The US State Department on Tuesday expressed concern that a law recently passed by the Knesset to brand foreign-funded NGOs could impinge free speech and association in Israel.

The law — approved by Knesset late Monday night — mandates that non-government organizations that receive more than half their funds from foreign governments or state agencies disclose that fact in any public reports, advocacy literature and interactions with government officials, or face a NIS 29,000 fine ($7,500).

State Department spokesman John Kirby told reporters at a briefing that some of Washington’s concerns regarding the bill were alleviated by amendments made before it was finally passed by Israeli legislators.

Nonetheless, he expressed the White House’s concerns “not just about free expression but association and dissent.”

“We are deeply concerned that this law can have a chilling effect on the activities that these worthwhile organizations are trying to do,” he said.

The Israeli government has defended the law as a way to increase transparency of foreign government intervention in Israeli affairs, but has been widely pilloried by critics in Israel and abroad who see it as targeting leftist groups and clamping down on free speech..

Supporters of the law, including one of its authors, Justice Minister Ayelet Shaked, said Monday that it was intended to create public awareness about large-scale foreign governmental intervention in Israel’s domestic politics. The law’s authors charge that advocacy groups funded by foreign governments “represent in Israel, in a non-transparent manner, the outside interests of foreign states.”

The law was passed a day before a bipartisan Senate report found that the V15 campaign to oust Prime Minister Benjamin Netanyahu in 2015 was indirectly funded by US State Department dollars.

Likud minister Zeev Elkin said Tuesday that the Senate’s findings were proof “of how correct the laws of transparency in foreign state funding of NGOs is.”

Critics, meanwhile, maintain the law unfairly targets left-wing and human rights organizations, many of which receive funding from European countries.

Earlier in the day, the European Union said the law goes “beyond the legitimate need for transparency,” appears to be aimed at limiting the activities of certain groups, and risks undermining Israel’s democratic values.

“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 working in Israel,” the European Union said.

Cabinet ministers in the Knesset plenum ahead of the vote on the controversial NGO bill, July 11, 2016. From left: Public Security Minister Gilad Erdan, Prime Minister Benjamin Netanyahu, Transportation Minister Yisrael Katz. (Yonatan Sindel/Flash90)

Cabinet ministers in the Knesset plenum ahead of the vote on the controversial NGO bill, July 11, 2016. From left: Public Security Minister Gilad Erdan, Prime Minister Benjamin Netanyahu, Transportation Minister Yisrael Katz. (Yonatan Sindel/Flash90)

“Israel enjoys a vibrant democracy, freedom of speech and a diverse civil society which are an integral part of the values which Israel and the EU both hold dear. This new legislation risks undermining these values,” it added.

The 28-nation bloc also urged Israel “to refrain from actions which may complicate the space in which civil society organizations operate and which may curtail freedom of expression and association.”

The German government last week said it was “concerned” about the “one-sided” legislation.

According to a Justice Ministry analysis of the law’s effect, nearly all the roughly two dozen existing Israeli organizations that are expected to be affected by the new rules belong to the left, including anti-occupation advocates B’Tselem and Yesh Din, as well as pro-Palestinian groups like Zochrot, which advocates for the return of Palestinian refugees and their descendants. Some Arab groups that advocate for equality for the Arab minority will also be subject to its stipulations.

Nonprofit organizations that stand to be affected by the NGO law slammed it as unfair and antidemocratic.

The New Israel Fund, which helps fund many of those groups, said in a statement: “This legislation targets organizations working for human rights and democracy, while allowing ultranationalist organizations to keep their sources of funding hidden despite their claim that the law increases ‘transparency.'”

The law has been criticized by Israeli opposition lawmakers for failing to include donations from private individuals. Most right-wing advocacy groups enjoy significant support from Jewish or Christian donors or activist organizations abroad.

Daniel Sokatch, New Israel Fund's executive director. (Courtesy of New Israel Fund/JTA)

Daniel Sokatch, New Israel Fund’s executive director. (Courtesy of New Israel Fund/JTA)

“The only thing transparent about this law is its true purpose: to intimidate and silence the civic sphere, and those advocating for an end to the occupation in particular,” NIF CEO Daniel Sokatch said.

“This is a deeply anti-democratic move, and Israelis from all sectors of civil society are already feeling its chilling effect. Those of us committed to a vision of Israel as a democracy that offers complete equality to all of its citizens as envisioned in the Declaration of Independence must redouble our efforts. Not only is freedom of expression for Israelis on the line, so is Israel’s standing as a liberal democracy. The stakes are high, and so is our commitment to working toward the future we believe in.”

Lawmakers vote on the NGO bill in the Knesset plenum, July 11, 2016. (Yonatan Sindel/Flash90)

Lawmakers vote on the NGO bill in the Knesset plenum, July 11, 2016. (Yonatan Sindel/Flash90)

Sari Bashi, who now serves as the Israel and Palestine Country Director for the New York-based Human Rights Watch, echoed the NIF’s criticism, saying the new law “targets and burdens human rights and left-wing groups by imposing onerous reporting requirements and hefty fines for noncompliance. If the Israeli government were truly concerned about transparency, it would require all NGOs to actively alert the public to their sources of funding – not just those that criticize the government’s policies.”

Bashi is a co-founder of Gisha, one of the groups whose funding sources make it subject to the new rules.

The veteran anti-occupation group Peace Now vowed to appeal the law to the High Court of Justice.

Calling it “a blatant violation of freedom of expression,” the group said its “true intention is to divert the Israeli public discourse away from the occupation and to silence opposition to the government’s policies.” The law was part of a trend of “severe deterioration in Israel’s democracy,” the group said in a statement.

“We will continue to fight this anti-democratic wave in the streets and intend to challenge the NGO law’s validity before the [High] Court.”