Explanatory Memorandum to COM(2023)516 - European cross-border associations - Main contents
Please note
This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2023)516 - European cross-border associations. |
|---|---|
| source | COM(2023)516 |
| date | 05-09-2023 |
1. CONTEXT OF THE PROPOSAL
• Reasons for and objectives of the proposal
The proposal stems from the European Parliament resolution of 17 February 2022, aiming to promote associations and other non-profit organisations in the EU in completing the internal market, protecting their fundamental rights and fostering an EU democratic space. More precisely, the resolution asked the Commission, under Article 225 of the Treaty on the Functioning of the European Union (‘TFEU’), to submit two new legislative proposals: a Regulation (under Article 352 TFEU), which creates the legal form of “European Associations”, and a Directive harmonising common minimum standards for NPOs (under Article 114 TFEU). The European Commission answered positively to the European Parliament call sharing the need to create an enabling environment for the non-profit sector, out of which associations are the most present legal form.
The proposal aims to improve the functioning of the internal market of non-profit associations by laying down measures coordinating the conditions for establishing and operating European cross-border associations (ECBAs), with the aim of facilitating the effective exercise of freedom of movement of non-profit associations operating in the internal market.
Non-profit associations represent the predominant legal form among non-profit organisations in the European Union, with an estimated number of 3.8 million present in EU Member States. Non-profit associations are also the largest in number of the four legal forms traditionally encompassed by the social economy.1 Among them, 310 000 non-profit associations are active in more than one Member States, while potentially another 185 000 could theoretically engage in cross-border activities, if barriers were removed. Non-profit associations are organisations driven by the key principles of the social economy: the primacy of people as well as social and environmental purpose over profit, the reinvestment of most of the profits and surpluses to carry out activities in the interest of members/users (“collective interest”) or society at large (“general interest”) and democratic or participatory governance.
Non-profit associations are active in sectors with a societal impact such as healthcare, social services, social inclusion, culture, sports, research and development, education and training, contributing 2.9% to EU GDP. Through their membership-based structure, they also have a direct leverage effect on citizens who are members, donors or beneficiaries of their activities. When provided against remuneration, non-profit associations’ activities constitute a service within the meaning of Article 57 TFEU.
Non-profit associations have a positive impact on ensuring social fairness and prosperity for EU citizens and they play a significant role for growth within the internal market. However, their socio-economic potential is not fully exploited. The full potential of the internal market can only be unleashed if all participants enjoy the rights provided thereby. To this end, non-profit associations need a predictable legal framework that allows them to seamlessly conduct their activities, including when conducting them across borders in the internal market.
Currently, non-profit associations and their activities are regulated by specific legislation in 24 Member States2 in a different manner, creating legal uncertainty and giving rise to different administrative procedures and requirements. Rules on formation, membership and governance impose different requirements. For instance, the number of physical or legal persons required to form a non-profit association ranges from 3 to 20 depending on the Member State. Different requirements apply when it comes to becoming a member or have an executive role in the non-profit association, in some instances pertaining to nationality or legal residence. While all non-profit associations have an executive and decision-making body, the rules pertaining to their governance vary across Member States. Furthermore, acquisition of the legal personality of non-profit associations follows different rules, with some Member States granting legal personality on registration, others on recognition by national authorities or on simple formation. Possibilities to carry out economic activities vary as well. Moreover, a very large majority of Member States do not recognise associations from other Member States seeking to engage in cross-border activities. This forces non-profit associations wishing to carry out economic activities in another Member State to form and register a brand new non-profit association in that Member State, implying additional administrative costs and formalities. This has also consequences regarding the channelling of capital between non-profit associations, impeding a seamless flow of capital and undermining non-profit associations’ ability to perform their activities in another Member State. Rules differ also regarding access to capital and difficulties exist when it comes to access financial loans, credits and guarantees within credit institutions. The non-profit nature of associations makes these obstacles particularly acute and add to the financial burden they need to bear when operating cross borders in the Union.
As identified in the context of the impact assessment supporting this proposal, these divergences impose unjustified compliance costs for non-profit associations seeking to carry out activities in multiple Member States, create uncertainty regarding applicable obligations, and may be deterring the provision and further development of services with societal impact in the internal market. Not only does this heterogeneity undermine the proper functioning of the internal market, but it also negatively impacts the freedom of association, together with the freedom of expression and information, and, ultimately, hampers non-profit associations to unleash their full potential to generate economic and societal value in the EU.
• Consistency with existing policy provisions in the policy area
The proposal is included in the 2023 Commission Work Programme as part of the Social Economy framework under the Commission’s headline ambition of “An economy that works for people”,3 contributing to the objective of “an economy that can fully respond to the needs of EU citizens thereby ensuring social fairness and prosperity”. In this sense, it interlinks with measures announced in the Social Economy Action Plan4 and forms together with them the “Social Economy framework”, namely: the proposal for a Council Recommendation on “developing social economy framework conditions in the Member States”5; and two Commission Staff Working Documents setting “relevant taxation frameworks for social economy entities”6 and “non-discriminatory taxation of charitable organisations and their donors: principle drawn from EU case-law”7. In particular, the Council Recommendation promotes an enabling environment for social economy entities, including associations, and the Commission Staff Working Documents on taxation matters bring clarity and improve the understanding of relevant tax rules for social economy entities and cross-border donations for non-profit organisations. These texts therefore complement this legislative proposal as they frame comprehensive strategies for social economy entities, including non-profit associations, and touch upon the area of taxation, which the proposal does not regulate.
The proposal follows partially some solutions adopted in the context of EU rules on company law8 and on services in the internal market. EU rules on company law (Directive EU 2017/1132)9 harmonise, inter alia, formation, capital and disclosure requirements and operations (domestic mergers and divisions, cross-border conversions, mergers and divisions for limited liability companies) enabling businesses to be set up and to carry out operations anywhere in the EU. The Services Directive10 facilitates the exercise of the freedom of establishment for service providers and the free movement of services, while maintaining a high quality of services. In a similar vein, the proposal aims at addressing the restrictions to the exercise of internal market freedoms non-profit associations face and enabling them to carry out operations anywhere in the EU, via the new form of European cross-border association.
In light of the above, the Directive fills in a legislative gap as there is no dedicated EU-level legislation regulating conditions for non-profit associations to operate cross-border in the internal market.11 In this sense, the targeted approach of the proposal is quite different from the broad one followed by the Commission proposal of 1992 to create a European legal form for association (i.e. the European Association)12, as it does not intend to create a European statute for associations, and creates instead a new national legal form facilitating the cross-border activities of non-profit associations and their mobility while respecting national traditions.
Furthermore, the proposal links with EU rules on other existing European legal forms generally designed to facilitate and enhance cross-border activities among Member States and more generally across the Union, in particular the European Economic Interest Grouping (EEIG)13, the European Grouping of Territorial Cooperation (EGTC)14, the European Research Infrastructure Consortium (ERIC)15, and the European Digital Infrastructure Consortia (EDIC)16. Although member-based, these legal forms are not comparable to non-profit associations in the context of this proposal. They are either designed for carrying out very specific and limited tasks17 (ERIC and EDIC), have a very limited type of membership18 (EGTC and ERIC), do not have limited liability (EEIG and EGTC), or do not have a non-profit purpose and a non-distribution of profits constraint (EEIG).
Finally, this Directive does not seek to regulate certain areas of law pertinent to ECBAs in the internal market, in particular taxation, employment law, competition, intellectual property, anti-money laundering and insolvency.
• Consistency with other Union policies
This proposal is embedded in the broader political objectives of the European Green Deal (including the “do not significant harm” principle”) and is relevant to other EU policies put in place in fields such as democracy and fundamental rights.
The proposal is also embedded in the Commission’s priority of “a Europe fit for the digital age”19 and supports the political objective of the Digital Decade 2030 by enhancing and encouraging the use of digital means to reduce administrative burden linked to cross-border activities of non-profit associations. This is ultimately relevant to strengthening the freedoms of expression and information in civil society, as well as to boosting civic engagement.
Addressing cross-border activities of non-profit associations, the proposal is in line with the findings of the 2022 Annual report on the application of the EU Charter of Fundamental Rights,20 which stresses that civil society organisations may advocate policies and legislation beyond the borders of Member States and that their role is particularly relevant in the context of current challenges that the EU is facing. In this connection, the Conference on the Future of Europe21 recognised the important role of the civil society and mentioned the need for a statute for European cross-border associations and non-profit organisations. The proposal could bring positive leverage to the European Universities alliances with the aim to facilitate a deeper, long-term and flexible cross-border cooperation22. The proposal is also prepared alongside the announced “Defence of Democracy” package23.
2. LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY
• Legal basis
The proposal is based on Article 50 TFEU and Article 114 TFEU.
Article 50(1) and (2) TFEU, which empowers the European Parliament and the Council to adopt provisions in order to attain freedom of establishment, serves as legal basis for measures that facilitate the exercise of the right of establishment of associations engaging in economic activity and their mobility, e.g. transfer of registered office.
Article 114 TFEU empowers the European Parliament and the Council to adopt the measures for the approximation of the provisions laid down by law, regulation or administrative action in Member States which have as their object the establishment and functioning of the internal market.
The aim of the proposal is to facilitate the exercise of non-profit associations’ right of establishment and the effective exercise of free movement rights by laying down measures coordinating the conditions for establishing and operating European cross-border associations, thereby providing inter alia for automatic recognition of their legal personality by Member States, ensuring they are subject to a single registration obligation and providing for harmonised rules on mobility (i.e. transfer of registered office). By creating within the national legal order of the Member States a new legal form of non-profit associations dedicated to cross-border activities of and by laying down the conditions for its operations and mobility across the Union, this proposal results in approximating legal and administrative action in the Member States with regard to non-profit associations and, therefore contributes to the functioning of the internal market.
In light thereof, Article 50 TFEU is the appropriate legal basis for measures that directly aim at improving the right of establishment of associations and their mobility within the internal market.
Article 50 TFEU is combined with Article 114 TFEU. Indeed, besides facilitating the freedom of establishment, the proposed Directive aims to ensure that non-profit associations can fully enjoy the free movement of goods, exercise an economic activity and receive services, and can exercise the freedom to receive capital. It does so by removing restrictions, in particular those related to the regulation of economic activities and the channelling of capital. Therefore, Article 114 TFEU is an additional legal basis for an intervention covering non-profit associations engaged in economic activities in the internal market, by harmonising divergent Member States’ restrictive provisions as regards their exercise of an economic activity and their freedom to receive capital, which have a direct effect on the functioning of the internal market.
• Subsidiarity (for non-exclusive competence)
The overall objective of the proposal is to remove barriers to the cross-border activities and cross-border mobility of non-profit associations in the internal market.
There is a clear value added by acting at EU level because the problems that this proposal tackles have a strong cross-border dimension. Currently, there is little coordination among Member States to facilitate cross-border economic activities of non-profit associations, their mobility and their ability to enjoy internal market freedoms. Such coordination, although theoretically possible, appears unlikely in the near future. For instance, following the Commission’s withdrawal in 2005 of its proposal creating the statute for a European association, only three Member States have legislated in ways to facilitate cross-border activities of non-profit associations by way of registration duties. In particular, individual action or inaction by Member States mainly focuses on regulating non-profit associations in their specific national context and does not address the cross-border dimension, with the exception of a few Member States. The Directive has a sole cross-border focus as it establishes a legal form targeting non-profit associations interested in operating in more than one Member States (the European cross-border association) and provides for the conditions of its operations and its objective is to help these non-profit associations benefit fully from the internal market freedoms through recognition of their legal personality across the Union and improved clarity on administrative procedures applying when operating cross-border. Relying on Member States’ action alone, it is likely that the legal and administrative barriers non-profit associations face when engaging in cross-border activities would persist, resulting in the continuation of legal uncertainty and red tape and not allowing a level playing field for non-profit associations in the internal market.
By acting, the EU will provide a clear and predictable framework enabling non-profit associations to fully benefit from their internal market freedoms when they operate cross-border. The objective of this initiative therefore cannot be achieved sufficiently by the Member States alone and can be better achieved at Union level.
• Proportionality
The proposal targets non-profit associations which operate or wish to operate cross-border and will not necessarily lead Member States to change their existing national rules on non-profit associations nor will it have direct implications on non-profit associations not interested in cross-border activities. The content and form of the proposal are, therefore, in proportion with the scale and scope of the identified problems non-profit associations face when they engage in cross-border activities or mobility.
The new legal form specifically designed and introduced at national level, which is the central element of this proposal, will allow flexibility for Member States to adapt it to their respective settings. The provisions prescribed in the proposed Directive will not require changing Member States’ legislation governing existing forms of non-profit associations established in their territory.
The analysis of the policy options carried out in the Impact Assessment, which took into account their effectiveness, efficiency, coherence and proportionality, showed that all options could have a positive impact and that the option in the presented proposal ranked highest in those terms.
• Choice of the instrument
This proposal takes the form of a Directive and a Regulation.
The use of a directive is required by Article 50 TFEU. In addition, a directive is considered to be the most appropriate and proportionate legal instrument to allow room for adapting the transposition measures to national settings, thereby also having the potential to facilitate the uptake of the new legal form by associations.
The Regulation is of technical nature and amends Regulation (EU) No 1024/201224 which established the Internal Market Information System (IMI) in order to ensure that Member States’ competent authorities cooperate and exchange information through the IMI when they apply the national rules implemented in accordance with the provisions of the proposal. It also amends Regulation (EU) 2018/172425 which established the Single Digital Gateway to ensure that Member States give online access to information relevant to the European cross-border associations (ECBAs) and non-profit associations and facilitate the exchange of evidence between competent authorities during the procedures concerning ECBAs, as laid down by the proposed Directive. The Regulation is the appropriate instrument in view of the principle of parallelism of form.
3. RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS
• Stakeholder consultations
This proposal follows extensive consultation activities with stakeholders namely non-profit associations, Non-Profit Organisations (NPOs), EU citizens engaging in non-profit associations and other NPO activities, Member States and public authorities, businesses, experts, and researchers in non-profit law.
An open public consultation and a call for evidence were published on 5 August 2022 and ran until 3 November 2022.26 Input and contributions from stakeholders fed into the process of determining and defining the magnitude of the problem and policy options.
The Commission contracted an external study to support the preparation of this proposal. In this context, additional targeted stakeholders’ consultations were conducted.
The impact assessment supporting the Commission’s proposal builds on results of the following consultation activities:
- a call for evidence, which received 50 replies;
- a public consultation, which received 64 replies;
- in the context of the external study, a targeted consultation through an online survey, with responses from domestic and cross-border associations (88 in total, including umbrella organisations), service providers (in total 12), academia/research institutes (in total 14), and responsible authorities (in total 11);
- in the context of the external study, 64 interviews with associations and umbrella organizations regrouping national associations.
While the absolute numbers of responses across the consultation activities could be perceived as generally limited, the representativeness of the contributions are reinforced through the contributions of 29 umbrella organisations, that represented the voice of 3026 associations.
Overall, the consultation activities showed that, among stakeholders there is both a wide acknowledgement of the need to strengthen the cross-border activities of non-profit associations and also support for EU action to facilitate cross-border activities of non-profit associations in the internal market.27
Most respondents reported recurrent challenges and obstacles when conducting cross-border activities. In the Call for Evidence, stakeholders highlighted existing barriers in areas such as providing services in another Member State without registration, problems of recognition in another Member State, access to funding, and different VAT regimes and approaches in different EU countries. In the public consultation, the most recurrent issues were tax related issues, registration processes, and administrative formalities. The answers from the targeted stakeholder consultations were similar, pinpointing issues such as different sets of national rules for establishing non-profit associations followed by difficulties in merging non-profit associations across different Member States and other tax issues.
Regarding the preferred policy option, 36% (22 out of 64) of all respondents to the public consultation, (where 67% i.e. 43 out of 64 are part of the non-profit sector) favoured “a new legal form for associations”. 16 out of 38 respondents who identified themselves to be under the legal form of associations, (i.e. 42% of those respondents) favoured it as well. The “harmonisation of common minimum standards” (policy option 2) was the preferred option of 42% (26 out of 64) of all respondents and for 32% (12 out of 38) of respondents under the legal form of association.
In the context of the targeted survey (which received 140 replies), responding non-profit associations supported an EU intervention, potentially favouring the creation of a new legal forms in terms of effectiveness in facilitating associations’ operations in another Member State, while other policy options were also widely supported.
Detailed information on the consultation strategy, the outcomes and conclusions of the stakeholder consultations can be found in Annex 2 of the impact assessment report and on Have your say (europa.eu).
• Collection and use of expertise
To support the analysis underpinning the impact assessment, the Commission used the results of an external study contracted to gather further evidence on cross-border activities of associations. It included a comparative legal analysis of associations laws and regimes in the EU, targeted surveys and the qualitative and quantitative assessment of impacts of potential measures.
In addition, the impact assessment was supported with evidence stemming from the study on Comparative legal analysis of associations laws and regimes in the EU, published in September 2022, and the study on Comparative legal analysis of merger rules concerning associations in the EU, published in July 2023.
Besides these support studies, additional expertise was identified through literature research and through the stakeholder consultation responses.
In this context, the Commission informed and discussed in June and November 2022 with the Commission expert group on social economy and social enterprises (GECES) about the initiative on cross-border activities of non-profit associations.
Alongside the support studies and stakeholder consultations, the Commission paid close attention to the European Parliament resolution of 17 February 2022, which provided recommendations to the Commission on a statute for European cross-border associations and non-profit organisations, as well as to the European Parliament study underpinning its resolution.28
• Impact assessment
The impact assessment for this proposal was examined by the Regulatory Scrutiny Board on 2 March 2023. Following the negative opinion received on 31 March, a revised impact assessment was submitted to the Board on 8 May 2023. Following the positive opinion with reservations of the Regulatory Scrutiny Board of 8 June 2023, the impact assessment which accompanies this proposal was revised in order to duly address the recommendations of the Board, e.g. by explaining further the choice of the legal basis, clarifying the different impacts among the policy options also in terms of subsidiarity and proportionality and presenting the scoring methodology of the policy options in a more granular manner.
The impact assessment analysed policy options building on the analysis of obstacles identified in four main areas of internal market: in relation to non-profit associations’ right to establishment when they operate cross-border, their capabilities to provide services and goods and sending and receiving of capital; the possibilities for cross-border membership and participation in governance bodies of non-profit associations when they operate cross-border; cross-border mobility of non-profit associations.
Under the scenario based on no policy intervention at the EU level, non-profit associations will continue to be governed exclusively by national law. In this baseline scenario, the impact assessment showed that existing barriers will most likely remain or in some cases worsen in light of societal challenges and market developments. Member States currently lack legislation specifically addressing cross-border activities and mobility of non-profit associations, except for a few countries. Moreover, there is no indication of Member States planning legislation in this space. Without an appropriate way to obtain recognition and facilitate mobility, Member State-level measures would have limited benefits.
Therefore, three policy options to reduce the identified barriers that non-profit associations face when operating cross-border in the internal market were assessed.
The first policy option was analysed through two sub-options proposing the introduction of: a) a European legal form called the “European Association" that would regulate all aspects of the functioning of this new legal form and coexist with national legal forms without replacing them. The European Association form would be beneficial for non-profit associations interested in operating in multiple Member States, but may have been less suitable for small non-profit associations with occasional cross-border activities; b) the establishment of an EU level legal form called the “European cross-border Association" that specifically covered cross-border aspects. Unlike the sub-option under point a), this sub-option does not fully prescribe the legal form but only exhaustively prescribes cross-border aspects. Both sub-options would be based on Article 352 TFEU and thereby the new legal form would be created through a regulation.
The second policy option proposes the harmonization of common minimum standards for the cross-border activities and mobility of non-profit associations across Member States. This option would require removing or amending existing provisions and introducing new ones in Member State law to achieve these objectives. This option would encourage fully online registration, digital registers, and standardized procedures to facilitate the registration of non-profit associations operating cross-border and exchange of information among Member States and at the EU level. Non-profit aassociations would automatically benefit from these harmonization measures, and depending on the scope of harmonization, all non-profit associations may have been affected by the new rules. Partial harmonization of national laws would simplify rules applicable to non-profit associations operating in cross-border contexts, providing rights and safeguards for their cross-border mobility and activities. The legal instrument for this option would be a Directive and the legal base would be Article 114 or 50 TFEU, or a combination thereof, considering the material scope of the initiative.
Thirdly, a policy option creating at national level an additional legal form of non-profit association designed for cross-border purposes and recognised by Member States, has been assessed. This policy option would require each Member State to introduce in their national legal system a legal form of non-profit association tailored for cross-border purposes. At EU level, it would encompass prescribing only requirements and safeguards necessary for facilitating the said cross-border purposes, and it would co-exist alongside existing legal forms for non-profit associations in national law, while respecting varying national traditions in association law. ‘Cross-border associations’ would not necessarily need to register in each Member State separately, as their legal personality and capacity would be recognised automatically and even when additional formalities are justified, ‘cross-border associations’ should not be required to provide information already submitted to a Member State competent authority. Instead, information will be exchanged between Member State authorities digitally.
The third policy option offers a combination of aspects from the first and second policy options, in that it creates an additional new legal form of non-profit associations (similar to the first policy option), but only with provisions relevant to cross-border aspects, which Member States may adapt to their respective national setting trough transposition (similar to policy option two), while avoiding the need to necessarily amend rules on existing legal forms at national level.
Although all policy options would contribute to achieving the policy objectives of the initiative (albeit in a difference manner and extent), the main differences between them concern their level of compliance with the proportionality and subsidiarity principles and their level of legal feasibility in relation to the identified problem. In this context, the third option emerged as the preferred option, as it contributes to resolving the identified problem and addresses the specific objectives, while being targeted and balanced in terms of costs and benefits29.
Furthermore, the study underpinning the Impact Assessment also evaluated the economic, social and environmental impacts of the preferred policy option and concluded that, in general, policy option three is expected to have a positive impact on competent authorities in the long term without significant adaptation costs.
From an economic perspective, the proposal does not impose any costs. The non-profit associations taking this new legal form may encounter certain costs, which will depend on the extent the harmonised provisions would differ from national rules, but these costs will not be significant. Non-significant costs might occur for public administrations in case an online register needs to be developed or adapted. No adjustment and administrative costs would occur for those associations not wishing to take this legal form. This policy option will lower both one-off costs of launching operations and recurring costs of non-profit associations operating cross-border compared to the baseline policy option. More precisely, the reduction of excess launch costs (e.g. information cost and direct charges) is estimated at EUR 2 150 per launch. Within the assessed 15-year time frame, excess cost reductions could potentially amount up to between EUR 338 million – 378 million in the best estimate scenario (EUR 358 million for the central estimate of 166 500 new cross-border associations in the assessed 15-year time frame). The reduction of excess cost of operations (recurrent costs, e.g. administrative and compliance costs) for non-profit associations currently operating cross-border is estimated at EUR 770 million per year. Within the assessed 15-year time frame, cost savings could potentially amount up to of EUR 8.5 billion, which would contribute to the general reduction of the regulatory burden. The impact assessment also makes a best estimate of potential indirect economic benefits generated: 157 000 – 176 000 additional associations operating cross border, creating 64 000 – 71 000 jobs and EUR 3.57 billion – EUR 4 billion added value, corresponding to the maximum potential uptake over a 15-year time frame.30
Concerning social impacts, it appeared difficult to determine a causal relationship between a directive simplifying regulatory and administrative rules on cross-border operations of non-profit associations and the potential social impacts. Nevertheless, the Impact Assessment determined indirect, but non-measurable, positive effects. In particular, the Directive is believed to improve the access for citizens in sectors offering services across Member States (e.g. healthcare and social services, community service social work, education and training, employment services, etc.). It will further foster convergence between the different models offered in the Member States, leading to an overall enhanced quality of such services in the EU. As regards fundamental rights, this Directive could also strengthen the right to freedom of assembly and association in a non-discriminatory manner, as non-profit associations using the new legal forms would be treated in an equal manner with non-profit associations that already exist under national laws. According to desk research and Public Consultation results, by improving the conditions for non-profit associations to operate in the internal market, the third policy option is believed to have a strong positive impact on safeguarding the rights to freedom of assembly and association and freedom of expression and information of non-profit associations and their members in the EU.
In principle, the nature and objectives of the initiative are not expected to generate measurable direct environmental impacts. When looking at the potential indirect benefits, the preferred option is expected to generate a positive impact by improving the position and presence of non-profit associations operating cross-border and active in the environmental and climate change sphere, such as promotion of biodiversity, nature preservation and the fight against climate change.
The initiative would also have an indirect economic impact on innovation and competition in critical sectors of high societal relevance (e.g. healthcare and social services, social work, work integration, training and education services, employment services and research and development). With fewer barrier for non-profit associations inside the internal market, there will be increased services and products offered on the national markets, as well as more cooperation and competition. This will foster innovation and price quality for services and goods.
Lastly, the initiative contributes to the Sustainable Development Goals (SDGs), and it particularly supports the SDG 8 (www.globalgoals.org/goals">Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all), by promoting job creation and improving equal and inclusive access to economic opportunities. It further contributes the SDG 16 (www.un.org/sustainabledevelopment/peace-justice/">Peace, justice and inclusive societies), by strengthening civil society through protecting associations among other entities.
• Fundamental rights
Although the proposal is centred on the functioning of the internal market for non-profit associations operating cross-border, it will also have a positive effect on the protection and promotion of fundamental rights. For instance, improving the conditions for non-profit associations to operate in the internal market will strengthen the enjoyment of the freedoms of expression and information (Article 11 of the Charter) and the freedom of assembly and of association (Article 12 of the Charter) in the EU. This will in fact allow non-profit associations with cross-border ambitions to effectively expand, thereby contributing to also exercise the fundamental rights that they entail on a larger scale, by benefitting from a more harmonized legal framework which would not neglect the national specificities.
From this viewpoint, this initiative will have positive spill-over effects on strengthening civil society in the EU and mitigating the overall trend of shrinking civic space observed in Europe, by facilitating cross-border activities and mobility of non-profit associations and enabling them to mobilise members, volunteers and interest groups operating in the internal market. It would make it easier for non-profit associations to engage in activities across Member States and enable them, first, to unleash their economic potential and, second, their potential to lower the threshold of citizens’ engagement in non-profit associations across the Union (as indicated in the impact assessment report, Section 4 on general objectives). Ultimately, the initiative will have an indirect positive impact on the EU democratic space.
4. BUDGETARY IMPLICATIONS
The legislative financial statement attached to this proposal sets out the implications for budgetary, human, administrative resources.
5. OTHER ELEMENTS
• Implementation plans and monitoring, evaluation and reporting arrangements
The Commission will monitor the implementation of the Directive and will report to the Council and the European Parliament every seven years. For the purpose of monitoring and reporting, the Commission will seek feedback from key stakeholders on the impact of the proposal, including advantages, drawbacks and any practical implementation challenges for Member States and non-profit associations. A regular feedback loop will also allow for data gathering from Member States concerning European cross-border associations (ECBAs) registered in their territory.
• Explanatory documents (for directives)
To ensure the proper implementation of this proposal, explanatory documents, explaining the relationship between its components and the corresponding parts of national transposition instruments, are necessary.
• Detailed explanation of the specific provisions of the proposal
The proposed Directive lays down measures coordinating the conditions for establishing and operating “European cross-border associations” (ECBAs), with the aim of facilitating the effective exercise by non-profit associations of their rights related to the freedom of establishment, free movement of capital, freedom to provide and receive services and free movement of goods in the internal market.
Chapter 1 contains, first, the general provisions such as the subject matter and scope (Article 1) and the definitions (Article 2). Second, it details the characteristics of an ECBA (Article 3) and the rules applicable to it (Article 4). Third, it empowers ECBAs with the legal personality and legal capacity and the automatic recognition thereof in all Member States (Article 5). Fourth, it lays down common rules for ECBAs concerning their statutes (Article 6), governance (Article 7), and membership (Article 8).
Chapter 2 lists the rights and the prohibited restrictions of ECBAs. An ECBA benefits from the principles of equal treatment (Article 9) and non-discrimination (Article 10). All decisions concerning an ECBA made by administrative authorities in the Member States should be subject to judicial review (Article 11). An ECBA should only register in one Member State to obtain legal personality and capacity and only for overriding reasons in the public interest, it is possible for both home and host Member States to ask for additional formalities (Article 12). An ECBA should be able to apply for funding in the Member State (s) in which it operates and should not be restricted on its ability to provide or receive funding, except to the extent such restrictions are prescribed by law, justified for overriding reasons in the public interest, appropriate for ensuring the attainment of the objective pursued and do not go beyond what is necessary in order for it to be attained. (Article 13). In addition, an ECBA should be able to provide and receive services and to engage in trade in goods (Article 14). Furthermore, an ECBA should not be subject to certain restrictions based, for example, on the nationality of its members (Article 15).
Chapter 3 concerns the rules of constitution and registration of an ECBA and is comprised of two sections. Member States should ensure that an ECBA is formed by way of its registration and has a minimum of three founding members (Article 16). This chapter also provides for the rules concerning the domestic conversion of a non-profit association into an ECBA (Article 17). It lays down the rules for the application for registration (Article 18), as well as the registration procedure (Article 19). It specifies that Member States should establish a register for the purposes of registration of ECBAs (Article 20) and the content of the ECBA certificate (Article 21).
Chapter 4 lays down the rules on ECBAs’ mobility rights. This concerns specifically the possibility for an ECBA to transfer its registered office without such transfer resulting in the dissolution of the concerned ECBA (Article 22) and the procedure for the transfer of an ECBA’s registered office (Article 23).
Chapter 5 contains provisions on the dissolution of an ECBA. More precisely, it lays down the rules concerning the voluntary dissolution (Article 24) and the involuntary dissolution (Article 27). Additionally, it ensures that an ECBA’s dissolution entails its liquidation which must be in line with the non-distribution constraint linked with its non-profit purpose (Article 25).
Chapter 6 includes provisions on enforcement, cooperation and monitoring of the rules contained in the proposal. This concerns the designation of the competent authority responsible for carrying out the obligations arising from this proposal (Article 27); the administrative cooperation among competent authorities of Member States and the monitoring by the Commission of the use of the Internal Market Information System (IMI) in the context of this cooperation (Article 28); the rules on the monitoring and reporting of this proposed Directive (Article 29).
Chapter 7 sets out the final provisions allowing the Commission to adopt implementing acts (Article 30), on the transposition of this proposal (Article 31) and the entry into force (Article 32) as well as the proposal’s addressees (Article 33).
The Directive is accompanied by a Regulation which is of technical nature and amends Regulation (EU) No 1024/2012 which established the Internal Market Information System (IMI) in order to ensure that Member States’ competent authorities cooperate and exchange information through the IMI, when they apply the national rules implemented in accordance with the provisions of the proposal (Article 1). It also amends Regulation (EU) 2018/172431 which established the Single Digital Gateway, to ensure that Member States give online access to information about ECBAs and non-profit associations and facilitate the exchange of evidence between competent authorities during the procedures concerning ECBAs, as laid down by the proposed Directive (Article 2).