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Following an EU Court ruling and the Commission’s infringement procedure, the Fidesz-led government eventually backed off, revoking the law it had brought against foreign-funded NGOs back in 2017. However, from now on the State Audit Office (ÁSZ) will be in charge of reporting on virtually all large organizations, something that further concerns the civil organizations in question.

Back in June 2017, the Hungarian parliament passed a law requiring civil groups to register as organizations funded from abroad once their foreign donations reach HUF 7.2 million (EUR 19,900 in today’s rate) in one year. According to this, NGOs were required to declare that they were considered organizations funded from abroad on their websites and in all of their press materials. In addition, the legislation also ordered them to make public the personal data of their foreign donors if their individual annual donations exceeded HUF 500,000 (EUR 1,380). The bill, dubbed “Lex Soros,” envisaged a fine for those failing to fulfill these obligations.

In their explanation, the government pointed to the alleged political pressure that these “NGOs were trying to exert on Hungarian public life with foreign support.”

A law aimed at NGOs’ stigmatization?

The legislation, however, drew controversy and criticism partly due to the circumstances it had been drawn upon. It was formulated following (and during) attacks by Prime Minister Viktor Orbán’s government on civil society groups, mostly on those receiving funding from Hungarian-American billionaire George Soros. Back then, the law also came on the heels of the government’s “Lex CEU” higher-education amendment which eventually resulted in the forced departure of a significant part of the highly-ranked university. Many critics also drew a parallel with a similar Russian law implemented in 2012 that required non-profit groups receiving foreign financing to identify themselves as “foreign agents.”

NGOs in question also suggested that the law only serves their “stigmatization,” arguing that they had always been operating transparently in line with the law and always provided all relevant data to the authorities. Also, the law affected non-political NGOs as well, such as animal shelters.

A legal clash in the EU

Besides several international organizations criticizing the government’s move, Orbán and his government also confronted the international law on the matter. Last June, the Court of Justice of the European Union (CJEU) ruled that the restrictions didn’t comply with the EU law. The Court argued that the obligations constituted a restriction on the free movement of capital, while its measures created a climate of distrust with regard to those associations and foundations.

Orbán himself commented that the CJEU judgement was part of the ‘liberal imperialism’ coming from the West, and although he didn’t like to see conspiracies everywhere,there still were conspiracies” and “there were background power organizations.” He also added that taking a look at the Hungarian participants of these lawsuits, one can “easily spot Soros’ organizations.” He, however, welcomed that the EC established the importance of the transparency of civil organizations.

Although verbally promising to do so, Hungary proved reluctant to implement CJEU’s ruling at first, eventually resulting in the European Commission’s infringement procedure against the country. Despite a written warning this February, the government did not modify the law in question for another two months, risking a fine.

State Audit Office to replace the law?

Just as previously communicated (the government insisted that in line with “society’s expectation” it would provide the necessary tools for transparency one way or another), the Orbán administration wouldn’t renounce the surveillance. According to the draft, the State Audit Office, led by a former Fidesz politician, would be in charge of annually reporting on those associations and foundations whose balance sheets exceed HUF 20 million (EUR 55,200) in a year, except for sports, religious, and national organizations.

In response, 19 NGOs, although welcoming the decision on dropping the law, expressed concern about ÁSZ’s involvement. Their joint statement points out that their finances are made public every year in line with the law. In addition, many of them in fact share more information than required. Despite their occasional criticism, civil organizations should rather be viewed as the government’s partners, they argue. The statement also notes that many of those exempt from this new ruling in fact receive an outstanding amount of public money at the expense of state tax revenues (something that would make deeper control and ÁSZ’ involvement more necessary). In brief, they view ÁSZ’s involvement as another possible means to discredit and stigmatize civil organizations.

Gov't to Modify 'Lex CEU' Law
Gov't to Modify 'Lex CEU' Law

The Hungarian government is modifying the higher education law that led to Central European University ending its academic operations in Budapest. In October of 2020, the European Court of Justice ruled that ‘lex CEU’ violates Hungary’s commitments under the World Trade Organization and infringes on academic freedom in the European Union. However, CEU will not […]Continue reading

One of the targets of the NGO law, the Hungarian Civil Liberties Union (TASZ, who boycotted the law’s application), went perhaps even further in slamming the move and said that “…the usage of ÁSZ for this purpose is the usage of the state machinery for political and power purposes,” and the state would utilize their auditors as “bludgeons.”

Meanwhile, liberal 444 speculates that the reason behind the government suddenly changing controversial laws “Lex Soros” and “Lex CEU,” is Prime Minister Viktor Orbán’s forthcoming meeting with European Commission president, Ursula von der Leyen, as the Hungarian PM wants to establish better grounds for the talks about RRF, the EU’s coronavirus recovery funds.

on the featured photo illustration: civil organizations demonstrating against the “Transparency Law” in 2017. Photo by Zoltán Balogh/MTI