Hungary has a complex FDI screening system, consisting of two parallel and independentlyfunctioning regimes, as summarized in the chart below. Transactions caught under eitherregime require the acknowledgement of the relevant authority as a precondition ofimplementation.
The first regime, the so called „General FDI Regime”, was introduced on 1 January 2019 tobasically implement EU Regulation no. 2019/452. It has a relatively narrow scope regarding thesectors covered (defense, national security, public utility services, certain financial services, ITsecurity, telecommunications and insurance). The declared aim of the FDI review is to protectHungary’s security interests.
The second effective FDI regime is the “Special FDI Regime” originally adopted because of theCovid-19 pandemic. It currently applies with slightly amended rules under Ukraine war relatedemergency regime (the amendments are currently applicable until 25 November 2023). It covers a wide scope of sectors and activities. The declared aim of the FDI review is toprotect Hungary’s sovereign interest in (a) the security and functionality of networks and systemsnot governed by sectoral legislation, (b) supply security related public interest and (c) public interestrelating to fundamental economic interests from a national economy perspective.
FDI screening rules are very complicated (below is a simplified summary only), and screeningunder both regimes is non-transparent. There is no public register on FDI filings and decisions, andthere are no published statistics.The Special FDI Regime leaves some room for maneuver in transaction structuring to avoid FDIscreening. Based on our practice, most transactions pass the review. Increased scrutiny isexpected if natural resources are concerned by a transaction, and where the energy sector ornational security linked activities are concerned. Veto decisions known to us concerned anacquisition where the target owned a mineral water spring, and the acquisition of Aegon insurancebusiness by Vienna Insurance Group. The legality of the Hungarian FDI regimes has beenchallenged by the European Commission and by market players (Xella, pending before the CJEU).
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