13
Hagen Henry
ICA Kooperativ huquq qo‘mitasi raisi, adyunkt professor, y.f.d., tashrif buyuruvchi
olim (University of Helsinki)
KOOPERATSIYA HUQUQI. TENDENSIYALAR. CHAQIRIQLAR
------------------------------------------------------
Hagen Henry
Chairperson of the ICA Cooperative Law Committee, Adjunct Professor, Doctor of
Law, Visiting scholar (University of Helsinki)
COOPERATIVE LAW. TENDENCY. CHALLENGES
------------------------------------------------------
Хаген Хенри
Специалист Института сельскохозяйственных исследований при
Хельсинкском университете, доктор юридических наук, адьюнкт-профессор,
приглашенный исследователь (University of Helsinki)
КООПЕРАТИВНОЕ ПРАВО. ТЕНДЕНЦИЯ. ВЫЗОВЫ
------------------------------------------------------
Cooperative Law. Tendency. Challenges
Table of contents
I.
Introduction
II.
The tendency of cooperative law
III.
Challenges
1.
General challenges
2.
Translation of the cooperative principles into legal rules
2.1.
The cooperative principles as the basis of cooperatives
2.2.
The cooperative principles
2.2.1.
General
2.2.2.
Principle by principle
IV.
Conclusion
I.
Introduction
The objective of this article is to discuss the translation of the internationally
recognized “cooperative principles” into legal rules and praxes.
14
This objective, as captured in the title of my article “Cooperative Law.
Tendency. Challenges”, risks portraying me as being pretentious. Is it possible to
capture the diversity of today’s cooperatives in the world in a singular of “cooperative
law”? It is, provided we reject a possible connotation of the term “cooperative law” as
meaning one uniform law, a meaning that could be read into the motives for the
increasing number of intra-national and supra-national processes of harmonizing
cooperative laws.
2
The premises behind the theme of this Conference - “Strengthening the Legal
Framework of Cooperatives as a Factor of Socio-Economic Development” - do not
only recognize the role cooperatives have played and continue to play in the
development of countries around the world,
3
especially in agriculture and in the
savings and credit sector.
4
They also attest to the end of longlasting doubts as to the
correlation between adequate law and the development of cooperatives, and to the need
of diversity, including a diversity of cooperative laws, as a source of socio-economic
- and to be added: sustainable - development.
5
The apparent contradiction between a
necessary diversity of cooperative laws and cooperative law in the singular is not a
real one, as “cooperative law”, as dealt with here, refers to the legal obligation to have
cooperative laws which translate the cooperative principles into legal rules and praxes,
considering the diversity of today’s cooperatives. The diversity of today’s cooperatives
is a product of the dynamics of cooperative development. It has led from the Rochdale
Society of Equitable Pioneers (which is held to be the first modern cooperative), a
group of persons of the same social class and a set of similar basic (consumer) needs,
to cooperatives being established by persons coming from all social strata, being active
in virtually all sectors (including the production and supply of energy and other
utilities, as agroecological food chains, in urban horticulture and farming, in education,
health and care services (social cooperatives), as bio-data banks and data protection
cooperatives etc.. Some cooperatives are active in several sectors (multi-purpose
cooperatives); some have very high numbers of members (especially cooperative
banks, insurances, consumer cooperatives), their members may be
2
See Henrÿ, Hagen, Armonizar los derechos cooperativos. ¡Realidad! ¿necesidad? ¡trampa!", in:
CIRIEC-España, Revista Jurídica de Economía Social y Cooperativa, nº 39, 2021, pp. 45-66. DOI:
10.7203/CIRIEC-JUR.39.21516 (forthcoming).
3
Facts and figures
•
1.2 billion persons around the world are members of a cooperative (see ICA web-page) - against
only some 330 million stock holders
•
if their economic dependents are added, some 3.5 to 4 billion people improve at least partly their
livelihood through a cooperative
•
cooperatives are active in all sectors: agricultural and savings and credit cooperatives (the most
prominent ones); workers´, consumers´ fishermen´ cooperatives, forest cooperatives; cooperatives in the utilities
sectors; engineering, tourism etc.
•
cooperatives come in all sizes by number of members, turn-over or other measure: from micro to
giant
15
•
.
•
the contribution of cooperatives to the GDP varies between 4-40%. Data and statistics are difficult
to come by and more often than not they are not reliable. To mention the efforts of the ILO to reintegrate cooperative
data and statistics into the national statistics systems
•
famous examples: the London Philharmonic Orchestra; IFFCO, one of the biggest fertilizer plants
in the world; Mondragon, Best Western International; KPMG International; the International Association of
Flight Controllers … are all organized in the form of a cooperative.
4
As concerns agricultural cooperatives an overview with examples is attached as Annex 1. See also
Münkner, Hans-H., Co-operation as a Remedy in Times of Crisis. Agricultural Co-operatives in the World. Their
Roles for Rural Development and Poverty Reduction, Marburg: Institut für Genossenschaftswesen 2012; and the
results of a large research project on agricultural cooperatives at:
support-farmerscoop-leaflet_2012_en.pdf
5
Bio-diversity to be complemented with cultural diversity to form the two necessary aspects of
development.
heterogeneous by interest, need, social background or profession) or by the
contribution members make to the production or provision of services (for example
worker-members, volunteer workers, user-members, investor members and financing
members or supporters all in one cooperative); they may not only serve their members,
but also, or even exclusively, non-members, their community or the public at large
(public or general interest cooperatives); they may (have to) take also other
stakeholders’ than their members’ (legal) interests into account, for example those of
(non-user) investor members; and/or they may count among their membership, beside
private law persons (natural and legal persons), also public law persons (municipalities
for example), especially in the health, care, education and utilities sectors.
This dynamics of cooperative development is more and more being induced by
the factors of globalization, namely digitalization and teletransferability of data. These
factors have affected the set-up of cooperatives as we have known them so far and,
more generally, they affect the very economic and social foundations of enterprises,
hence also cooperative enterprises. As for the setup of cooperatives, the trend is - as
can be seen from the above-described dynamics - from simple to more complex. This
concerns the activities, the beneficiaries of the activities, the notion of member and of
other stakeholders, the mixing of private and public interests and actors, as well as a
mix of commercial and non-commercial approaches (example: cooperative groups)
and of producers and consumers (example: energy cooperatives).
As for the effects of the globalization factors on the economic and social
foundations of enterprises, we observe the following: Enterprises of all forms change
from being singular, but collective, permanent entities, linked operationally to each
other by contract, to being organizational elements of more or less permanent,
collective, global horizontal and vertical chains that produce value out of data. These
value chains dissolve into global ephemeral and amorphic networks of actors
(connectives). These value chains and networks of actors consist of heterogeneously
structured elements, some of which hierarchically, some of which heterarchically,
some - like cooperatives - of a combination of the two and which are regulated by the
rules of more than one legal system.
16
Against this background snapshot and before concluding (IV) I proceed as
follows: Part II deals with the tendency in cooperative law, Part III with its challenges.
II. The tendency of cooperative law
The latest Report of the Secretary-General of the United Nations on
Cooperatives in social development (A/76/209) confirms a turn in cooperative law:
cooperative law has become autonomous and it is to relate to the cooperative
principles. Since the first cooperative laws in the mid-nineteenth century, many, if not
most, of the cooperative laws around the world were not autonomous and it was not
clear to what extent legislators, who often did refer to the cooperative principles, would
have to consider them in real terms. The cooperative laws oscillated between
autonomy and heteronomy and between being close to and distant from these
principles. Cooperatives were conceived either as “different” from capitalistic
companies or as “different” from associations, but hardly ever as something “other”
1
than these two, as a sui generis figure. Hence, cooperatives were regulated by laws
inspired either by the law on commercial/capitalistic enterprises or the law on
associations. In many countries, the rules of these laws still serve as default rules for
the cooperative law. Overall, attempts to emancipate cooperative law from these roots
were short-lived. Cooperative laws either did not withstand the economic and political
pressure to approximate the features of cooperatives with those of stock companies -
what we have been calling the “companization” of cooperatives,
2
or they tended to
“socialize”
3
cooperatives in the sense of approximating their features with those of
public interest associations. Not surprisingly, the first mentioned pressure gained
momentum as from the early 1970ies; and in the aftermath of the so-called financial
crisis in 2007/2008 regulators started pushing for the homogenization of the
governance structures of all types of enterprises in view of their greater economic
stability (“convergence”).
At first sight, this convergence seems to reinforce the companization of
cooperatives, i.e. distancing cooperative laws even further from the cooperative
principles. However, the justification of the convergence, namely greater economic
stability of enterprises, carries the germ for a turn in thinking: Uniformity of
enterprises - isomorphism - is not only impractical as peoples’ needs are diverse; it
also defies all we know about the principle of diversity being the source of
development, hence of the source of sustainable development. Sustainable
development has become a legal concept, recognized by the International Court of
Justice;
4
it gradually permeates all areas of law.
1
As for the distinction between “different” and “other” in this context see Henrÿ, Hagen, Entreprendre autrement : le
droit coopératif n’y est pour rien, in : Revue Economique et Sociale. Bulletin de la Société d´Etudes Economiques et
Sociales, Vol. 70, Septembre 2013, 93-103.
2
See for example, Henrÿ, Hagen, Guidelines for Cooperative Legislation, Geneva: ILO 2012.
3
Expression borrowed from Dr. Ifigeneia Douvitsa.
4
See Case Gabcikovo-Nagymaros Project (Hungary/Slovakia), Judgment. I.C.J. Reports 1997, Paragraph 140.
17
The referred to internationally recognized “cooperative principles” are the seven
principles of the International Cooperative Alliance (ICA). They have developed
gradually over two centuries through a continuous unique process of practiced theory
and theorized practice, involving virtually all countries.
1
They are now enshrined in
the 1995 ICA Statement on the cooperative identity (ICA Statement).
2
The term
“cooperative principles” is a short-hand for the explicit epistemological link between
the three parts of the ICA Statement, namely the definition of cooperatives, specific
values and principles, whereby “[C]o-operatives [as defined in the Statement] are
based on the values of self-help, self-responsibility,
democracy, equality, equity,
and
solidarity …” and
“[t]he cooperative principles are guidelines by which cooperatives
put their values into practice.” Regional cooperative laws and many national
cooperative laws refer to them; the 2001 United Nations Draft guidelines aimed at the
creation of a supportive environment for the development of cooperatives (UN Draft
guidelines) refer to them;
3
and the 2002 Promotion of Cooperatives Recommendation
(No. 193) of the International Labor Organization (ILO R. 193) integrates them,
4
albeit
with not unproblematic modifications.
The ILO R. 193 is legally binding as far as cooperative law is concerned.
14
Besides containing a number of paragraphs, which concern cooperative law directly,
such as Paragraphs 1, 2, 6 and 7, the ILO R. 193 relates in its Paragraph 10. (1)
cooperative law to the cooperative principles, while clarifying that this relation must
not mean the unification of cooperative laws in a/one law.
15
Paragraph 10. (1) of the
ILO R. 193 states: “Member States should adopt specific legislation and regulations
on cooperatives, which are guided by the cooperative values and principles set out in
Paragraph 3, and revise such legislation and regulations when appropriate.”
16
Paragraph 10. (1) of ILO R. 193 delimits the extension of the notion of
cooperative law, as well as its substance, in other words, it establishes what
For the history of the concept, see Bekhechi, M. A., Quelques notes et réflexions sur le statut du droit international du
développement durable, in: Mohammed-Jalal Essaid (sous la dir.), Variations sur le système international. Mélanges
offerts en l´honneur du Professeur Mohamed Lamouri, Casablanca, Najah Al Jadida, 2010, 107-137; Henrÿ, Hagen,
Sustainable Development and Cooperative Law: Corporate Social Responsibility or Cooperative Social Responsibility?,
in: International and Comparative Corporate Law Journal Vol.10, Issue. 3 (2013), 58-75.
1
For the history and ongoing interpretation of the ICA Statement, see Cano Ortega, Cristina, Una perspectiva actual del
sexto principio cooperativo: Cooperación entre cooperativas, in: CIRIEC-España. Revista Jurídica, 2015, Vol. 27, 285–
331 (288 ff.); International Cooperative Alliance Blueprint for a cooperative decade 2011-2020, available at:
ica.coop/sites/default/files/media_items/ICA%20Blueprint%20%20Final%20version%20issued%207%20Feb%2013.p
d f; the 2015 International Co-operative Alliance Guidance notes to the co-operative principles. Available at:
http://ica.coop/sites/default/files/attachments/Guidance%20Notes%20EN.pdf.
See also the work of the ICA Identity Committee and the outcome and follow-up of the XXXIII ICA Congress to be held
in December 2021 in Seoul.
2
See International Co-operative Review, Vol. 88, no. 4/1995, 85 f. and http://ica.coop/en/whats-co-op/co-
operativeidentity-values-principles
3
See Point 1 of the UN Draft guidelines as annexed to the 2001 Report of the Secretary-General of the UN on
Cooperatives in social development (A/RES/56/114 and A/56/73-E/2001/68).
4
See Paragraphs 2. and 3. of and Annex to The Promotion of Cooperatives Recommendation, 2002. ILC 90-PR23285-
En-Doc, June 20, 2002). Available at :
www.ilo.org/dyn/normlex/en/f?p=NORMLEXPUB:12100:0::NO::P12100_ILO_CODE:R193
18
cooperative law is in its formal and in its substantive sense. As concerns its
formal sense, the words “specific legislation and regulations” could be interpreted as
meaning organizational laws and regulations specifically on cooperatives. A
systematic interpretation of this paragraph, recourse to ILO R. 127
17
and the
preparatory work leading to the adoption of ILO R. 193
18
make it clear that the term
“cooperative law” has a much wider acceptation. It encompasses any law that shapes
the organization of cooperatives or regulates their operations, such as for example, the
constitution, labor law, tax law, consumer (protection) law, competition law,
accounting standards. Together with the internal byelaws of cooperatives (statutes,
charter of association or “internal rules), non-state law - such as customary law, rules
of informal economy actors, religious rules etc. -, government regulations (decrees,
ordinances), court
14
This question is not to be confused with the legal nature of the ILO R. 193 as such. The ILO R.
193 is binding for the Member states of the ILO, as it creates rights and obligations for them under the Constitution
of the ILO (see its Article 19).
The main arguments are the following:
i.)
Allowing cooperatives to join the ICA as members, but having a cooperative law that does not allow
them to fulfill their legal obligation to have internal byelaws which translate the ICA Statement would violate the
universal legal principle of the prohibition of a venire contra factum proprium. Such a legal obligation exists for
cooperatives which are members of the ICA and the members of these members as the ICA
Statement is part of the Bylaws of the ICA, which is an association under Belgian law; ii.)
An increasing
number of national and regional cooperative laws cite the, or refer to, the cooperative principles in one form or the
other and/or their rules reflect them without mentioning them. All current cooperative law (reform) projects known
to the undersigned do consider these principles. This behavior will eventually - if it has not already - qualify as a
source of public international law according to Article
38, 1.b. of the Statute of the International Court of Justice (“international custom, as evidence of a
general practice accepted as law”); iii.)
The high degree of democratic legitimacy of the ILO R. 193; iv.)
The
repeated adoption of texts with the same content as ILO R. 193 concerning cooperative law; and
v.)
The reinforcement and concretization of existing and binding Human Rights law (see the International
1966 Human Rights Covenants, especially the Covenant on Civil and Political Rights) by the ILO R. 193,
contributing to the materialization of the legal concept of sustainable development and to the emergence of a Human
Right to sustainable development.
For more details see Henrÿ, Hagen,
International Cooperative Law. Utopia, Realistic Utopia or Reality?,
in: Revista Cooperativismo e Economia Social, no. 42/2020, 25-56.
15
A fair amount of confusion surrounds this question to which ILO R. 193 seems to add by
establishing, on the one hand, the obligation to translate the cooperative values and principles into legal rules (see
Paragraph 10. (1)), while suggesting, on the other hand, that “common regional and international […] legislation”
be developed (Paragraph 18. (d) of ILO R. 193).
16
A similar, but less precise formulation of the same “obligation” may be found in Paragraph 6. of
the ILO R. 193.
17
The Co-operatives (Developing Countries) Recommendation (no. 127), 1966. Although the ILO
R. 193 replaces ILO R. 127 (see its Paragraph 19.) the latter has not been abrogated through the required formal
process yet. See its Paragraph 10. The UN Draft guidelines also emphasize the importance of such a wide notion
of cooperative law (see its Point 14.).
18
See for example, International Labour Organization (ILO), Promotion of cooperatives, Report
V(1), International Labour Conference, 88
th
Session, Geneva, 2000.
19
rulings and the legal praxes (law-making and implementation)
1
they form the
cooperative law in the wide sense.
2
Albeit to varying degrees of intensity and legal
value regional cooperative laws and the public international cooperative law need to
be considered as well. In the case of Uzbekistan for example the 1997 Model law on
cooperatives and their unions of the Commonwealth of Independent States.
In its substantive sense the notion “cooperative law” means the translation of
the cooperative principles into legal rules and legal praxes in the above mentioned
formal sense and which, by reflecting the legal concept of sustainable development,
enable cooperatives to contribute to sustainable development.
III. Challenges
This Part discusses the translation of the cooperative principles into legal rules
only. A discussion of the legal praxes would require in addition legal sociological
studies which are not available. Point 1. discusses some general challenges; Point 2.
discusses matters pertaining to the translation of each of the seven cooperative
principles.
1. General challenges
The first general challenge is political opposition. In the light of the undeniable
positive effects of companization, convergence and the unification of cooperative laws
the arguments of the proponents of these phenomena are not easy to refute. With the
growing preference for social and solidarity economy actors other than cooperatives,
the juridification of the Corporate Social Responsibility (CSR) and its extension to
include societal concerns (CSSR) and the superposition of stakeholder value for all
enterprises over shareholder value (capitalistic enterprises) and member value
(cooperative enterprises), it has become ever harder to justify the raison d’être of
cooperative law. But, the distinction of enterprise types might not lie (anymore) in the
result (shareholder value or member value and/or stakeholder value), but rather in the
(most effective) way to generate it. To no small extent the juridification of the CSR is
a reaction to the weakening capacity of the welfare state and the labor market to
organize democratic participation in decisions on what and how to produce and how
to distribute the produced wealth as that mechanism through which social justice
regenerates most effectively and will henceforth most effectively contribute to
sustainable development. Being people-centered and democratically structured,
cooperatives have an advantage in this context (of social justice).
The second general challenge is a methodological one and concerns the
interpretation of Paragraph 10. (1) of the ILO R. 193. Prima vista the ILO R. 193
integrates the content of the ICA Statement. However, a second reading reveals a
number of deviations, the relevance of which might have to be considered case by case.
1
The UN Draft Guidelines repeatedly emphasize the importance to not confuse black letter law with law, i.e. to include
in the considerations the implementation/interpretation of the texts and also the praxes of the stakeholders. See especially
its Points 9., 11., 13.
2
For more detail, see Henrÿ, Guidelines, op. cit., Box 2.
20
While the definition of cooperatives contained in the ICA Statement is literally
integrated into Paragraph 2 of the ILO R. 193, the cooperative values and principles
are not, nor does the ILO R. 193 reproduce the cited explicit epistemological link
between the three parts of the ICA Statement - definition, values and principles - for
which, as said, the short-hand “cooperative principles” stands.
2. Translation of the cooperative principles into legal rules
2.1 The cooperative principles as the basis of cooperatives
The discussion of the cooperative principles is to help explaining what
cooperatives are.
As mentioned above, the cooperative principles are the basis of cooperatives;
cooperatives are the object of cooperative law. Their definition delimits the scope of
cooperative law. The ICA Statement and Paragraph 2 of the ILO R. 193 define
cooperatives in literally the same words, namely “[…] the term “cooperative” means
an autonomous association of persons united voluntarily to meet their common
economic, social and cultural needs and aspirations through a jointly owned and
democratically controlled enterprise.”
This definition contains in a nutshell the essentials of any organizational
enterprise law, namely the purpose (“meet their common economic, social and cultural
needs and aspirations”) and the organizational form through which this purpose may
be pursued (“through a jointly owned and democratically controlled enterprise”).
These essentials are required to make the organization eligible for the attribution of
legal personality with its often underestimated far-reaching economic and legal
consequences. But they do not reveal as such the specifics of cooperatives.
The wide-spread lack of adequate rules on efficient higher-level cooperative
organizations (unions and/or con/federations), and of cooperative specific
1
audit
systems, the mentioned “companization” and “convergence”, the tendency to extend
the byelaw autonomy of cooperatives to cover the determination of their purpose and
the concentration in politics and academia on the form elements instead of on the
specific purpose as a distinctive feature of which the form elements are not but a
functional consequence, attest to an underestimation, if not misunderstanding of what
cooperatives are. Misunderstanding of what cooperatives are leads to
misunderstanding the scope of the cooperative law; it is the most frequent reason for
cooperative law remaining ineffective and/or dysfunctional. The result of this reflects
in all phases of the life of a cooperative: As for the phase of establishment,
cooperatives are often not created on the initiative of the potential members to address
their needs, but for reasons exogenous to the cooperatives. Hence they risk remaining
an entity which the members do not feel responsible for. In violation of Paragraph 6.
(a) of the ILO R. 193 registration remains cumbersome in many countries. As for the
1
Paragraph 8. (2) (b) of the ILO R. 193 extends audit to include apart from the financial audit also social audit. This is
however, to be broadened even further to include societal audit, the respect for human rights and labor rights etc..
22
See
also Point 15. of the UN Draft guidelines.
21
operational phase, government direct interference is frequently thought to be
necessary to compensate for management failures, financial weaknesses and failing
self-control mechanisms, instead of taking measures which would enable cooperatives
to avoid these failures and thus be reason for the disengagement of government.
22
As
for winding up, dormant, non-active, false, bankrupt cooperatives remain for political
reasons on the registers, are a burden for many governments and donors and tarnish
the image of cooperatives.
2.2. The cooperative principles
2.2.1. General
The matters pertaining to the translation of each of the seven cooperative
principles are drawn from various sources: A small number of academic studies, the
“Legal framework Analyses” of a great number of countries conducted by the ICA and
from the personal involvement of the undersigned in numerous cooperative policy and
legislation projects over a period of nearly three decades.
23
The discussion of these
matters does not nearly exhaust the legal reality; it tries to cover the various legal
traditions in the world, however rudimentarily.
The discussion is not a linear one. According to their nature, the cooperative
principles are mutually reinforcing, regenerative, and interdependent. Repetitions in
their presentation are therefore unavoidable. The objective is to create an
understanding of the complexity of the cooperative principles to be taken into
consideration when acting on cooperative law. For example, the democratic voting
rights clause (2
nd
Principle: one member, one vote) induces, in part at least, the
weakness of financing mechanisms. If compensated by investments, by members or
non-members, assorted with voting rights or not, the principle of autonomy and
independence (4
th
Principle) is easily at risk.
2.2.2. Principle by principle
24
“1
st
Principle:
Voluntary and Open Membership
Cooperatives are voluntary organisations, open to all persons able to use their
services and willing to accept the responsibilities of membership, without gender,
social, racial, political or religious discrimination.”
Frequently, this principle is narrowed down to a so-called “open-door” principle
and that is (mis)understood as an absolute right. This is also due to the persisting view
in many instances that cooperatives are rather charities than enterprises. The first point
can be answered by referring to the explanation of this principle, which is - as it is for
all cooperative principles - an integral part of the principle: access to membership is
conditioned. The second point is contrary to the wording of the definition of
cooperatives.
Other misunderstandings relate to the following:
The word “person”.
Many cooperative laws restrict the membership in primary
cooperatives to natural persons. This restriction is not in line with international law
22
and, reflecting an outdated approach whereby cooperatives were a means for a specific
strata of society, it is an obstacle to social and economic development. This can be
seen from those countries where mixed membership
23
Academic studies: see for example
-
Dante Cracogna, Antonio Fici and Hagen Henrÿ (eds.), International Handbook of Cooperative
Law, Heidelberg et al.: Springer 2013, XIV + 823 pp.
-
Gemma Fajardo, Antonio Fici, Hagen Henrÿ, David Hiez, Deolinda Meira, Hans-H. Münkner and
Ian Snaith (eds.), Principles of European Cooperative Law. Principles, Commentaries and National Reports,
Cambridge et al.: intersentia 2017, XII + 721 pp.
ICA Legal framework Analyses: See ICA web-site
24
This part is to a large extent based on a paper the author prepared for UN DESA in 2021.
Citations from the ICA Statement. Text identical with ILO R. 193, Annex.
cooperatives (natural persons and legal person) or cooperatives composed of
legal persons only are allowed.
1
Foreign nationals.
Foreign nationals continue to be excluded from membership
in cooperatives in many countries, at times “only” from leadership positions. Human
rights law does not allow for such discrimination. It is contrary to the very idea of
cooperatives which puts the human being (the person as such) at the center.
Furthermore, the exclusion of foreign nationals from membership also hinders
the establishment of cross border cooperatives, especially in the form of platform
cooperatives. In so doing, it deters especially younger people from opting for the
cooperative enterprise model.
Women
. Another area of concern is the gender non-discrimination clause (also
contained in the 2
nd
Principle and indirectly in the use of the term “member” in the
other principles). Especially in traditional types of cooperatives, such as agricultural
cooperatives, women are underrepresented in the membership and in particular in
leadership positions as compared to their share in the overall population and/or the
membership of a particular cooperative.
There are exceptions and the situation differs from country to country, sector
and level of the cooperative organization (primary, secondary or tertiary cooperative
organization) etc.. But gender and law studies have produced ample gaps between
formal equality and real/material equality, which at times amount to invalidating the
right to equal treatment.
A wide concept of cooperative law, as suggested above, might provide for the
means to detect and address gender discrimination. For example, while the right to
access to membership in a cooperative may be guaranteed to any person by a law on
cooperatives, the civil law or a customary law of that respective country might restrict
this right for married women by requiring the consent of their husbands. Another
example is access to credit. It is generally more difficult for women than for men,
1
For more details see Annex 2.
23
because the law or social norms restrict their ownership rights, depriving them
from the necessary collateral.
Youth.
Youth non-discrimination is not mentioned in the 1
st
Principle. Like with
the discrimination of women, the cooperative laws do not explicitly discriminate
against youth. Their being underrepresented in the membership compared to their
share in the overall population and in positions of responsibility must therefore be
attributed to other factors.
As for their not being represented in the membership, lack of information on the
fact that the cooperative model may also be used for other activities than the most often
portrayed ones like agriculture, savings and credit etc. and the absence of the subject
of cooperatives from the research, education and training
1
curricula might be decisive.
The 5
th
Principle and Paragraph 8. (1)(f) of the ILO R. 193 relate therefore to the 1
st
Principle. If the cooperative enterprise form is to be used beyond the classical areas,
young people have to be attracted to the model.
As far as youth is underrepresented in positions of responsibility, a number of
factors are at play: Apart from general age restrictions (legal majority age under the
civil or constitutional law), there might be cultural impediments. Another factor could
be legal rules and/or praxes which allow for the unlimited reelection of persons for
such positions. This might be a governance issue relating to the 2
nd
Principle.
“2
nd
Principle:
Democratic Member Control
Cooperatives are democratic organisations controlled by their members, who
actively participate in setting their policies and making decisions. Men and women
serving as elected representatives are accountable to the membership. In primary
cooperatives members have equal voting rights (one member, one vote) and
cooperatives at other levels are also organised in a democratic manner.”
This principle is of particular importance. Despite the trend of the convergence
of entrepreneurial governance structures, the juridification of the corporate social and
societal responsibility of all enterprise forms and the stakeholder value concept
superseding those of shareholder value and member value, democratic member control
continues to set cooperatives apart from any other enterprise form, eligible for the
attribution of legal personality. The notion of democratic member control
(participation) must however include the wider concept of political and economic
participation (3
rd
and 4
th
Principles), i.e. a cooperative specific governance structure.
Democratic governance is a, if not the, mechanism to regenerate social justice. It
therefore leverages the other aspects of sustainable development.
2
1
See Villafañez Perez, Itziar, Algunas reflexiones en torno a la necesidad de integrar la perspectiva cooperativa en el
estudio y desarrollo del ordenamiento jurídico, in: Hagen Henrÿ, Pekka Hytinkoski and Tytti Klén (eds.), Co-operative
Studies in Education Curricula. New Forms of Learning and Teaching, 2017, 54-71 (University of Helsinki Ruralia
Institute: Publications Series No. 35).
2
The link between cooperatives and sustainable development is underlined by the ILO R. 193 several times (see 3
rd
Recital; Paragraph 14.) .
24
Two aspects of the 2
nd
Principle are discussed here, voting rights and their
linking to financing and the general control by the members.
Voting rights and financing.
The “one member, one vote” clause for primary
cooperatives is translated by all known cooperative laws inasmuch as every member
has one vote, independently of the transactions with the cooperative or the financial
contribution. The clause has been under pressure for some time. It is thought to detract
members from transacting more with their cooperative and from being ready to
contribute financially more substantially to the activities of their cooperative, as these
engagements do not improve their influence on the decision making of the cooperative.
An increasing number of laws allow therefore for the attribution of a limited number
of additional voting rights (plural voting rights). In most cases they may not be
exercised when this would lead to a situation where members who hold plural voting
rights could take decisions on their own or in cases pertaining to fundamental questions
of an associative character, like for example a decision to join a higher-level
cooperative organization, dissolution, merging etc., whereas business matters are
under a plural voting rights regime. The question is: which criteria should be used to
determine (the number) of plural votes? The financial contribution and/or transactions
and/or other criteria? So far, no law seems to allow for the attribution of plural voting
rights in proportion to financial contributions. Allowing this would indeed bring
cooperatives too close to stock companies. On the other hand, the attribution of plural
voting rights in proportion to the transactions attributes an even greater influence to
those members than they already have de facto through the volume or the value of
their transactions.
As specified by the explanation of the 2
nd
Principle, the voting rights of
“cooperatives at other levels” may be allocated differently as long as it is done “in a
democratic manner”. As may also be derived from Paragraph 6. (d) of the ILO R. 193,
the number of voting rights should be proportional to the number of members of the
affiliates as a basic rule. Additional voting rights are at times attributed considering the
financial contributions of the affiliates. But this is questionable, especially when the
additional voting rights are attributed in proportion to the financial contributions.
Control by the members.
As the explanation of the principle indicates, the
principle holds more than is indicated by the frequent focus on the “one member, one
vote” clause. First of all, the 2
nd
Principle is not about voting only which, in reality, is
a seldom case and apart from elections, it might not suit organizations which, like
cooperatives, might find consensus building through deliberative procedures more
adequate. Furthermore, the principle is not only about voting and decision making, but
about member control in general (“participating in setting […] policies”, holding the
“elected representatives […] accountable”). This and a joint reading of the 3
rd
, the 4
th
and the 5
th
Principles demonstrate that what is meant is governance in the large sense
as described above and the empowerment of the members thereto through education
and training (5
th
Principle) and a cooperative-adequate audit system.
25
The challenge is to secure democratic governance structures in cooperatives
which, as mentioned in the Introduction, have become more complex, are integrating
organizationally into global value chains and/or dissolve into ephemeral non-
organized networks of actors. This requires that we must not be satisfied with the one
member/one vote clause, but that we have to redefine the loci of participation, the
participants and the modes of participation.
Loci of participation
. Participation must permeate all organizational and
operational aspects of cooperatives, from jointly and democratically determining the
needs of the members to education and information, and must be based on a
cooperative-adequate audit which is to enable the members to effectively control the
cooperative
28
(see above).
Participants.
The participants must be redetermined: from
members to other non-member stakeholders.
Modes of participation
. Virtual
participation, using latest secure technology, must complement physical participation.
The redefinition of governance includes addressing the specific control risk in
cooperatives. This control risk stems from a six-fold information, knowledge and
know-how gap between the members and the bodies which are in charge of and/or are
running the cooperative (management, board and supervisory committee, employees,
if any) and whom the members should (be able to) control.
29
To a large extent this
control risk is heightened by inadequate qualifications of both those who govern and
of those who should govern, because the cooperatives and their higher-level
organizations do not provide for sufficient education and training and because the
subject of cooperatives is close to absent from the general research and education
systems.
“3
rd
Principle:
Member Economic Participation
Members contribute equitably to, and democratically control, the capital of their
cooperative. At least part of that capital is usually the common property of the
cooperative. Members usually receive limited compensation, if any, on capital
subscribed as a condition of membership. Members allocate surpluses for any or all of
the following purposes: developing their cooperative, possibly by setting up reserves,
part of which at least would be indivisible; benefiting members in proportion to their
transactions with the cooperative; and supporting other activities approved by the
membership.”
The 3
rd
Principle repeats the general principle of democratic member control
(governance), enshrined in the 2
nd
Principle, in the form of the control of the capital. It
deals with two subjects:
28
More often than not audit is misunderstood as merely a tool to prepare the ground for negative
sanctions.
29
This knowledge and know-how gap risks to occur between
-
the members and the general assembly, -
the members and the delegates (if
any),
-
the members and the surveillance committee (if any),
26
-
-
the delegates/the surveillance committee/the members (as the case may be)
and the board, -
the board and the administration/management and between -
the board/administration/management and the employees.
internal financing (external financing is dealt with in the 4
th
Principle) and
distribution of surpluses. In addition to these aspects, income taxation of cooperatives
will be discussed.
A first reading leaves the impression that the emphasis is on surplus distribution.
This might explain why members tend to conceive their cooperative merely as a source
from which to pump benefits, instead of seeing it also as something to be fuelled by
them. Furthermore, contrary to the predecessor to ILO R. 193, namely ILO R. 127,
there is no hint to the liability of the members beyond that attached to their share
contribution and which is more often than not symbolic. Paragraph 12. (1)(a) of the
ILO R. 127 stipulated that the members should accept “a fair share of the risks [and
benefits] of the undertaking in which [they] participate […]”.
Internal financing
. Apart from stating that the “[M]embers contribute equitably
to […] the capital of their cooperative” and that “[M]embers allocate surpluses […]
possibly by setting up reserves”, the principle is silent as far as capital formation
through internal means is concerned. This is somewhat surprising as the question of
whether cooperatives are enterprises was debated for a long period of time and the
ICA Statement is the first of the kind to make this clear, as internal financing is
insufficient and as external financing is subject to limitations (see comment on the 4
th
Principle). This drawback accounts for much of the difficulties cooperatives have
when trying to find the necessary financial means. Legislative measures such as
allowing the issuance of obligatory additional member shares, possibly exempt from
financial liability and/or assorted with the right to receive interests and/or the right to
withdraw at any time, have not altered the situation fundamentally. The same is true
with allowing internal inter-member trading of shares. In addition: Neither is the
possibility to attract risk capital effective, as long as it is not assorted with voting
power, nor does the possibility to use all financial instruments that capitalistic
companies are allowed to use solve the problem. Astonishingly, legislators have done
little in recent years to stop the disappearance of, respectively to promote the
introduction of traditional and new financing instruments
1
which have the advantage
of not putting the principle of autonomy (see 4
th
Principle) at risk. Such financing
instruments are for example an increased member liability beyond the member share,
and the setting up of substantial indivisible reserves
2
and the establishment of
cooperative financial institutions (insurances and banks). The latter understand the
specific liability and responsibility mechanisms in cooperatives (governance), may
thus address the problem of cooperatives often not being able to provide the necessary
1
See ICA, Financial Conundrum and the ICA Survey of Cooperative Capital. Available at: ICA web-site.
2
The ILO R. 193 is not clear on this point. Whereas it refers to the 3
rd
Principle in Paragraph 3, it uses different language
in its Paragraph 6. (b): “Appropriate reserves” is much less precise and it is not cooperative specific.
27
securities (collateral). One would have to count among these specific liability
and responsibility mechanisms also the high risk aversion in decision-making due to
the democratic structure and which leads to a relatively low number of bankruptcies
and a proven record of crisis resilience.
1
Surplus distribution
. The problem is further worsened by the regulation of
surplus distribution. Ever more laws allow using ever more surplus money for the
compensation of capital contributions to the detriment of the establishment of
indivisible reserves, education funds and audit funds, as well as to the detriment of the
payment of patronage refunds to the members in proportion to their transactions with
the cooperative. Indivisible reserves improve the creditability and they are an
intergenerational contribution to economic security, an aspect of sustainable
development; education funds help to address the lack of education and training; audit
funds help those cooperatives which cannot afford auditors; and patronage refund
payments incite members to transact, hence to participate economically (see 2
nd
Principle) and therefore allow for the establishment of more substantial indivisible
reserves.
Income taxation.
One of the functions of cooperative-adequate taxation is that it
enhances the capitalization of cooperatives.
The following remarks are limited to the taxation of the surplus as opposed to
profit. It is one of the most controversial issues of cooperative law. ILO R. 193 refers
to the taxation of cooperatives in its Paragraph 7. (2). It reads: “Cooperatives should
be treated in accordance with national law and practice and on terms no less favourable
than those accorded to other forms of enterprise and social organization. Governments
should introduce support measures, where appropriate, for the activities of
cooperatives that meet specific […] outcomes [… .] Such measures could include […]
tax benefits [… .]” The words “tax benefits” in the 3
rd
sentence of this sub-paragraph
are used to justify the claim for tax exemptions or at least tax reductions. However,
this sentence does not relate to the taxation of cooperatives but, as can be seen from
the preceding sentence to which it refers, to certain activities of cooperatives. The
principles of income taxation of cooperatives must be derived from the general
principle of equal treatment of cooperatives enshrined in the 1
st
sentence of this sub-
paragraph. This principle, as does the universally recognized legal principle of equal
treatment in general, requires an identical treatment with other forms of enterprise
when the circumstances so require and, reversely, a specific treatment when the
circumstances so require. A specific tax treatment for cooperatives is justified by their
being structurally different, to the extent the surplus is being refunded to the members
as an obligation and in proportion to their transactions, to the extent cooperatives
promote (again an obligation as part of their objective) the social wellbeing of their
members, thus saving tax payers money which would otherwise have to be spent on
1
See Birchall, Johnston and Hammond Ketilson, Lou, Resilience of the cooperative business model in times of crisis,
Geneva: ILO 2009.
28
social issues, and to the extent it is being transferred to an indivisible obligatory
reserve fund which is to protect members’, third parties’ and public interests. These
items are to be seen as cost factors as they are based on obligations and therefore
constitute debts, hence they must not be included in the taxable income. This requires
cooperative specific book-keeping and accounting rules and procedures.
The result of such a tax regime is the same as that of tax exemptions. But the
given justifications indicate that it is not an exemption from an obligation to pay taxes,
but a reduction of the taxable income by a number of cost factors which are due to the
fulfillment of legal obligations. For further details, see Annex 3, which also explains
the difference between “profit” and surplus”.
This special tax treatment,
1
in legal terms equal tax treatment, presupposes an
effective audit which produces reliable information for the tax authorities on whether
a specific cooperative has acted according to the cooperative principles during the
financial year in question. As already mentioned, such audit systems are seldom in
place. Tax exemptions and tax reductions for cooperatives on the mere ground of their
being registered as cooperatives lead however almost inevitably to the creation of
bogus or false cooperatives.
The specific tax treatment of cooperatives might have repercussions on the social
security of its members. This will possibly depend on the relationship between
cooperative law, labor law and social security law.
“4
th
Principle:
Autonomy and Independence
Cooperatives are autonomous, self-help organisations controlled by their
members. If they enter into agreements with other organisations, including
governments, or raise capital from external sources, they do so on terms that ensure
democratic control by their members and maintain their cooperative autonomy.”
This principle is underlined by Paragraph 6. (e) of the ILO R. 193.
2
The
principle complements the 3
rd
Principle as far as financing is concerned and it has
ramifications which are relevant for the determination of the legal instruments to be
employed to regulate cooperatives.
While subjecting any external financing
3
explicitly to the principle of
autonomy, the principle recognizes the reality that internal financing mechanisms are
more often than not insufficient and any external financial contribution bears the risk
of infringing upon this autonomy.
As concerns investments, an additional reason for caution must be added.
Investors, be they members or not, pursue a double strategy. They are interested in the
1
In most countries, the income tax regime for cooperatives is unclear.
2
And also repeatedly by the UN Draft guidelines (see its Points 11.).
3
Starting with transactions with non-members which almost all laws allow (exception for example most of the Japanese
cooperative laws (the recently adopted Japanese Workers´ Cooperative Law is an exception to these laws), to cooperative
groups, investments by non-members with or without voting rights in the general assembly, at times limiting their
exercise to decisions concerning investments, and most of the time fixing a proportion of the total capital they may not
exceed; with granting the investors seat/s on the board and/or the supervisory council (if any).
29
growth of the value of the enterprise and - that being uncertain - they are seeking
periodical high returns on their investment. This will lead to transforming the aspects
of the objective of cooperatives (“meet their common economic, social and cultural
needs and aspirations”) into elements, with a preference for the economic element,
which turns easily into a financial one. Thus, the objective of the cooperative alters,
hence its form alters.
As concerns the ramifications of the principle for the determination of the legal
instruments to be used to regulate cooperatives, the original meaning of the word
“auto-nomos” in the sense of setting oneself one’s rules must be considered. It requires
a delimitation of the matters which are to be regulated by the constitution and those
which are to be regulated by other legal instruments. As for constitutions, a growing
number of countries protect cooperatives under their constitution.
1
The obvious
positive effect is that such protection is hard to withdraw, as generally changes to the
constitution require a special procedure. As for other legal instruments, a decision has
to be taken as to which matters are to be regulated by law, which by government
instruments (regulations or decrees), which by the internal byelaws or statutes of the
cooperatives and which by a policy document. Beyond differences stemming from
different conceptions of law, especially of constitutional law, the reality concerning
the power of cooperatives to regulate their affairs autonomously demonstrates two
extremes. On the one hand, overregulation by law and regulations, often expressed in
a multitude of texts and coupled with an attribution of powers to the government which
make cooperatives appear as semi-public organizations, if not as arms of the
government to reach specific policy or even political goals and leaving no room for
true auto-nomy. On the other hand, a tendency to grant an ever more extensive
autonomy to cooperatives which, in extremis, allows cooperatives to determine their
purpose through their bye-laws. The proponents of this latter stance claim that the
gradually juridifying corporate social and societal responsibility of all enterprises
makes the multitude of organizational enterprise laws senseless, while raising the
importance of wide bye-law autonomy.
2
A balance might have to be struck for every
individual case that must lie between a maximum which voids law of its functions
3
and a minimum whereby the law grants cooperatives at least as much autonomy as it
does to other forms of enterprise according to the principle of equal treatment. This
balance will have to reflect the effectiveness of cooperative self-control/governance.
The more effective it is, the less governments may claim to have a right to interfere
and vice versa.
“5
th
Principle:
Education, Training, and Information
1
As suggested by the UN Draft guidelines (see its Point 10.).
2
This seems to be also the opinion of the European Commission as expressed in its so-called Green Deal. See, EU
doc.COM(2019) 640 final
3
As for exclusive functions of law (in the sense of law made by a legislator) the following might be mentioned:
-
guarantee democratic and equal access to law;
30
Cooperatives provide education and training for their members, elected
representatives, managers, and employees so they can contribute effectively to the
development of their co-operatives. They inform the general public - particularly
young people and opinion leaders - about the nature and benefits of co-operation.”
This principle has two (interrelated) aspects, an internal one and an external
one.
As for the internal aspect, education and training of the kind specified in this
principle was an integral part of the praxes of the first modern cooperatives. Its general
decline might be attributed to many of the functions it then had now being fulfilled by
general public education. Especially in the form of enabling the members to control
(see also above 2
nd
Principle and its relation to the function of audit) it has however
retained its necessity and should be promoted through related tax measures. I.e.
legislators should consider making the establishment of an education and training fund
obligatory and exempt surplus money spent thereon from income taxation (see above
3
rd
Principle on income taxation).
As concerns the external aspect, the principle will only be as effective as
governments abide by their obligation to include the subject of cooperatives into the
research and education curricula at all levels of their education system (Paragraph 8.
(f) of the ILO R. 193
39
).
“6
th
Principle:
Cooperation among Cooperatives
Cooperatives serve their members most effectively and strengthen the
cooperative movement by working together through local, national, regional and
international structures.”
As cooperatives (should) have all rights and obligations other types of
enterprises may have, the term “cooperation among cooperatives” must mean
something more than the cooperation which may take place between legal persons in
general. It divides indeed into horizontal and vertical cooperation. Where horizontal
cooperation is not hierarchical, vertical cooperation as indicated by the words
“cooperatives at other levels” (see 2
nd
Principle) is. On the other hand, the word
“cooperation” does not allow for integration, as this would put the autonomy of the
cooperatives at risk.
40
The structure of higher-level cooperatives must therefore reflect
hierarchical elements without which joint work (cooperation) is not possible and
heterarchical elements through which a growth strategy built on concentration may be
avoided and the autonomy of the cooperating cooperatives is respected. This kind of
cooperation among cooperatives is therefore a structural
-
maintain/guarantee legal security for all stakeholders;
-
serve as a guide for the elaboration of public policies;
-
serve as a tool for the implementation of public policies;
-
satisfy the socio-psychological need to be recognized by law;
-
31
-
serve as a social ligament – not only “ubi societas, ibi ius”, but also “ubi ius, ibi societas”.
39
See
also Paragraphs 4. (b) and 8. (1)(k), 16. (h) of the ILO R. 193.
40
This is a particular problem where cooperatives become part of global value chains.
element of primary cooperatives. Its absence, that is the absence of effective
higher-level cooperative organizations, as mentioned a wide-spread phenomenon, is
not only a reason for failure of primary cooperatives, but also a reason for undue
external influence on them by government and/ or other actors. Less so because of
malign political intentions than out of a genuine will to help cooperatives grow, be it
with inadequate means. This explains also to a large extent why many laws prescribe,
in violation of the 4
th
Principle (Autonomy and Independence), that higher-level
cooperative organizations be established according to the administrative set-up of the
country.
Often, the cooperative law is unclear about the legal form these higher-level
cooperative organizations (unions, federations, apexes, confederations) should adopt.
The 2
nd
Principle seems to indicate that they are cooperatives (“cooperatives at other
levels”). The legislator might sovereignly decide, but the form will best serve, if it is
a function of the purpose of these structures, which can be socio-economic and
or/socio-political. For the former purpose the cooperative form will be suitable, for the
latter the associative.
In order that “[c]ooperatives serve their members most effectively” (Paragraph
6. (d) of ILO R. 193), i.e. do not serve their own interest, it is important that higher-
level cooperative organizations be set up, financed and controlled by their members
and not by external actors.
1
“7
th
Principle:
Concern for Community
Cooperatives work for the sustainable development of their communities
through policies approved by their members.”
2
With the ongoing political debate on measures to mitigate the effects of climate
change as part of endeavors to pursue policies congruent with the sustainable
development paradigm the debate on this 7
th
Principle has gained new momentum,
including suggestions to either amend the principle or to adopt an 8
th
one which would
more specifically address the aspects of sustainable development. The ever more
frequent reports by cooperatives on their working for the social and societal good of
their communities beyond the membership reveal however a risk of losing out of sight
that which distinguishes cooperatives from other forms of enterprise. These reports do
not differ substantially from those by other forms of enterprise. To the extent the CSSR
juridifies, this will lead to a further homogenization of the enterprise forms, unless
cooperatives concentrate on their most distinctive feature, namely democratic
participation (governance), that, under these circumstances and a radically changing
1
See also Paragraphs 11. (4) and 17 of the ILO R. 193.
2
The social responsibility of cooperatives beyond the membership is underlined also by the UN Draft guidelines (see its
Point 3).
32
notion of enterprise, might have to be extended to other stakeholders than the
members (see above comments on the 2
nd
Principle). A defined community? Society
at large?
1
IV. Conclusion
The foregoing discussion of the cooperative principles was to create a better
understanding of some of the terms with which the definition of cooperatives describes
the object/scope of cooperative law, such as “autonomous”, “persons”, “economic,
social and cultural needs”, “democratically controlled”, “enterprise”.
2
This is not to
say that such understanding solves all the practical problems, like access to finance,
management and governance issues, attitudinal shortcomings etc.. The following
additional points are raised as they are the subject of frequent misunderstandings.
Activities:
In line with Paragraph 1 of the ILO R. 193 and Paragraph 12. (c),
which reinforces it for financial activities, the definition contains no limitation as to
the activity cooperatives may exercise. However, such restrictions, especially as
concerns financial activities (banking and insurance) and housing are still in place in
many countries. This violates the principle of equal treatment enshrined in Paragraph
7. (2) of the ILO R. 193.
Social strata of the membership
: The definition does not contain any limitation
as to the social background of the membership. The historical fact of cooperatives
having been in many instances the only means of poorer strata to develop economically
is taken as a feature of cooperatives and continues often to be seen as such for
ideological reasons or out of donor interests. While cooperatives continue to be that in
many places, they have developed to be not only children of necessity, but also children
of choice (see discussion of the 2
nd
Principle).
The self-responsibility of the members
: As mentioned, often members do not
conceive of themselves as a group of entrepreneurs, but as persons entitled to claims
against their cooperative. The wording of the definition (“[…] persons united
voluntarily to meet their common economic, social and cultural needs and aspirations
[…].”) is clear on this point. The members are the drivers.
Finally, the benefits of cooperative law cannot be had without investing in
research on and education of the subject as required by Paragraphs 7. (2) and 8. (f) of
the ILO R. 193 and by the general legal principle of equal treatment of all enterprise
forms.
1
See also Paragraphs 4. (h) and 5 of the ILO R. 193.
2
In fact every word in this definition is relevant and would need an explanation.
