NGOs and the Law

Foundations of Charity

The International Journal
of Not-for-Profit Law

Volume 3, Issue 3, March 2001

By Charles Mitchell and Susan R. Moody, eds. (2001: Hart Publishing, Oxford-Portland Oregon)
Reviewed by Karla Simon

Foundations of Charity contains a series of essays on the historical underpinnings and current status of the definition of “charity” for legal purposes. It is a significant book – addressing theoretical as well as practical issues with respect to the general topic. The essays and authors include the following:

  • John Gardner: The Virtue of Charity and it Foils;
  • David Stevens: Rescuing Charity;
  • Alison Dunn: Charity Law as a Political Option for the Poor;
  • Susan R. Moody: Self-Giving in “Charity”: the Role of Law;
  • Mark Friedland: Charity Law and the Public/Private Distinction;
  • Rob Atkinson: Problems with Presbyterians: Prolegomena to the Theory of Voluntary Associations and the Liberal State;
  • Charles Mitchell: Reviewing the Register;
  • Patrick J. Ford: Public Benefit versus Charity: A Scottish Perspective; and
  • Michael Chesterman: Foundations of Charity Law in the New Welfare State.

With such distinguished authors as these addressing such important topics and from such varying perspectives, it is clear that the book makes a significant contribution to the literature.

The underlying theme of much of the book is the need to look – in a 21st Century context – at what the role of the “charity” sector should be, both vis-à-vis society and vis-à-vis the state. This has both a sociological/political aspect and a legal aspect.

In legal terms it is relevant to discuss to what extent public-serving not-for-profit entities (PBOs) are creatures of public law and to what extent they are creatures of private law. Further, what difference does it make if the legal system treats them as public law entities because of their public-serving functions? In general, the approach that most Western countries have taken, is that the public-serving functions of most organizations established by private individuals do not cause them to be seen as public law organizations. The fact that they are established by private individuals makes them quintessentially creatures of private law. Indeed, many government-organized NPOs, including PBOS, are organized under private law and as such are governed by the legal requirements of the private law system.

The fact that PBOs serve the public, does suggest, however, that they must be more responsive to the public than organizations that generally serve their members (MBOs). This requires greater transparency of operations as well as more significant accountability mechanisms for PBOs ( as opposed to MBOs.) Setting the level of appropriate accountability and determining who exercises it are appropriate issues for continuing discussion. Many of the essays in the book look at this matter from different perspectives, as the titles listed above illustrate. What is clear is that PBOS lack the automatic accountability available through share-holding in for-profit companies. Thus, watchful oversight mechanisms – through self-regulation, by courts or quasi-judicial bodies, such as the Charity Commission, by administrative agencies, by the public through disclosure laws, etc. – are necessary.

As a practical matter, this is a political as well as a legal question – each country must determine oversight mechanisms in accordance with national traditions. For example, in the Netherlands, self-regulation of public fund raising by PBOs works well. In other countries regulation is viewed as being necessary, but the degree and manner must be developed with the local context in mind (in the U.S., for example, also taking into account the First Amendment). The essays in the book frequently address these issues in both a theoretical and a practical way, and, in doing so, contribute to the current debate about what good practices in this regard should be codified in national laws.

A second theme running through many of the essays is what the concept of charity means in the modern world, with the decline of the Welfare State. Here one sees discussions of the relationship of charity (or PBOs) to the public sector. These relationships are evolving as we move from the 20th century to the 21st, and a discussion of them in another context (Italy) can be found in an article found in this issue of the Journal. In particular the essay by Susan Moody explores these themes. They are also present in legal developments in such countries as Hungary, the Czech Republic, and the People’s Republic of China, where new legal forms have been developed to receive assets (e.g., hospitals, schools, art institutions) that are privatized from the state into the PBO sector. While one assumes more in the West about how these then become “private” institutions (per the discussion above), the rationale behind such an approach bears more theoretical analysis. The essays in this book contribute to the debate.

In looking at the role of charity, one also needs to decide how the sector is distinguished not only from the state but also from the commercial and political sectors. The former distinction is especially pertinent today as charities are encouraged to develop business models of operation and to find “economic” activities to sustain themselves. These issues are going to continue to be debated over time, with, one suspects, continued attention from legislature as PBOs attempt to verge more closely to the commercial realm. Various essays in the book delve into this important question.

As to differentiating PBOs from political entities, the essays look at the issue in the historical context of the concept of charity in the common law tradition. This is important, because there has been considerable debate about the unwillingness of courts to be flexible in this regard in various countries (e.g., England, and, more recently, in Canada). Elsewhere in this issue we point out, however, that the distinction between permitted “political” activities of PBOs and those that are not permitted (because they are reserved to political parties) has been discussed in both France and Germany, both of which are civil law countries. Rather than being defensive about the common law tradition in this regard, it is important to engage in significantly more comparative research and analysis about this issue and to try to develop a paradigm that makes sense, without unduly restricting the access of charitable organizations to the marketplace of political ideas.

A final distinction that is discussed in the essays is the distinction between charity done through organized groups and purely personal acts of kindness and philanthropy. Again, this is an important matter – both theoretically and practically; and it has legal implications as well. Obviously the “halo” effect surrounding charitable organizations has tarnished quite a bit in recent years (resulting in calls for more transparency and accountability). It is important, however, to recognize that there are strong personal motivations behind the formation of charities. It is important as well to ensure that elements of voluntarism remain in the increasingly business-like world of charity. The way in which this will play out in new regulations for charities remains to be seen. The essays in this important book provide fertile thought about the issues that will face courts and legislatures when dealing with charities in ways that reflect all the new realities.