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Hungary: Rapidly shrinking civic freedoms - what business can do

In 2017, the Hungarian Government has moved to limit the influence of civil society organizations (CSOs) that promote democracy, human rights and the rule of law. In June, Hungary’s Parliament adopted the “Law on the Transparency of Organizations Supported from Abroad” (i.e., foreign funded organizations), legislation widely viewed as a major obstacle to the work and freedom of Hungarian CSOs. This is the first law of its kind in a European Union (EU) country. Limits to the free flow of capital may eventually affect not only CSOs, but international companies as well.

The government has also been targeting independent academic institutions. According to the Central European University (CEU), the proposed amendments to Act CCIV of 2011 on National Higher Education, tabled in Hungarian Parliament on 28 March, “would make it impossible for the University to continue its operations as an institution of higher education in Budapest, CEU's home for 25 years”. CEU is a private institution that significantly contributes to the economy through taxes and job creation – if CEU can be pushed out of Hungary for ideological reasons, any other business can be forced to do so as well. Concerned companies can sign the #I Stand with CEU petition.

In recent months many people and institutions, including the Venice Commission, Council of Europe, EU Parliament, UN Special Rapporteurs, and German and US Governments, have warned that the law is contrary to international standards. April saw the biggest anti-government protest in Hungary since Viktor Orban came to power. In July, the European Commission announced it was launching infringement proceedings against Hungary over the country's law on foreign-funded NGOs. The Commission also decided to take a second step in its infringement procedure regarding Hungary's Higher Education Law.

However, the government appears undeterred and determined in its efforts. A Washington Post article on 18 April said "The only key players to have remained silent are the many European and U.S. multinational corporations" operating in the country. Now is the moment for business to act.

Enabling environments for civil society is the same as it is for business. Businesses have a particularly important role to play in protecting civic freedoms: the United Nations and the 2017 World Economic Forum’s Global Risks Report call upon businesses to do so. The following arguments make a strong case for companies to privately and/or publicly denounce the Hungarian Government’s actions:

  • The Government is questioning the legitimate role of civic organizations to formulate opinion on government policies because no one elected them. Such definition of stakeholder status would render all chambers of commerce and business and professional associations illegitimate;
  • The Government is questioning the legitimate role of civic organizations which receive some of their funding from abroad, using the term foreign agent to label them. The suggestion that the legitimacy of organizations operating partially or fully using funding coming from a donor or parent company in another nation questions the security of all foreign direct investments in the country;
  • Representatives of the governing party repeatedly identified foreign corporations as having opposing interests with Hungarians and threatened that civic groups that “serve the interests of foreign powers and the international big business as opposed to Hungarians, have nothing to do here”;
  • By raising these issues with the government and by showing their support for CEU and for civil society organizations, businesses can respond to the concerns of their consumers and employees, establish themselves as responsible leaders in their sectors, and be a powerful driver in reversing the trend.

Below we provide a compilation of materials evidencing the steps taken by the Hungarian Government against civil society, and the main public responses to these steps (by UN experts, Council of Europe, leaders of philanthropic organizations, and citizens), as background materials.

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Article
19 June 2017

Hungary: NGO examines negative consequences of new law on foreign-funded organisations

Author: European Center for Not-for-Profit Law (Hungary)

"What’s at stake? Hungary’s new Law on the Transparency of Organizations Supported from Abroad: A briefing paper by the European Center for Not-for-Profit Law", 15 Jun 2017

On 13 June 2017, Hungary’s Parliament adopted the Law on the Transparency of Organisations Supported from Abroad (i.e., foreign funded organisations), legislation widely viewed by intergovernmental and civil society organisations (CSOs) as a major obstacle to the work of Hungarian CSOs and their interactions with civil society domestically and internationally... This is the first law of its kind in a European Union (EU) country...ECNL highlights five key concerns about the new Law: 

1.  A threat to civil society’s survival: If an organisation fails to register and meet requirements under the Law, it may be fined up to 900,000 HUF (approx. €3,000) and terminated. Under international law, dissolution of a CSO is a measure of last resort, to be used only in cases of serious misconduct....

2. Stirring distrust and suspicion: The new categorization and labelling, coupled with the government’s broader negative campaign against foreign funded groups, opens the door for stigmatization. 

3. Threatening services for those most in need: [I]t will likely have an effect on civil society broadly, including organisations working on social service delivery, humanitarian aid, and environmental protection – all of whom also receive foreign funds... 

4. Is it really about transparency? No. Hungarian CSOs are already subject to stringent transparency requirements which are in line with international standards.

5. The law and international standards. In recent months CSOs from Hungary and Europe, and the international community (e.g.,  Venice Commission, CoE Conference of INGOs Expert Council on NGO Law; EU Parliament; UN Special Rapporteurs), have warned that the Law violates international standards.

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Article
13 June 2017

Hungary passes bill stigmatising foreign-funded NGOs

Author: Amnesty International

"Hungary: NGO law a vicious and calculated assault on civil society", 13 Jun 2017

The passing of a law stigmatising non-governmental organizations (NGOs) that receive foreign funding is the latest in an escalating crackdown on critical voices and will hamper critically important work by civil society groups, said Amnesty international... The Law on the transparency of organizations funded from abroad will force NGOs receiving more than 24,000 EUR direct or indirect funding from abroad to re-register as “civic organization funded from abroad” and to put this pejorative label on every publication.“Threadbare attempts to disguise this law as being necessary to protect national security cannot hide its real purpose: to stigmatize, discredit and intimidate critical NGOs and hamper their vital work[.]" “This latest assault on civil society...has...echoes of Russian’s draconian ‘foreign agents’ law[.]” By forcing NGOs...to label themselves as “foreign funded”, the Hungarian government is seeking to discredit their work and turn people against them. “This vicious and calculated assault on the rights to freedom of expression and association is a serious miscalculation and contravenes Hungary’s human rights obligations. It must be challenged on all levels[.]”

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Article
2 June 2017

NGO law Affects Business too, TASZ Warns

Author: Stefánia Kapronczay, Hungarian Civil Liberties Union, TASZ (in Budapest Business Journal)

The director of a Hungarian NGO says she wants businesses to stand up for civil society rights..."A strong civil society is an indicator for stability in a country: The UN Special rapporteur, Maina Kiai has found that the presence of a robust, vocal and critical civil society sector guarantees, almost without exception, that a state also possesses a good business environment," says Stefánia Kapronczay, executive director of the Hungarian Civil Liberties Union, TASZ...the draft Bill on the Transparency of Organizations Financed from Abroad would force NGOs that receive more than HUF 7.2 million annually from a foreign source to register as a "foreign-supported organization"..."This is really talking about the issues we represent; we represent people, mostly the people of Hungary. Some others represent migrants and refugees, but I think you can also serve the rights of Hungarian people by protecting the rule of law and the interests of the whole country. That is something that can be common ground with the business community."...

Kapronczay says the logic of the rhetoric behind the bill impacts foreign multinationals. "It says foreign funding is against the interests of Hungary. Many companies here are foreign funded, so what does it mean to them? And many companies have CSR programs to fund civil groups, so is that frowned upon? These are very direct consequences," insists Kapronczay. "What we would like to see from the business community is it taking a clear stance for these values.... NGOs are standing up for the values of the European Union, such as rule of law, which businesses operating in EU countries also benefit from. In my opinion, it is important that business also stands up for these, not only the free movement of capital. Moreover, standing up for values like human rights and democracy can have added value, because the customers who care about this do tend to have more money," she argues. "Our organizations stand up for a fully independent judiciary; that is not only important for human rights, but also for resolving business disputes. It protects businesses from corruption and cronyism."

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Article
22 May 2017

Hungary: European Parliament's resolution condemns serious deterioration of rule of law, democracy & fundamental rights

Author: Dave Uwakwe, MyEurop.info

"EU moves closer to sanctioning Hungary for “illiberal” drift", 21 May 2017

The European parliament has adopted a resolution condemning the “serious deterioration of the rule of law, democracy and fundamental rights” in Hungary, beginning a process that could, in theory, lead to the country losing its voting rights in the EU Council. Hungary has faced accusations from Brussels and human rights groups that since Viktor Orban’s Fidesz government came to power in 2011 it has clamped down on asylum seekers, tightened rules on NGOs, and threatened press and academic freedom in the country. Following the vote on Wednesday, the EU Parliament’s civil liberties committee will be tasked with drawing up a formal resolution to investigate whether there is a “clear risk of serious breach” of EU values in Hungary. If Hungary fails to address the recommendations set out in the resolution, the EU can, after a series of votes, move to remove Budapest’s voting rights. Last month the EU launched a probe into Hungary’s higher education law that requires third-level institutions to be registered in the EU, a measure which is seen as targeting the US-based Central European University. 

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Item
15 May 2017

UN rights experts urge Hungary to withdraw Bill on foreign funding to NGOs

Author: Mr. Michel Forst, Special Rapporteur on the situation of human rights defenders; and Mr. David Kaye, Special Rapporteur on the promotion and protection the right to freedom of opinion and expression

Two United Nations human rights experts* today urged the Hungarian government to withdraw their recently proposed Bill on the Transparency of Organizations Financed from Abroad (T/14967). The Bill, if adopted into law, would severely curtail the rights to freedom of expression and freedom of peaceful assembly and association in Hungary. Under the provisions of the proposed Bill, non-governmental organizations that receive more than 24,000 EUR annually from a foreign source would need to register with the court as a 'foreign-supported organization'; report annually on the names, countries and cities of foreign supporters and label themselves as 'foreign-supported organization' on their website and publications.

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Article
10 May 2017

Hungary: Multinational corporations only key players still silent on Orban's assault on independent academia, civil society & media

Author: Thorsten Benner & Wolfgang Reinicke in The Washington Post (USA)

"It’s time for international investors to speak up about Hungary’s assault on democracy", 18 Apr 2017

Earlier this month, German President...warned against an assault on civil society and academic freedom in the heart of Europe. “Europe must raise its voice,” he declared. He was referring...to the predicament of the Central European University (CEU) in Budapest... Hungarian parliament passed a law with the sole purpose of driving CEU...out of the country... His latest move has earned Orban strong criticism... The U.S. government has come out strongly against [it]... German Chancellor Angela Merkel... [has] harshly criticized him. The only key players to have remained silent are the many European and U.S. multinational corporations — such as Audi, Daimler and General Electric...factories, research and development centers, and logistics hubs [of which] form the backbone of Hungary’s economy... German companies alone employ 174,000 Hungarians... Daimler has just invested about a billion euros in a new plant in Hungary. Audi is the second-largest employer... Any slowing or interruption of Audi’s production has an immediate impact on Hungarian gross domestic product. It is time for these companies to change course... Multinational corporations have a particular responsibility within the E.U... They cannot turn a blind eye when political freedom is being eroded even as they continue to benefit from the four economic freedoms of the [E.U.] common market. Foreign investors need to clearly speak up against Orban’s authoritarian agenda and his assault on independent civil society and media.

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Article
3 May 2017

Hungary: Council of Europe Commissioner for Human Rights raises concerns about draft NGO law

Author: Council of Europe

"COE Human Rights Commissioner calls on Hungary to reject draft NGO law", 3 May 2017

In a letter addressed to the Speaker of the National Assembly of Hungary, published today, Commissioner Muižnieks urges the members of this Assembly to reject a proposed draft law on the Transparency of Organisations Supported from Abroad. The Commissioner notes that the draft law carries a clear risk of stigmatising a large number of organisations pursuing lawful activities in the field of human rights, causing a chilling effect on their activities. It introduces far-reaching restrictions on freedom of association, which cannot be regarded as necessary in a democratic society and are therefore at variance with international human rights standards. The draft law introduces an additional administrative burden on NGOs falling within its scope without an apparent legitimate purpose. In addition, according to criteria which are not immediately clear, the draft law excludes from its scope other types of NGOs, such as those pursuing sports or religious activities. The Commissioner further regrets the apparent absence of any meaningful public consultation or debate preceding the introduction of the draft law to the National Assembly on 7 April, against the backdrop of continued antagonistic rhetoric from certain members of the ruling coalition, who publicly labelled some NGOs as “foreign agents” based on their source of funding. Read the full letter from the Commissioner here

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Article
27 April 2017

Hungary: In midst of govt. crackdown, 80 leaders of foundations issue statement in support of civil society

Author: Open Society Foundations

"Statement Supporting NGOs in Hungary", 26 Apr 2017

A group of 80 leaders of philanthropic organizations in the United States and Europe, including the Open Society Foundations, has issued a statement in response to the efforts of the Hungarian government to restrict and stigmatize nongovernmental organizations operating in the public interest.

"As the leaders of private philanthropies in the United States and Europe, we are greatly concerned by the repeated efforts of the Hungarian government to restrict and stigmatize nongovernmental organizations operating in the public interest... We support transparency... and reasonable regulation of civil society organizations, but some of the proposals currently under consideration go well beyond what is reasonable and would have the effect of discriminating against certain organizations and stigmatizing those that operate at world-class levels and are able to attract financial support from private foundations in Europe and globally... The ability to source funding from international donors is an important signal of the international quality and competitiveness of Hungarian NGOs, and it reflects Hungary’s solidarity with the European commitment to civil society. We hope the Hungarian government will honour the country’s and Europe’s commitment to the freedom of its citizens to form organizations, debate the issues of the day, and seek financial support from all legitimate sources."

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Article
11 April 2017

Hungary: UN expert urges parliament to reconsider new law that 'puts academic freedom at risk'

Author: The Office of the United Nations High Commissioner for Human Rights (OHCHR) Media Unit

"Hungarian Parliament urged by UN expert to reconsider new law targeting Central European University", 11 April 2017

Recently adopted legislation... "targets freedom of opinion and expression in Hungary, freedom of academic pursuit, the role that scholarship and research play in the expansion of knowledge and the development of democratic societies,” [David Kaye, UN Special Rapporteur on the freedom of opinion and expression] said... [It] requires, among other things, foreign-accredited universities to provide higher education services in their own country... “While [...] drafted in seemingly neutral terms, its restrictions would particularly hit CEU,” Mr. Kaye said. “If enacted, its requirements and timelines could cause the University to cease its operations”... “Members of [Hungarian] Parliament have a unique opportunity to restate Hungary’s commitment to democratic norms and academic freedom..,” the Special Rapporteur concluded. Mr. Kaye’s statement is endorsed by the Special Rapporteur on the rights to freedom of peaceful assembly and association, Maina Kiai, and the Special Rapporteur on cultural rights, Karima Bennoune.

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Article
10 April 2017

Hungary: Crackdown leads to largest anti-govt. protests in recent history in support of Central European University & civil society

Author: Erika Benke, BBC

Thousands of people have taken part in a protest in Hungary to demand the abolition of laws which could force the closure of one of the country's most prestigious universities. New rules introduced by the government mean the Central European University (CEU) would be unable to award diplomas because it is registered in the US. The university was founded by philanthropist George Soros. The legislation has already been rushed through parliament. Demonstrators in the capital on Sunday want President Janos Ader not to sign the controversial legislation backed by the governing right-wing Fidesz party of Prime Minister Viktor Orban. Hungarian government spokesman Zoltan Kovacs said the demonstrations would not cause the government to back down. "There's no reason to," he said. "It's possible for CEU to fulfil the requirements set out in the new law - they have a year to comply." ...BBC Budapest correspondent Nick Thorpe says it was probably the biggest anti-government protest in Budapest since Mr Orban came to power seven years ago. The protesters took to the streets both to defend the CEU and protest against attempts by the government to pressure human rights and environmental groups which support refugees.

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