The State and Civil Society Organizations: Friends or Foes?

January 31, 2024
Given civil society organizations’ (CSOs) vulnerability to foreign interference, how can the public interest in their operational transparency be balanced with the need to protect the rights to freedom of expression and association?

The principle of non-interference is fundamental to international relations and a pillar of contemporary international law. This does not mean, however, that states must refrain from supporting CSOs abroad, especially if those organizations promote UN guiding principles such as human rights, peace and security, and sustainable development. Support for civil society abroad can be offered in good faith or for nefarious purposes.

How, then, are CSOs faring in the current realpolitik-driven global environment? In practice, CSOs in democracies in transition are unlikely to survive without foreign donor support. Is there a legitimate interest on the part of the host state in controlling that funding? If yes, how far can the oversight go? Is the transparency of the funding that CSOs receive a good thing, fostering a more accountable and effective civil society, or do the practical negative effects arising from any regulation outweigh the theoretical advantages?

The Russian legal system provides an extreme example of interference in legitimate civil society operations with its highly restrictive “foreign agents” law. All CSOs and media that receive funding or other, ill-defined support from abroad are subject to stringent requirements. To begin with, they are required to attach the highly stigmatizing label of “foreign agent” to all their publications, including social media posts. Russian law also imposes onerous reporting responsibilities that require CSOs to disclose their donors. Violations incur sizable administrative fines and risk criminal prosecution. These sanctions serve effectively as censorship, as they discourage CSOs and media from expressing ideas and disseminating information on issues of public interest. Foreign agent laws not only affect the CSOs directly designated as such; they also produce a chilling effect on participation in public affairs and the legitimate operations of CSOs. The Venice Commission condemned the foreign agents law in Russia for encompassing “serious violations of basic human rights, including the freedoms of association and expression, the right to privacy, and the right to participate in public affairs, as well as the prohibition against discrimination”.

Policies that restrict fundamental freedoms and yield more state control over civic space are often mimicked by other governments. Both Ukraine and Georgia have pushed for laws that imposed a requirement on CSOs to disclose their foreign funding. In both countries, it was robust civil-society pressure that prevented the amendments from making their way through the national legislatures. Other countries in the region might not be so fortunate. Most recently, Kyrgyzstan has been pushing for a foreign-agent–style law with vague terms, burdensome requirements, and harsh sanctions. Western democracies are not immune to foreign agents laws, as Australia’s widely criticized foreign Influence Transparency Scheme Act of 2018 vividly demonstrates

Foreign agent laws do not survive scrutiny from the point of view of the rights to freedom of association and expression. Onerous reporting responsibilities are counterproductive to CSOs’ efficiency. Can there, however, be a legitimate interest in demanding more accountability in NGOs’ use of foreign funding? The answer, in an open society where transparency underpins public trust and serves as a safeguard against corruption and fraud, is yes. The public is entitled to have some knowledge of the sources of funding for NGOs operating in their countries. 

For the most part, the question of transparency is moot. NGOs not only report to their donors directly, but often publish financial information in their activity reports and inform the public of the sources of funding in other ways, such as through social media or public events. Self-regulation is a far more productive and human-rights–compliant transparency mechanism. After all, the state is never completely in the dark since it receives information on NGOs’ finances through tax reporting—which is completely reasonable so long as it is not discriminatory or corrupt. Additionally, the public interest in certain cases might override the protection of privacy and allow for public disclosure. This is clearly the case with the financing of political parties, electoral campaigns, and lobbying organizations. The Council of Europe’s Venice Commission recognizes these instances of mandatory disclosure as justifiable.

Voluntary disclosure is the linchpin of CSO transparency and accountability. One commendable initiative is ACCOUNTABLE NOW, which unites leading global NGOs around commitments to responsible advocacy, ethical fundraising, responsiveness to stakeholders, good governance, and integrity standards. A useful parallel can be drawn here with the media. Journalists’ unions and internal ethics boards are usually cited as the most effective instruments for ensuring integrity, accountability, and professionalism in journalism. Transparency in the use of public funds is particularly relevant for public broadcasters. Disclosure of media ownership structures is another safeguard that cultivates audience trust in the media’s impartiality and independence. Similar models should apply to CSOs, which share numerous similarities with media outlets, starting with their role as watchdogs for government and politicians. 

How to deal with CSOs that are suspected of being instrumentalized as weapons of foreign interference? Several issues should be settled before answering. First, there is a clear difference between public and private funds. Private donors have a right to privacy, which must be protected, save for the exceptions noted above. An expectation of greater public scrutiny regarding state funding is not only reasonable but often desirable, considering that public funds constitute taxpayers’ money. That said, NGOs must be accountable primarily to the state-donor rather than to the state in which they conduct their operations.

NGOs are also accountable to their beneficiaries—the groups, individuals, or organizations with which they work directly. Any general regulation of donor-NGO relationships is in any case likely to be redundant because large, state-funded donor organizations such as USAID or the Swedish International Development Cooperation Agency (SIDA), already have extensive reporting and monitoring and evaluation frameworks in place.

Second, certain legitimate state controls pierce the confidentiality of NGO operations. These concern, for example, investigations of money-laundering, financing of terrorism, espionage, non-compliance with international sanctions regimes, corruption, and tax evasion. The UN Special Rapporteur on the right to freedom of assembly cautions against increased controls on CSO sources of funding and promotes the use of existing legislation, which is often sufficient. According to this thinking, cumbersome reporting and public disclosure laws that target foreign funding are only one step away from the repressive use of broad “national security” laws by authoritarian regimes.

Third, what conduct constitutes illegal foreign interference? This is a complex legal and policy question that is beyond the scope of this paper, but it is useful to state what does not qualify as foreign interference. The funding of CSOs to conduct activities aimed at the promotion of human rights, media pluralism, peace and security, social cohesion, intercultural understanding, and other ideals that can be inferred from the UN Charter, major international treaties, and the UN Sustainable Development Goals, should not be considered illegal interference, even if they amplify a foreign state’s influence or soft power.

To contend, however, that states must never demand more transparency or reporting from CSOs would be indefensible. The key consideration is that any regulation must be balanced against the rights of CSOs and their members, in particular the rights to freedom of expression and freedom of association. As such, any regulation that touches upon the exercise of these rights must be seen as subject to stringent conditions and the possibility of judicial review. Under human rights law, restrictions are permissible only when they are provided by law, necessary for a legitimate aim, and proportionate. Laws that create these restrictions must be narrowly construed and clearly defined. The requirement of necessity can be satisfied only for a permissible goal, such as the protection of public health or the rights of others. A state’s general desire to be aware of CSO operations on its territory would not pass the test.

Proportionality means that the desired policy outcome must be achieved through the least intrusive measure, particularly when governments apply penalties. Onerous bureaucratic requirements that interfere with the daily work of NGOs fail to meet the threshold of proportionality. In balancing official demands for transparency of funding sources for electoral campaigns and political parties with protecting the confidentiality of politicians and their donors, the former is much more likely to prevail provided that other human rights safeguards are met. This already alleviates a significant measure of concern about foreign influence.

Our key recommendation for states is to work with CSOs, not against them. Nations have a legitimate interest in protecting themselves from foreign interference. However, this cannot come at the cost of unjustifiable restrictions on CSO operations. There are ways in which the state can effectively cooperate with civil society and break the cycle of antagonistic relations. Models of cooperation can boost transparency, as the parties will be compelled to share more information. Inevitably, there will be NGOs for which cooperation with officialdom will remain out of the question, either for reasons of strict impartiality and reputation or out of a desire to remain outside the policy process. It is also evident that CSOs that are in fact instruments of foreign interference will avoid additional scrutiny and shun cooperation with the host state. This will only make them less competitive than other NGOs and less able to influence policy.

States should create domestic funding opportunities for CSOs operating on their territory, as government-sponsored grants provide an opportunity for public authorities to develop relationships with civil society actors. Governments might benefit from delegating certain functions to CSOs, which can respond to communities’ needs in a more cost-efficient, agile, and grass-roots manner. NGOs will then incur certain reporting and disclosure responsibilities. Access to these grants should remain transparent and non-discriminatory, offered via a competitive selection process. Clearly, many NGOs will prefer not to use public funds, especially where the receipt of such funds is associated with political influence or even potential corruption. State-sponsored grants are thus better suited to activities seen as less political or partisan, such as those related to homelessness or creating public spaces in cities. Relevant research argues that sustainable state financing models should prioritize institutional grants for CSOs rather than isolated project-related grants, although a combination of long- and short-term financing might be the best way to cater to different needs.

Countries can also proactively involve CSOs at various stages of the policymaking and implementation processes. Many NGOs actively seek opportunities to collaborate with the central government, agencies, local government, and communities in these realms. The state benefits in these cases from civil society’s grassroots perspective, flexibility, and higher level of trust among citizens. In a 2023 sociological study conducted in Ukraine, the level of trust in civil society and volunteer organizations was significantly higher than in most public institutions, such as the legislature, the courts, the civil service in general, mayors and local government, and even many non-state entities, including the media, trade unions, and political parties. It follows that citizens are more likely to support policies designed and executed in partnership with NGOs. The latter can in turn maximize their impact and achieve their objectives more quickly and effectively if they are directly engaged in institutional and regulatory work. One positive example of a policy-focused partnership is Ukraine’s anti-corruption program, which is rooted in a strategy adopted by parliament, and was developed by Ukraine’s National Anti-Corruption Bureau through a series of public consultations. The program was adopted in early 2023, with clear deliverables and timelines, and is now being brought into effect.

Partnerships between CSOs and the government can certainly be regulated formally, but collaboration with civil society can be achieved more effectively through soft instruments such as voluntary codes of conduct co-created by the government and CSOs, grant agreements, invitations to working groups, or even bilateral contracts. Exploration of the full range of possible models of collaboration between government and civil society is beyond the scope of this paper. But the very principle of NGOs’ participatory engagement, either through funding opportunities or direct collaborative policymaking, seems to be the least problematic approach to boosting transparency and accountability.

Recommendations

States should:

  • respect CSOs’ freedom of association, widely construed.

  • not discriminate against CSOs that receive foreign funding or other types of support from abroad.

  • refrain from imposing mandatory labeling of CSOs’ activities or output as “foreign”, or other onerous reporting duties and bureaucratic regulations.

  • prioritize the use of existing legal instruments such as money laundering, anti-corruption, and tax evasion investigations, to address issues of legitimate concern.

  • focus, in the event of credible allegations of foreign interference, on the underlying criminal offense by applying the relevant criminal justice framework, such as espionage or financing of terrorism.

  • refrain from creating new controls on legitimate civil society activity to avoid a chilling effect on CSOs’ operations.

  • respect and protect the confidentiality of CSOs’ operations, their internal functioning, and their sources of funding.

  • recognize that any interference with the confidentiality of CSOs’ operations or financing must be based on clearly defined law, necessary for achieving a legitimate aim, and able to pass the proportionality test.

  • create a favorable environment for civil society groups by eliminating barriers to participation in public affairs, investing in civic education, and creating preferential tax regimes.

  • create non-discriminatory grant programs for domestic CSOs based on open and fair competition.

  • proactively and inclusively engage CSOs in policy development and implementation processes through consultations, collaborative formats such as hybrid working groups, and even delegating to them certain projects and government functions.

Maksym Popovych is a human rights expert and a 2023 GMF Policy Designers Network (PDN) fellow.This article is part of a series of contributions from PDN fellows. The PDN is made possible by a grant from the German government through the KfW development bank.