China’s New Nonprofit Law and the Growing Trend Impacting International Philanthropy

Chinese legislators just passed disturbing legislation granting police broad authority to supervise foreign nonprofits.  The Chinese law requires all foreign nonprofits to register with the Ministry of Public Security and authorizes the police to search nonprofits’ offices and summon their representatives at will.  China has joined Russia and India in citing national security concerns as ostensible grounds for adopting increasingly hostile laws to US and other foreign nonprofits operating in their countries.

Since the 9/11 terrorist attacks, US mission organizations, disaster-relief groups, and other humanitarian nonprofits have needed to implement numerous safeguards to ensure charitable assets do not fall into the hands of, or incidentally support, terrorists.  Such anti-terrorism measures are amply warranted.  But the changing legal and political landscapes in Russia, India, and China present entirely different challenges for nonprofits engaging in humanitarian or mission work in these countries.  The new regulations in these three countries are forcing US nonprofits to develop new and creative legal solutions to protect the ongoing humanitarian and mission work in these countries.

For example, following President Putin’s re-election in 2012, Russia adopted what is commonly known as the “Foreign Agent Law” which requires nonprofits that receive foreign donations and engage in "political activity" (a broadly defined term) to register and declare themselves as “foreign agents.”  Once registered, the nonprofits are required to disclose their status as “foreign agents” on all official fundraising and other communications and are subject to a number of other hostile provisions.  In 2015, Russia enacted an additional law which bars any nonprofit that the Russian Government determines is “undesirable” as a threat to the constitutional order and defense capability, or the security of the Russian state.  NGOs that do not cease all operations are subject to substantial fines and jail time.

U.S./E.U. Replace Safe Harbor with “Privacy Shield” but Details on New Plan Unclear

U.S. organizations transmitting personal information across the Atlantic can breathe a sigh of relief – sort of.  The U.S. and E.U. agreed this month to a new framework designed to protect the online privacy of E.U. citizens and to mitigate legal exposure for U.S. entities transmitting personal information across the Atlantic.  The agreement, known as Privacy Shield, replaces Safe Harbor, a fifteen-year-old privacy agreement, was ruled illegal by the Court of Justice of the European Union (“CJEU”) - the highest EU court, last October. 

This developing area of the law is often not on the radar of nonprofit organizations.  In fact, many nonprofits are not eligible to participate in Privacy Shield and its Safe Harbor predecessor.  However, as discussed below, Section 501(c)(6) trade associations and certain other nonprofit entities should qualify to enjoy the legal protections available under these legal frameworks.  Since the abrogation of Safe Harbor, many eligible nonprofits have faced uncertainty regarding the legal status of their transatlantic data transfers.  The new replacement Privacy Shield promises to both protect E.U. citizens’ personal information and shelter U.S. qualifying nonprofits and other entities who comply with its terms. 

It may be too soon to celebrate, however.  Specific terms and conditions of Privacy Shield have not yet been disclosed.  Furthermore, it is not clear that the new agreement will pass legal muster with E.U. Data Protection Authorities (“DPAs”) once the details are published.  Until this occurs, U.S. organizations conducting transatlantic transfers of personal information remain in murky legal waters.  During this time of uncertainty, U.S. organizations should continue to implement alternative legitimization mechanisms (discussed below).

Going Global: Operating Charitable Programs Abroad

Philanthropy in the US has always carried a distinctly global mindset.  US-based nonprofits have a lengthy and impressive history of not only sending money, goods, and volunteers to help those in need, but also operating overseas to directly conduct their missions.  Legal and practical issues may vary considerably. Several basic pro-active steps, however, apply to nearly every nonprofit contemplating international activities.

Research, Research, Research

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