22 June 2020

European Court declares that Hungary’s foreign-funding restrictions violate EU law

This new item was originally published on the Philanthropy Advocacy website.

On 18 June 2020 the European Court of Justice (CJEU) ruled that Hungary’s foreign-funding restrictions violate EU law. This is an important decision for cross-border philanthropy rights and freedoms in Europe. It marks a milestone in a legal battle that began in 2017, when Hungary’s parliament approved new rules requiring that Hungarian organisations receiving over 7.2 million Hungarian forints (about € 20,000) from outside Hungary need to formally register and present themselves as foreign-funded entities. Hungary was the first EU country to introduce a so-called “foreign funding” restriction inside the EU.

The  CJEU in its  judgment   followed the conclusions of the Advocate General  opinion. The CJEU held that the transparency law runs contrary to Member States obligations of the  free movement of capital laid down in Article 63 TFEU and to Articles 7, 8 and 12 of the Charter of Fundamental Rights of the European Union (‘the Charter’), on the right to respect for private and family life, the right to the protection of personal data and the right to freedom of association.

The CJEU concluded that the transparency law establishes a non-justifiable difference in treatment between domestic and cross-border movements of capital. The law applies, exclusively and in a targeted manner, to associations and foundations receiving financial support sent from other Member States or third countries. The requirement to declare themselves and to register as “organisations in receipt of support from abroad” is considered a restriction to the  freedom of capital and the Hungarian government failed to justify this.  The court identified a limitation to  the freedom of association since the law made the operations of the associations falling within the scope of that law much more difficult. It also held that declaration and publication requirements laid down by the transparency law limit the  right to respect private and family life.

The court also considered  the right to the protection of personal data being affected. The stated limitations to fundamental rights could not be justified by any of the objectives of general interest expressed by Hungary. The current CJEU´s judgment is a relevant decision with regards to cross-border philanthropy, and we are now working with expert partners such as ECNL to analyse in more depth its implications. It is also an example of how EU law can be used to protect fundamental freedoms.  EFCDAFNE  and  ECNL  recently put together a  Handbook  to provide practical guidance for CSOs to advocate and litigate using EU law to protect their rights and civic space in the EU.