The proposed European Foundation Statute (EFS) has suffered a setback in its progress towards enactment, with the 28 EU member states failing to produce a consensus.

Last week, the Italian EU presidency presented a new version of the proposal for a regulation to the Permanent Representatives Committee (COREPER 1), which prepares the agenda for the ministerial Council of the European Union meetings.

The final step in the process to create a regulation will be a vote by the 28 member states making up the Council, which must be unanimously in favour for the proposal to become law.

A unanimous decision by COREPER is also sought beforehand, in order for the file to proceed to the Council.

But at the COREPER meeting, a few countries, including the UK, Netherlands, Denmark, Austria and Slovakia, rejected the principle of an EFS initiative.

Others rejected the current compromise text prepared by the Italian presidency.

The EFS proposal establishes a constitution for a pan-European foundation (FE) operating across borders to support general interest causes, removing the requirement for foundations operating in different jurisdictions to set up separate legal entities in each country.

It is supported by the industry because it would provide a single set of rules for European foundations, helping to reduce the costs and uncertainty involved in cross-border activities.

At present, an estimated €100m per year is spent by the sector in complying with more than 50 types of national legislation in Europe.

It could also stimulate cross-border donations and provide a level of transparency and accountability to individual foundations set up under its framework.

It would not, however, replace existing national laws, but would be optional and complementary.

The European foundation sector disburses €100bn annually and employs 1m people, with more than double that number working as volunteers.

Gerry Salole, chief executive at the European Foundation Centre, which has advocated an EFS for several years, said: “This is a serious setback for foundations and communities and citizens on the ground. The EFS is a simple, cost-effective solution to enable foundations to fund across communities in Europe and bring about more public good to communities most in need.

“The perversity of unanimity decision-making means a minority can veto the choice and agreement of the majority. This decision-making process demonstrates the flaws in policy-making at EU level.”

He also observed: “There’s an added irony that countries with a strong track record of foundations working hard over time to improve the lives of citizens and cooperating closely with their national governments, have rejected the proposal. Therefore, this ‘I’m all right Jack’ attitude is particularly perverse.”

The EFS proposal has gone through a long process of refinement to maximise the chances of success at the final hurdle.

In particular, the tax provisions were removed after proving a major obstacle to progress.

Emmanuelle Faure, European affairs senior officer at the EFC, said: “It is important to note that a majority of EU countries are supportive of the EFS initiative, with only a small minority rejecting it.”

Countries rejecting the current compromise text included Estonia, Germany – which believes further work is needed on the text  – and Portugal, which wants to set the FE’s minimum starting capital at €100,000, compared with €20,000 in the current draft (although there is scope for member states to ask for a maximum of €100,000).

Faure said: “Some of the issues at stake could be tackled if the negotiations were to continue.”

The decision as to the next move lies largely with the new European Commission, which can keep the initiative in the legislative process during 2015, or withdraw it altogether.

The latter would automatically mean that a new initiative would have to start from scratch.

The current EU Presidency Trio (Italy, Latvia, Luxembourg) can also, in cooperation with the EC, decide to move forward with the file, or not.

It is not clear what the outcome will be, but any decision is likely to be made within the next few weeks.

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