Victims of crime funded by unincorporated charities should be able to claim compensation, bill committee hears

The Henry Jackson Society, a think tank, says in its submission that this legal loophole should be closed

Houses of Parliament
Houses of Parliament

The government should close a loophole in charity law that leaves the victims of terrorism or other offences that have been funded by unincorporated charities unable to claim compensation, according to evidence to the Joint Committee on the draft Protection of Charities Bill.

The committee that is scrutinising the bill, which would extend the powers of the Charity Commission, has now taken all its oral and written evidence.

The think tank the Henry Jackson Society – which previously counted William Shawcross, chair of the commission, among its members – made its submission to the committee in December, but it was published only last week alongside a large batch of other submissions.

It was prepared with the help of Jonathan Turner, a barrister at Thirteen Old Square Chambers, who is not a member of the HJS but had previously approached the society with his concern about this loophole.

"This came to my attention when I was instructed by some victims of terrorists who wanted to make a claim – and the reasons they didn’t is that they wouldn’t have been able to recover anything," he told Third Sector.

Turner said these clients were victims of various attacks in Israel in the past 10 years, and that he was unable to progress their case for compensation from the charity involved because the charity was unincorporated.

The HJS submission says: "Victims of wrongs committed in the course of the activities of an unincorporated charity have no right to recover compensation from the charity’s assets. Such wrongs may range from knowingly funding terrorism to sexual abuse."

These victims can make claims against individual staff or trustees of the charity, but these individuals might not have the money to pay damages, the submission says.

The submission, which describes the misuse of charities as fundraising operations for terrorist organisations as "a significant problem", says that amending the bill to allow for victims of the wrongs of unincorporated charities to claim compensation "would not affect any liability of trustees or employees". The submission says this amendment would be "a small but useful improvement".

Asked by Third Sector whether he thought it likely the bill would be amended to include the proposal, Turner said: "We think it is justified and the arguments are strongly in favour of it. We wouldn’t be doing it if we thought there was no chance"

Many charities have historically been unincorporated, but a number are now either choosing to incorporate or incorporate their board of trustees – both options confer various advantages, including that trustees are not liable for losses made by the charity.

The new charitable incorporated organisation legal structure has been available to new charities since the start of 2013, allowing them to be incorporated without having to register at Companies House as well as with the commission.

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