Social Economy : New Legal Framework for European Foundations

Article excerpt

Foundations for public benefit should be able to exercise their activities in other EU member states more easily. With that aim in mind, the European Commission presented, on 8 February, a draft Council regulation creating a new legal statute for a European foundation, to remove the legal and tax barriers these entities encounter in carrying out their tasks in the EU.

These foundations, most of which are created to address national or regional needs, raise funds and manage projects in different sectors: social services, education, research, health and environmental protection. They are important players in the European social economy, as recognised by the Social Business initiative of 25 October 2011, and make a "substantial contribution to achieving the ambitious goals of smart, sustainable and inclusive growth set by the Europe 2020' strategy," reads the proposal Their assets are estimated at between 350 billion and 1,000 billion.

OBSTACLES

Foundations for public benefit, the only type of foundation recognised in all member states, are increasingly developing activities in member states other than the state where they were initially formed. But they are confronted with very different legal and taxation contexts, which creates conformity costs that compromise their effectiveness and limit possibilities for accepting donations from another EU state.

Sometimes they are obliged to set up other structures in another member state where they wish to intervene. For example, Europea Sociedad y educacion, a foundation initially formed under Spanish law, had to use this solution to engage in activities in Portugal because that state does not legally recognise the offices of foreign foundations. It had to spend 250,000 in formation expenses. The German foundation Miriam, which supports people with disabilities, was unable to set up a structure in Ireland, where it has assets received as donations. The Irish authorities turned down this option because the foundation had no public activity in Ireland and was registered in association with a German regional authority.

The European Parliament has requested in several resolutions (in 2006, 2009 and 2011) a specific framework permitting the development of foundations' activities and the collection of cross-border donations. A 2008 study for the Commission, carried out by the Max Planck Institute for Comparative and International Private Law and the University of Heidelberg estimated the cost of these cross-border activities for foundations at between 90 million and 101.7 million. The study concluded that a European foundation statute is needed to remove these obstacles and strengthen the European dimension of foundations' activities pursuant to the principle of freedom of establishment and free movement of capital.

OPTIONAL LEGAL SCHEME

Since these entities do not benefit from the advantages of the single market and carry out tasks that form part of the social economy, and because an appropriate framework cannot be created under national legislations, the Commission bases its proposal on Article 352 TFEU. …