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The European Commission has given Hungary two months to change a law on foreign-funded civil organizations or face hefty fines.
The law, introduced in 2017, requires NGOs that receive foreign donations above a certain amount to register with Hungarian authorities
The European Commission began an infringement procedure against Hungary on Thursday over a controversial law requiring foreign-funded non-governmental organizations (NGOs) to disclose their donors to authorities or face fines.
Hungary has drawn the ire of Brussels in recent years for cracking down on criticism of the ruling Fidesz party and shrinking the space for civil society.
The Commission has sent a formal letter of notice to the government of Prime Minister Viktor Orban. The move is part of the EU's infringement procedure used when member states are accused of violating EU law.
"Civil society organizations are an indispensable part of our democracies. We must support them, not fight them," Vera Jourova, a deputy head of the European Commission, said on Thursday.
The infringement letter reflected the EU court's decision, arguing that the NGO law "threatens the role of civil society as an independent actor," while creating a "climate of distrust towards them as well as limiting the privacy of donors."
If Budapest does not react within two months, the Commission could ask the European Court of Justice to impose financial fines.
Passed in 2017, the so-called "transparency rule" requires NGOs with donations from abroad above a certain amount to be publicly labelled as foreign funded. Violators could be forced to close.
Critics of Hungary's right-wing Prime Minister Orban say the law is tailored to target US billionaire George Soros, a Hungarian-born businessman who funds causes that support democracy and human rights globally.
Orban has repeatedly accused organizations funded by Soros of political meddling.
In June 2020, the European Court of Justice (ECJ) ruled that the law was illegal.
"Hungary's restrictions on the funding of civil organisations by persons established outside that member state do not comply with the Union law," the Luxembourg-based court said in a statement.
The court ruled that the law violates EU rules on free movement of capital, along with rights to data protection and freedom of association.