How co-operative law helps co-ops grow: A UK perspective

‘We have no explicit recognition of something distinctive as a co-operative which deserves protection and promotion, and consequently no real protection of co-operative identity’

Last month, Co-op News heard from Dr Hagen Henry about how the countries that have “got it right” with their co-operative law are the ones that translate the complex co-operative principles into legal rules.

For Cliff Mills of Anthony Collins Solicitors, UK co-operative law fails to do this. “Although we now have a relatively recent Act which pulls all relevant law together into one place, our co-operative law falls a long way short of what is needed to enable a substantial change in the growth of co-operatives,” he says. “We have no statutory definition, no explicit recognition of something distinctive as a co-operative which deserves protection and promotion, and consequently no real protection of co-operative identity”.

In 2020, the ICA-EU Partnership on cooperative development (#coops4dev) launched the Legal Framework Analysis, a long-term global research project to map co-operative laws around the world – a project jointly conducted by the ICA and its four regional offices. Mr Mills has recently completed the National Report for the UK.

One of the important questions covered in this project is the degree of “co-operative friendliness” of the laws of each jurisdiction, and on a scale of one to six where one is “very co-operative friendly” and six is “co-operative unfriendly” Mr Mills concludes that the UK scores six. Co-operatives UK gave a slightly less critical score of five (“more co-operative unfriendly than friendly”). Why did Cliff Mills reach this conclusion?

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“There is no recognition of co-operatives as a distinct and legitimate type of organisation which could be of benefit to the common good, as happens for example in Spain and Italy,” he says. “By way of comparison, the UK recognises charities as a ‘good thing’, with a clear legal definition, a statutory gate-keeper to regulate charities and ensure that the status is not abused, and fiscal advantages to encourage charities themselves and for individuals to give money to charities.

“There is no comparable recognition of co-operatives in the UK, no acknowledgement that they bring any positive benefit to the state, to the economy, or to the wider community.

“Even if there was a desire for such recognition, there is no statutory definition of a co-operative which could found such a recognition. Consequently, there is no public policy basis for arguing that cooperatives should be treated for tax or regulatory or any other purposes any differently from businesses trading for private benefit.”

Mr Mills adds that he only recognised how comparatively impoverished the UK is in this respect when he undertook a review of how the (then) 28 EU member states dealt with indivisible reserves within their national legislation. Based on an objective analysis of how each country’s legislation approaches the core questions about co-operative law and protection of co-operative assets, the UK comes out among those at the bottom. The full review is published in Who Owns Europe, but a shorter version has just been published in the 3rd edition of the International Journal of Co-operative Law.

“I actually found it quite shocking that the jurisdiction where the co-operative idea was founded is one of the least friendly to co-operatives in Europe today,” he says. “However I have to say that this is consistent with my experience working as a co-operative lawyer over the last two decades or more, and more recently studying and talking to legal experts familiar with the co-operative laws of other jurisdictions. Having said that, becoming aware of what we are missing and what we could strive for and how we can access it without necessarily having to secure primary legislation – this opens up new possibilities for innovation.”

Much has happened in recent years in exploring the relationship between the co-operative laws of different jurisdictions, what they have in common and how they differ (what academics call comparative law). In 2016, the first International Forum on Cooperative Law was held in Montevideo, bringing together for the first time lawyers from multiple jurisdictions. The third such forum is due to be held in 2021. The ICA has launched several initiatives including the global Legal Framework Analysis referred to above, and the launch of a new website as a portal for cooperative laws worldwide. The lawyers themselves have also established their own world-wide community of co-operative lawyers with its website which hosts the International Journal of Cooperative Law.

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In 2017 the Principles of European Cooperative Law were published, the culmination of work started in 2009 on a comparative study of co-operative law across the EU. This project, in which Ian Snaith was the UK’s legal expert working with six other well-known European legal co-operative scholars, seeks to distil the essence of what is captured by the co-operative laws of the seven jurisdictions they studied. This is invaluable work to inform future policy-making both within the EU and also for the UK following its departure.

Despite the challenges, Cliff Mills believes there are still positives. “In spite of all the other reasons to be gloomy at the moment, there are all sorts of things to be upbeat about. The pandemic means that most conferences are taking place online, which opens up fantastic opportunities to take part in things previously out of reach, to learn and have new ideas. The growing community of cooperative lawyers provides opportunities for new thinking and exploration, and the ICA is on the point of launching a Loomio group for this purpose which will be a real help. 

“The need and appetite for co-operative innovation seems to me to be as strong as at any time in my career, in order to meet the challenges of Covid-19 and climate change. Being able to learn what other jurisdictions are doing provides a great source of inspiration for innovation to us in the UK.”

For more information on the Legal Framework Analysis,