EN Official Journal of the European Union C 351/57

Opinion of the European Economic and Social Committee on the ‘Proposal for a Council Regulation on the Statute for a European Foundation (FE)’

COM(2012) 35 final — 2012/0022 (APP)

2012/C 351/12

Rapporteur: Ms HELLAM

On 10 May 2012, the European Commission decided to consult the European Economic and Social Committee, under Article 304 of the Treaty on the Functioning of the European Union, on the

Proposal for a Council Regulation on the Statute for a European Foundation (FE)

COM(2012) 35 final — 2012/0022 (APP).

The Section for the Single Market, Production and Consumption, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 30 August 2012.

At its 483rd plenary session, held on 18 and 19 September 2012 (meeting of 18 September), the European Economic and Social Committee adopted the following opinion by 132 votes to one, with eight abstentions.

1. Conclusions and recommendations

1.1 The European Economic and Social Committee (EESC) supports the proposal of the European Commission (EC) for a Council Regulation on a European Foundation Statute (EFS), which will allow for the creation of the European Foundation (Fundatio Europaea). The EESC had called for this Statute (1) with the aim of facilitating cross-border activities and cooperation of public benefit foundations in the European Union and thus contributing to the promotion of economic and social cohesion in the EU.

1.2 The EESC now recommends that the European Parliament and the Council adopt the proposal without delay. Indeed, more than ever before, foundations are tackling issues that span national borders, issues that require an efficient organisational form. Foundations at the European level that are active in the areas of science, research and societal issues need a legal form that is recognised in every EU Member State.

1.3 The foundation sector itself and its representative organisations and networks at national and EU levels have repeatedly called for an EFS as the most cost-effective solution for addressing cross-border barriers and thereby stimulating foundation activities across Europe.

1.4 The Fundatio Europaea (FE) will be optional and will not replace local and national legislations. It will, however, give the opportunity to foundations opting for the statute to work in each country of the EU without the need to create local structures, provided that the foundation will be recognised in the country of origin of its creation.

1.5 The EESC agrees that the proposed action fully complies with the subsidiarity principle. EU action is necessary to remove national barriers and current restrictions encountered by foundations when they operate in several Member States. The current situation shows that the problem is not adequately covered by national measures and the transnational character of the matter requires a European framework to ensure the development of foundations whose mission is to work on a European scale. To meet this objective, an action taken by a Member State on its own would not guarantee optimal results in respect of the principle of the single market.

1.6 The rationale of the proposal is to create an innovative legislative framework which will be additional to existing national laws, which will remain unchanged in their form and scope. Member States will retain the ability and choice to maintain and develop national forms of foundations.

1.7 The EESC agrees with the choice of the Regulation for the proposal. It is the most appropriate legal tool to ensure consistency in the Statute in all Member States and to increase trust, as it requires a direct and uniform application of rules. This is further strengthened by Articles 47 and 48 on the cooperation between supervisory authorities, and with tax authorities respectively.

1.8 The EESC agrees with the core features of the EC proposal on an EFS, which aims to strike a balance between easy access to the Statute in terms of formation, and trustworthiness in terms of transparency and accountability.

1.9 The proposal includes tax elements which do not create a new regime but put automatically FEs on an equal footing with national public-benefit entities. This section of the proposal must be reviewed carefully as it must not jeopardise the much needed adoption of the proposed Regulation.

2. Gist of the proposal

2.1 At Union level there is no possible way to harmonise the legal frameworks in which the public benefit purpose entities carry out their activities in the EU. Some estimated 50+ laws govern the formation and operations of foundations across the EU. Differences between civil and tax laws across the Member States make cross-border operations of those entities costly and cumbersome. In addition, legal, tax and administrative barriers hamper foundations' cross-border work. As a result, the cross-border channelling of funds and support to public benefit purposes remains largely underexploited.

2.2 To address these problems, the Commission tabled a proposal for a Regulation which sets a new European legal form intended to facilitate foundations' establishment and operation in the single market. This legal form will allow foundations to more efficiently channel private funds to public benefit purposes on a cross-border basis in the EU. This, in turn, should result in more funding being available for public benefit purpose activities and therefore, should have a positive impact on European citizens' public good and the EU economy as a whole.

2.3 The proposal lays down the main features of the FE, the methods of formation and the rules concerning organisation of the FE. Furthermore, the possibility of converting the FE back into a public benefit purpose entity or winding up is foreseen under certain conditions.

2.4 The regulation sets minimum supervisory powers of the supervisory authorities in each Member State, in order to enable them to effectively oversee the activities of the FEs registered in that Member State. It also provides for the automatic application to the FE and its donors of the same tax benefits as granted to domestic public benefit purpose entities.

3. General comments

3.1 The EESC has acknowledged in its previous opinion the significant contribution of foundations in numerous areas such as human rights, the protection of minorities, employment and social progress, protection of the environment and the European heritage, and the promotion of scientific and technological advances. They also play a key role in helping to achieve the goals of smart, sustainable and inclusive growth set by the Europe 2020 strategy.

3.2 Within the EU, people, goods, services and capital can generally move freely across borders, something that is not generally true for actions and resources devoted to public benefit purposes. This is the purpose of the creation of an FE, a new optional legal entity that stands alongside those legal forms already existing in EU countries.

3.3 The EESC considers that with the European Foundation Statute, foundations will benefit from more uniform conditions across the EU by using one legal tool and a governing structure which will be comparable in all Member States, and which will give greater legal certainty and fewer compliance costs.

3.4 The Statute will facilitate the pooling and scaling up of their expertise and resources. Having a recognisable European form for foundations will also stimulate cross-border initiatives and donations. Member States' economies are likely to see more funding become available for important fields such as research and education, social and health services, culture or the protection of the environment.

3.5 The EESC welcomes the fact that the EC proposal focuses only on public benefit foundations. It notes that the definition of public benefit purposes set out in Article 5 is based on a closed list of the most common purposes that can be found in the majority of Member States. This provides for increased legal certainty as to what is of public benefit, but may prove very cumbersome to update, as this could only be done by unanimity decision of the Council and consent of the European Parliament at the occasion of the first review of the Regulation seven years after its entry into force.

3.6 The EESC notes that the concept of "serving the public interest at large" could be refined in the Regulation and specify that the FE must have (an) identifiable public benefit purpose(s) and serves the public interest at large and/or a section of the public. The EESC would also recommend that the following elements be considered in determining whether a body provides or intends to provide public benefit: a) how any (i) benefit gained or likely to be gained by any persons involved in the body or any other persons (other than as members of the public), and (ii) disbenefit incurred or likely to be incurred by the public, in consequence of the body exercising its functions compares with the benefit gained or likely to be gained by the public in that consequence, and b) where benefit is, or is likely to be, provided to a section of the public only, whether any condition on obtaining that benefit (including any charge or fee) is unduly restrictive.

3.7 The EESC welcomes other core characteristics of the EFS as set out in the proposed Regulation, which it had recommended in a previous opinion, including: a) the European dimension of the FE with activities in at least two Member States. This cross-border component should be required at the time of registration and during the lifetime of the FE, b) the method of formation of the FE either ex-nihilo, by converting a national foundation into a European Foundation or by merging national foundations. The choice of forming an FE could be performed only by legal and natural persons who actually have or develop activities on a European scale, which provides each Member State with the assurance that the national foundation framework will retain its specificities, c) the minimum amount of assets of the FE (EUR 25 000) with a view to increasing creditor protection without preventing smaller initiatives from starting, d) a wide legal capacity including the right to hold movable and immovable property, to receive and hold gifts or subsidies of any kind, including shares and other negotiable instruments, from any lawful source, and e) within the scope of the EF's public benefit objective, the ability for the FE to carry out economic activities directly or through another legal entity provided that any income or surpluses are used in pursuance of its public benefit purposes.

3.8 The EESC notes that the Regulation aims to facilitate the implementation of recent rulings of the European Court of Justice (2) giving the possibility to make transnational donations to FEs and treating the FE as a public benefit foundation under local tax law. The EESC believes that for tax purposes, the FE should be granted standard non-profit status in full respect of the competence and practice of the tax authorities of the Member State where the EF is tax-liable, to determine its tax treatment in accordance with applicable tax regulations at the national level. While the Member States cannot discriminate against FEs vis-à-vis national public benefit foundations, which is contrary to EU treaty and ECJ case law, they have the leeway to choose which tax regime applies. Member States should also specify what tax regime will apply to FEs, when several regimes for not-for profit organisations can be found in their jurisdiction.

3.9 Finally, the proposed Regulation should fully take into account recommendations made by the foundation sector to ensure that the final instrument on the one hand has a genuine European dimension without undue references to national provisions, and, on the other hand, is both comprehensive and straightforward which will maximise its future use.

4. Specific comments

4.1 As outlined in the aforementioned EESC's opinion, the essential advantages and benefits of the EFS would be fourfold i.e. efficiency and simplification, accountability, economic benefits, and political and citizen benefits. The EESC believes that the proposed Regulation strikes a good balance between these elements, while some proposals could be refined as explained below.

4.2 The EESC wishes to take note of the translation of specific terms in the proposal, namely the concept of public benefit, which in some languages may be translated as public utility or general interest and refer to a very specific type of existing national legal form with an interconnected set of rights and requirements. In particular this could lead to some confusion as to which national public benefit entities would be entitled to convert to an FE, unless this is clearly specified by the Member States.

4.3 The EESC considers that it is up to the Member States to specify which public benefit entities and foundations could convert to an FE or merge to form an FE. This would exclude by definition unincorporated entities, such as trusts, but would cover foundations with public benefit aims which in some EU Member States house non-autonomous funds, as well as public benefit endowed funds.

4.4 The EESC believes that given their public benefit character and tax status, FEs set up in perpetuity should spend their annual income in a reasonable period of time (e.g. within a period of 4 years), while securing the possibility of allocating part of their resources (e.g. one third) to maintain the value of and/or to grow their endowment. The latter would not apply to FEs which are set up for a limited period or to a spend-down foundation.

4.5 The EESC wishes to point out that the EC proposal's requirements in terms of transparency, particularly as far as the issue of external audit is concerned, are more demanding for the FEs in relation to the size of their required assets than existing requirements for national foundations across the EU. This may be a deterrent to the future use of the FE. Audit requirements should be effective only above certain threshold(s) (e.g. EUR 150 000) and/or an average number of at least 50 employees. For FEs with assets less than the proposed EUR 150 000 threshold, an independent examiner could be used instead of an auditor. Indeed, current practices show that 8 Member States do not require external audits, while, where they do, the thresholds may vary from over EUR 15 000 (Estonia) to over EUR 2,5 million (Poland) and employing over 50 staff (3). This proportionate approach as regards auditing does not discharge the FE from fulfilling other transparency and accountability provisions laid out in the Regulation regarding in particular regular (annual) public reporting.

4.6 While the FE should be able to pursue "related" economic activities, i.e. related to its public- benefit mission, the notion of unrelated economic activities may be more difficult to define. It might be clearer to allow the FE to undertake only indirect unrelated economic activities through another legal entity.

4.7 The EESC believes that the Regulation must set out provisions regarding the right of the FE's employees to be informed and consulted at the appropriate transnational level in situations where the FE has a significant number of employees in different Member States as follows: a) as regards the social dimension, the Regulation would in general refer to the principles of the law of the place where employees carried out their work, b) as regards the practical arrangements for the transnational information and consultation of employees, these should be determined primarily by means of an agreement between the parties in the FE, c) in the absence of such an agreement the requirements set out in the Regulation in Article 38 for the purposes of informing and consulting employees should be applied, and d) the final objective should be to maintain acquired rights, which are currently enjoyed by employees working in national-level foundations, while avoiding an excessively cumbersome system.

4.8 The EESC believes that the Regulation as it stands creates de facto some completely new provisions for volunteers, while there is no European status/legal definition of volunteers, or their rights and duties. In the absence of such fundamental elements, the EESC believes that information and consultation of volunteers of the FE should be conducted according to applicable national laws. As regards the practical arrangements for the transnational information and consultation of volunteers, these should be determined primarily by means of an agreement between the parties in the FE. Here the idea is to not circumvent existing laws on and status of volunteers, as well as to not make the use of the FE too complex and cumbersome by adding requirements which are not to be found in real situations. The EESC also believes that volunteers' rights to information and consultation cannot compare with employees'; this would create unprecedented rights and legal complexities.

4.9 The EESC welcomes that the proposed Regulation follows its initial recommendations to delegate the oversight of EFs to competent designated authorities in the Member States on the basis of the commonly agreed EFS standards regarding registration, reporting and supervision requirements set forth in the EFS Regulation. Where such authorities do not already exist, the EESC believes that company registration authorities could play such a role. The EESC considers that it should be left to the discretion of the Member States to designate one or more authorities according to needs and practices.

4.10 Should the EU legislators wish to retain tax elements in the final Regulation, the EESC advises that they take due account of the approach which foundation practitioners would recommend. This could entail for instance a combination of the civil law instrument (the EC Regulation) and tax law requirements that Member States would consider essential (e.g. disbursement of the annual income in a reasonable period of time).

Brussels, 18 September 2012. The President of the European Economic and Social Committee Staffan NILSSON

(1) EESC opinion: OJ C 18, 19.1.2011, p. 30.

(2) "Persche" (Case C-318/07), "Stauffer" (Case C-386/04), "Missionswerk" (Case C-25/10).

(3) See Foundations Legal and Fiscal Country Profiles, European Foundation Centre 2011.