The European Commission has opened a legal case against Hungary over a new higher education law that threatens to shut down a Budapest university founded by US financier and liberal philanthropist George Soros.

The Commission, which upholds EU laws, said on Wednesday that it had sent a letter of formal notice to Budapest as "a first step towards an infringement procedure".

"The Hungarian authorities will now have one month to respond to the legal concerns," it said.

The move against the Central European University (CEU) is not the first time Hungary has targeted an organisation funded by Soros.

Prime Minister Viktor Orban - in power since 2010 - has repeatedly clashed with NGOs sponsored by the philanthropist.

Orban dislikes the liberal and internationalist worldview Soros promotes through his organisations.

The CEU has stood as a bulwark of liberal thinking in Hungary and across eastern Europe since it opened in 1991 after the fall of Soviet-backed communism in the region.

Mass protests

Brussels, long exasperated by what it sees as Orban's authoritarian tendencies, believes the law, passed on April 4, undermines the principle of academic freedom and is incompatible with the European Union's democratic values.

The law has triggered mass street protests in Hungary in support of the CEU, but Orban says it is needed to prevent foreign universities from issuing dubious diplomas.

Michael Ignatieff, CEU president and the former head of Canada's Liberal Party, appealed to Brussels for help on Tuesday.

READ MORE: Why is Hungary trying to shut down a university?

EU politicians were set to debate the Hungarian situation in Brussels later on Wednesday and Orban was also due to take part.

Orban on Wednesday dismissed concerns about his country's new higher education law.

While insisting that Hungary remains committed to the European project, Orban also launched another stinging attack on Soros, branding him "an open enemy of the euro" single currency who wants to open Europe to a million migrants a year.

"We are not as big and powerful as you are, and not as big as powerful as George Soros, the American financial speculator attacking Hungary," Orban told MEPs in Brussels, defending his law.

READ MORE: Intellectuals criticise law targeting CEU university

The EU's scope to punish Hungary is limited, however, as this would require the unanimous backing of the 27 other member states. Orban can count on his nationalist-minded allies in the Polish government to oppose any harsh action.

The Commission's "infringement" procedures, which it can open when a member state violates EU laws, are a lengthy affair, but diplomats in Brussels hope Orban can be persuaded to seek a compromise.

"I think the Hungarian government will try to find a deal. The style of the discussion may not be very elegant but there will be some sort of a compromise in the end most likely," one diplomat said.