How co-operative law helps co-ops grow

'Law is one of the means to ascertain which of those entities, which claim to be a co-operative, are really a co-op'

Traditional companies are governed by corporate law. But globally, the legislation governing co-operative entities is far less standardised. How does legislation affect the growth and development of co-operatives? And what role does co-operative law play in safeguarding co-operative identity in the first place?

The International Labour Organization (ILO) published its first guidelines on co-operative law in 1998. A second edition followed in 2005, and referenced the newly adopted ICA Statement on the Co-operative Identity, UN guidelines for the development of co-operatives, and the ILO Recommendation No. 193 concerning the promotion of co-operatives. 

“The reference in UN and ILO documents to the co-operative values and principles demonstrates how important those values and principles have become. More and more co-op laws refer to them,” says Dr Hagen Henrÿ, adjunct professor of comparative law at the University of Helsinki and chair of the International Cooperative Alliance Committee on Cooperative Law (ICA-CLC). 

The ICA-CLC works with the ICA’s Identity Committee to develop proposals for contemporary legal interpretation of the definition of co-ops. It has recently launched a website, legislation.coop, with the aim of providing a portal to co-op laws all around the world. 

Parallel to ICA-CLC is Ius Cooperativum, a community of co-operative lawyers which organises the International Forum on Cooperative Law and publishes the International Journal of Cooperative Law.

He was previously chief of the ILO’s Co-operative Unit and wrote the first, second and third edition of the Guidelines for Cooperative Legislation, for the ILO.

What makes a ‘good’ co-op law?

For Dr Henrÿ, a ‘good’ co-operative law is one which translates the complex co-operative principles – as defined by the ICA – into legal rules. In turn, the countries that have got it ‘right’ are, theoretically, the ones which best translate the principles into legal rules. 

“The ICA Statement on the Co-operative Identity is part and parcel of the statutes of the internal rules of the ICA, which is an association – so for the members of the ICA (and indirectly also for the members of those members) this is highly important and also legally relevant because it’s part of their duties to make sure that they respect the statutes,” he says. 

“Do co-operative laws help co-operatives grow? The short answer is yes. But the question speaks to a very, very complex reality. I think law is one of the means to ascertain which of those entities, which claim to be a co-operative, are really a co-op. We should rely more on law to provide the mechanism to find that out.”

Implementation and education

The challenges around legislation don’t stop at the laws themselves. “The implementation of the law is very important. It doesn’t help just to have a good text if the law is not implemented,” says Dr Henrÿ. For co-operative laws to be implemented and upheld, there must be lawyers who understand them – but, as with business studies and economics, co-operatives are missing from the syllabus in most law faculties.

“One of the first questions I always put to my students is: ‘Have you ever come across co-operative law?’ With a very few exceptions, the answer is always no, never,” he says.

He saw the subject disappear from the curriculum, research and textbooks from the beginning of the 1970s. “Anecdotally, around that time, there was the oil crisis, the first report of the Club of Rome, conversations about the limits of growth – responding to how natural resources were being taken out of the equations and the financialisation of economics. There was thinking that you could replace the ‘natural resources’ which you need for the economy, with capital. And that led to giving preference to companies which put an emphasis on capital and maximising profit, meaning co-operatives were off the table.”

But things are changing again as new debates around sustainable development have come to the fore, and social responsibility has become a serious legal issue, instead of just a political one.

In this context, the issue for co-ops  – and co-operative law – is how to demonstrate co-operative distinctiveness. “This is quite a hard thing to do because businesses report on the same things, such as the environment and social issues,” says Dr Henrÿ. “The two things which are still distinct to co-operatives, and will hopefully remain so, are democratic participation and solidarity, in the legal sense. Solidarity means basically that you accept obligations, without any legally protected expectation that you would get something in return; that is a key issue for co-operatives and co-operative law.”

MEC and Safeguarding

As well as enabling co-operatives to grow (both in quantity and quality) co-operative law also has a role to play in safeguarding active, current co-operative enterprises. In September, the sale of Canada’s Mountain Equipment Co-op to US private equity firm Kingswood Capital Management caused an outcry and soul-searching in the global movement – particularly among MEC’s own members, who vehemently declared they had not been consulted on the decision. 

“Regarding MEC, I’m not saying this could have been prevented by law because I don’t know the case, but I think there was a serious issue of not involving the members, as they should have been involved, according to the principles,” says Dr Henrÿ.

Related: Members of MEC plan next steps in their fight for co-op ideals

“It is an extreme example, but it highlights the issue of participation, or rather the lack of it. In general, we know that in co-ops of all sizes, participation is an ailing issue. I think it is also misunderstood by many as you go to your general assembly where you have one vote per member. 

“I think this is a very, very simplistic if not ridiculous view of things – this is not the level to which participation should be limited. It has to be really enshrined in all operational and organisational aspects of the co-operatives.”

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