Category: Hungary

According to a draft legislation on digital companies issued at the end of 2023, “digital companies” would be exempt from paying public burdens and local business tax. Employees in employment relationships and the executives of companies could fulfil their tax payment obligations after their income through special public burden contributions.

According to the bill, only companies in which the majority of employees come from third countries can enter the new system, and access to the incentive would require companies to have appropriate qualifications. The certification would be organised by the government in a foundation circle, with a decree designating the foundation to issue and evaluate the tender, while the digital company would be able to contract with the designated authority once certified.

Companies with at least HUF 20 million in capital can become a digital company by contracting with the competent authority. This may be applicable to companies whose business activities are based on information technology development activities, applicability of smart contracts, cybersecurity, information and communication research, and development and innovation activities that make them available to the market, industry, and science. The proposal also identifies possible areas of activity, adding that any other activities may only be aimed at supporting the main activity, and the revenue derived from it cannot exceed 20%.

The discussion of the draft legislation is expected in the coming months.

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

Wolf Theiss has advised Uniper on the sale of the Gonyu gas-fired combined-cycle 430-megawatt power plant to Veolia. BDO Legal Hungary and Cleary Gottlieb reportedly advised Veolia.

The transaction remains contingent on regulatory approval.

Uniper is a German multinational energy company based in Duesseldorf, Germany, and has been a state-owned enterprise since late 2022.

Veolia is a French transnational company with activities in three main service and utility areas traditionally managed by public authorities – water management, waste management, and energy services.

According to Wolf Theiss, “Uniper has signed a share purchase agreement to sell Hungary’s most modern gas-fired combined-cycle 430-megawatt power plant located in Gonyu, Hungary, to Veolia. Uniper is selling 100% of the shares in Uniper Hungary Energetikai, the Gonyu power plant operator, to Veolia Invest Hungary, a subsidiary of Veolia.”

The Wolf Theiss team included Budapest-based Partner Laszlo Kenyeres, Counsel Norbert Balint, Senior Associate Zoltan Bodog, and Associates Bence Kalman and Kinga Kajcsos as well as Vienna-based Partner Sarah Wared.

The legal status of platform workers (e.g. food couriers) is continuously subject to interpretation and often times scrutiny from the authorities. The Hungarian Curia settled the status in its latest decision, at least from a labour law point of view.

Background

Platform work is a form of employment in which organisations or individuals use an online platform to access other organisations or individuals to solve specific problems, or to provide specific services in exchange for payment. Currently, the majority of Hungarian (and of EU’s) platform workers – including taxi drivers, domestic workers and food delivery drivers – are formally self-employed. Nevertheless, a number of them have to abide by many of the similar rules and restrictions as an employed worker. 

Hungarian latest development

In its latest decision of 13 December 2023, the Hungarian Curia overturned the former second instance decision and established that platform workers – in the given case food couriers – do not fall under the Hungarian labour code since the platform service provider did not have the right to give the wide range of instructions and the right to control the place, time and manner of work, which would have substantiated the existence of subordination (hierarchy) as the primary qualifying feature of the employment relationship as dependent working status.

Based on the specific provisions of the Hungarian Labour Code (Sections 42 and 45), the Curia has taken into consideration that

(1)        General supervision and determination of the manner in which the couriers perform their individual tasks (wearing of branding) and expecting a certain availability and acceptance of the delivery within 75 seconds during the active period do not constitute the wide range of employer’s instruction right within the meaning of the Labour Code.

(2)        The platform worker himself allocated the time he wished to carry out his tasks; this was not monitored or challenged by anyone (with some limitations). Hungarian labour law does not recognise a type of employment relationship where the number of hours of employment is exclusively adapted to the needs of the employee.

(3)        The form of remuneration is not of decisive importance for the classification of the legal relationship between the parties (in a long-term agency relationship the agent is also entitled to regular recurring remuneration for the services provided).

Based on the above considerations, the Curia shared the original assessment of the first instance court that the legal status of platform workers should not be reclassified under labour law.

EU legislation

According to the EU, currently, around 28 million people in the EU are estimated to work on platforms and at least 5.5 million persons performing platform work may be wrongly classified as self-employed (known as bogus self-employment) and are missing out on important labour and social protection rights. In order to tackle that and provide clear and transparent rules for platform workers, the EU Parliament and Council have been working together on a bill since 2021 to improve the working conditions of persons performing platform work.

By Balint Zsoldos, Head of Tax, KCG Partners Law Firm

David Hanis joined Oppenheim in Budapest to specialize in energy fresh out of law school, and has never looked back. 15 years later, just before Christmas 2023, CEE Legal Matters reported on his appointment to a Partner position at the same firm. Demonstrating you can move forward by staying in the same place, he shares his story below.

CEELM: First of all, congratulations on your appointment, David. Can you tell our readers a bit about yourself, your background, and your early days as a lawyer?

Hanis: Thank you for the warm congratulations. It’s an honor to share my journey with the readers. I’m 38 years old and embarked on my legal career immediately after graduating from the Eotvos Lorand University in Budapest, back in 2009. My transition into the professional world was swift; merely a week after my graduation, I began my tenure at Oppenheim. This firm has been my professional home for the past 15 years, a place where I’ve grown from a junior lawyer to a partner, navigating through various roles and responsibilities. My specialization in energy law within our Energy and Regulated Industries practice group has been both challenging and rewarding, offering me a unique perspective on the legal intricacies of this dynamic sector. On a more personal note, being a father to twin girls has enriched my life in unimaginable ways, balancing my professional ambitions with the joys of parenthood.

CEELM: What made you choose Oppenheim at the start of your career?

Hanis: My choice of Oppenheim was serendipitous yet deliberate. During my university studies, I had the privilege of being taught by Gergely Legradi, one of the founding partners of Oppenheim, who not only imparted legal knowledge but also introduced the practical aspects of law, particularly in contract negotiations. His mentorship extended beyond the classroom, offering me a trainee position at Oppenheim. The decision to accept was influenced by my respect for Gergely as a mentor and my research on the firm, which solidified my eagerness to join. Oppenheim’s reputation as a market leader, especially in energy law, aligned perfectly with my career aspirations.

CEELM: After joining the firm, what did you find there that convinced you to stay?

Hanis: My initial attraction to Oppenheim was its prestigious standing in the legal market, particularly within the energy sector. However, what cemented my decision to stay was the firm’s culture. The community at Oppenheim was welcoming, supportive, and conducive to professional growth. It wasn’t just the opportunity to work at a market-leading firm that appealed to me but the genuine camaraderie and mentorship that I found. These aspects, coupled with a clear path for career advancement, made Oppenheim the perfect fit for me.

CEELM: How has your role and practice evolved since joining Oppenheim?

Hanis: The evolution of my role at Oppenheim has been a journey of continuous learning and adaptation. Initially, my focus was on mastering the legal framework of the energy sector, from electricity to natural gas laws. The early years were about building a foundation, understanding the markets, and honing my legal skills. Passing the bar exams marked a significant turning point in my career, transitioning from learning to practical application and client management. Over the years, my connection with our clients deepened, allowing me to become a key figure in providing legal advice for complex situations. This progression led to my current role as co-head of the Energy and Regulated Industries practice group, where my responsibilities have expanded to include leadership and strategic direction.

CEELM: Can you recall the first time you had to manage or coordinate a team?

Hanis: One of my most memorable experiences at Oppenheim was when I first took on a leadership role in September 2017. It was a pivotal moment, marking my transition from individual contributor to team leader. Managing and mentoring our new (at the time) junior lawyer, Zoltan Bodak, was a significant responsibility. I took great pride in guiding him through the complexities of our practice, fostering a collaborative environment that encouraged growth and learning. This experience was the first of many that shaped my approach to leadership, emphasizing the importance of mentorship and team dynamics in achieving our collective goals.

CEELM: Why has the Oppenheim team remained a solid fit for you over the years?

Hanis: Reflecting on my time at Oppenheim, two key factors stand out as to why the firm has remained the ideal place for me: the treatment of people and the career perspective it offers. Oppenheim excels in fostering a supportive and respectful environment, where professional and personal growth are equally valued. The firm’s commitment to its people, combined with its vision for the future, has provided me with unparalleled opportunities to advance and lead. This culture of excellence and support is what makes Oppenheim not just a workplace, but a community where I’ve been able to thrive.

CEELM: How do you see your practice evolving from here on?

Hanis: Our practice group and my own practice are closely related: if the Energy practice group – co-led by Gergely Legradi – is evolving, then so is my practice. What I see and experience on the market – energy, energy efficiency, renewables, mining – these are all on a fast track all over the world. With added emphasis in Europe, and country specifics in Hungary. I see this as a key transition taking place over the next ten years. We’ll stay very busy in both energy and other regulated industries (such as waste management or environmental issues in automotive and healthcare).

Specifically, energy law requires meticulous attention to detail and specialization in the field. As well as the understanding of the technical aspects – if you don’t understand how the market works, what system balance or balancing capacity is – you can’t negotiate that contract. Sure, some commercial provisions may be the same, but we need to understand both the big picture and the medium level: what is happening on the market and why it’s happening. Energy is also a highly regulated market with clear specifics – e.g., transmission and distribution system operators, energy stock exchanges – those are quite particular players, and you need to know their responsibilities and codes so that you are ultimately able to elaborate legal solutions that take all of that into account.

In terms of mandates, I am certain we’ll see an increase in renewables, not just because of the EU and Hungarian energy strategies aiming to increase their presence in the energy mix, but because that’s the actual market situation: a lot of investors are doing renewable projects or seeking to invest there. We’re looking at growing photovoltaics, energy storage, wind, and geothermal markets. Renewables will be the biggest share of our work. Second, we’ll have new structures developed by commercial markets – various types of PPAs, for example, synthetic PPAs (a very exciting, basically financial structure) or sleeved PPAs (a multiplayer solution including generator, trader, and consumer) and the traditional corporate PPAs. And third: technology-intensive investments in the Hungarian market. There are some very special transactions aimed at the development of new technologies, to exploit geothermal energy or create balancing capacities, for example.

In my view, there will also be a more intense shift of focus, with traditional companies investing in e-mobility, for example, because of the simple necessity of people switching to electric vehicles. On top of all that, you will have to deal with a lot of quite new players – such as prosumers, aggregators, and energy communities in the mix as well – the integration of which will require smart grid solutions. Finally, the traditional hydrocarbon and energy trading sector will remain very important, as they are strategic market segments.

CEELM: As a partner, what are your plans for shaping the future of the law firm?

Hanis: As a partner, my vision for the future of Oppenheim is to build upon our strengths, ensuring that we remain competitive and responsive to the changing legal landscape. This involves not only maintaining our market visibility and attracting top talent but also focusing on client satisfaction and internal growth. By fostering a culture of excellence, collaboration, and innovation, we can continue to provide exceptional service to our clients while offering our team members meaningful opportunities for professional development. Ultimately, the success of our firm will be measured by our clients and colleagues.

A reorganisation of the authorities regulating the pharma sector and new legislative pieces have brought notable changes to the life sciences sector in Hungary.

The key changes over the last few months have been:

• The new centralised pharmaceutical administration body, the National Centre for Public Health and Pharmacy (Nemzeti Népegészségügyi és Gyógyszerészeti Központ (NNGYK)), has become the sole national authority for pharmaceutical, medical device, and food safety matters. The creation of the NNGYK was brought about in August 2023 by the merger of the National Institute of Pharmacy and Nutrition (Országos Gyógyszerészeti és Élelmezés-egészségügyi Intézet (OGYÉI)) and the National Public Health Centre (NPHC) (Nemzeti Népegészségügyi Központ (NNK)). The expectation is that the previously separate authority bodies, in many cases requesting each other’s assistance, will be able to operate in a more efficient, streamlined manner with shorter response times.
• New active substances and new indications were introduced to the list of reimbursed medicinal products with effect from 1 January 2024. This long-awaited piece of legislation expanded the list of medicines covered by social insurance funding. Decree nr. 50/2023 (XII.12.) amended previous legislation on the Social Insurance Funding of Medicines and on the Issuance of Financing Procedures. The new regulations will result in the inclusion of high-value medicines in 38 therapeutic areas, including 52 products in oncology, onco – hematology, chronic heart failure, Parkinson’s disease, and Wilson’s disease in social insurance funding.
• Late last year, Act XCI of 2023 was published on 21 December 2023, containing several amendments to laws affecting the supply of medicines in Hungary. It mainly amends pricing rules for certain medical devices, where products in certain categories may be sold at a price up to 5 percent higher than the price accepted as the basis for public funding. This amendment is particularly important for distributors operating in a retail system, where there have been no limits on the maximum price at which a distributor of a medical device may sell its product if it is supplied to another distributor and not to the end user. A separate ministerial decree is expected to determine the maximum price at which such medical devices can be sold.

By Peter Ihasz, Senior Associate, and Bence Andras Kiraly, Associate, Wolf Theiss

Gabor Pazsitka has joined Schonherr’s Budapest office as a Partner and the Head of the firm’s local Banking & Finance practice.

Before joining Schoenherr, Pazsitka was a Partner at Cerha Hempel for a year, at Jalsovszky for seven years starting in 2016, and at Hajdu & Pazsitka for nine years, between 2007 and 2015. He began his career with Linklaters in 2000 as a Trainee and spent seven years with the firm, eventually becoming a Managing Associate.

“I am delighted to welcome Gabor to our Budapest office,” Schoenherr Hungary Managing Partner Daniel Gera said. “Bringing in more than 25 years of experience in representing and advising clients on a diverse range of finance transactions, he is a perfect fit for our dynamic and rapidly growing practice. We are confident that Gabor’s experience and knowledge will benefit our clients and all of us at Schoenherr.”

Most of us have likely encountered a situation where we bought our favourite chocolate at the grocery store, only to be surprised upon opening it at home to find that the size and weight of the chocolate had decreased, while the packaging and price remained unchanged.

This phenomenon is called shrinkflation, which can occur not only with chocolate but with any pre-packaged product. To reduce or prevent this phenomenon, the Hungarian government has adopted Government Decree No. 1/2024. (I. 9.), which will come into effect on 1 February 2024. The decree imposes obligations on both retailers and manufacturers. If a specific product, defined as any pre-packaged item placed on the retail market and sold uniformly by the retailer in one or more size categories, is introduced to the market with significantly reduced weight or volume compared to the product manufactured by the producer between 1 January 2020 and 1 July 2023, the retailer is obliged to publish informative notices indicating the packaging change for the respective product. This obligation extends for a period of two months from the commencement of the product’s distribution. The decree must also be applied in cases where the affected product was placed on the market between 1 July 2023 and 1 February 2024, and the retailer continues to sell the product. If the retailer started selling the product between 1 July 2023 and 29 February 2024, and continues to sell the product, the obligation to inform consumers must be fulfilled starting from 1 March 2024.

Hence, if, for instance, the weight of a product decreases by 10%, while the price remains either unchanged or increases, the product is subjected the retailer’s disclosure obligation.

The retailer is exempt from this obligation if the manufacturer introduced the new, smaller packaging unit without discontinuing the previous packaging units within six months, and the retailer continues to sell the previous packaging units.

To meet the retailer’s disclosure obligation, in the case of manufacturing in Hungary, the responsibility lies with the manufacturer. In other cases, the first entity introducing the product into the Hungarian market, along with the wholesaler, are obliged to provide information to the retailer in the product’s accompanying documentation or in writing through other means regarding the reduction in the product’s packaging and the discontinuation of the previous packaging units.

The Hungarian manufacturer or the entity introducing the product into the Hungarian market for the first time, including wholesalers, must also provide the information given to the retailer to the National Food Chain Safety Office.

If the parties involved fail to meet their disclosure obligations, they may be subject to a consumer protection fine of HUF 1m (approx. EUR 2,580) per product.

By Daniel Gera, Office Managing Partner, and Akos Kovacs, Associate, Schoenherr

Ban & Karika Attorneys at Law recently announced that Partner Marton Karika has left the team in a move that became effective on February 1, 2024.

The nearly 15-member team, now operating as Ban & Partners, is led by Managing Partner Gergely Ban and Partner Peter Weidinger.

Karika had joined the team back in 2010, and spent 13 and a half years as a Managing Partner with the firm.

“We would like to take this opportunity to warmly thank Marton for nearly a decade of work and wish him the very best for the future,” the firm stated. “The same team will continue performing the same professional work, and we remain the exclusive Hungarian member of Act Legal and the LAWorld network.”

“We consider the new year and the new office structure as an opportunity with potential for growth,” Ban and Weidinger said in a joint statement. “We look forward to another exciting and prosperous year in 2024 together with our clients and partners!”

Oppenheim has recently announced the appointment of Peter Virag – formerly of DLA Piper – as Head of its Antitrust, Competition, and Trade team.

Virag has 15 years of experience in both EU and Hungarian competition law, according to Oppenheim. His main areas of practice include antitrust cases, merger control notifications, state aid-related advice, and consumer protection investigations.

Before joining Oppenheim, he spent eight years with DLA Piper, the last seven of which as a Senior Associate, after having started as an Associate in 2016. Earlier, he spent four years as a Case Handler with the Hungarian Competition Authority, a month as an ECN Official with the European Commission’s DG Competition, and two years with BNT as a Junior Associate, starting in 2009.

“I have had the privilege of working with Peter in the past and I am confident that his move to Oppenheim will contribute significantly to the further development of the practice,” Managing Partner Istvan Szatmary commented. “As I need to focus more on my management responsibilities, Peter will be responsible for leading the competition practice and further strengthening our presence in the market.”

“I’m proud to be joining one of the largest and most prestigious law firms in Hungary and I’m looking forward to working with Istvan again,” Virag added. “My first priority will be to serve our clients by providing them with sensitive solutions, but I will also focus on the further growth of the firm. The current team of five lawyers is a solid base for this challenge.”

On 15 June 2021, the Hungarian Parliament passed Act C of 2021 on Land Registration that was supposed to enter into force on 1 February 2023. As this deadline neared, it became evident that neither private citizens, companies, lawyers nor authorities were adequately prepared for the change.

This was why the legislator delayed the entry into force of the new law three times. The new act will finally go live on 1 October 2024. In the meantime, Governmental Decree No. 179/2023 was also passed. It includes detailed implementation rules, eliminating most uncertainties about the future everyday use of the new law.

The changes implement a fully electronic procedure into the real estate registration process that until now was paper based. In addition to several practical novelties for private citizens and companies, there will be major changes for lawyers.

Proven solutions under the previous regulation will remain, while a brand-new electronic database will be developed. The land registry procedure will thus be fully electronic, reducing procedural times and costs.

“Probably the newest change is that there will be automatic decision-making. In simpler cases this will enable the registration of ownership within only an hour.”

The complete land registry administration will be digitised and finally brought in line with modern requirements. Users will be provided with an additional service in relation to real estate data. There will be a so-called technical data sheet compiled from the data in the National Register of Buildings, which will provide specific technical and digital information. Another novelty is that certain data can be searched for, grouped and extracted in a non-formalised version for several properties at the same time according to the client’s request.

While the implementation phase of the new regulation will certainly pose challenges for all users, professional users eagerly anticipate the benefits of the new law. Real estate lawyers are currently talking about how the new system will affect those who deal with real estate daily. The new law establishes a 21st century land registry procedure in Hungary, supported by a 21st century IT system.

The new system addresses the following issues:

Speed

The current procedure is extremely slow, unless the applicant submits the application to the land registry where the property is located. Following the switch to the electronic procedure, the submission is registered immediately and can be arranged by any land registry in the country regardless of where the property is located.

Ranking

The relationship of an entry relative to others is determined by its rank. When submitting a land registry application, a rank is established with a document on which the registration is based (e.g. sale and purchase agreement). It is possible that, despite an initially unnoticed formal defect, the administrator registers a side note and any potential deficiencies may only become apparent during the subsequent verification process. According to the new regulation, the application data are immediately verified by an IT system. Only appropriate and formally complete applications will be automatically side-noted.

Priority

In terms of order of priority, problems were caused by applications signed on the same date. Since they related to the same property, they were submitted on the same day and to the same land registry. In an electronic procedure, priority will no longer be based on the same day, but on the same second. Since the IT system will register the receipt of files to the second, it will exclude the possibility of files being submitted at the exact same time.

Pending procedure

In most cases, the registration application is handled by a pending procedure, for a period not exceeding six months from the submission of the application. Under the new legislation there will no longer be a pending procedure, but the purchaser’s right will be recorded on the title deed. If the purchaser’s right was registered on the title deed, the land registry will automatically suspend the ranking of any upcoming submissions.

Data updates

The owner’s and other rightsholders’ data are often out of date on the title deed, making it difficult to identify the property and the rightsholders. Under the upcoming regulation, the IT system connected to the land registry will automatically update the data on the property and the rightsholders.

Recording of lawsuits

Transaction safety requires that lawsuits must be recorded on the title deed. Under the new rules, the courts will notify the land registry at the same time as the application is sent to the defendant.

Land registries have already distinguished themselves positively compared to other public administrative bodies in Hungary, particularly when it comes to the operation and efficiency of Capital Land Registries. After the new regulation comes into effect, procedural difficulties will be a thing of the past and the land registry will enter the 21st century.

“After the new regulation comes into effect, procedural difficulties will be a thing of the past and the land registry will enter the 21st century.”

By Laszlo Krupl, Partner, Schoenherr Hungary