Transparency of donors in the Netherlands | ECNL, AML / CFT

Legislative intentions regarding transparency of donors to not-for-profit organizations has caught the attention of the European Center for Not-for-profit Law (ECNL).

On 29 June ECNL published the article New proposed changes to the Dutch Transparency Act, an update on the most important improvement and remaining concerns of the revised draft:

New proposed changes to the Dutch Transparency Act

29-06-2021
Short update on what the most important improvements and remaining concerns are in the revised draft.

 

After a strong public reaction to the previous draft of the Dutch Transparency Act and parliamentary questions at the end of 2020, the Ministry of Justice and Security has just published a revised draft for a second round of public consultation on June 8, 2021.

What has happened so far?

The very first draft of the Act in late 2018 required all civil society organisations (CSOs) to publish overviews of donations that amount to or exceed 15,000 EUR a year.

Read ECNL’s first comment to the first draft here.

After a strong push back by civil society in 2019, the Ministry took a different framing and approach in November 2020 by replacing this generic obligation for all CSOs with narrowing the focus of interest to CSOs that are considered a (potential) threat to ‘public order’ or ‘general interest’.

ECNL had identified main points of why the second draft Act in 2020 was not in line with European and international standards, read it here.

We now analyze the main changes proposed in the third draft from June 2021 compared to the previous version from November 2020, and assess to what extent these have improved the standards and what the remaining concerns are.

Relevant changes that improve the previous version of the draft Act

No discrimination based on origin donor: Potentially unwanted donations now also include those from the Netherlands and within the EU/EEA (previously, only donations from outside the EU/EEA were deemed as potentially suspicious). This broadens the number and scope of donations under potential scrutiny, but does not discriminate based on the origin of the donor.

Clear possible follow-up actions and judicial oversight: The amendment clarifies which authorities can take follow-up actions after gathering information on donations and donors from CSOs that are under scrutiny for activities that may ‘undermine democratic rule of law’. More specifically, it is now only up to the Public Prosecutor to determine whether and, if so, what follow-up action will be taken. The Public Prosecutor can now request the Court to order one or more measures if it is plausible that a CSO receives donations and carries activities that undermine or are aimed at undermining the democratic rule of law. The measures introduced are:

  1. an order to periodically report all or specified categories of donations to the public prosecutor’s office for a period of up to three years to be determined by the court;
  2. the freezing of one or more goods for a maximum period of one year, which can be renewed if requested by the Public Prosecutor;
  3. a ban of up to two years from receiving certain donations or certain specified categories of donations;
  4. the return of donations, the deposit in a third-party money account designated by the court or the forfeiture to the state of certain donations or goods.

Assessment framework for the Court: The new draft introduces criteria and assessment framework related to what constitutes “undermining of the democratic rule of law” and which (type of) activities could fall under this.  The judge will weigh up, among other things, the seriousness and nature of the conduct and the nature and seriousness of the consequences for the ‘democratic rule of law’.

It is positive that the draft Act introduces clearer criteria for what constitutes “undermining the democratic rule of law” and that it embeds some constitutional guarantees, including judicial overview at a later stage. However, there are still some relevant points that are not in line with European and international standards.

Remaining concerns

Lack of oversight for far-reaching powers for the Mayor: The Mayor is still given far-reaching powers with a large margin of appreciation without any (parliamentary) oversight for demanding information from CSOs about their donations and donors when it deems a (potential) threat to the democratic order. For example, the Mayor can impose a penalty payment for each day the CSO fails to provide the requested information (duty to cooperate). The Mayor can also request the Court to impose an administrative ban on the CSO director if they fail to fulfil their information or cooperation obligations imposed by this draft. In this regard, the draft Act is still not in line with rule of law principles.

Legal uncertainty: The large margin of appreciation of the Mayor to assess whether or not a CSO and their activities are or will potentially be a threat to public order (and thereby undermine democratic rule of law) also creates legal uncertainty as there are no clear criteria on what may constitute an indication of risk or disruption of ‘public order’ that can trigger these powers of the Mayor. This gives room for discriminatory application as it will be left to the whim of the Mayor and can potentially lead to self-censorship of CSOs and limiting Freedom of Expression and Freedom of Association and Assembly  as CSOS and activists may feel that they might be under additional scrutiny for what they do and say.

Lack of a clear remedy:   CSOs do not have clear legal remedies to contest the decision of the authorities when, for example the Mayor, demands information on their donations and donors. CSOs will not be able to know based on what activities the Mayor concluded that they are a potential risk and need further scrutiny and will also have no opportunity to proof otherwise. This would result in a practice contrary to the rule of law principles.

Violation of the right to privacy: the draft Act requests all intermediaries to obtain private information in advance about the donors of CSOs (name, private residency/seat, country) regardless if there is justified reason for further scrutiny by the Mayor and other authorities. This puts burden on CSOs to obtain and verify information, regardless of being scrutinised or not. At the same time this may deter individual donors to provide funding because they may not be willing to provide private information and data without clarity how it will be used in future proceedings. Legitimate donors might be reluctant or not able (for legal reasons) to share their privacy protected details and therefore decide not to donate to Dutch CSOs, creating vacuum of income for many organizations.

A wide group of CSOs will still be potentially affected: the draft Act does not provide clear criteria that will guide the authorities to decide whether or not to demand information on donations and donors. This means that a large group of CSOs receiving funding will potentially be subject to additional administrative requirements, supervision and potential restrictions to their activities. This is especially the case for the Mayor and in relation to what constitutes a potential threat to ‘public order’.

Disproportionate infringement on freedom of religion and belief: The Mayor is still enabled to process personal data which may show religious or philosophical believes (article 3(2)). It is not explained why it is necessary to gather this particular data to determine whether or not an organisation is a threat to public order and/or democratic rule of law. Even if argued to be necessary, it is important to demarcate clearly what specific information is allowed to gather as the current formulation is too broad. This means that a broad interpretation can lead to disproportionate infringement on the freedom of religion and beliefs. It can also disproportionately affect certain religious minority groups and thereby be discriminatory.

In conclusion, the points made above make it evident that the draft Act still has a number of important concerns and issues that should be taken into consideration in the follow-up of the public consultation.

Read ECNL’s contribution – written jointly with other Dutch CSOs – to the public consultation below (in Dutch):

Joint submission on the Dutch Transparency Act June 2021

 

Action for Civic Space / Netherlands

 

More information:

ECNL on the draft legislation:

Over Ellen Timmer, advocaat ondernemingsrecht @Pellicaan

Verbonden aan Pellicaan Advocaten, http://www.pellicaan.nl/, kantoor Rotterdam, telefoon 088-6272287, fax 088-6272280, e-mail ellen.timmer@pellicaan.nl ||| Weblogs: algemeen: https://ellentimmer.com/ || modernisering ondernemingsrecht: http://flexbv.wordpress.com/ ||| Motto: goede bedoelingen rechtvaardigen geen slechte regels
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