By Luke Baker
JERUSALEM (Reuters) - The European Union said on Tuesday an Israeli law targeting foreign-funded NGOs risked undermining democracy and free speech, and a leading Israeli rights group said it would appeal the legislation in the Supreme Court.
Israel's parliament passed the NGO bill during a late-night session on Monday by a vote of 57 to 48. The law will require NGOs that receive more than half their funding from foreign governments or bodies such as the European Union to provide details of their donations.
"The reporting requirements imposed by the new law go beyond the legitimate need for transparency and seem aimed at constraining the activities of these civil society organizations," the European Commission said.
"Israel enjoys a vibrant democracy, freedom of speech and a diverse civil society... This new legislation risks undermining these values," said the commission, the executive arm of the EU.
Prime Minister Benjamin Netanyahu, whose far-right justice minister sponsored the bill, said the law aimed to prevent "the absurd situation in which foreign countries interfere in Israel's internal affairs", without the public knowing.
Most of the Israeli NGOs that receive support from foreign governments are left-wing and many oppose the policies of Netanyahu's right-wing government toward the Palestinians.
Rightist groups - including those that finance settlement-building - are largely funded by Jewish foundations and wealthy individuals abroad, and will not be affected by the law.
The so-called "transparency bill", under discussion for more than a year, has previously drawn criticism from the United States and the opposition, with center-left leader Isaac Herzog describing it as indicative of "budding fascism".
Peace Now, a foreign-funded NGO opposed to Israeli settlements, said the bill was tailored specifically to target only peace and human rights organizations.
"Its true intention is to divert Israeli public discourse away from the occupation and to silence opposition," it said. "While the law will delegitimize left wing organizations, pro-settler NGOs that receive millions of dollars in foreign donations without any transparency will remain unaffected."
The group said it would challenge the law's validity before Israel's Supreme Court, even though it may not be subject to its provisions since less than half its funding may come from foreign governments in 2017, when the law takes effect.
Other rights groups were equally critical, with the Association for Civil Rights in Israel saying the law was "intended to harm organizations that promote democracy and worldviews" that differ from the governing coalition.
Human Rights Watch condemned the heavy burden and potentially large fines that the law can impose on foreign-funded groups. It said a better approach would have been to require the same level of transparency from all NGOs.
(Writing by Luke Baker; Editing by Jeffrey Heller and Ralph Boulton)