Hungary’s foreign-funding restrictions declared in violation of EU law

The European Court has declared that Hungary’s foreign-funding restrictions violate EU law.

The legal battle began in 2017, when Hungary’s parliament approved new rules requiring Hungarian organisations receiving over 7.2 million Hungarian forints (about €20,000) from outside the country to formally register and present themselves as foreign-funded entities.

The law applies exclusively to associations and foundations receiving financial support sent from other Member States or third countries, and its introduction made Hungary the first EU country to introduce a so-called “foreign funding” restriction inside the EU.

The European Court of Justice has now held that the transparency law runs contrary to Member States’ obligations of the free movement of capital laid down in the Charter of Fundamental Rights of the European Union. This is specifically in regards to the right to respect for private and family life, the right to the protection of personal data and the right to freedom of association.

The court concluded that the transparency law establishes a non-justifiable difference in treatment between domestic and cross-border movements of capital.

It found the requirement for these organisations to declare themselves and to register as “organisations in receipt of support from abroad” to be a restriction to the freedom of capital, and that the Hungarian government had failed to justify this. 

The court also identified a limitation to the freedom of association because, it found, the law made the operations of the associations falling within the scope of that law much more difficult.

In addition, it held that declaration and publication requirements laid down by the transparency law limit the right to respect private and family life, and that the right to the protection of personal data was also affected. The stated limitations to fundamental rights could not be justified by any of the objectives of general interest expressed by Hungary.

Philanthropy Advocacy and ECNL among other partners have stated that they are now working to analyse in more depth the law’s implications.

EFC, DAFNE and ECNL recently put together a handbook to provide practical guidance for CSOs to advocate and litigate using EU law to protect their rights and civic space in the EU.