New bill gives superpowers to the Sovereignty Protection Office to silence independent media and NGOs in Hungary

A recently submitted bill threatens to eradicate the last traces of freedom of the press, giving the so-called Sovereignty Protection Office a blank check to brand any media, NGO a threat to Hungary’s sovereignty, and destroy it financially. If the bill becomes a law, financing terrorism in Hungary would become easier than supporting independent media. 

Under „Bill T/1192 on the Transparency of Public Life”, the Government, on a proposal from the Office for the Protection of Sovereignty, would decide by decree on the listing of organisations that recieve funding from outside Hungary and whose activities influence public life in a way that threaten Hungary’s sovereignty.

Once on a list, the target could not appeal the decision in court, thus this branding is exempt from judicial review. Although the government decree may be directly challenged by the listed organisations by means of a constitutional complaint, to the same Constitutional Court that has been packed with regime loyalists. What constitures as „foreign funding” and „activities threatening sovereignty” is defined extremely loosely, meaning that

practically any organization could be arbitrarily branded as a threat without realistic options for judicial review.

The legal text defines not only foreign governments, but any organization or person abroad as foreign donors, meaning that as much as receiving a donation from a Hungarian citizen holding a citizenship in another country, or taking in ad revenue from a multinational company could be cited as a grounds for sanctions. Revenues coming from other EU countries or through the EU’s programs are no exception and can be taken away, violating the EU’s basic principal of free flow of capital.

What activities are under threat?

According to the bill, Hungary’s sovereignty is threatened by any activity or endeavour financed by foreign aid and aimed at influencing public life”, which violates the values defined in the provisions of the Fundamental Law, or which portrays them in a negative light or supports action against them. The constitutional provisions referred to are the following:

(i) the rule of law [Article B(2)],(ii) responsibility for and cooperation with Hungarians living outside the borders [Article D],(iii) protection of marriage, the family and gender identity [Article L(1)],(iv) the country’s commitment to international cooperation for the establishment and maintenance of peace and security and the sustainable development of mankind [Article Q(1)]; and(v) the protection of Hungary’s constitutional identity and Christian culture [Article R(4)]

The law is clear that one does not have to actually violate a constitutional provisions to be considered a „sovereignity threat”, but just the negative portrayal of these concepts violate national sovereignty under these rules.

And it is difficult to understand this in any other way than that the aim is explicitly to directly sanction criticism of the government,

which is precisely how the Sovereignty Protection Office used it’s previous limited mandade to date.

The bill explicitly states that „influencing public life” incudes „influencing democratic debate”, i.e. exercising freedom of speech. This, if you express the wrong opinion, could make you a target of crippling fines.

What are the targets being threatened with?

Once a company, foundations, associations or other legal entity is blacklisted by the government, they are forbidden from recieving any funding from abroad, and will also lose their right to collect of 1%s of personal income tax, an important revenue stream of NGOs. Their managers and other key figures would also be considered as key public figures for the purposes of anti-money laundering and counter-terrorist financing due diligence obligations, would be required to make public asset declarations.

Though the bill states that the tax authority (NAV) could permit organizations to recieve foreign funding,

no legal requirements are specified for such a permit, which once again means that all entities would be subjects of arbitrary decisions.

The bill requires financial institutions holding the bank accounts of listed entities to monitor bank accounts and if they detect a suspicious payment transaction, they need to freeze the asset and report it to NAV. Then NAV can order a suspension of the payment and then decide within a 90-day time limit, which can be extended by the same amount, whether the targeted entity needs is allowed to recieve the funds. This would happen if it can be assumed that, based on the beneficiary’s past activities, objectives, public statements, press or social media coverage, the grant is intended to influence public life.

This means that assets can be frozen not based on any actual agreement between a beneficiary and a benefactor, but solely because the beneficiary previously criticized the government.

If the bank fails to report the transaction, it may be required by the NAV to pay the amount as a fine. In practice the law would mean that banks would need to constantly monitor the accounts of targeted legal entities in Hungary.

Supporting media: worse than supporting terrorism?

NAV may at any time investigate whether a blacklisted organisation receives unauthorised funding and impose an administrative fine of twenty-five times the amount of the unauthorised aid. In the event of failure to comply with these obligations, and if the organisation concerned accepts the grant without authorisation a second time, NAV will prohibit the organisation from further activities that influence public life.

Despite allagedly promoting transparency, bill also includes a clause restricting public disclosure of data related to a case if the disclosure would pose a law enforcement or national security risks. This has been lifted from the Anti-Money Laundering and Counter-Terrorist Financing (AML/CFT) legislation. However, having such a clause here makes no sense since accepting the support of a dual national living in Hungary or accepting a fee for a Google ad is not yet a criminal offence, unlike money laundering and terrorism financing.

Against a decision of NAV, the anti-money laundering body, no immediate legal protection is available in an administrative action: this is precisely the legal instrument that would allow immediate judicial redress for the infringements resulting from the unlawful decisions of the authorities. Instead, the blacklisted entity would have to start a lawsuit at the supreme court (Curia) in 30 days, which would make a decision within 15+45 days.

In other words, a transaction could remain frozen for most of a year.

Given the NAV’s powers of authorisation and transaction approval, the harshness of sanctions and investigative powers, and the lack of legal protections, and of course the obligations imposed on banks, it is not an exaggeration to say that if this is included in the adopted law, it will be easier to finance terrorism or launder money in Hungary than to operate a blacklisted media outlet or NGO legally.

The fact that the anti-money laundering organisation system is used for this task is interesting, because NAV also implements EU anti-money laundering obligations, with which this new role is in itself incompatible.

Sanctions against the heads of organisations

The bill also obliges the executive officer, founder and member of the supervisory or audit committee of a blacklisted organisation to make an annual declaration of assets and liabilities upon the creation or termination of their office or otherwise, in accordance with the rules applicable to Members of Parliament.

For some reason, the declarations are not submitted to the previous actors in the story, i.e. the Sovereignty Protection Office or the NAV, but to the Minister of Justice for publication on his website, because the declarations are public. By contrast, here are a few public offices whose holders do not have public asset declarations: the chairman of NAV, the chairman of the board of National Health Insurance Fund, the CEO of the national railway company, the CEO of Development Bankg of Hungary.

The sanctions for failure to make a declaration are also strong: in the event of failure to make a declaration, the right of representation of the person concerned is suspended until the declaration is made up (there is no legal remedy against this), and a fine of up to HUF 2 million can be imposed immediately for failure to make a final declaration. However, when, after 30 days, the other declarants would, in the logic of the regulations, cease to hold office because of the omission, the bill simply empowers the Minister to prohibit the organisation from carrying out its activities.