The nongovernmental sector in many CEE/FSU countries was initially unregulated or regulated by laws from the interwar period. The absence of regulation allowed some commercial businesses to "masquerade as not-for-profit organizations." Laws defining NGOs were needed to distinguish between profit-generating businesses and nonprofit entities, "so as not to discourage the growth of these important civic actors." From UNICEF Innocenti Research Center, Women in Transition 102 (1999). Since then, however, most countries have adopted basic framework legislation governing the nongovernmental sector, including the establishment and role of NGOs.

The extent to which the legal environment is responsive to the needs of the nongovernmental sector, however, varies from country to country. For example, recent NGO legislation in Albania provides "excellent substantive criteria" for NGO registration, creates tax exemptions for public-benefit NGOs, and "allows NGOs to earn income from the provision of goods and services" and "to compete for government contracts and procurements." The NGO sector in Belarus, however, continues to face significant bureaucratic obstacles, including high registration fees for membership NGOs, delays in NGO registration, inconsistencies in the legal framework governing NGOs that "permit state authorities to persecute NGOs," and a complicated and centralized process for invoking tax-exempt status. From USAID, 2002 NGO Sustainability Index for Central and Eastern Europe and Eurasia 24, 39-40 (2002).

Yet despite the variety in legal environments, NGOs face common problems throughout the region. Some common problems include restrictions placed on the ability of NGOs to engage in advocacy, limits on NGO revenue-raising activities, the intrusion of the state into NGO governance and structure, and the imposition of burdensome and confusing registration requirements. From USAID, Lesson in Implementation: The NGO Story 13 (1999). "[I]mportant financial issues such as tax deductions for charitable contributions and NGO's ability to charge service fees have still not been addressed in many countries." In addition, the history of the relationship between the state and citizen associations under many communist regimes complicates state regulation of NGOs. Some NGO leaders in Russia, for example, view with suspicion the state's efforts to "coordinate" NGOs, while others suggest that these efforts "are proof of long overdue government recognition of the sector." From USAID, 2001 NGO Sustainability Index for Central and Eastern Europe and Eurasia 3, 7 (2001).

At the same time, however, significant improvements in the legal environment continue throughout the region. In October 2002, the Federation of Bosnia and Herzegovina enacted a new NGO law. As the International Center for Not-For-Profit Law explains, the new law "includes many progressive provisions, largely complies with international standards and regional best practices, and represents a significant step towards a more enabling legal environment for NGOs in BiH." A law passed in Bulgaria in 2000 has been described as "one of the most modern international legal principles on NGO status." From USAID, 2000 NGO Sustainability Index for Central and Eastern Europe and Eurasia 56 (2000).