Hungary cracks down on foreign funding, dealing a harsh blow to NGOs — and to European democracy

Protestors hold banners saying ‘No to the stigmatisation of civilians’ at a meeting of the Hungarian parliament’s justice committee, prior to the bill’s approval. Laszlo Balogh/Reuters

This article, which was originally published on May 10 2017 with the headline “Hungary’s bill on civil society funding is a harsh blow for European democracy”, has been updated to reflect latest developments.


Hungary has officially become Europe’s first “illiberal democracy”, an outcome prime minister Viktor Orban all but promised a few years back.

On June 13 Hungary’s parliament voted to turn a much-critised bill, On the Transparency of Organisations Supported from Abroad, which tightens control over non-governmental organisations that receive financing from abroad, into law.

The law requires organisations that annually receive more than 7.2 million Hungarian forints (around US$26,000) from foreign institutions or individuals to be placed on a register and compelled to publicly state that they receive “foreign funding”. Foreign donors must be individually identified.

Organisations that fail to comply can see financial sanctions or be shuttered.

In Budapest in mid-April, thousands marched against the law and in support of NGOs, which are also under pressure in Poland as the government there seeks to control civil society funding.

Amnesty International, whose branch in Hungary is directly impacted by the legislation, called the new law “the latest in an escalating crackdown on critical voices and will hamper critically important work by civil society groups”.

Display of authoritarianism

Orban’s tactic is to target civil society with debilitating laws and regulations that are presented as mere “technical requirements” necessary to promote transparency or national security.

Similar provisions implemented in other parts of the world reveal that this move often represents a sneaking authoritarianism, limiting freedom of association and of expression and silencing critical voices.

The government has all but admitted as much. In January 2017, Szilárd Németh, a right-wing politician and a deputy chair of parliament’s national security committee, was cited in both the Guardian newspaper and in Reuters as saying that the proposed law was aimed at NGOs that receive funding from organisations related to American-Hungarian businessman and philanthropist George Soros. His Open Society Foundations supports pro-democracy groups around the world.

George Soros is an American-Hungarian businessman and known philanthropist. World Economic Forum/Wikimedia, CC BY-SA

On April 25, government spokesperson Zoltán Kovács also referred to the “danger” of “so-called NGOs”, specifically mentioning Open Society Foundations-funded groups working on immigration issues.

The civil society law comes shortly after a fast-track law targeting the Soros-founded Central European University , which may force the prestigious academic institution to leave Budapest. Soros responded by calling the Orban government a “mafia state”.

An age-old tactic

Restrictions to foreign funding is an increasingly common way for governments to dampen civil society. The International Centre for Non-Profit Law found that 36% of restrictive civil society laws enacted globally between 2012 and 2015 targeted international funding.

International standards require that associations should be free to seek, receive and use foreign or international funding, and not be stigmatised for doing so.

People protest against the bill that would undermine Central European University on April 9 2017. Bernadett Szabo/Reuters

As early as 2016 the UN’s Human Rights Council had already expressed concerns about the trend in funding restrictions. The Carnegie Endowment for Peace’s Thomas Carothers, an expert in the field, describes the attacks on foreign funding as the “leading edge of wider crackdowns on civil society”.

Across the globe, activists are operating in increasingly dangerous conditions: they face threats, physical assaults and assassination. In April the head of the international organisation CIVICUS declared called the situation of civil society a “global emergency”.

In the Hungarian government’s approach, the “foreign” tag is a stigma for both the funders and the NGOs, according to the group Transparency International. It implies that “everything that is ‘foreign’ is necessarily against the Hungarian nation” and might be representing foreign interests

For Amnesty International, the bill has echoes of the draconian foreign agents law adopted under Russian President Vladimir Putin, which has restricted, closed down or silenced almost 150 Russian human rights and social justice organisations since 2012.

As noted in 2013 by Maina Kiai, UN Special Rapporteur on the rights to freedom of peaceful assembly and of association, the Russian term for “foreign agent” is synonymous with the phrase for “foreign spy”.

The 2012 Russian law ushered in increasingly harsh legal measures against civil society organisations, including a 2015 “undesirables” law that allows organisations to be banned and individuals fined or imprisoned for violating the foreign agents law.

Seven non-profit organisations have since been declared “undesirable”, including The National Endowment for Democracy, Open Society Foundations, International Republican Institute and the National Democratic Institute for International Affairs, and, in April 2017, an organisation run by former Russian prisoner of conscience Mikhail Khodorkovsky.

The European Union reacts

The European Commission and European Parliament vice president both expressed concerns about the Hungarian law’s incompatability with EU laws when it was in draft form.

Prior analysis jointly carried out by the European Centre for Non-Profit Law and the Hungarian Civil Liberties Union, among other NGOs, argued that the draft law violates EU law on anti-money laundering and terrorist financing, as well as provisions enabling the free movement of capital.

The government had “provided no evidence”, it asserted, that NGOs were at risk of money laundering or terrorist financing or demonstrated that existing national transparency measures are inadequate.

Viktor Orban defends his draft law in front of the European parliament on April 26. Eric Vidal/Reuters

Despite all evidence to the contrary, Viktor Orban has repeatedly reiterated that the NGO law was intended to promote increased transparency, saying it follows the example of an American law.

But as Human Rights Watch noted, this argument, which Russia also invoked in 2012, refers to the US Foreign Agent Registration Act, which “covers those organisations and individuals that operate ‘under direction and control of a foreign principle’”. It does not relate to advocacy-oriented NGOs with international donors.

The law’s passage puts the EU in a bind. A member state has now severely weakened the rights to free speech and association.

In engaging with the Hungarian government over the past months, including, in April, when announcing infringement proceedings after the Higher Education Law that targeted the Central European University, the Commission and European Parliament have emphasised the importance of these fundamental freedoms.

But if the bloc is to continue to claim that it is a union based on democratic values, it will have to do more than just voice concerns. Failure to protect and defend democracy within its own borders will undermine the EU’s credibility to do so elsewhere in the eyes of its own citizens, and that of the world.

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