CHARITY LAW ASSOCIATION OBSERVATIONS ON THE CHARITIES (NORTHERN IRELAND) ORDER 2006
DEPARTMENT OF SOCIAL DEVELOPMENT NORTHERN IRELAND CONSULTATION EXPIRY DATE 13 OCTOBER 2006
Introduction
1.The Charity Law Association has over 900 members, mainly lawyers, but also accountants and charity professionals. It is concerned with all aspects of the law relating to charities and has established a working party to consider a response to proposals for Charity Law Reform in Northern Ireland.
The Members of the Working Party are:
Anne-Marie Piper Farrer & Co (Chair)
Paul Bater Paul Bater & Co
Andrew Brown BTCV
Marion Baxter Robinsons
Ian Davies Farrer & Co
Jean Dollimore Hempsons
Alison Dunn Newcastle Law School
Richard Fries London School of Economics
Mark Harvey Help the Aged
Grace Henry Help the Aged
Malcolm Lynch Wrigleys
Simon Mackintosh Turcan Connell
Alison Maclennan 11 Old Square
Stephen Marshall Robinsons
Dr Gareth Morgan Association of Independent Examiners
Hubert Picarda QC 9 Old Square
Chris Priestley Withers
Jane Macfarlane British Institute of Legal Practice
Kerry O'Halloran University of Ulster
Philip Smith Arthur Cox
Background
2.The Charity Law Association warmly welcomes the decision of the Department of Social Development ("DSD") to put in place a fully developed regulatory system for charities in Northern Ireland.
3.We have considered the draft Order against the current Charities Bill proceeding in England and Wales and also against the Scottish Charities legislation where appropriate.
4.The main focus of the policy review in Northern Ireland has been on the question of a definition of charity and whether a charity commission and register of charities were necessary in Northern Ireland. In the event the draft Order mirrors fairly closely the Charities Bill going through Parliament in England and Wales at the moment but with some significant differences to tailor the situation to Northern Ireland.
5.We now consider the draft Order commenting, where appropriate, on its various Articles. As the drafting follows the England and Wales Charities Bill very closely and that that Bill has been the subject of considerable scrutiny and pre-legislation debate there is not a great deal of comment required.
Charitable Purposes, Article 4
6.This Article omits any reference in the charitable purposes to promoting the efficiency of the armed forces of the Crown. This is of course entirely understandable in the context of the political and social situation in Northern Ireland, but it does produce an apparent difference in terms of permitted charitable purposes between England and Wales and Northern Ireland.
7.It is also omitted from the Scottish definition. However, it would be available as a charitable purpose as one of the preserved pre-existing purposes so that the omission is not as important as it seems.
8.In Article 4 (3)(e) charitable purposes are described as including the advancement of peace and good community relations. The promotion or advancement of peace would not be regarded by the Charity Commission in England and Wales as a charitable purpose and this is one of the ways in which the drafting of the Order reflects the special situation in Northern Ireland. On the other hand there is nothing in the drafting to suggest that the charitable purposes are confined to Northern Ireland. In this connection we may start to see "jurisdiction shopping" once we have the English, Scottish and Northern Ireland definitions in place. An organisation which knows that the promotion of peace will not be accepted in England and Wales could set up a charity in Northern Ireland which the Inland Revenue would be obliged to recognise. Presumably, it is intended that the Northern Ireland definition will apply for Northern Ireland rating purposes (since rating is a devolved tax). However, it appears that the wording of Article 3(2) may well require HMRC to recognise charities registered by CCNI for the purposes of UK taxes that are not devolved, but there was no suggestion in the 2005 consultation that it was intended to override the Pemsel decision in this respect.
Public Benefit Test, Article 5
9.This Article deals with the public benefit test and incorporates in paragraph 5(3)(a) and 5(3) what is described as a more rigorous public benefit test which requires a balancing exercise. In this respect, the Northern Ireland Order follows the Scottish legislation. It is too early to say what effect these differences may produce. There is further potential for the Northern Ireland definition to diverge from the English and Welsh test, which again highlights the need to clarify which approach will be used for UK tax purposes.
The Charity Commission for Northern Ireland, Article 8 and Schedule 1
10.These provisions set up the Charity Commission for Northern Ireland ("CCNI").
11.The members of the CCNI will be appointed by the Department of Social Development. Paragraph 11 of Schedule 1 states clearly that the Commission shall not be regarded as the servant or agent of the Crown or as enjoying any status, immunity or privilege of the Crown and property of the Commission shall not be regarded as property of or held on behalf of the Crown.
12.This contrasts with the present position under the English Charities Bill where under clause 6 which incorporates a new section 1A into the 1993 Act. It is specifically provided in paragraph (3) that the functions of the CCNI shall be performed on behalf of the Crown. This is mitigated to some extent by the following paragraph (4) which says that in the exercise of its functions, the commission shall not be subject to the direction or control of any minister of the Crown or other government department.
13.In Article 8 the DSD is required to exercise its power of appointing Commissioners so as to secure that the knowledge and experience of the members of the CCNI include such matters as are mentioned in paragraph (5) regrettably paragraph (5) is missing from the draft paper.
14.There is no equivalent of the provision which appears in the Charities Bill in England and Wales which prohibits the interference in the operations of the Charity Commission by any government department. Perhaps this is an item which could be clarified.
15.There is no provision in the Order for an Irish language name for the CCNI. This is in contrast to the England and Wales Charities Bill where there is provision for a Welsh name for the Charity Commission. Bearing in mind the importance of the Irish language which was stressed in the Belfast Agreement, this seems a curious omission unless the issue is so sensitive in Northern Ireland that its absence is justified. Irish Gaelic language is now one of the official languages of the EU.
The Official Custodian for Charities in Northern Ireland, Articles 13, 43 and 44
16.The long experience of the Official Custodian in England and Wales leads us to highlight two potential problems that might arise in relation to the Northern Ireland Order as drafted.
17.Where property has been vested in the Official Custodian, it sometimes happens that there may be litigation in respect of that property equally there may be a necessity to sell or transfer the property. The Official Custodian cannot exercise any powers of management. In the absence of some special dispensation, the Official Custodian may find him or herself named as a defendant in litigation or being required to join in conveyancing or other documents as a party. It would be preferable if Article 13 made it clear that in such cases, any proceedings should be served on the trustees or an interim manager or any documents whilst mentioning the Official Custodian should not need to be signed by him or her.
Article 44(2) deals with the issue of conveyancing documents but regulations under Article 44(1) will have to deal with the issue of the Official Custodian being made a party to litigation.
The Charity Tribunal for Northern Ireland, Articles 14 to 17
18.These provisions mirror those set out in the Charities Bill for England and Wales. Again, there is no provision for an Irish language name for the Charity Tribunal for Northern Ireland. This contrasts with the England and Wales Bill where there is a provision for a Welsh name for the Tribunal.
The Register of Charities and Charity Names, Articles 18 to 23
19.These Articles mirror to a large extent the provisions of sections 3 to 6 of the Charities Act 1993 as amended by the new Charities Bill in England and Wales however, the following exceptions should be noted:
19.1Every charity which is established or operates in Northern Ireland must be registered in the Register of Charities. There are no exempt, excepted or other limited forms of charity registration in Northern Ireland.
19.2The requirement to register applies to charities registered in England and Wales or Scotland.
19.3There will be liaison between the CCNI and the English and Scottish bodies to ensure minimum difficulties in compliance with registration.
19.4Under Article 20(1) the presumption of charitable status arising from registration will exist in Northern Ireland as it does in England and Wales. This presumption of course does not apply in Scotland. The use of the presumption implies that CCNI may need to consult HMRC during the registration process, at least concerning any borderline applications, as currently happens in E&W.
20.The provisions as to charity names mirror those of the Charities Act 1993 as amended but again, there is no reference to charity names or constitutions being permitted in Irish Gaelic. There may well be policy reasons for this but it is worth pointing out.
Powers to Act for the Protection of Charities, Articles 24 to 27, 35 to 40, 43, 44 and 54
21.These provisions mirror sections 8, 9, 10, 18 to 23 of the Charities Act 1993 and clauses 19 to 26 of the current English Charities Bill. The only matter of note is that the power to require information and to exchange information under Article 26 of the Northern Ireland Order is narrower that section 10 of the Charities Act 1993 in England and Wales. Paragraph 10C(4) of Schedule 8 to the Charities Bill will amend section 10 of the Charities Act 1993 to prohibit disclosures that contravene the Data Protection Act 1998 or Part 1 of the Regulation of Investigatory Powers Act 2000. There does not appear to be any good reason not to include equivalent protection in the draft Northern Ireland Order, particularly given the power to disclose information to a public body outside the UK.
Powers to make Cypres Schemes, Articles 28 to 32
22.The provisions relating to cypres schemes mirror sections 13 to 15 of the Charities Act 1993 as they are to be amended by clauses 15 to 18 of the Charities Bill currently going through Parliament.
Dealings in Charity Land, Articles 59 to 64
23.These provisions mirror sections 36 to 39 of the Charities Act 1993 together with the proposed amendments under clause 27 of the Charities Bill. Again there is nothing specific to Northern Ireland which requires comment.
Charity Accounts Reports and Returns, Articles 65 to 74 and Schedules 6
24.These provisions mirror the provisions of sections 41 to 49 (but omitting section 46) of the Charities Act 1993 as amended by clauses 28 to 30 and Schedule 6.
25.The principal difference between the Northern Ireland provisions and those of England and Wales is the lower accounting thresholds. This is possibly explained by the smaller number of charities involved in Northern Ireland. In evidence given to the House of Commons Northern Ireland Affairs Committee on 3 May 2006, the DSD representative expressed concern about the risk of misuse of charities in Northern Ireland by paramilitary and other criminal organisations. It is possible that the proposal for lower thresholds for charity accounts (and charitable company audits in Article 105) reflects this concern rather than the smaller number of charities in Northern Ireland. The key question is whether the imposition of higher compliance costs that will be borne by all smaller charities is a proportionate means of addressing the risk of abuse.
26.The Association of Charity Independent Examiners, in its submission to this consultation, has expressed in detail its concerns on the cost of compliance with these lower thresholds. We support those concerns.
Public Charitable Collections, Articles 132 to 150
27.These Articles mirror the provisions of clauses 45 to 66 of the England and Wales Charities Bill with one exception. In England and Wales, the Charity Commission will issue certificates authorising organisations to collect. In England and Wales, permits for particular collections will be issued by local authorities. In cases of refusal or withdrawal, appeals are to the Charities Appeal Tribunal in the case of certificates and to the local magistrates' court, in the case of permits.
28.In Northern Ireland the CCNI will issue both the certificates and the permits. Nevertheless, the appeals are similar in that refusal of a certificate would be appealable to the Charities Appeal Tribunal for Northern Ireland whilst the refusal of a permit would be appealable to the local magistrates' court. However, we are aware that the drafting of this part of the Order has caused some confusion (and could perhaps be clarified).
Control of Fundraising, Articles 151 to 160
29.These provisions mirror the provisions of sections 58 to 64 of the Charities Act 1992 as amended by clauses 67 to 69 of the England and Wales Charities Bill. The Northern Ireland order omits the lengthy definitions which are contained in the English section 58 and further clarification will probably be made through the regulation making power of the Department for Social Development.
30.Again, as the provisions mirror those of the England and Wales Charities Act and there are no specific items relating to Northern Ireland, there is nothing unusual or controversial in the provisions.
Charitable Incorporated Organisations, Articles 106 to 122 and Schedule 7
31.These provisions mirror the provisions of clause 34 and Schedule 7 of the England and Wales Charities Bill.
32.In practical terms, the English Bill has all of the provisions in Schedule 7 whereas the Northern Ireland order splits the provisions between the Articles and the Schedule. Again, as the provisions mirror those of the England and Wales Charities Bill there is nothing unusual or controversial which invites special comments.
Unincorporated Charities, Articles 123 to 130
33.These provisions mirror the provisions of section 74 and 75 of the English Charities Act 1993 as amended by clauses 40 to 43 of the Charities Bill.
Incorporation of Trustees, Articles 75 to 87
34.These provisions mirror the provisions of sections 50 to 62 of the Charities Act 1993.
Charitable Companies, Articles 97 to 105
35.The provisions mirror those of sections 563 to 69 of the Charities Act 1993 as amended by clauses 31 to 33 of the Charities Bill.
36.The one difference worthy of note is that the Northern Ireland order provides for dramatically lower thresholds for charitable companies to be audited. This may reflect the smaller scale of the charity sector in Northern Ireland. There may be other reasons for the lower thresholds. The Association of Charity Independent Examiners in its submission to this consultation has also expressed concerns about the cost and burdens of compliance with these lower thresholds. Again, we would support the concerns expressed in relation to the lower thresholds for company audits in Northern Ireland.
Various Provisions Relating to Trustees, Articles 88 to 96
37.These provisions mirror those of sections 72 and 73 of the Charities Act 1993 as amended by clauses 35 to 39 of the Charities Bill.
Miscellaneous Powers of the Charity Commission for Northern Ireland, Articles 45 to 57
38.These powers cover a range of matters from Schemes for common deposit funds to advice and ex gratia payments.
39.The powers mirror those set out in the Charities Act 1993 as amended by the Charities Bill.
Miscellaneous General Provisions, Articles 167 to 179
40.Again, these mirror the provisions of the Charities Act 1993 as amended, where appropriate, by the Charities Bill.
Two Specific Matters Relating to Northern Ireland, Articles 58 and 166
41.Article 58 permits the court in Northern Ireland to freeze the assets of charities registered in England and Wales or Scotland provided that preliminary notification is being made to the CCNI. It seems that the application to the court in Northern Ireland would be made either by the Charity Commission for England and Wales or the Office of Scottish Charity Regulator ("OSCR"). It is not clear from Article 58(4) whether the CCNI would make an application to the court for a cy pres transfer of funds or whether it would be the Charity Commission for England and Wales or OSCR. This needs clarifying. References to the Commission mean CCNI according to the definitions in Article 2(2).
42.Article 166 gives the DSD the power to apply any of the provisions of the Northern Ireland Charities Order to certain types of organisations. The actual heading to the Article refers to organisations established outside Northern Ireland although the text of the Articles refers to organisations which are managed or controlled from outside Northern Ireland. It is not entirely clear what the target of this Article is since any organisation which operates in Northern Ireland would have to register in Northern Ireland under Article 18(2). Similarly, even a charity which was established and registered in Northern Ireland could possibly be controlled or managed from outside it, and the objectives of this Article need clarification. If the charity in Article 18(2) refers back to the definition in Articles 2(2) and Article 3, then the obligation to register only applies to a charity that is subject to the control of the High Court. Presumably, DSD is assuming that the Northern Ireland courts would follow the Gaudiya Mission case, so that they need a reserve power to control foreign charities.
We hope that these observations are helpful. Should DSD have any comments or questions in relation to this submission they should please direct them in the first instance, to the Chair of the Working Party whose contact details are (Office Telephone) 020 7917 7462, (Mobile) 07956 127396 (Address) 66 Lincoln's Inn Fields, London WC2A 3LH.
