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European Foundation Statute may be in peril, expert warns

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  • European Foundation Statute may be in peril, expert warns

EUROPE – The European Foundation Statute (EFS) is in danger of falling at the final hurdle before it becomes reality, a leading European lawyer has warned.

The European Commission's proposal for a statute, which is moving through the EU's legislative process, passed another milestone on 30 May when the European Parliament legal affairs committee (JURI) adopted its interim report on the EFS by 21 votes to 1, although with suggested amendments.

But to become law, the draft regulation must now be adopted unanimously by the soon-to-be 28 states and approved by the European Parliament (EP).

And it will be very difficult to get a united vote, says Jorge Carrera, legal adviser to Spain's permanent representation in Brussels, who has attended several meetings of the EP working party reviewing the proposal.

The EFS would create a pan-European legal entity, the European Foundation (FE).

This would provide a single set of rules for European public benefit foundations with activities in more than one member state, helping to reduce costs and legal uncertainty where they work across borders. It would enable them to pool and scale up their resources, and stimulate cross-border donations.

The EFS could also provide a level of transparency and accountability to individual foundations set up within its framework.

However, it would be an optional alternative framework and not replace or harmonise existing foundation laws.

"Every single country has a reservation about the EFS," said Carrera, addressing a session of the European Foundation Centre's (EFC) Annual General Assembly in Copenhagen.

The EFC has been vigorously advocating the case for an EFS for several years.

"There is a mood of scepticism, particularly because of the tax aspects," Carrera added.

The proposed FE structure would give tax relief on the income and expenditure of European foundations wherever they operated within the EU.

But since national tax regimes differ across Europe, some individual member states are reluctant to sign up to an all-embracing model.

"And some member states do not have a foundation vehicle in their legal framework, so they doubt whether a new legal vehicle is necessary," Carrera said.

There is also disagreement as to how 'public benefit' – a criterion for qualifying as an FE – should be defined.

Changes to the proposal contained in the EP report include a requirement for minimum assets of €25,000, which should be maintained throughout the FE's lifetime, a provision on timely disbursement (within 4-6 years) and a minimum duration for FEs (set at four years in principle).

The list of public benefit purposes has also been enlarged to include supporting victims of violence and terrorism and the promotion of interreligious dialogue.

But the report warns that tax concerns should not become a stumbling block to adopting the EFS.

It says an alternative option would be to exclude the tax provisions altogether, while reinforcing a number of core elements of the public benefit concept.

"For the EFC, it is now about politics, not about the law," said Carrera.

"First, I would consider going for a pure civil law instrument, without the tax element. At the same time, they should try to build a communications strategy towards all 28 member states."

However, there is some debate as to whether omitting the tax element would defeat the object of the EFS.

The Irish Presidency of the Council of the European Union has now created a compromise proposal that is being discussed at the next working party meeting.

On 2 July, the EP full assembly will vote on a motion for a resolution on supporting a Regulation.

Member states must then vote on the EFS by the end of this year.

The EFC is now in discussions with the Lithuanian EU Presidency, which takes over from Ireland next week, and which has committed to pursuing the issue after the summer break.

Meanwhile, the European foundation sector has sent an open letter to Ireland, Lithuania and the next two Presidency countries – Greece and Italy – calling on them to champion the EFS.

It said an EFS would help foundations to better channel their resources to citizen initiatives and wellbeing across Europe, while also reinforcing the values espoused by the European project.

It also said legal and administrative barriers to cross-border activities currently cost Europe's 110,000 foundations more than €100m a year.

Several hundred individuals and organisations, representing 7,000 foundations working in 30 countries, including the EFC and Donors and Foundations Networks in Europe, have signed the letter.

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