News

Hungary has a complex FDI screening system, consisting of two parallel and independently functioning regimes, as summarized in the chart below. Transactions caught under either regime require the acknowledgement of the relevant authority as a precondition of implementation.

Act LVII of 1996 - on the Prohibition of Unfair Trading Practices and Unfair Competition (“Competition Act”) contains the main rules for merger control, augmented by sectoral legislation applicable to pharmacies and media.

Hungary's Appeal for Chinese Investment in Europe – Key Takeaways

On 2 April 2024 the Hungarian government submitted a draft bill to Parliament, which contains two “new competition tools” to be introduced into the Hungarian Competition Act:

The HCA made recommendations for businesses (impact assessment), the lawmaker (green labelling scheme) and enforcers (logos and label check).

Hungary - Stores must inform consumers and manufacturers and distributors must notify the authority if they replace their pre-packaged products with new, smaller packs compared to the pre-existing reference packs.

I. Overview The Hungarian legislator made some significant changes to the Hungarian FDI screening system effective as of 13 January 2024. The most important change is that a statutory pre-emption right will be granted to the Hungarian State in case of transactions including solar power plants. In addition, the “indirect transaction exemption” rule has also been amended.

Act LVII of 1996 - on the Prohibition of Unfair Trading Practices and Unfair Competition ("Competition Act") contains the main rules for merger control, augmented by sectoral legislation applicable to pharmacies and media. Broadly, the Hungarian merger control regime is similar to that of the EU, with a few differences. The Hungarian Competition Authority ("HCA", in Hungarian: Gazdasági Versenyhivatal) regularly issues jurisdictional notices on merger control, the latest version available to date is notice 2/2023 last amended on 9 June 2023.

Hungarian Competition Authority (HCA)’s expedited sector inquiry to drive new legislation for online booking and accommodation services - the HCA published its draft report on 20 October 2023

The Hungarian Parliament adopted a new Act on complaints, whistleblower reports and rules on reporting abuse. The law provides the possibility for employees to report workplace abuse and misconduct by name or anonymously and requires certain companies to set up a mandatory whistleblowing system.

On 16 March 2023, the Court of Justice of the European Union (“CJEU”) issued an interesting judgment (C-449/21), in response to the Paris Court of Appeal’s request for a preliminary ruling, on whether a national competition authority may ex-post investigate as abuse of dominance a transaction which does not meet the established threshold defined in the EU Merger Regulation or national legislation.

FDI screening is a topic that has become of increased importance in recent years both across Europe and more widely, and Hungary is certainly not alone in having introduced new restrictions.

On 21 May 2021 the Hungarian Parliament passed Act XL of 2021 amending the act on the defense against the COVID-19 pandemic, thus further extending the state of emergency until the 15th day following the first 2021 autumn parliamentary session, which in practice is likely to fall at the end of September. The extension of the state of emergency prolongs the effect of several COVID-19 related regulations as well, and also includes that the restrictions on foreign investments (FDI) will be effective until 31 December 2021...

Effective from 1 May 2021, certain restrictions imposed due to the Covid-19 pandemic are relaxed by the Government Decree No. 194/2021. (IV. 26.) on the third stage in the phasing out of protection measures to be applied in the event of an emergency due to the Covid-19 pandemic (“Government Decree”). Many of the new measures follow on from the introduction of the so called ‘protection certificate’ for those who have received their Covid-19 vaccines or have been confirmed to have contracted the disease.

Second stage in the phasing out of protection measures: With the administration of the first dose of the COVID-19 vaccine to 3.5 million residents, Government Decree 175/2021 (IV.15.) on the second stage in the phasing out of protection measures will enter into force...

On 7 April 2021 the Hungarian Government issued Government Decree No. 166/2021 (IV.7.) on the extension of most of the current protective measures until 19 April 2021...

On 27 March 2021 the Hungarian Government issued Government Decree No. 143/2021 (III.27.) on the extension of protective measures due to the Covid-19 pandemic, effective from 28 March 2021 and Government Decree No. 144/2021 (III.27.) on the first stage in the phasing out of protection measures (“Government Decree”).

On 5 March 2021 the Hungarian Government issued Government Decree No. 104/2021. (III.5.) on the temporary tightening of protective measures due to the Covid-19 pandemic (“Government Decree”), effective from 8 March 2021.

On 9 February 2021 the Hungarian Government issued Government Decree No. 52/2021 (II.9.) on rent free period (“Government Decree”), effective from 10 February 2021.

Urgent research is ongoing around the world aiming at finding the most effective Covid-19 vaccine. These products should comply with the same legal requirements of pharmaceutical quality, safety and efficacy as any other medicine. The substances are first tested in laboratories then on human volunteers within the framework of clinical trials. Only drugs with successfully completed phase III clinical trials are suitable to apply for marketing authorisation from the competent – national or regional – drug safety authorities. At this moment, recent developments are reported to having reached the end of phase III clinical trials, and in some cases, conditional marketing authorisation procedures are ongoing and in some cases concluded.

As we reported in April 2020, the Hungarian Government issued temporary legislation (Government Decree no. 102/2020), effective until the end of the state of emergency (18 June 2020), which regulated the holding of shareholder and board meetings during the state of emergency. After the end of the state of emergency, some of these rules ceased to have effect, some of them were amended with the purpose of leading corporate governance back to normal. In the context of the reintroduction of the state of emergency from 4 November 2020, the Government also re-introduced the former extraordinary rules on corporate governance in its Government Decree no. 502/2020. (“Government Decree”) effective from 17 November 2020.

On 10 November 2020, the Hungarian Parliament passed Act No. CIX of 2020 on Protection Against the Second Wave of Covid-19 (the “Act”). The Act entered into force on 11 November 2020 and extends the state of emergency originally declared by Government Decree no. 478/2020. (XI.3.) until 19 February 2021 and empowers the Government to extend the effect of its decrees until the end of the state of emergency.

As we reported in May new foreign investment restrictions (“New Hungarian FDI Regulation”) were introduced by a Government Decree during the Covid 19 state of emergency (in addition to the already existing FDI rules on sectors closely related to national security). We also reported at the end of June that the Parliament has refined and slightly modified those rules in an Act and e.g. it exempted indirect transactions from mandatory FDI screening. Now the Parliament has made only two minor but undoubtedly significant changes to the New Hungarian FDI Regulation.

On 4 September 2020 the Hungarian Government announced the amendment of Government Decree no. 408/2020 (VII.30.) on the rules of entering the territory of Hungary (the “Amendment”). The Amendment came into force on 5 September 2020.

On 30 August 2020 the Hungarian Government accepted new rules on entering Hungary and Government Decree 407/2020. (VII.30.) restored border control at the entire border of Hungary effective from 1 September 2020.

The emergency powers handed to the Hungarian government in March in response to the coronavirus epidemic were cancelled with effect from 18 June 2020, thus terminating the state of emergency with effect from 18 June 2020.

As we reported in May new foreign investment restrictions were introduced by a Government Decree during the Covid 19 state of emergency. At that time the restrictions appeared extensive and burdensome for foreign investors. With effect from 18 June 2020, the Hungarian Government terminated the Covid 19 state of emergency declared on 11 March and several Government Decrees issued in the past few months ceased to have effect. However the Parliament adopted an Act which contains certain provisions from those Decrees (and certain refinements of those provisions) which will therefore remain effective – most of them until the end of 2020. In this Newsletter we focus on provisions of this Act on foreign investment restrictions and certain practical issues which arise from their implementation.

The Hungarian Government issued a new decree on 25 May 2020 (the “Decree”), which requires both notification to and acknowledgement by the Minister of Innovation and Technology (the “Minister”) as a precondition to implementing foreign investment into Hungarian companies operating in a large number of sectors.

Easing the rules on the Restriction of the freedom of movement - UPDATE to our 12 May Newsletter

Government Decree 168/2020. (IV.30.) relaxed the restriction of free movement as follows as from 4 May 2020, except for Budapest and county of Pest (where free movement is similarly restricted as before)

New special taxes on Banks and Retailers have been introduced in Hungary, effective from 1 May 2020. The details of the new taxes are set out in our 16 April 2020 briefing note.

The Hungarian Government has passed a decree and appointed a government commissioner for a listed company (Kartonpack NyRt.) The commissioner is given powers to exercise certain shareholders’ rights, including replacing the members of the board of directors and the supervisory board, and also to exercise certain ownership rights, including powers to terminate agreements of the company and to participate in negotiations with lenders.

Several weeks have passed since the introduction of the first special legislative measures to address the coronavirus pandemic. In this newsletter we review the issues many of our clients face and consider some of the further potential legal issues which may arise as the lockdown conditions are relaxed.

On 21 April 2020 the Hungarian Government introduced several tax reliefs for corporations.

Update: Recent employment law measures adopted to mitigate COVID-19's negative impact on Hungarian economy

As part of its response to the economic effects of the COVID19, the Hungarian government passed, on 10 April, a new law which paves the way for providing direct financial aid (the “Temporary Government Support”) to Hungarian businesses that are in or face cash flow problems due to the current economic circumstances caused by the COVID19 pandemic. The measures announced by the Hungarian government follow the framework previously accepted by the European Commission (section 3.1. of Communication C/2020/1863 on the Temporary Framework for State aid measures to support the economy in the current COVID-19 outbreak) and provide that limited temporary amounts of aid may be provided to businesses that find themselves facing a sudden shortage or unavailability of cash, if this is an appropriate, necessary and targeted response in the current circumstances.

In recent weeks, the Hungarian Government adopted various support measures and state aid schemes tailored specifically to employers in an effort to assist companies in the economic turbulence caused by the COVID-19 crisis. We set out below a brief summary of the specific employment related state subsidies available from 16 April 2020.

On 14 April 2020, the Hungarian government issued decrees on special taxes on retailers and credit institutions which will be effective from 1 May 2020. The new taxes are supposed to mitigate the economic harm caused by the COVID-19 crisis.

On 10 April 2020 the Hungarian Government issued new temporary legislation (Government Decree no. 102/2020) which changes the modus operandi of holding shareholder and board meetings.

At the 7 April 2020 press conference of the Operational Group, responsible for the Hungarian government’s response to the COVID 19 crisis, László Palkovics, the Minister for Innovation and Technology announced certain measures intended to mitigate the economic impact of the COVID-19 crisis.

In certain key respects the situation applying after the declaration on 15 March 2020 of an “extraordinary judicial holiday”, as described in our 24 March 2020 briefing, no longer applies.

The Hungarian Prime Minister, Viktor Orbán, has announced that a package of economic measures related to COVID-19 will be published on the 7th of April, 2020. The support scheme is expected to include several labour market and financial relief measures in the industry, commerce, transport and logistics sectors.

As part of its response to the economic effects of COVID19, the Hungarian government issued overnight a moratorium on all payments under existing commercial credit agreements (including loans and financial leases to businesses and consumers) until 31 December 2020...

As part of the Hungarian government’s efforts to protect the safety and health of Hungary during the state of emergency ordered as a result of COVID-19, on 22 March 2020 the Hungarian government has proposed and parliament has approved a new law (Act on Protecting Against the Coronvirus). This law was scheduled to be passed on 23 March 2020 with a fast-track procedure.

As part of the Hungarian government’s efforts to protect the safety and health of Hungary during the state of emergency ordered as a result of COVID19, the task force established by the Hungarian government has announced a list of companies which, due to their operation in the energy, telecommunication, transportation, health or technological sector may represent an infrastructure that has a direct and imminent role in protecting the national safety, health and economy of Hungary...

In order to take appropriate measures to provide a safe environment, employers are finding that they need to process more personal data than in normal times. A proper data processing protocol can and should strike a balance between epidemic control and privacy protection.

On 27 March 2020, the Hungarian government passed Government Decree 71/2020 (III.27.) which introduces a restriction of movement for the following two weeks.

Due to the COVID19 epidemic the Hungarian Competition Office („HCO”) has introduced various changes to its ordinary procedure. These changes are generally designed to limit personal meetings and allow the HCO employees to work from home. These changes may, however, have an impact on ongoing cases as follows...

FAQ: Corporate governance and COVID-19 In light of the current COVID-19 outbreak, all companies and institutions are taking precautionary measures to minimise the potential impacts the COVID19 and to safeguard the health and safety of everyone involved. This, however, may also impact the company’s ability to hold its annual general meeting or other extraordinary meeting of the shareholders or other managing and/or supervisory bodies.

FAQ: The COVID19 outbreak affects most of the businesses having employees in Hungary. So far employers have raised various questions to our employment team and we collected below the most frequently asked questions and our general responses. It is important to note that the situation is very fluid and applicable rules and their interpretation can change rapidly.

Is there any tax relief due to the COVID19 pandemic?

Is the Covid-19 epidemic considered as force majeure under Hungarian law?

In what way are the lease agreements affected during the moratorium?

Government Decree No. 46/2020 (III.16.) came into effect on 17 March 2020, ordering prohibitions and restrictions on visiting certain premises.

FAQ: How COVID19 impacts the ongoing lawsuits and arbitration cases?

FAQ: Corporate governance and COVID-19 In light of the current COVID-19 outbreak, all companies and institutions are taking precautionary measures to minimise the potential impacts the COVID19 and to safeguard the health and safety of everyone involved. This, however, may also impact the company’s ability to hold its annual general meeting or other extraordinary meeting of the shareholders or other managing and/or supervisory bodies.

Representatives of Hungarian companies may register authorised e-signatures with the court of registration...

FAQ: Hungarian government submits new legislation introducing the possibility to govern without the Parliament

Due to the current developments in connection with the spread of Covid-19 (coronavirus), we would like to inform you of the measures being taken by Lakatos Köves & Partners (“LKT”).