The Requirement of

Independence: The Legal View

Julian Smith and Elizabeth Jones

4 November 2015

In this session:

(1) The meaning of independence

(2) Independence in the context of:

•Charitable status

•Decision-making and duties

•Contracting and working with others

Does it exist?

Grand Committee on the Charities (Protection and Social Investment) Bill

Baroness Warwick of Undercliffe (29 June 2015) “The Charities Bill is not the

place to sort out these policy problems, nor is it the place to decide whether

historic charity law in all its variety might need to be tested. But it is the place to

reaffirm the centuries-old principle of the independence of charities and the

overarching duty of trustees to act only to fulfil the charity’s purpose.”

Does it exist? (2)

Trusted and Independent: Giving charity back to charities

Review of the Charities Act 2006

4.21 Further, as set out in the principles underpinning this Review……the

independence of the sector must remain paramount. Although it is part of the

existing common law that charities must be, and be seen to be, free from the

influence of Government or any other group, no more formal protection of that

status exists. The sector must continue to be seen as more than an outlier to

local or national government. How independence can best be promoted and

safeguarded must be an important feature of any debate on the future of the

sector.

What it is not

• Independence from regulation, or immunity from the law

• Independence from Parliament

• Immunity from taxation

– UK

– Europe

• Political neutrality

– Speaking out: guidance on campaigning and political activity by charities (CC9)

• A bar to collaboration

– Collaborative working and mergers: an introduction (CC34)

• A bar to commercial partnerships

– Charities and commercial partners (RS2)

• A bar to trustees (individual or corporate) having opinions

So what is it?

Independence from the State

• Independence of charities from the state (RR7)

– Suggests it is about unlawful delegation of discretion

• Trafford Community Leisure Trust and Wigan Leisure and Culture Trust

(Registration Decision 21 April 2004)

– Accepts that a charity can undertake a current statutory function, whether

mandatory or discretionary

– What matters is effective use of resources

• Construction Industry Training Board v A-G [1973] Ch 173

– What matters is jurisdiction of the High Court

– Now in s.1(1)(b) Charities Act 2011

So what else is it?

• Public benefit

– "private" or "personal" benefit must be incidental

– Example – perception of Andrew Lloyd Webber Art Foundation (Decision Jan

2010)

– You must not serve the interests of a closed class only

• Acting for exclusively charitable purposes

– Example – guidance on lobbying coalitions

– Exercise of powers (investment)

• Non-partisan education

Intersection of the duties of trustees with the

requirement of independence

• Overriding duty of trustees and unlawful delegation of discretion

• The duty of impartiality and appointment rights

• Independence of thought and board diversity

• Managing conflicts of interest and addressing confidentiality

• Evidencing independence in decision-making

Contracting and independence (1)

• Recognition that funders are entitled to set terms

• The World Children's Fund (Charity Commission inquiry report published

January 2009)

– Contract between the Fund and the World Children's Fund Europe, a Swiss charity

– The Fund was required to pay all income, less direct and governance costs to the

Swiss charity

– Charity Commission was critical of the trustees' decision-making but did not go as

far as to say the contract represented an unlawful fettering of the trustees'

discretion

Contracting and independence (2)

• Choice for trustees as to whether to enter into a contract on the terms offered

• Where there is a close connection between the funder and recipient

demonstrating independence may be more difficult

• Contracting with an arm of government is no different from contracting with

any other third party from a legal perspective

• Report from the Panel on the Independence of the Voluntary Sector raises

serious issues on independence for the sector

“ Respect and uphold the independence of CSOs [civil society

organisations] to deliver their mission, including their right to

campaign, regardless of any relationship, financial or

otherwise, which may exist

Paragraph 1.1 of the Compact

Independence and working with others

• Funding from Government: Commitments in the Compact in contrast with

recent findings of the Panel on the Independence of the Voluntary Sector

• Joint working and collaborations with others

• Delivery of charity's mission rather than the aims or objectives of other

charities, corporate funders or parts of government

Any questions?

Julian Smith

julian.smith@farrer.co.uk

Tel: 020 3375 7432

Elizabeth Jones

elizabeth.jones@farrer.co.uk

Tel: 020 3375 7138