Why European funders need to be vigilant to keep their space open


Hanna Surmatz


In ways big and small, European philanthropy contributes to the public good in the fields of research and innovation, education, health, environment, culture, international development, democracy or human rights just to name a few. Many funders were also quick in responding to the Covid-19 crisis – a recent study suggests that foundations across Europe mobilised over 1.1 billion euros to help mitigate the immediate effects of the pandemic. And this is only a rough estimate.

In the context of the pandemic a number of philanthropic organisations have changed their way of working for example by moving from restricted to unrestricted funding, easing red tape, considering more collaborative approaches and by taking a more active role in advocacy work. Whether this leads to a longer term change in approach, still remains to be seen.

This crisis has clearly demonstrated how fragile our societies and economies are, and that different public and private actors and new collaborations also cross-sectors and across-borders are needed to tackle today”s challenges. A couple of policymakers have in this new context introduced incentives to support philanthropy work and they are reaching out to engage more with foundations. Yet there are numerous challenges facing European philanthropy.

European foundations and civil society organisations are a critical part of our democratic and pluralistic societies and have a key role to play but this cannot be taken for granted:

Worrisome developments that limit the space
There are worrisome developments in parts of Europe as well as globally, with questions being raised about the legitimacy of philanthropy and civil society actors but also intentional limitations of the operating space for organised philanthropy and wider civil society. Policy makers are debating if and how public benefit organisations should engage in policy/political activities. Foreign funding restrictions were introduced in Hungary, and there is a similar legislative proposal in Bulgaria. Some policymakers have even initiated or supported smear campaigns against specific funders and public-benefit organisations – and this is happening even inside the EU.

At the same time, there are legislative initiatives that negatively impact our sector, without the intention to do so, such as the important fight against money laundering and terrorism financing, which had a real chilling effect on public-benefit organisations. Some governments have also used the “security” or the “crisis” argument to intentionally close down civic space.  

Single Market – yes, but not for philanthropy
Comparing with the business sector, European philanthropy (and wider civil society) does not yet have a level playing field inside the EU. A single market and free and easy processes to operate exists for business, but not for philanthropy. Some would suggest that this is not needed, but the reality tells a different story.

More and more European funders and philanthropic organisations operate across borders and work in collaboration with partners. Yet they face legal, administrative and fiscal barriers. Lack of recognition of the legal personality in another EU member state, transfer of seat or mergers across borders, discriminatory practices and complex, burdensome tax rules are just some examples of these challenges.

Did you know that barriers to cross-border philanthropy lead to estimated annual costs of 100 million euros (as was estimated by the 2009 feasibility study on a European Foundation Statute). This money could be better spent on social programmes, medical research, innovative digital solutions, training for young people and much more.

Philanthropy Advocacy to promote an enabling environment
The current crisis requires mobilisation of different public and private actors to make sure that no one is left behind. The demands side also on the philanthropy sector is increasing and an enabling environment can help the sector do its public benefit work in the most effective way.

DAFNE and EFC have joined forces with the Philanthropy Advocacy initiative and formulated the European Philanthropy Manifesto, which is a call on European and national policy makers to (1) Recognise philanthropy and engage with it; (2) Facilitate cross-border philanthropy; (3) Enable and protect philanthropy; and (4) Co-grant and co-invest for the public good and civil society.

What are the entry points at EU level?
The new EU agenda has several entry points for philanthropy and wider civic space issues. We already engage in a wide range of initiatives, such as the Conference on the Future of Europe, Rule of Law, Democracy Action Plan, EU Money Laundering Action Plan, Social Economy Action Plan, New EU tax policy and the Multi Annual Financial Framework (including Values Fund, Invest EU and recovery schemes) – to name just a few.

Together with ECNL, we developed a handbook that gives guidance to civil society organisations, if necessary, to challenge national provisions or measures that impact their mission, activities and operations on the basis of EU law.

The use of EU law and the provisions on the free flow of capital and freedom of associations, has already helped to push back on foreign funding restrictions. On 18 June 2020, the European Court of Justice declared foreign funding restrictions in Hungary violate EU law. This is an important milestone to build upon and declare similar initiatives illegal.

There are other EU policy options to reduce barriers to cross-border philanthropy, such as the creation of a supranational legal form to facilitate European public benefit engagement. Member States and the EU should in any case facilitate tax effective cross-border philanthropy, which currently still is very complex and burdensome – ideas around mutual recognition are discussed in this context.

EU policy itself should not unduly restrict the space – in particular  EU policy to counter-terrorism financing, money laundering and tax evasion, (and its national implementation) has had unintended consequences on our sector and we need to ensure that this policy is risk based and does not unduly restrict our sector and that philanthropic flows can still cross-borders safely.

Collaboration among the EU and philanthropic organisations has a new momentum. Philanthropy Advocacy is engaging around the next EU Multi-annual framework (MFF), which includes recovery and resilience packages as well as continuation of old and creation of new programmes such as a values fund which all offer entry points for philanthropic actors at different levels (as partners/co-funders/co-investors/intermediaries/beneficiaries). With civil society partners we are also stating some concerns about envisaged cuts in areas of key relevance to our sector.

Finally, there is dynamic in the philanthropy sector around social investment/mission related investments and the EU as well as national policy makers could help facilitate this.  The Invest EU programme, which aims to trigger also more private investments into EU policy fields is specifically interesting for philanthropic investors.

What is clear is that European funders and their infrastructure have to be vigilant to maintain and shape their space – in order to be able to operate as freely and independently as possible also in the future. The joint DAFNE and EFC Philanthropy Advocacy project is a European hub for monitoring EU and national developments with impact on the operating environment, legal analysis and engagement with policy makers to implement the policy recommendations of the European Philanthropy Manifesto. We collaborate with experts in the field and with wider civil society to speak with a stronger voice on areas of common concern. If you are interested to engage with Philanthropy Advocacy, please get in touch. I also invite you to check the Philanthropy Advocacy website with regular news and updates.

Hanna Surmatz for Philanthropy Advocacy, a joint DAFNE and EFC initiative

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