1 September 2020
The EU Court has ruled that the provisions of a Hungarian law that impose obligations of registration, declaration and publication, as well as significant penalties, on NGOs receiving funding from third countries are contrary to the EU Treaties. The case arose from infringement proceedings brought against Hungary by the European Commission, supported by Sweden. However, despite the judgment, the provisions remain in force and continue to affect NGOs registered in Hungary.
In 2017 The Hungarian Parliament enacted a law (Act No. 76 of 2017) “on the transparency of organizations supported from abroad” (Transparency Law). The law was most probably designed to fulfil a part of the Government’s policy that puts non-governmental organizations (NGOs) under pressure.
While the preamble to this Transparency Law states, inter alia, that civil society organizations “contribute … to democratic scrutiny of and public debate about public issues” and that they “perform a decisive role in the formation of public opinion” and that “[their] transparency is overwhelmingly in the public interest”, instead of supporting these organizations, it imposes obligations of registration, declaration and publication on certain categories of civil society organizations directly or indirectly receiving support from abroad exceeding a certain threshold and provides for the possibility of applying penalties to those that do not comply with the obligations.
The striking discrepancy between the first and the second part of the previous sentence is clear, although, the conflict is essentially one of policy. This may be explained to some extent by the continuation of the preamble, reading as follows:
“Support from unknown foreign sources [to civil society organizations] is liable to be used by foreign public interest groups to promote — through the social influence of those organizations — their own interests rather than community objectives in the social and political life of Hungary”; [this support] “may jeopardize the political and economic interests of the country and the ability of legal institutions to operate free from interference”.
Well, the question of whether a Member State should implement such a policy towards NGOs in the 21st century is one thing. The extent to which such a policy can be part of the legal system of a Member State is another question entirely. This was the question posed to the Court of Justice of the EU in this infringement case.
The Court found that by adopting the provisions of the Transparency Law, Hungary had introduced discriminatory and unjustified restrictions on foreign donations to civil society organizations, in breach of its obligations under Article 63 TFEU and Articles 7, 8 and 12 of the Charter of Fundamental Rights of the European Union.
What do these provisions referred to by the Court say?
Under Article 63(1) TFEU, all restrictions on the movement of capital between Member States and between Member States and third countries are prohibited.
According to Article 7 of the Charter, everyone has the right to respect for his or her private and family life, home, and communications. In addition, under Article 8(1) of the Charter, everyone has the right to protection of their personal data. The right to freedom of association that is enshrined in Article 12(1) of the Charter sets out that everyone has the right to freedom of association at all levels, in particular in political, trade union and civic matters.
According to the Court, the Hungarian Act of Parliament breached all these fundamental rights and freedoms, in a discriminatory and unjustified manner.
First of all, the obligation of ensuring the free movement of capital in the EU was breached because the Transparency Law makes all associations or foundations falling within its scope and receiving financial support from a Member State other than Hungary, or a third country, subject to a set of specific obligations. First, such associations or foundations must register “as an organization in receipt of support from abroad” with the competent courts. Second, they must submit to those courts each year a declaration containing a set of data relating to: a) their identity, b) the financial support reaching or exceeding certain amounts which they receive from natural or legal persons having their place of residence or registered office in another Member State or in a third country, and c) the identity of such persons. They also must indicate on their internet site and in their publications and other press materials that they are organizations in receipt of support from abroad.
Next, the Transparency Law provides that a failure to comply with the obligations applicable to the associations and foundations at issue exposes them to a set of penalties including the adoption of compliance orders by the competent public prosecutor, the imposition by the competent court of fines of between EUR 30 and EUR 2 700 and the possibility of dissolution being ordered by that court at the request of the public prosecutor.
“Those various measures” – the Court says – “which were introduced together and which pursue a common objective, put in place a set of obligations which, having regard to their content and their combined effects, are such as to restrict the free movement of capital which may be relied upon both by civil society organizations established in Hungary, as the beneficiaries of capital movements taking the form of financial support sent to them from other Member States or third countries, and by the natural and legal persons who grant them such financial support and who are therefore behind those capital movements.”
As for the breach of the Charter, the Court found that the systematic obligations in question are liable to have a deterrent effect on the participation of donors resident in other Member States or in third countries in the financing of civil society organizations falling within the scope of the Transparency Law. This hinders the activities of those organizations and the achievement of the aims which they pursue. They are furthermore of such a nature as to create a generalized climate of mistrust vis-à-vis the associations and foundations at issue, in Hungary, and to stigmatize them.
So, what can we expect in the aftermath of this judgment?
Well, the Transparency Act entered into force on 27 June 2017 and the Commission sent Hungary a letter of formal notice as early as on 14 July 2017. On 7 December 2017, the Commission brought the action to the Court, which took 2.5 years to arrive at the present judgment. During this time, many NGOs were listed as “supported from abroad”, putting a stigma on and shaming their name.
Now that the judgment has been published, the Hungarian Government is under a legal obligation to act quickly, withdrawing or appropriately amending the foregoing Law.
Well, nothing visible has happened since the proclamation of the CJEU judgment, so the Transparency Law is still in force, and what is more, it still must be followed. Reading the official statements of the Government do not give rise to much hope either.
Ms. Judit Varga, Minister of Justice for Hungary, reacted to the judgment of the Court saying that: “The standpoint of the Government continues to be that the registration and publication obligations prescribed by the Hungarian regulation did not make the financing or operation of the supported organizations more burdensome. The judgment of the Court does not refer to any data or fact proving such an impact.”
She went on, saying that: “The legality of the Hungarian regulation on the transparency of organizations supported from abroad was confirmed by the judgment of the EU Court today.”
It seems this story is far from reaching its conclusion.
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