Legal Approaches Of Purposes The Case Of Independent Agencies

Legal Approaches of Purposes:
the Case of Independent Agencies

January 2007
Boudewijn de Jonge
University of Amsterdam

Legal Approaches to Purposes: the Case of Independent Agencies
Legal Approaches of Purposes: the Case of Independent Agencies

Supervisor: Mr. J.H. Reestman
Corrector: Prof. Mr. I.C. van der Vlies
Final thesis for the law school of Amsterdam University
All rights reserved (2007).

Table of Contents
Introduction................................................................................................................. 4
Part One ..................................................................................................................... 5
Hobbes and the development of legal personality .................................................. 6
The State as unique source of authority .............................................................. 6
Fragmentation of the State .................................................................................. 7
General functions of purpose provisions ................................................................. 9
Communication function ...................................................................................... 9
Direction function............................................................................................... 10
Correction function ............................................................................................ 11
Private law: the transgression of object theory...................................................... 11
Purpose theory in its purest form....................................................................... 12
Development till date ......................................................................................... 12
Public law: purpose provisions as part of accountability ....................................... 14
Accountability for the existence of an independent agency ............................... 14
New lines of accountability of the independent agencies .................................. 16
Position in international law ............................................................................... 17
Part Two ................................................................................................................... 19
The comparison .................................................................................................... 20
Legislative culture as factor................................................................................... 20
Interpretive spectrum of ‘purpose’......................................................................... 22
Independent agencies in context .......................................................................... 23
Netherlands ....................................................................................................... 23
United Kingdom................................................................................................. 26
United States..................................................................................................... 29
France ............................................................................................................... 32
European Union................................................................................................. 36
Comparative syntheses......................................................................................... 42
Part Three................................................................................................................. 43
Practical effects compared to private law.............................................................. 44
Communication ..................................................................................................... 44
Direction................................................................................................................ 45
Correlation between objectives and tasks ......................................................... 45

Limits to political influence on objectives ........................................................... 46
Correction ............................................................................................................. 47
Establishment .................................................................................................... 48
Parliamentary oversight..................................................................................... 48
Negligence of tasks ........................................................................................... 49
Directors’ liability................................................................................................ 49
Administrative decisions .................................................................................... 50
Civil liability........................................................................................................ 50
Conclusion on practical effects ............................................................................. 51
Bibliography.............................................................................................................. 52
Books .................................................................................................................... 52
Articles .................................................................................................................. 52
Table of Contents

Reports / Policy Documents.................................................................................. 53
Caselaw ................................................................................................................ 54
Websites ............................................................................................................... 54
List of independent agencies and their legal acts ................................................. 55

3

Introduction
The most basic entity of our society, the human being, the natural person, is since
long not the sole recognised person in law any more. Advancement of society and
increased co-operation between us has resulted in the introduction of the concept of
‘legal personality’ into law. Now, this concept applies only to groups of natural
persons, but perhaps more entities will be recognised as players in law in the future –
political movements and philosophers are claiming recognition of the animal as a
legal subject these days, and some legal theorists foresee that electronic agents will
be participants in law one day.1

An ever more complex society has also caused the face of the State to chance. No
longer, the contrat social empowers a Sovereign, a natural person, but it is the State
as a legal person that receives the general power from the citizens. The State, which
does not operate as an indivisible entity anymore, but has subjected its power to
external transnational organisations, and has internally brought its power outside the
realm of the State with independent agencies, endowed with separate legal
personality. The State is in a process of – not to be overstated – decentralisation or
fragmentation and internationalisation.
At both ends of the contrat social the face of the participating actors is under change;
a very fundamental change at the State’s end.

In times where the identity and intrinsic uniqueness of human being and State are
questioned, scholars are seeking to give direction to this movement. The identity of
human beings raises the questions of life: ‘who am I’, ‘why am I here’, etc. The
discussion over identity and purpose of the other side in the contrat, the fragmented
State and other new public legal personalities, can be put in similar terms.
In this thesis, the modern identity of the State, as a participant in the contrat social,
will be examined. Not the State itself will be the subject of the inquiry, but the new
participants in the contrat social, that have arisen along side the State: the
independent agencies, on a national and international level.
It will be examined to what extent the legal definitions of their identity and purpose2
can offer practical direction in the search after their position and function in our

society.

This thesis is divided according to three questions to which a tentative inquiry will be
set about:
- Part One: why are identity and purpose of these organisations legally defined?
- Part Two: what do these legal provisions consist of?
- Part Three: how can these provisions be given a practical meaning in reality?

1
Teubner G. Rights of Non-humans? Electronic Agents and Animals as New Actors in Politics and
Law, in: Journal of Law & Society 2006(33), and Cliteur P. and Baaij H. Stop discriminatie dieren
[trans: Stop Animal Discrimination], in: NRC Handelsblad. Rotterdam: 3 October 2002.
Introduction

2
The word ‘purpose’ is used herein – unless specified – with a broad meaning which encompasses
words like function, role, objective, duty, aim, goal, etc. For a more detailed overview of the semantic
spectrum, see page 22, infra.

4

Part One
In this part the origin and doctrinal necessity for the definition of identity and purpose
of an organisation will be examined. To place this into context, first the genesis of the
concept of ‘legal personality’ will be reviewed. Then it will be explained how the
definition of identity and purpose is tight up with the concept of legal personality and
how this was worked out in private law. Finally, it will be seen what implications this
holds for public law legal personalities.

5

Hobbes and the development of legal personality
In Hobbes view of the contrat social, the State was created as to prevent civil society
to collapse, to prevent anarchy brake loose.3 In the state of nature, no associations
between human beings took place. But with the contrat, the multitude conferred its
rights and powers upon one entity to secure the interests of all. To guarantee the
effectiveness of the protection of society and the integrity of the State, no other
entities could arise along side the State without the State approving their existence.
The State, and the State alone, was the source of any exercise of power over the
members of society. No person, no group and no collective could exercise power or
create obligations for human beings, unless the State had explicitly vested this
authority in the group.

The State as unique source of authority
The State was the universitas, containing universal power, and was a separate entity
from its constituents. This resulted in a strict separation of private and public
interests. Clearly, this was an answer to medieval feudalism, in which private persons
were endowed with public power, and to the existence of craft guilds that consisted of
private individuals pursuing group interests, while possessing great power over large
groups of craftsmen.4 In Hobbes Leviathan, no one could exercise such power over
others, without the State guarding the general interest.

Initially, this strict separation of private and public interest led to strict limitations on
individuals co-operating in groups. Such a group was not to be regarded as a
separate entity from the individual group members, so to make clear that they
pursued their own interests, and could be held individually responsible for any act.
Human beings were the only persons that were actors in law, and that had standing
vis-à-vis the State.
Reality, however, demanded that individuals could act collectively. And therefore
practice came into being that the Sovereign, the personification of the State, granted
incorporation to a group. In the United Kingdom, for example, a Royal Charter was
originally the only way to form an incorporated body.5 When economic developments
demanded this, ‘partial associations’ were allowed along side the Royal Chartered
groups – but, with a maximum of seven group members.

Von Savigny carried on Hobbes’ ideas in this respect in most extreme form, when he
concluded that in Roman law each and every group needed explicit concession by
the State to come into being. Not just for the attribution of legal personality, but also
for the mere existence of a group, State action was required.6

The idea of the State as the sole authorisation of any exercise of power in society,
has been under attack several times. Especially in conflicts over the position of the
State vis-à-vis other powerful persons, like the Church and the unions, doubts over
the special role of the State were voiced.7 English Pluralists held that the State is

3
Hobbes T. De Cive : the English Version. Oxford: Oxford University Press (1983).
4
McLean J. Personality and Public Law Doctrine, in: University of Toronto Law Journal. 1999 (1),
p131.
5
Groenewald Th. Doeloverschrijding bij BV en NV. Deventer: 2001, p11.
Part One

6
McLean J. Op.cit. n4, p128.
7
Id., pp125-6.

6

nothing more than any other association, and that there is therefore no need for
explicit or implicit authorisation from the State for their establishment. More moderate
pluralists, like Dicey, took the position that the associations do not need the State’s
approval for the existence and that individuals are free to associate, but only for the
creation of obligations for individuals.

Fragmentation of the State
That discussion is of importance to the current debate over the identity of the
fragmented State.8 Increasingly, the State as a singular entity, as sole attributor of
power, solemnly devoted to the general public interest, has changed. On the one
hand, the State has shifted parts of its general power to independent public agencies,
and on the other hand the State is taken part in power sharing agreements, with
other States and with private actors. As a result, the State is now a plurality of legal
persons, many of which are to achieve specific ends and serve specific interests.
And besides the State, private stakeholders are increasingly present in the processes
of rule making. This happens partially through self-regulation, but also through direct
influence and sector representation in public bodies.

Runciman explained the discussion over the unique character of the legal person(s)
of the State, by way of analogy with a theatre play.9
In the play, every actor wears a mask to act a certain role.10 The mask signifies legal
personality, which can be attributed or taken by the State. The State also does this to
human beings, e.g. by denying legal personality to mentally ill.
In the most pure form of the Hobbessian play, the State can be viewed as the
director of the play, the distributor of the masks. The State does only give one mask
to each actor and there are no masks for group persons.

In the modern version of the play, it has turned into an improvised play. The
economic reality has caused the State to acknowledge group masks.11 The actors
may start and fill in their role autonomously, and may collectively take up a mask as
they wish. Whilst the State does not distribute the masks anymore, it does still
prescribe the minimum requirements to the masks. If a group of actors wants to use
a mask collectively (wants to obtain legal personality for their group), they will have to

meet the requirements as set by the State. One of the minimum requirements is a
description in the statutes of the role or purposes that the actors envisage for their
group. Other than the State and human beings, a group is only allowed to engage in
activities for the defined statutory purposes. The group will be free to interpret that
role of the character freely, but once the outer burdens of the role are overstepped
the mask is not recognised as such anymore, and the individual actors act in their
own personal capacity.

8
Lindseth P. Agents without Principles? Delegation in an Age of Diffuse and Fragmented Governance.
Hartford: February 2004, p7.
9
Runciman D. Pluralism and the personality of the state. Cambridge: 1997, p223 and further.
10
The Latin word persona comes from the Etruscan word phersu, which means ‘mask’. The mask
became the word used to refer to the actor, thereby symbolising how the mask identifies the person.
11
That this development is still ongoing can be seen in the movement towards recognition of group
and corporate criminal liability by Western countries. Recently, e.g., Portugal, Slovakia and Romania
Part One

introduced corporate criminal liability in their legal systems. See: Eurojust. Eurojust & Human
Trafficking. The Hague: 2005, p26.

7

The current dogmatic problems over independent agencies can be put in this
perspective as well. The independent agencies possess independent legal
personality, and therefore have a mask to act on their own in the play. It is unclear
who is behind the mask, whether that are individual human beings, or whether it is
the State acting with different masks. In any case, it is clear that these entities are
established for specified purposes, with a particular role to play. The State must
define their role in the play, because power is exercised by a separated legal person
in the play. That power may, other than with the State itself, only be exercised for a
defined end.

By the same token, where the State gives power to legal persons that comprise of
private and public actors collectively or subjects its power to an international legal
person, the purpose of that legal person should be defined. This is because of the
underlying premise of the Hobbesian system: where power is exercised in society by
an actor other than the State, this can only be done for an end to which the State has
consented.

It has been asserted that the present confusion over the identity of the State, now
that it also operates through separate legal entities, and authorises self-regulation
more and more, is a bit of a return to medieval feudalism.12 In particular, the
independent market regulators, which operate with special representative organs of
producers, are regarded as the re-emergence of craftsman associations.13 As in
medieval times, the State is now sharing its sovereignty with other entities: interest
organisations (unions, NGO’s, etc) and transnational organisations. Private persons
are endowed with public authority, while operating outside the direct democratic
realm.14 The most extreme example of shifting public power is the case in which EU
law requires a legally independent market regulator to be established, distinct from
the State, because the State itself participates in the market as a shareholder of a
public utility company, so to ensure that the State is not acting contrary to the public
interest (the free market principles).15

12
McLean J. Op.cit. n4, p131, and Ankersmit, F. Privatisering bedreiging voor democratie, in: NRC

Handelsblad. Rotterdam: 20 October 2005.
13
See for example the ENISA ‘Stakeholders Group’.
In the Netherlands, the Kohnstamm Commission wrote: The [agencies] concentrate on the exercise of
their tasks and relations with the concerned stakeholders. This does not fit with the general principles
of democracy and law. The [agencies] experience political discussion and parliamentary questions as
irrelevant and an expression of distrust. Translation by author. Werkgroep Verzelfstandigde
Overheidsorganisaties op Rijksniveau [Kohnstamm Commission]. Een herkenbare overheid:
investeren in de overheid, Interdepartementaal Beleidsonderzoek 2003-2004 nr. 1. Available at:
www.andereoverheid.nl.
Compare: Freeman J. The Private Role in Public Governance, in: New York Law Review 75(3), p543
and Metzger G.E. Privatization as Delegation, in: Columbia Law Review 103(6), p1501. Both follow to
a certain extent the school of Critical Legal Studies in posing that there is no more fundamental
difference between public and private actors acting in public interest.
14
That private individual personify the independent agencies as such, is not only the case in the U.S.;
also in the recent discussion in the Netherlands over the Equal Treatment Commission, discussion
arose over the personal qualifications and background of the individuals in that commission: Cliteur
quoted in: Algemeen Dagblad. Rotterdam: 18 October 2006.
15
See on the dichotomy of the State as market participant and regulator, and the consequences for
independent market regulators: Lassere B. L'Autorité de régulation des télécommunications (ART), in:
Part One

L'Actualité juridique - Droit administratif 3 (1997). Available at: www.lex-electronica.org/articles/v4-
1/lasserre.html.

8

These new constructions of government, sometimes referred to as ‘governance’, may
not be problematic at all. But the transferral of power from the State to independent
agencies and (transnational) networks needs to be conditional, and a clear definition
of their role – including its purposes – should be part of that framework of conditions.
That approach guarantees that ultimately the fundamental premise of Hobbes still
applies: no power is exercised in society without consent of the State.

General functions of purpose provisions
The character or identity of an organisation is greatly determined by its purpose,
besides its physical make-up and financial position, e.g. It should be born in mind
that the creation of agencies is part of a development within public administration
towards functional decentralisation. The chosen term for this development already
signals that the description of the function of an agency is a key element of the
concept. The mirror concept of functional decentralisation is functional centralisation,
which takes place towards transnational agencies and networks. Again, the purpose
is the criterion which brings together agencies from different jurisdictions or is the
raison d’être for a new transnational agency.
Clarity over this part of the character of an organisation has at least, conceptually,
three functions, which work in two dimensions. The functions are communication,
direction and correction, and the dimensions are related to the forum and the
moment in time.

Communication function
The clarity over the purpose has a communication function, since it gives certainty
and a common framework of expectations for all relevant stakeholders. Internally to
employees, managers and shareholders, and externally to the State, third parties, the
public, etc.
Internally, the purpose is important, because organisations are group persons: a
collective undertaking. To refer again to the model of society as a theatre play: the
actors behind the mask must understand which role they have, in order to be able to
act collectively.

Noteworthy is that, with hardly any exception, all organisations included in the

survey, have a section on their website where its overall objective and mission is
stated. And in most of the cases, the words for these sections are simply taken from
the legal description in the constituent documents. Especially for ‘first contact’ with an
organisation the description of the purpose enables the counter party to understand
the basics of the identity of the organisation. In commercial life, for example, the
register of the Chambers of Commerce provides all basic characteristics, including
the purpose.

Clear communication of the (limited) purpose of a public organisation can prevent the
public to have unrealistic high expectations. For example, the EU agencies often
operate with a limited mandate. Subtle but precise communication over the purpose
of the organisation can be read in either the name (‘European Monitoring Centre on
Racism and Xenophobia’, which communicates its relatively passive role) or the
catchphrase (Eurojust: ‘European Judicial Cooperation Unit’, which reflect that the
participating authorities remain autonomous).
Part One

9

Notorious examples of mislead expectations over purposes of organisations can be
found in the realm of international law. The problem occurs for humanitarian missions
in particular, which function as temporary organisations, on the basis of the founding
act of the sponsoring international organisation and their Status of Mission or Status
of Forces Agreements. Miscommunication or misunderstanding over the complicated
legal mandates which limit the actions of such missions often causes local
populations to be disappointed in the foreign assistance.

Direction function
The direction and correction function have a stronger legal connotation than the
communication function.

Internally, the direction function increases in importance for organisations with narrow
mandates: international organisations and their missions, charities, and independent
public organisations, are established for very specific ends. The definition of the
purpose for an organisation determines which role it is going to play. During the start-
up phase, more concrete defined tasks can be derived from the purpose of the
organisation, and the required assets and processes can be defined. Most private
law corporate bodies operate under very wide purpose provisions that will not give
much guidance internally.

The function of direction is of particular importance for the public organisations.
Because of the legality principle, public organisations cannot take up any role,
without a proper legal basis. Not only the substance of a decision needs a proper
legal basis, also the path leading towards that decision must have a statutory basis.
This is described as organisational-functional legitimacy.16 Any concrete activity of or
purpose given to an organisation can therefore not exceed the original legal basis.

An illustrative case in this respect was the ENISA-case for the European Court of
Justice (ECJ). The European Network and Information Security Agency (ENISA) is
established on the basis of Article 95 TEC, which offers a basis for the harmonisation
of national laws. ENISA is charged with activities related to network and information
security, like risk analysis, awareness raising, and issuing recommendations. The
question to be answered by the Court was whether the establishment of ENISA was

indeed an act that harmonised the laws of the Member States. In order to answer
that question the Court examined whether the objectives and tasks of the
organisation were closely enough related to actual process of harmonisation.
The ECJ confirmed that European agencies are a means to an end (harmonisation
i.c.), and not an aim in itself, when it ruled the following:
The establishment of ENISA cannot be separated from its tasks, but it is a
means to the end. The ENISA Regulation thus pursues only a single aim,
which is to be derived above all from the provisions on the tasks of ENISA.17
The judgment pinpoints the entire existence of the organisation on the purpose of
harmonisation. Harmonisation is the single aim of the organisation to which all its
tasks and competences are subordinate. This judgment emphasises once again for

16
The term Organisatorisch-funktionelle Legitimation was introduced by Waechter; quoted in:
Schroten K. De overheidsstichting op het niveau van de centrale overheid. Deventer: Tjeenk Willink
2000, p61.
Part One

17
ECJ. ENISA-case: UK vs. Parliament and Council. Judgment of 2 May 2006. C-217/04 ECR 2006 I-
03771, para21.

10

all EU agencies that their actions shall be directed by the purposes mentioned in their
legal basis, which is ultimately to be found in the EU treaty.

The positive side of the coin is that the management of public organisations itself can
therefore go back to their statutory basis to reconsider its mission or the fulfilment
thereof: the purpose provision functions as a tool for analysing its performance.

Whereas the purpose of an organisation may play an important role at the start-up
phase, the definition of purpose may also cause an organisation to wind up or down
size its activities. Especially where a clear end state or measurable targets are
defined as part of the purpose, a moment is defined where the raison d’être of the
organisation will seize to exist. If the organisation chooses to change its focus of
activities, to avert its own redundancy, for example, there may be a need to change
the purpose as defined in its basic document.
An example of this is the Dutch Central Organ for the reception of Asylum seekers
(COA). Since the numbers of asylum seekers sharply dropped, the organisation is
actively seeking new ‘markets’ to offer its reception and housing services. However,
its statutory purpose is explicitly restricted to asylum seeker-related activities.18

Externally, clarity over the purpose of an organisation serves processes of co-
operation. Although the field of activities may be similar between two organisations,
the purposes may be very different.

Correction function
Finally, the definition of the purposes of an organisation functions as a correction
mechanism.
The definition of the purpose of an organisation protects the stakeholders who confer
assets (shareholders, creditors), power (the State) and time (employees) on the
organisation. All these stakeholders are equipped with an enforceable right that their
assets, power or time will not be exerted for another purpose than what they placed it
for with the organisation. In fact, the purpose functions here as a protection of the
interests of stakeholders. To a varying degree each organisation is purpose bound:
limited in its activities by its purpose.

In the start-up phase, the State may refuse legal personality to an organisation if it
deems its purposes illegal. When an organisation goes bankrupt, in most Western
legal systems, the executor can render any previous act by the organisation void if
the act was contrary to the purpose of the organisation. But also personal liability of
directors, or financial consequences in case of public independent bodies may be
attached to transgression of the object.

Private law: the transgression of object theory
Within private law two major categories of legal personalities can be distinguished, in
relation to purpose descriptions in the articles of association. On the one hand there
are the business corporations in corporate law, and on the other, there is the diverse
mix of non-profit organisations19. For both categories holds that in all Western legal

18
Based on conversation with COA employees in November 2006.
Part One

19
The word ‘non-profit’ refers herein to non-commercial organisations that are not established with the
principle aim to pay (parts of their) profits to shareholders, or similar constructions.

11

systems legal persons are registered, and upon registration a purpose must have
been determined in its founding documents.

Purpose theory in its purest form
In corporate law, the description of the purpose had originally an important role in the
creation of legal persons by groups of individuals. In its ultimate form, the corporation
was seen as nothing more than Zweckvermögen: the belongings of the corporation
belonged to the purpose, not to private individuals.20

Both in civil law and common law countries, transgression of the object of a company
fell under the ultra vires doctrine, which has a purely corrective function. Any act by a
corporation beyond the defined purpose of the corporation was void or voidable.
Especially in the United States this doctrine was applied strictly, until the beginning of
the 20th century.
The doctrine had an internal dimension (the management could be sanctioned on
grounds of default) and an external dimension (contractual obligations with third
parties could be affected by voidness). On top of that, the executor could ex post
declare any act void, if this act was performed ultra vires. The external dimension in
particular shows the weight that is given to the restrictive effect of purpose
provisions: contracts with third parties may be declared void if they do not fit the
purpose of the corporation.21

Development till date
However, in the course of time, and for both practical reasons and reasons of
principle, the doctrine lost its much of its relevance. When with time the restrictions
upon the creation of incorporated bodies relaxed, the main function of the purpose
description became the protection of the interests of shareholders and creditors.
Protection of good faith with third parties and an ever wider definition of the aims of
corporations, made that from the side of courts as well as from the side from the
corporations (shareholders) itself, the restricting effects of the doctrine were limited.
The interest of certainty in business transactions prevails nowadays over the interest
of pinpointing a company to its original purpose. US Company law has abolished its
external effect entirely, but also in most European countries the external effect is
limited to cases in which the counter party was not acting in good faith.

While the external effect of ultra vires was abolished in many countries, the first two
EEC Directives concerning corporate law recognised that the concept of the purpose
for a corporation is not completely meaningless for practice. These directives still
demand that upon establishment of a corporation a purpose is defined. The
directives left the possibility open for the Member States to uphold an ultra vires
doctrine with external effect.22

In the Netherlands, for example, the purpose provisions can still be used by several
stakeholders. The circle of stakeholders that may invoke ultra vires is large:

20
Machen A.W. Corporate Personality. 24 Harvard Law Review 4 (1911), p256.
21
See: Blanco Fernandez J.M. Doeloverschrijding bij BV en NV [Book review], in: RM Themis
2003(1), p42. He refers to the importance of the possibility to have the purpose of the organisation
taken into account where contractual obligations were obviously disadvantageous to the organisation.
Part One

22
The First Council Directive 68/151/EEC of 9 March 1968 on corporate law, article 9.1, and the
Second Council Directive 77/91/EEC of 13 December 1976 on corporate law, article 2(b).

12

contractors, shareholders and employees may invoke ultra vires in inquiry (‘enquête’)
procedures, liability of management can be invoked on grounds of transgression of
object, and executors may invalidate previous acts on such grounds. However, it
must be said that only in the bankruptcy procedures the legal concept appears from
time to time. The external effect is limited to cases in which the other party was not
acting in good faith.23
Two developments limited the practical meaning of purpose provisions. On the one
hand, courts have changed the concept into a ‘benefit test’: whether the contested
act was in the ‘general interest’ of the corporation, more than whether the actual
dealing fits the purpose provision.24 On the other hand, the wordings of purposes are
chosen as wide as possible, so to prevent any uncertainty over the authority to act of
a corporation.

Whereas the meaning of the concept of purpose for private parties is reduced, the
State has shown an increasing interest in the corrective function of purpose recently.
EU States have agreed to pay more attention to the use of legal personalities for
illegal purposes upon the moment of registration. This renewed attention also covers
the purpose of the corporation, and aims to filter out organisations that are
established to support racketeering, terrorism or debt avoidance practices.25

In the context of purposes of legal persons, the previous category of corporations can
be distinguished from a second category of non-profit organisations. The difference
in purpose with the first category is one that may not always be directly obvious from
the statutory purpose. Sociologically seen, the purpose of a commercial enterprise is
profit maximisation, while non-profit organisations is to support or strive for an issue
of public concern. Yet, in the bye-laws of both types similar wordings can be found,
because both types sometimes only mention their prospected activities or area of
activities. However, the legal classification (as private corporation or charity) creates
a theoretical watershed between the different purposes, mainly through the explicit
exclusion of profit pay out in the case of charities.

While for the commercial corporations in principle the purpose – what to achieve – is
clear (disagreements are mostly concerned with how to achieve profit maximisation),
the purposes of non-profit organisations are of a different and immense diverse

nature.
Generally spoken, the purpose provisions have their corrective effect through a
similar system as with the corporations (i.e. responsibility of management, voidance
of legal acts and annulment in bankruptcy procedures). But the character of the non-
profit organisation as a goal organisation appears from, for example, the legal
burdens on the change of the purpose of the organisation. In the Netherlands a
foundation is only allowed to change its purpose, if the deed of foundation explicitly
provides for this.26

23
A good example can be found in: Rechtbank Rotterdam. Judgment of 24 February 2000.
Jurisprudentie Ondernemingsrecht 2000/76, paras 6.3.1.-6.4.1.
24
E.g. the Playland judgment of the Dutch High Court. NJ 1997/149, para3.4. For an analysis of this
case law, see : Belder J.C. Concernfinanciering en doeloverschrijding, in: Vennootschap &
Onderneming 2003(4), p42.
25
See e.g.: Ministerie van Justitie. Beleidsregels preventief toezicht op vennootschappen 2005 [trans:
Policy regulation preventative control on corporations 2005], p10. See also the case law mentioned
Part One

herein, n27, infra.
26
Schroten K. Op.cit. n16, p26.

13

Another important difference with commercial corporations is that the State has more
rights to intervene. For example, the Dutch State may, through a court order, replace
the board of a foundation in case of transgression of the statutory purposes
(2:298.1(a) Dutch Civil Code). That the State has a stronger position with regards to
non-profit organisations in scrutinising the pursue of the purpose, is not surprising in
the light of the historical discussion whether such organisations compete with the
State as sources of authority (see p6). The practice of forbidding non-profit
organisations that undermine the authority of the State is still alive in Western
democracies. A recent example can be found in the prohibition of a Muslim
organisation that run their own courts and had its own government as part of an
underground Caliphate state in Germany and other countries.27

Public law: purpose provisions as part of accountability
In the discussion over the position, function and personality of independent agencies
and networks, often a key role is played by the concept of ‘accountability’.
Accountability can be described as a system comprised of four factors:28
- an actor (who is held accountable),
- a forum (which calls the actor to account),
- an act (over which the actor gives account), and
- an obligation (by which the conduct of the actor is measured).

Weber introduced the strict functional approach of organisations, as purely a means
for achieving an aim. In his theory all public organisations, as part of the
bureaucracy, were strictly subordinate to parliament, in the purest form of a principle-
agent system: the Parliament as principle of the Minister and the Minister as principle
of the bureaucracy.29

Accountability for the existence of an independent agency
Delegation of policy and executive authority to independent entities, and subjecting
authority to transnational networks, has caused that the number of acts over which
the State (strictu sensu) can be held accountable has been limited. Whether the
reason for placing (the executive) power at arm’s length is either independence,
increased expertise or efficiency, in all cases, the result is that the scope of

democratic accountability is restrained.
For example, the Minister cannot be held accountable anymore for advisory opinions
by an equality board, or the actual distribution of grants by an arts council.
However, the act that the Minister can still be held accountable for, is the primary act
or decision to place the execution of power at arm’s length: the decision to establish
the independent organisation and delegate powers to it. This also includes, as a
mirror, the power to end the delegation, and to wind up an independent agency.

27
The Hizb ut-Tahrir movements, which pursue the establishment of a pan-Islamic caliphate, operates
in most Western countries through plain legal persons. For example, in Germany, the foundations
related to this movement were forbidden. However, in the Netherlands, the government – being aware
of its purposes – decided not to forbid the Dutch branch ‘Stichting Dienaar aan Islam’. See:
Bundesverfassungsgericht, judgment of 2 October 2003, 1 BvR 536/03, and: [Netherlands] Official
Reports of the Lower House Annex 2001/2002, no. 603, p1271.
28
Bovens M. Analysing and Assessing Public Accountability. A Conceptual Approach. January 2006.
Available at: www.connex-network.org/eurogov/.
29
Strikwerda J. Organisatie & Verandering, deel 1. 2002. p3. Notice that the neither the US style
Part One

presidential system, nor the Dutch style parliamentary system can be summarised in such simple
terms.

14

A legal act of establishing or winding up an independent agency and delegating
powers to it, is not fundamentally different from any other act. Organisations are seen
as a means to achieve a certain economic or social goals, and thereby the same
framework of accountability applies to such a decision. The act of establishment of
an independent agency is benchmarked by the purpose it was given. Likewise in
private law, foundations are wound up once the purpose is achieved, or it appears to
be impossible to achieve the purpose.

A similar line of thought applies to the participation in transnational networks.
Whenever it is decided to participate in a transnational network, the Minister can be
held responsible for the initial act of participation, and the use of the power to pull out
of it. If an independent agency participates in a network, the statutory purpose and
activities of the network in practice can be tested against the statutory purpose of the
agency itself. By way of analogy: in private law, members of an association, may
demand management to pull out of a federative association if the purpose of that
association does not fit the purposes of the primary association anymore. 30
At the time of writing, in many EU Member States parliaments question their
government over the set up of a new EU agency on fundamental rights, which would
be the focal point in a network of national agencies.31 Allegedly, the function of the
new agency would have too much resemblance with the Council of Europe, and
serve no valuable purposes, and not withstand the subsidiarity test.
It should be noticed, however, that little attention is paid to the establishment of and
participation in more informal networks. This irregardless of numerous academic
analyses that conclude that these transnational networks of agencies fulfil very real
functions in practice. For example, the European network in which equality bodies
co-operate – Equinet (formerly: Euroneb) – is operating very much in the margin of
attention. There is no constituent document available for this network, let alone any
formal statement of their intended purposes.32 By way of the very informal structure,
and, as a consequence of that, the lack of a clearly expressed purpose and role for
this network, it seems to evade political and public scrutiny.33
It may be argued that no legitimacy issues will arise as long as no binding powers are
attributed (in terms of decisions in individual cases, or rule-setting), since all
participating agencies bear responsibility for activities of the network.
Notwithstanding that, it remains arguable that a legal basis is necessary since the

networks are presented as separate entities, there are public assets involved, and
their work – of whatever nature – possesses a certain public authority.

30
Similar issues as to the participation in federative associations, can be seen in the context of private
law: see, for example, on the statutory limits in the deed of foundation to such co-operation: Sangers
G.J.H. Bestuurlijke controle van federatieve verbanden, in: Galle R.C.J. (ed). Handboek bestuur en
management van de grote vereniging. Den Haag: Elsevier (2002), chap27, p3. For example:
Rechtbank Utrecht. MGT Alkmaar vs. Jongeren Federatie MGT. Judgment of 19 april 2006.
Jurisprudentie Ondernemingsrecht 2006(177), with annotation of Blanco Fernandez J.M.
31
Proposal for the new EU Agency on Fundamental Rights: COM(2005) 280. For the discussion in the
Dutch parliament, and an overview of the debate in parliaments of the other Member States, see: fiche
4.3.87 on http://europapoort.eerstekamer.nl [mainly in Dutch].
32
Answer of Mrs. Palmer of the secretariat of Equinet on 28 November 2006.
33
Bigmani argues strongly in favour of giving a legal basis for these informal networks, so to give them
a face to the public and strengthen the basis of their accountability: Bigmani F. Transgovernmental
Part One

Networks vs. Democracy: The Case of the European Information Privacy Network, in: Michigan
Journal of 26 International Law, p860.

15

Legal Approaches Of Purposes The Case Of Independent Agencies

Legal Approaches Of Purposes The Case Of Independent Agencies

Recommandé

Recommandé

Contenu connexe

Tendances

Tendances (16)

En vedette

En vedette (6)

Similaire à Legal Approaches Of Purposes The Case Of Independent Agencies

Similaire à Legal Approaches Of Purposes The Case Of Independent Agencies (20)

Plus de legalinfo

Plus de legalinfo (20)

Dernier

Dernier (20)

Legal Approaches Of Purposes The Case Of Independent Agencies