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At the height of the migrant crisis, Budapest introduced new laws to freeze any external funding to organisations of over €22,000. Strongman leader Viktor Orban argued the cash could be used for money laundering or to finance terrorism. But the restrictions were seen as as deliberately targeting billionaire philanthropist George Soros and his Open Society Foundation that supported a number of Hungarian NGOs.
The government claimed such organisations were working against the national interest and meddling in the country’s political affairs.
In a ruling today, the European Court of Justice said the laws “run contrary to the obligations on member sates in respect of the free movement of capital”.
“Hungary’s restrictions on the funding of civil organisations by persons established outside that member state do not comply with the Union law,” it said in a statement.
The Luxembourg-based court said Hungary’s law imposed “discriminatory and unjustified restrictions of foreign donations to civil society organisations”.
“The objective of increasing the transparency of the financing of associations” is not present or capable of justifying the disputed law, its judges added.
The ruling, which can’t be appealed, comes in a long line of clashes between Hungary and the European Commission.
Brussels has constantly accused Budapest of flouting the bloc’s legal framework and disregarding rule of law.
Mr Orban’s Fidesz have stood by the controversial law since it was introduced in 2017.
It states that NGOs receiving foreign funding must disclose donations to Hungarian authorities before the information is published online.
Mr Soros’ Open Society Foundations relocated their headquarters from Budapest to Berlin as a result of the crackdown.
Amnesty International praised the ECJ’s ruling, hailing it as a “landmark decision”.
David Vig, Amnesty Hungary’s director, said: “Today’s landmark decision deals a blow to the Hungarian authorities’ efforts to stigmatise and undermine civil society organisations who criticise government policy.
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“The law requiring NGOs to label themselves as foreign-funded was never really about fighting money laundering and international terrorism, as the Hungarian government claimed. Instead it is a blatant attempt to muzzle critical voices and chip away at public support for organisations fighting for human rights, justice and equality.
“It is vital that the Hungarian Constitutional Court now acts quickly to resume its review of this repressive law, which should be annulled as soon as possible.”
Hungary now faces the prospect of being lumped with heavy fines unless it fixes the disputed law.
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The Commission or another member state would, however, have to lodge another complaint with the ECJ.
The Luxembourg-based court said: “Where the Commission considers that the member state has not complied with the judgement, it may bring a further action seeking financial penalties.
“However, if measures transposing a directive have not been notified to the Commission, the Court of Justice can, on proposal from the Commission, impose penalties at the state of the initial judgement.”
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