

Regardless of the legal basis envisaged, it will be wise to pay attention to the terminology used. The concept of “public utility”(utilité publique) used in Article 14 of the proposed directive in its French translation corresponds in reality to the French legal concept of “general interest”.[5]

3. Expected impacts

3.1 Recognise and guarantee freedom of association

The statute for a European association (option 1 proposed by the European Commission) allows this legal form to be recognised in all the Member States without any specific formalities and makes it easier to transfer the registered office from one Member State to another without losing legal personality. Therefore, the regulation proposes a specific statute for associations, similar to the European Company and the European Cooperative Society. European associations would thereby be guaranteed the same treatment throughout the European Union. France générosités calls for the application of this principle to European foundations.

Furthermore, the proposed regulation summons up the principle of freedom of association, which implies freedom of membership and freedom to determine who may or may not be a member of the association according to objective and reasonable criteria, subject to compliance with the principle of non-discrimination.

Freedom of association also implies freedom of management: the proposed regulation points out that an association is free to organise its governance provided that it operates democratically and has two bodies: a board of directors and a general assembly.

Lastly, the proposed Regulation makes it possible to open regional chapters that have legal personality but act in the name and on behalf of the European association. That should facilitate coordinated action by associations whose scope extends over the territory of several Member States.

Nevertheless, France générosités notes that the creation of a European association statute is accompanied by the creation of new oversight bodies. In this respect, adjustments should be made to preserve freedom of association in the same way in all Member States.

Consequently, the mission of the “National associations body” must be limited to a simple registration within a short time frame. In addition, the “European Associations Board” must be able to incorporate national association representatives (such as the High Council for Associations in France – Haut conseil à la vie associative) in order to bring up the problems in the field.

France générosités also supports the alternative proposal to create a new national non-profit organisation in each national legislation based on a harmonised definition of “disinterested administration”. This new national legal entity would be recognised in other Member States’ jurisdiction by mutual recognition. This proposal is similar to option 2 proposed by the European Commission but goes further the sole matter of cross-border activities.

3.2 Recognising the Role of NPOs in Developing the Internal Market

The Parliament’s proposals for a regulation and a directive constitute an act of recognising the role of associations and NPOs in the social economy and in the development of the internal market. Indeed, the Parliament expressly recognises the possibility for non-profit organisations to engage in economic activities (recital O of the Resolution of 17 February 2022) which are inseparable from exercising the statutory non profit objectives entrusted to them.

This is formalized in the proposed regulation and directive by a definition of non profit status that allows association and NPO to develop economic activities related to the non profit objectives (if applicable, of public utility) [6] and to make profits which could only be reinvested in the achievement of

The non profit objectives. Furthermore, these profits are the subject of a separate presentation in the financial statements prepared by the board of directors.[7]

This is also reflected in a definition of economic activities,[8] which States are not authorized to restrict except for reasons of public safety hazard.

France générosités is in favour of such an openness, which corresponds to the actual operation of many non-profit organisations. It should be said that the income from any economic activities must be able to be used to support the non-profit activities of the NPO as well as the economic activity itself insofar as that activity is useful or even necessary to the non-profit objectives of the NPO.

However, France générosités notes that the regulation of State aid is not the subject of a specific provision in these proposed regulation and directive. The European Commission’s Social Economy Action Plan presented in December 2021 as well as the Parliament’s resolution of 6 July 2022 called for a necessary adaptation of the legal framework of state aid to the specific needs of the social economy. Therefore, that regulation must guarantee more firmly that NPOs can engage in activities of selling goods and services which must not be hampered by State aid.

Furthermore, France générosités calls for the utmost vigilance over future changes to the General Block Exemption Regulation so as not to violate the principles cited above and so that that regulation will be well aligned with recognising the non-profit status of organisations.

Finally, France générosités regrets that the tax issues are not better taken into consideration, beyond the principle of equal tax treatment and non-discrimination should allow a European non-profit organisation to enjoy the same benefits as a comparable national organisation.

Conclusion:

France générosités is at the disposal of the Commission to participate in the expert workshops that it could organise on specific topics related to this legislative initiative.

You can see the Lagodinsky report here : europarl.europa.eu

You can find the french version on our participation : Proposition d’initiative législative sur les activités transfrontières des associations

[1] Council Regulation (EC) No 2157/2001 of 8 October 2001 on the Statute for a European Company (SE)

[2] Council Regulation (EC) No 1435/2003 of 22 July 2003 on the Statute for a European Cooperative Society (SCE)

^[3] EU funding of civil society organisations (own-initiative opinion), adopted on 19 October 2017, ref. SOC/563-EESC-2017-01953-00-01-ac-tra

[4] Creating a European statute for associations and NGOs which provides a precise definition of a European NGO or association (information report), adopted on 6 October 2021, ref. SOC/639 – EESC-2020-01567-00-01-RI-TRA (EN) 2/5

[5] We have at your disposal a note that defines the following terms as used in French law: general interest / public utility / social utility.

[6] Article 2a of the proposed regulation / Article 2, 2a of the proposed directive

[7] Article 15, 8 of the proposed regulation

[8] Article 24 of the proposed directive