Category: Hungary

In a bid to enhance legal competitiveness, a new legislative proposal aims to streamline regulations in environmental protection, waste management, consumer rights and workplace safety, boosting the competitiveness of domestic businesses. The proposal is currently under public consultation, but it already highlights several key changes that may be of interest to various sectors.

Workplace safety: the range of professionals authorized to perform occupational health tasks would be expanded to include various specialized medical fields, such as occupational medicine and public health. Additionally, workplace risk assessments would be required every five years instead of three, unless otherwise necessary, easing the administrative burden related to workplace safety.

Consumer protection: the proposed amendment introduces a significant shift by setting a clear financial threshold for the obligation to employ a consumer protection officer, which was previously required without any revenue-based limits (for any business not classified as a small or medium enterprise (SME) under the SME Development Act). By establishing the threshold at HUF 5 billion, the change specifically targets larger businesses with significant market influence, thereby reducing the regulatory burden on smaller companies

Condominiums: the right of disposal over jointly owned property would automatically belong to the community, eliminating the need to include this in the founding documents. Moreover, new rules are introduced for summoning co-owners to meetings, allowing for acknowledgment receipts or postal notifications.

Electricity: the proposed amendment formally defines the concept of biomass processing and establishes the foundation for permit issuance, aligning with existing regulations.

Inheritance proceedings: notaries could satisfy their procedural fee claims from the heritage, with new rights to impose restrictions on the transfer and encumbrance of assets.

Waste management: activities such as the creation of educational and instructional items or gifts from waste, as well as the production of artistic works from waste, provided they are publicly displayed, would now require registration in the official waste management authority’s register. This ensures that such activities are regulated and monitored under proper waste management practices. The number of companies eligible to enter into individual agreements with the concession holder regarding specific waste management requirements would increase significantly, as the threshold for waste producers would be lowered from 50,000 tons per year to 5,000 tons per year.

Most of the amendments focus on fine-tuning existing regulations, offering targeted improvements such as more precise procedural requirements or updated thresholds, as seen in the waste management and consumer protection regulations. While these efforts support the broader goals of economic growth and environmental responsibility, the proposed changes do not introduce transformative measures that would dramatically reshape the legal landscape for businesses. Instead, they reflect a pragmatic approach to maintaining legal clarity and operational efficiency.

By Reka Fulop, Attorney at Law, KCG Partners

Schoenherr has advised Seidel Hungaria Ingatlankezelo on its sale of an industrial asset located in Ajka, Hungary to Muszertechnika Holding. Molnar and Bereczky advised Muszertechnika Holding.

The asset has a 3,500 square meter gross leasable area.

Seidel Hungaria Ingatlankezelo is the Hungarian subsidiary of the Austrian-based Situlus Holding, an independent investment company founded in Graz.

Muszertechnika Holding operates in the industrial production and financial services sectors, with a focus on electromobility projects and the production of geodetic instruments. It is primarily active in the electronics, automotive, and real estate sectors

The Schoenherr team included Austria-based Partner Clemens Rainer and Hungary-based Partner Laszlo Krupl, Attorney at Law Lilla Szepsi Szucs, and Associate Viktoria Magyar.

The Molnar and Bereczky team included Partner Daniel Bereczky.

From 1 August 2024, the maximum fine that can be imposed by the Hungarian Competition Authority equals 15% of the undertaking’s net turnover. According to the Authority’s statement, its primary objective is not to impose fines, however, the increase in the potential financial penalty is a strong deterrent. In any case, it can be observed that the Authority is becoming more and more stringent concerning fines: while in 2023 it imposed fines totalling HUF 2.2 billion, the total amount of fines imposed this year exceeded HUF 2 billion by August.

The specific amount of the fines is calculated by the Authority’s Competition Council within the discretionary framework provided by the Competition Act and the fine notices issued by the Authority, taking into account all the circumstances of the case. From 1 August 2024, the maximum fine equals 15% of the undertaking’s net turnover of the previous year. Until 31 August 2023, this amount was only 10% and on 1 September 2023, it increased to 13%.

The Authority offers a number of cooperation opportunities for undertakings and active cooperation during the competition supervision proceedings that can reduce the amount of the fine. In addition, the Authority also provides information material (in topics such as changes in consumer protection law, statements in connection with sustainability) to prevent infringing behaviour. According to the Authority, the goal is to protect consumers effectively and to actively support businesses that want to comply with competition rules. 

By Rita Parkanyi, Partner, KCG Partner

A new draft regulation was put to public consultation until 27 September 2024 that could bring significant changes to the operation of district heating systems in Hungary. The aim of the regulation is to increase the use of renewable energy sources such as geothermal and biomass in district heating, thus reducing dependence on natural gas and costs.

The changes contained in the draft regulation submitted for public consultation will mainly affect public and municipal institutions such as schools and hospitals. These operators are subject to a district heating supplier’s cost price from October 2022. The increase in gas prices during the energy crisis was reflected in district heating production, since two-thirds of the district heating portfolio contains natural gas, which has led to a significant increase in institutional heat tariffs. Renewable energy sources, such as biomass and geothermal energy, are playing an increasing role in district heating production. An important benefit of their use is that prices remain more stable and less volatile than for natural gas.

Another main objective of the new regulation was to encourage an increase in the share of renewable energy in district heating production, followed by specific development tenders. The European Commission has approved a €95 billion investment and development support plan for the Ministry of Energy to build new renewable district heating technologies and further improve the energy efficiency of existing systems. The tenders are expected to be launched by the end of the year for district heating companies and district heating producers.

In addition to the above, there are also plans to increase the profit margins of district heating companies in order to successfully draw down the tenders. Currently, the regulation only allows a profit margin of 2%, which makes it difficult to carry out investments, especially when obtaining bank financing. The profit rate is to be increased for new investments after 2025, helping to make more renewable and energy-efficiency investments possible.

The aim is to double the share of geothermal in district heating production by 2030, which could replace hundreds of millions of cubic metres of natural gas, reducing the country’s energy dependence and costs. An important element of this is the change in government regulation at the end of 2022, making it much simpler to obtain a permit. Previously, separate water and other permits were required, but now a “one-stop-shop” system has been introduced, simplifying the process.

By Rozsa Rusvai-Darazs, Attorney at law, KCG Partners Law Firm

Oppenheim has partnered up with the Korean law firm Jipyong by signing a memorandum of understanding, leading to Jipyong opening a Korea Desk in Hungary.

“Central and Eastern Europe is emerging as a significant investment area for Korean companies, owing to its status as a production hub for Europe, its integration into the European value chain, and potential for market diversification,” an Oppenheim press statement read. “Hungary, in particular, is viewed as an attractive destination for investment by Korean firms because of its strategic position at the intersection of Eastern and Western Europe, providing access to the entire European market.”

According to Oppenheim, “to better serve the increasing legal needs of Korean companies entering the Central and Eastern European market, the Korea Desk opened at Oppenheim benefits from a strong local presence,” with the firm stating that “an additional partner-level attorney will soon join the team to collaborate with Oppenheim and Jipyong’s CEE team in providing seamless and effective legal advice.”

According to the latest data from the Hungarian Central Statistical Office, nearly 100,000 foreign nationals were employed in Hungary as of July 2024, with almost 80% coming from third countries. After years of government-led anti-immigration messaging, many Hungarians have expressed fear and outrage at the sight of large groups of Indian, Filipino, and Vietnamese workers in smaller towns, perceiving them as competition for job opportunities.

To bolster the protection of Hungarian workers and their families, the Ministry of National Economy is considering stricter regulations regarding the employment of guest workers. This initiative aims not only to safeguard Hungarian jobs and the domestic labor market but also to enhance the organization of training programs for job seekers. These efforts will play a vital role in mobilizing the country’s labor reserves and increasing workforce participation.

When a company intends to lease workers from third countries, a guest worker residence permit can only be issued to those whose employer is a qualified temporary work agency and who are nationals of countries listed in a specific government decree. The criteria to become a qualified temporary work agency are stringent; existing agencies must deposit HUF 50 million (EUR 124,500) and maintain an average annual statistical headcount of at least 1,000 employees over the 12 months preceding their application, with at least 500 being Hungarian nationals.

The current list of eligible countries from which nationals can be leased via a temporary work agency includes the Philippines, Indonesia, Kazakhstan, Mongolia, Vietnam, Brazil, Georgia, Kyrgyzstan, Venezuela, and Colombia.

To prevent potential abuses, the new regulation looks to prohibit private intermediaries (placement agencies) from recruiting third-country nationals outside the EU. However, qualified temporary work agencies will still be allowed to employ these workers. According to industry professionals, there are no real elementary changes affecting temporary work agencies in the current draft, although the industry expects the government to re-regulate the leasing of guest workers in a more significant way in the next few years.

By shifting the recruitment responsibility from placement agencies to companies wishing to employ foreign workers, the decree is likely to increase administrative and HR costs. This may encourage businesses to rely more on Hungarian workers for as long as possible.

In addition to protecting Hungarian jobs and the domestic labor market, the decree also aims to enhance the organization of training programs available to job seekers, thus significantly contributing to the mobilization of the country’s labor reserves and boosting workforce participation. The proposal intends to align training offerings more closely with the needs of the economy and labor market. The incentive system may simplify the organization of training programs and expand the range of training available to job seekers, ensuring that it is tailored to their personal circumstances and the demands of the labor market. These new elements will facilitate the selection of appropriate training, and additional support will be introduced to encourage both job seekers and the public sector to participate in training initiatives. These could be useful steps, and similar training courses would be necessary to make better use of Hungary’s labor pool.

By Denes Glavatity, Attorney-at-Law, KCG Partners Law Firm

On 1 October 2024, the Hungarian Government published a decree on the basic regulations of settlement planning and construction requirements, which fundamentally rewrites and clarifies the frameworks for construction and property planning in many areas. Among these, one regulates the placement of solar panels and solar collectors, while another sets out the general framework for the installation of wind turbines.

On solar panels and solar collectors, the decree states that solar panels can only be installed integrated into the architectural façade of a building, and they cannot be placed on balconies, either on independent supporting structures or built into the balcony structure. On public land, solar pavement can only be created with a slip-resistant surface. Solar panels and solar collectors cannot be installed on monuments; on properties designated as monuments and in areas of cultural heritage, they can only be installed with the approval of the heritage protection authority. With the exception of economic and industrial areas, the area of solar panels and solar collectors cannot exceed 30% of the area of parking spaces.

Renewable energy installations, except for small household power plants, cannot be placed in forested, agricultural, or nature-like areas; however, installations legally placed in such zones before the entry into force of this regulation may remain, and renewable energy installations with final permits for power generation and grid connection may be placed. Solar panels and solar collectors can only be placed in side and back yards in residential areas if they are not visible from public spaces.

The Governmental Decree will come into effect on January 1, 2025.

Based on the EU rules, Member States can aid the adoption of balcony solar, but it is not mandatory, and it has not been embraced by all countries. Belgium, notably, has banned plug-in solar devices over fears about the impact of having unregistered systems feeding into the electricity grid. Austria, France, Italy, Poland and Luxembourg have all taken an encouraging stance towards balcony solar, while renewable energy campaigners in Spain are seeking to get their government to loosen the rules soon.

By Lilla Majoros, Attorney at law, KCG Partners Law Firm

Bittera Kohlrusz & Toth former Managing Partner Csaba Bittera has joined Fraport as its Senior Legal Advisor.

Fraport Frankfurt Airport Services Worldwide is a German transport company that operates the Frankfurt Airport in Frankfurt am Main and has an interest in the operation of several other airports around the world.

Before joining Fraport, Bittera spent six years at the helm of Bittera Kohlrusz & Toth, between 2018 and 2024 (as reported by CEE Legal Matters on June 15, 2024), and another six years helming its legacy firm Bittera & Toth, between 2012 and 2018. During this period, and earlier, he also provided services to the Budapest Airport, firstly as an in-house counsel between 2004 and 2009, then as an Attorney at Law between 2009 and 2010, and finally as the Acting Head of Legal and Company Secretary between 2010 and 2024. He was in charge of the legal management of the crisis that Budapest Airport faced after the collapse of Malev in February 2012.

Commenting on the move, Bittera said that he loved working for the Budapest Airport. “I love aviation and after 20 years I felt that it was time to move on. Fraport put the trust in me and I am looking forward to working on great airport transactions in my new role.”

Originally reported by CEE In-House Matters.

The Government of Hungary has overhauled the regulatory framework governing the district heating sector. The legislative changes are primarily aimed at supporting substantial new investments in district heating production by increasing the profit limits for new installations utilising renewable and geothermal energy.

In the Hungarian district heating sector, services provided by both producers and service providers are subject to regulated prices and profit limits. The profit limit is determined as the product of the asset value and the profit factor specified in the respective Ministerial Decree. Until recently, producers of district heating were only allowed to apply a profit factor of 4.5 %, even if they utilised renewable energy or met the requirements of high-efficiency cogeneration. Any profit exceeding this cap needed to be reinvested to enhance production efficiency and could not be withdrawn from the enterprise (e.g. as dividends).

The new rules, applicable to installations commissioned after 31 December 2024, will grant a profit factor equal to the arithmetic average of the reference yields published on the last business day of March for 10-year and 15-year Hungarian government bonds, plus 2.5 % (with a minimum of 4.5 % and a maximum of 9 %). The changes will also allow higher profit rates for operators of existing conventional production units that implement investments enhancing energy efficiency or reducing district heating costs.

Shortly after introducing the new district heating price regulation framework, the Government sent another positive signal to potential investors. The Ministry of Energy published the National Geothermal Utilisation Concept, a policy document aiming to make geothermal energy a key component of Hungary’s green economy by leveraging the region’s favourable geological conditions. Domestic geothermal energy use is targeted to increase from 6.4 PJ in 2022 by 20 % to 8 PJ by 2026, and to 12-13 PJ by 2030. The strategy is expected to increase the share of geothermal energy in total heat production from 6.5 % to 25-30 % by 2035.

The Concept highlights a joint approach to industrial, agricultural and district heating, focusing on the development of cascade systems on a heat community basis to optimise geothermal energy extraction. Regarding district heating, the policy document underlines that significant water-based geothermal potential exists in Budapest and 20 other medium-sized and large municipalities that currently have district heating but are not yet supplied with geothermal energy.

To achieve the objectives outlined in the Concept, a state financing framework based on 3+1 pillars is proposed:

1. Targeted grants to mitigate geological and associated financial risks during the initial phase of investments based on thermal water extraction. Projects with secure market conditions that fully utilise heat in a cascade system and align with municipal needs (while ensuring compliance with reinjection conditions) will be prioritised.
2. A geothermal investment loan scheme characterised by favourable and predictable terms for the implementation of investments, including drilling, heating centres and pipeline systems.
3. Further support schemes aimed at enhancing the efficiency of geothermal energy utilisation and promoting municipal heating initiatives.
   The “+1” pillar is the aforementioned restructuring of district heating price regulation, i.e. the increase of profit factors for new district heating production units utilising renewable energy (including geothermal energy)

The recent legal changes in Hungary’s district heating sector offer a promising opportunity for investors, especially those focusing on geothermal energy. The new regulatory framework, which allows for higher profit limits, combined with the additional incentives highlighted by the National Geothermal Utilisation Concept, creates a conducive environment for investment. These developments position Hungary as an attractive market for those looking to engage in the growth of renewable energy within the district heating sector.

By Gergely Horvath, Attorney at Law, and Barbara Darcsi, Associate, Schoenherr

I am not a political expert, but I grew up in Hungary and the United States and have always focused on both countries’ policies and political climates. These opinions are based on what I have seen over the past ten-plus years of living between our countries and the policies we have seen from Harris and Trump (either spoken or acted). Both candidates have notable implications for Hungary’s relationship with the United States. It could impact NATO dynamics, visa policies, and economic agreements. Each candidate offers distinct approaches that could affect Hungary’s foreign policy and its alignment within Europe.

With a Harris win, we would likely see a continuation of the Biden administration’s approach of maintaining a unified NATO, reinforcing collective security, and deterring Russian influence in Eastern Europe. Harris is expected to support efforts to strengthen NATO’s regional presence, keeping Hungary aligned within NATO’s collective defense framework. Her administration would likely encourage European allies, including Hungary, to increase defense spending and support NATO’s shared security goals. This approach would prioritize alliance unity, but Hungary might feel pressure to align more closely with U.S.-backed defense strategies.

Trump’s approach to foreign policy has been more skeptical of NATO, viewing it as financially imbalanced and overly reliant on U.S. resources. If he returns to office, his administration might pursue policies encouraging European allies, including Hungary, to assume more defense responsibilities while reducing American military commitments. This would offer Hungary more flexibility to pursue its foreign policy strategies, though it may also place increased expectations on European allies to address their regional security independently.

Hungarian citizens must apply for a new ESTA visa for each trip to the United States, as the visa has become single-use for Hungarian citizens in recent changes.

A Harris-led White House would likely maintain the current ESTA visa waiver program, which allows Hungarian citizens relatively simple travel access to the U.S. Still, it would likely maintain the current single-use requirement, aiming to uphold consistent standards across the Visa Waiver Program with heightened security measures.

Although Trump generally favored stricter immigration policies, the Hungarian visa policy would likely be a special case if Trump is re-elected, possibly reversing the one-time-use rule, which would allow Hungarian citizens more straightforward access for multiple visits. While Trump has traditionally emphasized border security and rigorous immigration control, the restrictions on Hungary’s ESTA access could be revisited in line with his bilateral approach, potentially easing travel barriers.

Economic issues are also at stake, especially with the recent termination of the U.S.-Hungary double taxation treaty. This treaty had previously allowed citizens of each country to avoid paying taxes twice on income earned across borders, facilitating cross-border trade and investment. The treaty’s end under Biden now places a more significant tax burden on Hungarians working or investing in the U.S., complicating bilateral business relations.

A Harris administration might consider revisiting this treaty, though a renewed agreement would likely come with conditions related to democratic governance and economic transparency. Harris’s focus on aligning economic agreements with governance standards could emphasize the rule of law, affecting the terms of any renegotiation.

Conversely, Trump’s economic pragmatism could lead him to negotiate a streamlined, governance-neutral economic arrangement, likely focusing solely on trade and investment efficiency. This could facilitate smoother business operations for Hungarian firms in the U.S. but may introduce regulatory discrepancies between Hungary’s EU obligations and U.S. agreements, especially if Trump pushes for policies favoring the U.S. over the EU economic practices.

The outcome of the 2024 election will shape Hungary’s diplomatic strategy, particularly within NATO and regarding U.S. relations. A Harris administration would push Hungary to align more closely with NATO’s collective defense and shared security goals, fostering continuity and stability in Europe’s security framework. Her administration would likely emphasize multilateral cooperation, aligning economic and defense policies with democratic norms and potentially introducing conditionalities on economic agreements.

In contrast, a Trump presidency would offer Hungary more autonomy, favoring bilateral agreements that could allow Hungary to prioritize its independent foreign and economic policy goals. However, this approach would come with increased expectations for Hungary to take on more regional defense responsibilities. This shift could alter Hungary’s reliance on NATO for regional security.

As the election nears, the race remains close, with each candidate set to impact U.S.-Hungarian relations significantly. Whether Harris or Trump wins, the next four years will likely bring substantial shifts in diplomatic, economic, and security ties between the two nations. Both candidates bring distinct approaches that could redefine the future of U.S.-Hungarian engagement, making this election pivotal for the relationship’s direction and priorities.

By Oliver Koppany, Foreign Legal Counsel, Jalsovszky