* Suspension follows Fidesz win in European elections

* Reforms had stirred worries over judicial independence

* EU said some reforms risked democracy, rule of law (Adds detail, more comments)

BUDAPEST, May 30 (Reuters) - Hungary unexpectedly announced an indefinite suspension of a new administrative court system on Thursday, backtracking on a reform that had raised concerns over judicial independence.

Changes to Hungary's judiciary proposed by the nationalist ruling Fidesz party have been at the heart of a confrontation with the European Union, which says some of Prime Minister Viktor Orban's reforms threaten democracy and the rule of law.

Hungary passed a law late last year to set up courts overseen directly by the justice minister, a move critics said could allow political interference in judicial matters.

Early this year, Hungary had already modified some aspects of the reform criticised by the Venice Commission, a European panel of constitutional law experts.

"The government will initiate the indefinite suspension of the launch of the administrative court system," Gergely Gulyas, Orban's chief of staff, told a news conference.

"We believe that the law meets European standards and rule-of-law requirements," he said. "However, the administrative court system has been caught up in debates in Europe, which have unjustifiably called judicial independence into question."

The administrative courts had been due to take over cases about government business such as taxation and elections currently handled in the main legal system.

The government said the courts would be presided over by independent judges who would be able to handle cases more efficiently.

POLITICAL FRAGMENTATION

Orban's Fidesz, however, won the Hungarian leg of European parliamentary elections, in a contest that highlighted the deepening political fragmentation of the 28-country bloc and complicated efforts to agree Europe's new leaders.

Fidesz was suspended from the mainstream European People's Party (EPP) in March over Orban's record on respect for the rule of law, freedom of the press and minorities' rights. Orban subsequently courted far-right leaders in the run-up to the vote.

Gulyas said there was no link between Fidesz's membership in the EPP and Thursday's suspension of the reform, which he called a "last-minute measure" that occurred just before the impending appointment of judges for the new courts.

"This should improve Hungary's position within the EU," Gulyas said in response to questions on whether the move was intended to shore up Orban's standing in the mainstream group.

Gulyas said Hungary considered criticism of the reform unfounded, however, it should be mindful of criticism and pre-empt a possible challenge against the new system by the European Commission, which has appealed some of Orban's past reforms.

Gulyas pointed to a legal challenge by the Commission against Polish reforms affecting judges, saying charges brought by the EU executive in the field of judicial independence were "too dangerous" to risk an entrenched conflict.

He said Hungary could abandon the new courts altogether if it fails to allay concerns over the proposed changes. (Reporting by Gergely Szakacs; Editing by Toby Chopra, William Maclean)

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