The European Commission took the first step in commencing legal proceedings against Hungary on Thursday, following the country’s failure to change a controversial 2017 law requiring foreign-funded non-governmental organizations (NGOs) to disclose their donors to authorities or face fines.

The move comes as a result of Hungary’s failure to repeal its controversial Law on the Transparency of Organisations Supported from Abroad, which was deemed contrary to EU law by the European Court of Justice (ECJ) last year. More specifically, in its ruling in June the court had found the act to be in breach of EU rules on the free movement of capital and the fundamental rights to protection of personal data and freedom of association that are protected by the EU Charter of Fundamental Rights.

The legal notice of the European Commission is the first step to an infringement procedure based on Article 260(2) of the Treaty on the Functioning of the European Union. The proceedings would allow the European Commission to refer cases of Member States failing to comply with ECJ judgments back to the court, along with a request for financial sanctions.

In its notice, the European Commission requested the Hungarian government “take and implement all required measures to remedy the situation,” and further provided Hungary with a delay of two months to reply to the concerns raised by the European Commission.

Failure to respond to the legal notice would likely allow the European Commission to continue with its infringement proceedings by referring the case back to the Court with proposed financial sanctions.