The Commission filed a case against Hungary at the bloc's top court, the European Court of Justice in Luxembourg, over the law passed last year, which also enforces new restrictions on the right to claim asylum.

Orban's government dubbed it the "Stop Soros" law, a reference to the Hungarian-born U.S. billionaire George Soros, whose promotion of liberal and open societies is at odds with Budapest's nationalistic stance.

"The Hungarian legislation curtails asylum applicants' right to communicate with and be assisted by relevant national, international and non-governmental organizations by criminalizing support to asylum applications," the Commission said.

"Additional inadmissibility grounds for asylum applications ... curtail the right to asylum in a way that is not compatible with EU or international law."

The court case could lead to hefty fines for Hungary, where the EU has tried in vain to stop Prime Minister Viktor Orban tightening restrictions on media, academics and critical non-governmental groups in recent years.

Hungary - along with its regional ally Poland, also run by a nationalist government - now faces the prospect of losing EU handouts as the wealthier, western EU states that contribute to the bloc's joint budget want to make aid conditional on upholding democratic principles.

The feuds over migration and democratic standards have isolated the eastern states, who were left out in this month's carve-up of top EU jobs.

It is the European Commission's job to monitor member states' enforcement of EU laws, and the incoming executive has vowed not to let Budapest and Warsaw off the hook on democracy in its next five-year term, starting in November.

The current Commission has also opened a legal probe against Hungary for not feeding people awaiting deportation in transit zones near Serbia. The United Nations has repeatedly criticized conditions in these "prison-like" transit zones.

REUTERS