The Grand Chamber of the Court of Justice of the European Union has ruled that Hungary failed to fulfil its obligations under EU law when it imposed reporting requirements on NGOs in receipt of foreign funding.
According to the Court, by introducing obligations of registration, declaration and publication on civil society organisations in receipt of support from abroad exceeding a certain threshold, Hungary had imposed discriminatory and unjustified restrictions on the organisations themselves and those providing the financial support.
In 2017, Hungary adopted legislation that the government claimed would ensure financial transparency of civil society organisations. Under this law, organisations which received funding from abroad over a certain threshold must register as an “organisation in receipt of support from abroad.” This included entering the names of the donors and the exact amount donated into a publicly available database. These organisations must also state on their website and publications that they are in receipt of foreign support. The European Commission brought proceedings against Hungary for failing to fulfil obligations under the Treaty on the Functioning of the European Union and the Charter of Fundamental Rights.
The Court found that the transactions covered by the Hungarian legislation fall within the scope of the concept of “movements of capital” in Article 63(1) TFEU. The difference in treatment between domestic and cross-border movements of capital does not correspond to any objective difference and could deter individuals or organisations from abroad from providing financial assistance. The legislation also creates a climate of distrust by targeting organisations getting funding from abroad and singling them out in public as such. As a result, the obligations and the penalties provided for under the legislation constitute a discriminatory restriction on the free movement of capital, as prohibited by Article 63 TFEU.
The Court acknowledged that the objective of increasing transparency in the financing of civil society organisations may be in the public interest as some of them have a significant influence on public discourse. However, Hungary did not demonstrate why the objective warranted these specific measures. The restrictions at issue apply indiscriminately to any organisation in receipt of foreign money over a certain amount without any regard to whether that organisation holds significant influence. The Court also addressed the public policy exceptions provided in Article 65 (1)(b) TFEU which may be relied upon in the areas of money laundering, financing terrorism and organised crime, in so far as the EU legislature has not completely harmonised its approach. These grounds cannot be relied upon unless there is a genuine present and sufficiently serious threat to a fundamental interest of society and Hungary did not established that there was such a threat
The Court concluded that the restrictions in the legislation were not justified and Hungary had failed to fulfil obligations under Article 63 TFEU.
The Court also examined whether the Hungarian legislation complied with Articles 7, 8 and 12 of the Charter of Fundamental Rights. The Court found that the legislation limited the right to freedom of association under Article 12, the right to respect for private and family life under Article 7 and the right to protection of personal data under Article 8. The law made it significantly more difficult to operate associations which fall within its scope and the obligations of declaration and publication limited the right to privacy. In addition, a Member State’s obligation to protect personal data under the Charter precludes information in relation to identified persons from being disseminated unless it takes place in the context of fair process, as outlined in the Charter. The Hungarian legislation provides for the disclosure of personal data and Hungary has not provided any evidence that it meets the fair procedures provided for in the Charter.
Given this analysis, the Court concluded that the legislation at issue violated Articles 7, 8 and 12 of the Charter of Fundamental Rights.
Click here for the judgment.