Leaner, meaner, greener: Pope Francis updates Vatican business and contracting laws
The pope has updated his laws on how the Vatican does business, here's what's changed
Pope Francis issued two new apostolic letters Tuesday, amending the financial regulations for Vatican curial offices and for the Vatican city state.
The pope set a new threshold for acts of “extraordinary administration,” which require approval, and amended policies Francis set in 2020 governing external contracting and purchasing orders by Vatican bodies and institutions.
Many of the changes are stylistic, cleaning up and clarifying the language of the existing laws. Other changes harmonize the pope’s 2020 laws with the apostolic constitution Praedicate evangelium, on the governance of the Roman curia, issued by Francis in 2021.
So what do the new laws change, and what does it all mean? Here are the highlights.
‘Extraordinary administration’
The pope’s first big change Jan. 16 is to establish a new threshold for acts of extraordinary administration — a class of major financial decisions which require permission, because they usually change or could put at risk the stable patrimony of an institution.
Dioceses around the world already have financial thresholds, usually set by bishops’ conferences, above which they have to seek special approval from the Vatican’s Dicastery for Clergy, which handles acts of governance by diocesan bishops.
The limits differ from place to place, in line with local economic conditions.
In the U.S., acts of extraordinary administration are defined as any transaction with a dollar amount at or over $7,500,000 for dioceses with Catholic populations of half a million people or more, and for other dioceses the maximum limit is $3,500,000.
With the promulgation of the motu proprio “On the limits and modalities of ordinary administration” Jan. 16, Pope Francis set a similar limit for curial and city state institutions, calculated at 2% of the annual operating budget of the body, or 150,000 euros, whichever is higher.
The power to set that limit was granted to the Vatican’s Council for the Economy in article 208 of Praedicate evangelium; above that threshold, expenditures and other transactions have to be approved by the Secretariat for the Economy.
The actual wording of Tuesday’s motu proprio doesn’t actually change the responsibility of the council for setting the threshold, so Francis is essentially enshrining a threshold devised by that body into Vatican law.
The move is part of a general effort to tighten financial oversight and control of curial budgets by the secretariat in the wake of a Vatican cash crunch and the fallout of the financial scandal and trial.
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Going green(er)
When Pope Francis issued his 2020 norms for the regulation of contracts in the Vatican, he included two provisions, both of which have been slightly expanded in the new revisions.
In 2020, Francis included a specific provision that companies be barred from doing business with the Vatican if they had committed “serious breaches of environmental obligations.” Now, with the changes made on Jan. 16, the pope has lifted the environmental concerns from the body of the law into its main guiding principles.
Whereas article one of the norms previously stated that Vatican business norms were to be drafted and applied in accordance with the social teaching of the Church and relevant Vatican City judicial structures, now the same article also includes the pope’s environmental encyclical letter Laudato si’ as well.
The new norms also provide for the Secretariat for the Economy to create a special commission to review cases where contractors or deals might fall outside or be in conflict with the Church’s social teachings and, notably, this commission’s decisions will be unappealable.
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‘Decentralization’
One of the more interesting reforms of Tuesday’s motu proprios is that they create a new formal category of “decentralized body” — meaning a curial department or Vatican affiliated institution which does not have to go through APSA, the Administration of the Patrimony of the Apostolic See — for contracts and purchasing.
While the 2020 norms did allow for institutions and departments to request special permission to make their own arrangements for external contracts and purchasing, this was presented as a special case needing special permission.
APSA’s role as the centralized asset and fund manager for all curial and Vatican-affiliated institutions was a major reform of Praedicate evangelium. Under the norms of the constitution, every Roman body was required to move its money and turn over management of its assets to APSA, and the administration was also given responsibility for “provides whatever is necessary for the ordinary activities of the Roman Curia, and is responsible for liquidity, accounting, purchases and other services.”
However, the Jan. 16 changes to the law create a new formal designation of “decentralized body” for institutions which want to conduct their own business apart from APSA, and even allows for them to club together for joint purchasing.
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Lessons learned?
In addition to all this, Francis’ new norms on Tuesday also tinkered with the various rules about what sort of companies and businesses Vatican departments can do business with.
Taken together, they seem to be incremental changes made with the benefit of a few years’ experience — both in the course of ordinary operations and also, probably, from the financial trial.
One example is the slight loosening of the ban on curial and city state departments doing business with any company “constituted in the form of a trust company, or [which] is participated in or represented, directly or indirectly, by trust institutions or subjects.”
Now, the new norms state, doing deals with trusts is acceptable, except those “that do not allow the actual beneficiary to be identified, unless evidence is given of the identity of the beneficiary.”
The original blanket ban was part of a longer list of excluded persons and businesses who posed a likely risk of corruption or other shady practices but, in the light of experience, the new regulation now singles out the aspect of trust incorporation which presents the common problem — that it can be used to obscure that real actual owners or beneficiaries.
Similarly, new stricter regulations have been introduced banning business with companies (or trusts) registered or owned by someone registered in “states or territories with privileged tax regimes.”
These new regulations would have, for example, blocked the Secretariat of State’s London property deal, which triggered the Vatican financial scandal and trial. In that deal, they acquired a building owned via a series of nested companies registered in the Channel Islands, a tax haven, and via a corporate structure which made discovery of the ultimate owner difficult-to-impossible to see.
Similarly, the ban on doing business with those convicted of fraud or other financial crimes has now been upgraded to cover those under investigation for the same behavior, even if it has not yet resulted in a conviction.
Also excluded from Vatican business now are those found to have violated “the ethical rules established by the professional order to which he belongs,” which would include disbarred or professionally censored lawyers and accountants, for example.
These provisions, had they been in place in 2018, would have blocked the appointment by the Secretariat of State of Gianluigi Torzi to act for them in the London property deal.
Good to see the laws being refined and formalised. Now you just gotta stick to them… which seems to be the chief problem in the first place.