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The International Labour Organization (ILO) has published an update to its publication containing guidelines on co-operative legislation. The book, in its third edition, is authored by Hagen Henrÿ and is based upon the ILO Recommendation 193 on the Promotion of Cooperatives.
The motto of the book “Co-operative enterprises build a better world, but co-operatives cannot – and must not - save the world,” emphasises that co-ops should not be seen simply as a “panacea” in crisis situations.
The publication aims to show what co-operatives are and how they work, what kind of legislation is required to ensure further development of co-operatives and how legislation can be drafted. The book also reveals, that in spite of an increased amount of co-operative legislation, there has been a tendency to align co-operative law with stock company law.
The guidelines leave place for national particularities, yet try to encourage legislators to take into account internationally accepted standards. National laws are a necessary means to implement public international co-operative law, of which Resolution 193 forms the nucleus, according to Mr Henrÿ, a former chief of the ILO’s Cooperative Branch.
One of the difficulties in harmonising co-operative law, according to the guide, lays in the risk of causing co-operative movements to disintegrate and losing too many of their common features.
Mr Henrÿ said: “The harmonising issue is important because the question in our global world is about the type of enterprise without any reference to its national base.”
The book also addresses the issue of “pre-co-operatives” and the fact that most such entities, sometimes encouraged in order to favour the rapid development of co-operatives, have not evolved towards autonomous co-operatives, but they rather continued to depend upon external support.
The guidelines stress that co-operative law should be based upon a participatory approach, enabling not only co-operators, but also stakeholders to participate in the definition and design of law. “This participatory law making is difficult in some countries because there are no efficient co-op unions or federations in place,” said Mr Henrÿ.
Education is also a focus in the publication, with a mention that co-operative law does not rank high on the education and research agendas. “All of those interested in co-ops should try to make them a subject part of education curricula. If you study law, why not study something on co-operative law?” said Mr Henrÿ.
The difference between general and detailed co-operative law is also outlined. A "too detailed" co-operative law will infringe upon the autonomy of co-ops to make its own rule through its bylaws or statues. On the other hand, if the law is not detailed enough, the government can step in and fill in the gaps by regulation. “Then we might have a gap between what parliament as a legislator wants and what the government wants. But it could also mean that co-ops themselves give a lot of details in their statues and then the third parties dealing with co-ops' business partners are not very clear what prevails,” explained Mr Henrÿ.
He added that co-op law can be prescriptive “because that is the nature of law,” but at the same time it can “enable co-ops to settle and operate a business in the form of co-ops".
Mr Henrÿ believes that while “co-ops should be allowed to be active in any sector,” it is also important to understand why there are restrictions. ILO Recommendation 193 calls on legislators to allow co-operatives to be active in all sectors.
“When it comes to the financial sector there is often a reason why there are restrictions. There are no prudential mechanisms in place which could effectively monitor financial institutions in the form of co-ops. That is because you have these monitoring systems for other types of enter,” he explained.
Although it is important to recognise co-ops as legal entities, the book emphasises that formalisation should not be an end in itself. The book adds: “The co-operative law, by and of itself, does not change anything. In order for an effective and efficient co-operative movement to emerge and/or to thrive, the law must be applied.”
According to Simel Esim, the Director of the ILO co-operative branch, 70 countries have revised their co-operative legislation in line with the provisions in Recommendation 193 and the direction has been toward more autonomy and independence.
