On the International Rise of Philanthropic Protectionism

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March 2015; International Journal of Not-for-Profit Law

In the latest issue of its journal, Doug Rutzen, the CEO of the International Center for Not-for-Profit Law, has a very important and detailed article about the efforts of governments around the world to tighten the clamps on civil society organizations that receive foreign funding. The NPQ Newswire has covered this topic in the past, particularly with increasing restrictions being implemented in Russia, Egypt, and elsewhere. Just last weekend, the Wall Street Journal reported on the Chinese government’s implementation of new restrictive policies as foreign charities and the foreign employees or advisors of Chinese civil society organizations.

Rutzen’s article is the most comprehensive review of this trend that we have seen. His article identifies policies in every region of the globe, with restrictions including limitations on the life cycles of NGOs, on NGOs’ freedom of assembly rights, and foreign funding of domestic NGOs. Specifically, Rutzen lists 10 kinds of legal impediments or restrictions that governments are enforcing against NGOs and provides examples of each:

  1. Requiring prior government approval to receive international funding
  2. Enacting “foreign agents” legislation to stigmatize foreign funded CSOs
  3. Capping the amount of international funding that a CSO is allowed to receive
  4. Requiring that international funding be routed through government-controlled entities
  5. Restricting activities that can be undertaken with international funding
  6. Prohibiting CSOs from receiving international funding from specific donors
  7. Constraining international funding through the overly broad application of counterterrorism and anti-money laundering measures
  8. Taxing the receipt of international funding, including cross-border philanthropy
  9. Imposing onerous reporting requirements on the receipt of international funding.
  10. Using defamation laws, treason laws, and other laws to bring criminal charges against recipients of international funding.

Governments, Rutzen writes, use four kinds of justifications for these policies: (1) state sovereignty; (2) transparency and accountability in the civil society sector; (3) aid effectiveness and coordination; and (4) national security, counterterrorism, and anti-money laundering concerns. In China, according to the WSJ article, the current effort to crack down on NGOs receiving foreign money seems to reflect the government’s concern about the “destabilizing” effects of foreign influence in China’s development civil society. Authorities have apparently drafted a law that would strengthen the government’s hand in regulating NGOs, using “national security” as the justification.

Describing the framework in international law for regulating the flow of philanthropic capital to domestic NGOs, Rutzen identifies three standards for these restrictions to meet in order to be potentially considered legitimate:

  • First, they “must have a formal basis in law,” having been enacted by the nation’s legislative body rather than simply announced and implemented by government decrees or administrative regulations.
  • Second, they must advance a “legitimate aim,” such as “national security or public safety, public order, the protection of public health or morals, or the protection of the rights and freedoms of others,” that is real, not concocted
  • Third, even if established by law and advancing a legitimate aim, they must be justifiable as “necessary in a democratic society.”

As Rutzen notes, many of these restrictions on foreign-funded NGOs are really aimed at controlling and limiting an independent civil society or the presence and content of political dissent. He cites studies that demonstrate “a correlation between states where election manipulation takes place and states where the government restricts [civil society organizations’] access to foreign support.” The explanation suggests that it isn’t just happening in nations where rule is by dictators or autocrats, but also countries with the veneer of a democratic process. “Restrictions on foreign funding may be a tactic for a vulnerable regime to cling to power by defunding the opposition,” Rutzen adds.

What results from the philanthropic protectionism policies currently being implemented and the additional dozen or more countries that are contemplating doing so is a shrinking space for cross-border philanthropy. The world needs a vibrant civil society that gives voice to all peoples. Standing by as governments use a variety of indefensible arguments to cut the flow of philanthropic capital to civil society organizations as an all-but-transparent mechanism to shut off the voices of dissent means standing by and watching the constriction of democracy. Going through the motions of democracy via elections doesn’t make a country democratic if the government strives to control and silence civil society organizations.—Rick Cohen