Why Hungary’s New NGO Law Is Harmful for Business

Budapest, Hungary. Aerial view of the old city Budapest, Hungary with river and Parliament Building with cloudy blue sky

The new non-governmental organisations’ (NGO) law in Hungary made international headlines; however, the crackdown on independent NGOs, trying to hold the government accountable, is not a new phenomenon in Hungary. The newly adopted law is about the transparency of foreign funded organisations. Despite its title, the law does not further transparency, but rather serves as a tool to stigmatise independent voices.

Transparency, including that of NGO’s funding, is a basic principle in democratic societies. However, there is already legislation in place that serves this principle. NGOs are already obliged, by law, to submit detailed annual reports about their funding sources, the way the funds are spent as well as indicating whether the grants in question are international. None of those organisations, for whom the new law is critical, question the legitimacy of this legislation.

The new NGO law introduces a new category of NGOs: organisation supported from abroad. Civil society organisations getting— directly or indirectly — at least HUF 7.2 million (€23,720) worth of support annually from foreign sources must register as organisations supported from abroad. Furthermore, they have to display this label on their website and their publications. The law sets forth an additional reporting requirement, as well. There are many uncertainties about the interpretation of the law, such as what indirect support means and what the organisation’s obligations are in revealing this indirect support.

Many compared the law to the Russian foreign agent law. In fact, a number of its provisions are actually a carbon-copy of the infamous law, which was used as a starting point to strangle independent civil society in Russia. Since the adoption of the foreign agent law, in 2012, 27 of the 148 registered “foreign agent” organisations have closed down.

The new Hungarian law was criticised by many international organisations, including the Council of Europe’s Commission for Democracy Through Law. The so-called Venice Commission is concerned that “the Law will cause a disproportionate and unnecessary interference with the freedoms of association and expression, the right to privacy, and the prohibition of discrimination”. The European Commission has launched an infringement procedure regarding the law on foreign-funded organisations, on the basis of the right to freedom of associations, the free movement of capital and also the right to protection for private life and private data.

The new law was adopted in June, however, human rights, anti-corruption and green NGOs have been targeted since 2013, as being against Hungary’s interests. The Government launched a stigmatising communication campaign against independent organisations, regularly contesting the credibility of these organisations. The impact of this can be felt when potential partners turn down training invitations, due to the “political climate”, and donors increasingly inquire about anonymous ways of donating.

Since 2013, the Hungarian government has built up a rhetoric that equates foreign funding with activities that go against the interests of Hungary and Hungarians. According to the new regulation, European Union funding — unless directly distributed by the Hungarian state — also counts as foreign funding. Hungary’s public investments rely heavily on European Union funding, even above the regional average. This is just one example that illustrates why such rhetoric sends a harmful message, when our economy is dependent on, and in many ways linked to, the global economy.

Stigmatising NGOs hurts other actors as well. NGOs and civil society organisations in general are essential in a democratic society, as they are vehicles for citizen participation. Furthermore, many of the concerned organisations campaign for legal certainty and the rule of law, which are essential for doing business. Maina Kiai, the former UN special rapporteur on freedom of assembly and association, published a report after studying 37 countries. The conclusion reads: “Indeed, the presence of a critical civil society can be viewed as a barometer of a state’s confidence and stability – important factors for businesses looking to invest their money.”


The views expressed in this opinion editorial are the author’s own and do not necessarily reflect Emerging Europe’s editorial policy.


About the author

Stefánia Kapronczay

Stefánia Kapronczay

Stefánia Kapronczay is executive director of the Hungarian Civil Liberties Union. She graduated cum laude from the Faculty of Law at ELTE as a lawyer, also completed a five-year master’s programme in sociology, in 2010. Between August 2012 and July 2013 she was a scholar at Stanford University, attending courses on human rights and public interest work and graduating as a Master of the Science in Law. She was elected as the co-chair of the International Network of Civil Liberties Organisations in May, 2014. She was a German Marshall Fund fellow in 2015. She is an advisory board member to School of Public Life, a community-based research and training centre, member to the advisory board of the Rajk László College for Advanced Studies.

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  • NGO’s trying to hold government acountable? Give me a break! These are ideological-political movements, looking to undermine the Hungarian state, and more broadly, NGO’s are undermining all states.