Category: Hungary

Pontes Budapest has advised BayWa AG on the sale of its Aufwind Schmack Elso Biogaz Szolgaltato subsidiary operating the Szarvas biogas power plant to Hungary’s MOL Group.

The BayWa Group is a Munich-based company that operates in 14 countries in the agriculture, building materials, and energy sectors.

“The acquisition of the power plant – having one of the most significant production capacities in the CEE region – fits into MOL’s new sustainability strategy,” Pontes reported, with the company’s primary goal to further expand its sustainability portfolio and accelerate the green energy transition. The power plant is located in an area where MOL is active in research and production activities.

The waste processing facility uses organic waste to generate electricity and heat, with a peak electricity capacity of 4 megawatts. The plant processes more than 40,000 tons of waste from the region’s meat production and another 53,000 tons of residual waste from neighboring livestock and meat processing farms annually. In addition, about 18,000 tons of agricultural substrate are used as raw material for the plant, which produces more than 12.5 million cubic meters of biogas.

“The purchase of the Szarvas Biogas plant is a great opportunity for us, since in addition to being able to take advantage of valuable synergies within the company, we can also support the EU’s energy independence efforts,” MOL Group Director of Downstream New and Sustainable Businesses Adam Horvath commented. “With the acquisition, we contribute to the implementation of the REPowerEU action plan, which treats biogas and methane production as a priority area.”

Pontes Budapest did not respond to our inquiry on the matter.

With the Schrems II judgment, which invalidated the Privacy Shield, the CJEU (Court of Justice of the European Union) make it more difficult to comply with the GDPR for companies transferring personal data from the EU to the US. However, the new EU-US Data Privacy Framework (or “Framework”) adopted on 10 July aims to put an end to this situation. But how does the Framework make data transfers between the EU and US easier? In this short article, we explain the basics of the new Framework and answer the above question.

Background

Based on the adequacy decision that preceded the new EU-US Data Privacy Framework, the so-called Privacy Shield, adopted in 2016, US companies could register under the Privacy Shield and once they did so, the European Commission recognised that the US provided adequate protection for personal data transferred to such companies. This meant that no additional safeguards were needed for data transfers to such companies.

However, the CJEU, in the 2020 Schrems II judgment, invalidated the Privacy Shield stating that US laws did not provide adequate protection, in particular, due to the excessive rights of the national security organisations and lack of appropriate legal remedies.

In the absence of the adequacy decision, parties making such transfers should have applied a complex set of rules providing other additional safeguards, most commonly the standard data protection clauses adopted by the European Commission.

However, following the negotiations between EU and the US, the US passed a legislation aimed at addressing the problems identified in the Schrems II judgment.

EU – US Data Privacy Framework

After the above-mentioned legislation, the European Commission concluded that the US now ensures an adequate level of protection for personal data transferred from the EU to companies participating in the EU-US Data Privacy Framework.

The Commission has based its decision on the following.

The Framework, by adopting new set of rules and binding safeguards, limits access to EU data by US intelligence services to what is necessary and proportionate.

Moreover, the new Framework provides access for EU citizens to an independent and impartial redress mechanism regarding the collection and use of their data by US intelligence agencies, which includes a newly created Data Protection Review Court (DPRC).

Based on the above, personal data can be transferred to US companies participating in the EU-US Data Privacy Framework without being subject to any further conditions or authorisations. Consequently, the transatlantic data transfers may be based on solely on the Framework, instead of the currently used standard contractual clauses.

Certification of the US companies

It is noted that to participate in the Framework, US companies, shall, of course, comply with Framework, and, similar to the previous Privacy Shield, make a certification application to be added to the “Data Privacy Framework List”.

Once the US organisation are placed in the above-mentioned List, it can receive personal data on the basis of the Framework.

Moreover, US companies, who are already registered in the previous Privacy Shield, can rely immediately on the Framework but they shall also take actions to comply with the new Framework until 10 October 2023, for instance, they need to update their privacy policies.

Summary

After the invalidation of the Privacy Shield, the situation for companies that transfer a personal data to the US has become more difficult, as companies should apply specific data protection clauses to each transfer to the US.

However, the recently adopted EU – US Data Privacy Framework remedied the problems identified in the Schrems II judgment, subsequently, according to the European Commission, the US now provides the effective legal protection as well as the right to an adequate judicial remedy for those whose personal data are made available to US national security organisations.

The adoption of Framework significantly makes it easier to transfer personal data from the EU to the US, as a certified US company can receive personal data from the EU solely based on the Framework instead of the currently used standard contractual clauses.

However, it is noted that US companies, can only use the Framework if they apply for certification and they are added to the Data Privacy Framework List.

Those US companies, who are already registered in the previous Privacy Shield, are in a better position as they can rely immediately on the Framework, but they shall also take actions to comply with the new Framework until 10 October 2023.

By Peter Korozs, Junior Associate, SmartLegal Schmidt & Partners

Based on the GDPR, data controllers have several obligations, such as maintaining the records of data processing or in case of joint controllers, entering into an agreement which determines their respective responsibilities for compliance with their data protection related obligations. In a recent case, the Court of Justice of the European Unio (‘CJEU’) needed to decide on the issue whether the non-compliance with these obligations constitutes unlawful processing resulting in the duty to erase the personal data of the data subject.

Background

Regarding the factual background of the case, the German Federal Office for Migration and Refugees (‘Federal Office’) rejected the applicant’s application for internal protection. The applicant attacked this decision before the administrative court; thus, the Federal Office sent an electronic file containing the applicant’s personal data to the court via the electronic court and administrative mailbox.

The administrative court had doubts as to whether the maintenance and the transmission of the electronic file complied with the GDPR for two reasons. First, the Federal Office did not produce a complete record of the processing activities relating to the electronic file in accordance with Article 30 of the GDPR. Second, in disregard of Article 26 of the GDPR, no national legislation governs the transmission of the electronic file, and the Federal Office did not provide an agreement on the joint responsibility.

In the above context, the German administrative court asked the CJEU whether the failure of the controller to comply with the accountability principle of the GDPR (Article 5), specifically not concluding an agreement determining joint responsibility for processing and not maintaining a record of processing activities constitutes unlawful processing conferring on the data subject a right to erasure or restriction of processing.

The decision of the CJEU

The CJEU recalled that the lawfulness of processing is precisely the subject of Article 6 of the GDPR. This means that a data processing may only be lawful if one of the six conditions set forth in Article 6 is met, for example if the data subject has given consent to the data processing or the data processing is necessary for the performance of a contract or for the legitimate interests of the controller.

However, compliance with the obligation laid down in Article 26 of the GDPR to conclude an arrangement determining joint responsibility for processing and the obligation to maintain a record of processing activities laid down in Article 30 is not among the grounds for lawfulness of processing set out in Article 6 of the GDPR.

Thus, the infringement of Articles 26 and 30 of the GDPR does not constitute unlawful processing in the sense of the right to erasure (Article 17 1. (d)) or of the right to restriction of processing (Article 18 1. (b)), since this breach as such does not mean that the controller violates the principle of “accountability” (Article 5).

This means that the ‘sanction’ of the violations of Article 26 and 30 of the GDPR is not the erasure of the personal data or the restriction of the data processing, but other corrective actions provided for by the GDPR, such as the obligation to bring the processing operations into compliance with the GDPR, the lodging of a complaint with the supervisory authority, or compensation for any damage caused by the controller.

Lesson learnt

The decision of the CJEU presented above is important because it makes a clear differentiation between the legal basis of the data processing and the “secondary” data protections related obligations of the controllers (and processors) under the GDPR.

The CJEU clarified that the lawfulness of the processing activity depends solely on the questions of whether a legal basis (based on Article 6) exists in relation with the data processing. In case the appropriate legal basis is missing, the data subject may demand the erasure of his personal data or the restriction of the data processing. By contrast, if the data processing has a legal basis in accordance with the GDPR, nevertheless the controller fails to comply with other obligations provided for by the GDPR, other corrective actions may be implied.

By Anita Vereb, Attorney-at-lawda, SmartLegal Schmidt & Partners

Vodafone Hungary Head of Regulatory Magdolna Csomor has joined 4iG as Deputy Head of Group Regulatory.

Csomor has been serving as the Head of Regulatory at Vodafone (acquired by 4iG as reported by CEE Legal Matters on January 24, 2023) since 2019, and will continue in that role as well. She first joined the company in 2017 as a Senior Legal Advisor.

Before that, she was a Senior Legal and Regulatory Counsel with Invitel between 1993 and 2017. Between 1991 and 2002 she was a Senior Legal Advisor with Leo Burnett Group. She also worked for Synergon and OTP Bank.

“I got a great opportunity to continue my career as the Deputy Head of Group Regulatory at the Hungarian 4iG Group,” commented Csomor. “As a result of several large-scale acquisitions in Hungary and the Western Balkans, 4iG transformed from a stand-alone IT player into a challenger in digital technology and IT-telco convergence as a regional technology/info-communications group. I have spent several decades in the telco industry as a legal and regulatory counsel. I have great practice both in mobile and fixed regulations. I have worked for incumbent and also for alternative operators. This an exciting challenge to be one of the professional leaders of this innovative challenger tech group.

Originally reported by CEE In-House Matters.

Hengeler Mueller has advised Muhr und Bender on the acquisition of RUAG International Holding’s aerostructures activities in Oberpfaffenhofen and Eger. Baker McKenzie, and reportedly Pestalozzi, advised RUAG International Holding. Reportedly, Lakatos, Koves & Partners and Novalex advised Muhr und Bender as well.

The transaction is contingent on regulatory approval.

According to Hengeler Mueller, “Mubea with its headquarters in Attendorn, Germany, is a lightweight specialist for automotive and aerospace components. As part of a strategic development, Mubea is taking over approximately 1000 employees at the German production site in Oberpfaffenhofen and the Hungarian production site in Eger. Both sites will generate sales of approximately EUR 200 million in 2023.”

The Hengeler Mueller team included lawyers in Berlin, Munich, Brussels, and Frankfurt.

The Baker McKenzie team included Budapest-based Managing Partner Akos Fehervary, Associates Daniel Orosz and Dominik Csacsu, and Junior Associate Gabor Hajduk as well as further team members in Munich.

Editor’s Note: After this article was published, Lakatos, Koves & Partners confirmed it had advised Muhr und Bender as well. The firm’s team included Partner Adam Mattyus, Counsel Pal Rahoty, Senior Lawyer Nora Szigeti, and Lawyer Kornel Dirner.

The Court of Justice’s strike on protectionism in favor of ‘strategic companies’ in the Member States.

Introduction

Secure and continuous access to raw materials is pivotal for any industry, especially for strategic sectors, which was highlighted by the COVID-19 crisis. The construction sector is certainly a sector of strategic importance, in which Member States have a legitimate demand to guarantee the security of supply. From a national perspective it is understandable that the more ‘locally’ established the whole supply chain is, the more likely it is to function reliably in case of a crisis. Green considerations also seem to support this view, as rethinking global supply chains could lead to less transportation and shipping, which means lower emission and pollution rates. It is also clear that the majority of governments would like to see a flourishing national construction industry, dominated by national champions and SMEs.

However justified they may seem, protectionist measures carried out even in the post-COVID world by Member States must still comply with the core principles of EU law, most importantly, the fundamental freedoms of the internal market. Delivered on 13 July 2023, judgment C-106/22 (‘Judgment’) of the Court of Justice of the European Union (‘CJEU’) reaffirmed this expectation by confirming that national measures that hinder acquisition of strategic sectors by foreign-owned companies infringe the free movement of capital.

Background

One of the key players of the case at hand was Xella Kft. (‘Xella’), a Hungarian company manufacturing concrete construction products. Xella is 100% owned by a German company, which is in turn 100% owned by a Luxembourg company, Xella International SA. The ultimate parent company of the Xella group is, however, registered in Bermuda, and belongs to an Irish national.

The other actor of the case was Janes és Társa Kft. (‘Janes’), a Hungarian company owned by another Hungarian company, operating a gravel, sand and clay mine. Janes’ key client had already been Xella, purchasing the majority of the raw materials quarried by Janes for its concrete production. In 2022, Xella decided to acquire 100% of the shares in Janes, leading to a case that resulted in a ruling of the CJEU.

Janes’ activity of quarrying gravel, sand and clay entailed the designation of a ‘strategic company’, within the meaning of Section 276(3) of the Vmtv, a Hungarian legislation enacted during the COVID-19 pandemic aiming at inter alia the protection of public interest in the safety and operability of supply chains in strategic sectors. Upon acquiring these strategic companies, Vmtv. required filing a notification to the Minister for Technology and Innovation (‘Minister’) seeking approval of the proposed transaction. In the case at hand, however, upon Xella’s notification, the Minister, prohibited the implementation of the transaction , on the ground that the acquisition of the Hungarian company would endanger the ‘national interest’ referred to in the Vmtv.

The parties challenged the decision of the Minister on the ground that it did not contain exhaustive justification for the prohibition prescribed by the Vmtv. As the competent court, the Metropolitan Tribunal annulled the decision and instructed the Minister to conduct a new procedure. Nevertheless, by his second decision (‘Decision’), the Minister once again prohibited the implementation of the transaction, on the ground that the transaction would mean – inter alia – a risk of prejudice to or endangerment of the interests of the State, public security, public order in Hungary, in particular with regard to the security of supply of basic social needs, as per the Vmtv.

The Decision stated that if Janes would be indirectly acquired by a company registered in Bermuda (a ‘foreign investor’ under the Vmtv.), this could pose a risk to the security of supply of raw materials in the construction sector. In addition, the Decision added that ‘the acquisition by a foreign owner of a strategic company would reduce the proportion of domestic-owned companies, which could harm the ‘national interest’, in the broad sense’ , given that the construction sector in Hungary is already dominated by foreign actors.

The Decision was challenged by Xella, who argued that it constituted ‘arbitrary discrimination or a disguised restriction on the free movement of capital in the light, inter alia, of Articles 54 and 55 TFEU, which afford, in parallel, the benefit of freedom of establishment to companies established in the European Union’. Xella also stated that its final owner is a Union citizen and argued that the blurry concept of ‘national interest’ in the Vmtv. might go contrary the principles of rule of law.

The Metropolitan Tribunal stayed the proceedings and asked the CJEU, in essence, whether Article 65(1)(b) TFEU should interpreted as meaning – having also regard to recitals 4 and 6 of Regulation 2019/452 and to Article 4(2) TEU – that it permits laying down rules such as those of the Vmtv.

The CJEU’s findings

The CJEU stated at the outset that, although the transaction was not governed by Regulation 2019/452 (which provides for framework for the screening of foreign direct investments (‘FDIs’) into the Union), the ownership structure of the foreign investor may of course be taken into account when assessing the potential risk to security or public order posed by the respective investment. The CJEU added that although Xella is part of a group of companies whose ultimate parent company is established in a third country, it ‘has the right to rely on the freedom of establishment guaranteed by the TFEU since it is connected to the legal system of a Member State and is therefore an EU company’. Thus, the CJEU decided the case on the TFEU provisions on freedom of establishment.

Naturally, such rules cannot be relied on in a situation which is confined within a single Member State. In this respect, however, the cross-border ownership structure of Xella could be considered to constitute the necessary ‘foreign element’ which entailed the applicability of the TFEU.

As regards the Vmtv.’s respective provisions as applied by the Decision at issue, the CJEU firstly stated that, in so far as they allow the authorities of a Member State to ‘prohibit an EU company, on grounds of security and public policy, from acquiring a shareholding in a ‘strategic’ resident company […] clearly constitutes a restriction on the freedom of establishment of that EU company, in this case a particularly serious restriction’.

As the national law was found to be in breach of the freedom of establishment, the CJEU went on to assess whether their provisions could amount to the well-settled case law of overriding reasons relating to the public interest. In order to be acceptable, the respective national measure must (i) be appropriate to ensure that the objective it pursues and (ii) must not go beyond what is necessary to achieve it.

The CJEU inferred that the Vmtv. was intended to protect the ‘specific national interest in ensuring the security and the continuity of supply to the construction sector, in particular at the local level’. Although TFEU 51(1) allows for a restriction of the freedom of establishment on the grounds of public policy, public security or public health, the CJEU highlighted that purely economic considerations, such as the promotion of the proper functioning of the national economy cannot justify the restriction of a fundamental freedom. Similarly, public policy and security grounds cannot be relied on by Member States to serve purely economic considerations.

In connection with the security of supply, the CJEU held that such a motive may only be relied on in case of a ‘genuine and sufficiently serious threat’ to a fundamental interest of society. However, unlike the sectors of telecommunication, petrol or energy, the CJEU did not find the excavation of gravel, sand and clay a ‘fundamental interest of society’ that would justify the above restriction. Furthermore, the CJEU could not verify that the proposed acquisition would give rise to a ‘genuine and sufficiently serious threat’, especially since the major purchaser of Janes’s raw material had already been Xella.

Consequently, the CJEU held that the provisions of the TFEU on freedom of establishment preclude a national foreign investment screening mechanism that prohibits the acquisition of a resident company (even if regarded as strategic) by another resident company of a foreign background on the ground that the transaction risks harming the national interest in ensuring the security of supply to the construction sector. The respective provisions of the Vmtv., thus, were held to be contrary to Union law.

The broader context

In addition to the above Judgment, Hungarian measures in the construction sector have already been placed under strict scrutiny by the European Commission (‘Commission’). In its 2023 Country Report on Hungary, the Commission raised concerns over the adverse business environment of foreign-owned companies, especially those producing cement and ceramic materials.

In addition, soon after the Judgment, the Commission announced to bring Hungary before the CJEU in the framework of an infringement procedure launched over national rules fixing prices for specific construction materials, and providing for a 90% penalty on the difference between fixed prices and sale prices exceeding the fixed prices. The Commission is also concerned that the national rules require economic operators to maintain fixed output levels, regardless of whether they are economically justified. In the Commission’s view, these national measures may infringe Article 49 TFEU on the freedom of establishment and go against the EU Single Market Transparency Directive.

The Hungarian Competition Authority also conducted various expedited sector inquiries into the product markets of ceramic and wooden construction materials, and also the insulation market. In these, the Authority formulated recommendations for various legislative interventions in favor of the consumers, mostly to tackle rising prices by creating long-term strategies and strengthening domestic production.

Although on a different legal basis, back in 2021 Hungary also prohibited the acquisition of AEGON’s Hungarian subsidiaries by the Austrian VIG, arguing that the transaction would threaten Hungary’s legitimate interests. The Commission investigated the case and found that the prohibition of the transaction infringed the freedom of establishment, hence was contrary to Article 21 of the EUMR.

In conclusion, although cropping supply chains especially in the construction sector would possibly serve national and green considerations at the same time, EU Member States must be aware to implement these ambitions without infringing the fundamental freedoms of EU law.

By Tamas Simon, Junior Associate, Baker McKenzie 

Smart grids are rapidly becoming the backbone of modern electricity networks. The integration of digital communication and control technologies enables smart grids to optimize electricity generation, distribution, and consumption. However, the increased use of digital technologies and the massive amounts of data generated also raises serious concerns about data security. This article will explore the data security concerns around smart grids.

What is a Smart Grid?

Smart grids integrate a wide range of technologies, such as sensors, meters, and automation systems, that enable real-time monitoring and control of the grid. They also allow two-way communication between electricity providers and consumers, enabling consumers to manage their energy consumption better and participate in demand-response programs.

Data Security Concerns on Smart Grids

Smart grids generate massive amounts of data that can be highly sensitive and valuable. This includes information about energy consumption, production, and distribution, as well as about the state of the grid, such as voltage and frequency. This data can be used to optimize the grid’s performance and improve energy efficiency. However, the same data could also be used by malicious actors for nefarious purposes such as hacking, data theft, and cyber-attacks. The following are some of the data security concerns about smart grids.

Cybersecurity Threats

Smart grids are vulnerable to cybersecurity threats like hacking, malware, and denial-of-service attacks. Hackers could exploit vulnerabilities in smart grid devices and systems to gain unauthorized access to the grid and steal sensitive data. Malware can be used to disrupt the operation of the grid, causing power outages and other disruptions. Denial-of-service attacks can overload the grid with traffic, making it difficult to manage and control.

Privacy Concerns

Smart grids generate a vast amount of data about energy consumption, which can reveal sensitive information about consumers’ daily habits and routines. This information could be used to infer personal details such as when someone is home, what appliances they use, and their daily routines. This could be valuable to third-party companies for targeted advertising or other purposes, but malicious actors could also use it for identity theft and other criminal activities.

Data Protection

Smart grids are subject to various data protection regulations, including the General Data Protection Regulation (GDPR) in Europe and the California Consumer Privacy Act (CCPA) in the United States. These regulations require electricity providers to ensure that the data generated by smart grids is protected and used only for legitimate purposes. Failure to comply with these regulations can result in significant fines and reputational damage.

Legacy Systems

Smart grids are often built on top of legacy systems that were not designed with cybersecurity in mind. These legacy systems can be vulnerable to cyberattacks and provide a pathway for hackers to access the smart grid. Integrating legacy systems with modern smart grid technologies can also create vulnerabilities that malicious actors can exploit.

Supply Chain Risks

Smart grids rely on a complex supply chain that includes a wide range of components and systems, from sensors and meters to communication networks and control systems. Each of these components represents a potential vulnerability that hackers can exploit. Electricity providers must ensure that their suppliers and vendors follow best practices for cybersecurity and data protection to minimize these risks.

Smart grids are an essential component of modern electricity networks, enabling the optimization of energy generation, distribution, and consumption. However, the increased use of digital technologies and the massive amounts of data generated by smart grids also raises serious concerns about data security. Electricity providers need to take a proactive approach to data security and implement robust cybersecurity and data protection measures to minimize the risks of cyberattacks.

By Robert Szuchy, Office Managing Partner, BSLaw Budapest – Szuchy Law Office

On 13 June 2023, the Hungarian Parliament adopted a new law regulating the employment of foreign workers. The law introduces the concept of guest workers (third-country nationals from countries outside the EEA and from non-neighbouring countries) and establishes guidelines for their employment in Hungary.

Previously, Hungarian employers could hire third-country nationals who successfully applied for a combined work and residence permit (Single Permit). The new law introduces a guest worker residence permit, which can be obtained by citizens of countries that do not neighbour Hungary and countries outside the European Economic Area, as determined by a separate ministerial decree (yet to be adopted). Additionally, the decree will specify the total number of guest workers allowed each year, and the maximum number of guest workers per country. The legislation also restricts the employment of guest workers to specific jobs, with the details to be regulated by the ministerial decree.

The law defines a limited group of employers who can hire guest workers. These include employers implementing investments of national economic importance, employers with partnership agreements within the Key Exporter Partnership Program, and qualified temporary-work agencies.

An advantage of the guest worker residence permit is that no expert opinion needs to be obtained from the labour authority. This streamlines the decision-making process, enabling guest workers to start working in Hungary sooner.

Initially, the guest worker residence permit can be requested for two years, similarly to the combined permit. However, the permit can only be extended for up to three years from its first issuance, while the “classic” combined permit allows for periodic two-year extensions. Another downside is that guest workers’ relatives may not apply for a residence permit for family reunification if they accompany the guest worker to Hungary.

It is important to note that the law places increased responsibility on employers regarding guest workers. If a guest worker fails to leave the European Union when their residence permit expires, the employer is obliged to cover the costs associated with their expulsion, deportation and possible detention by immigration authorities if the guest worker cannot bear these expenses.

Overall, the new law on the employment of foreign workers introduces the concept of guest workers and provides regulations for their employment in Hungary. While it simplifies certain aspects of the process, it also poses limitations and responsibilities for both the workers and their employers. Experts argue that the new legislation was necessary to tackle labour shortages, particularly in the context of significant national investments. While it remains to be seen whether the legislation will sufficiently ease workforce shortages, it appears to be a necessary step in that direction. The new law will enter into force on 1 November 2023.

By Daniel Gera, Office Managing Partner, and Dora Halmosi, Associate, Schoenherr

The EU Directives on Work-life balance and on Transparent and predictable working conditions were introduced into the Hungarian national legislation in January 2023 and brought about significant changes and obligations for employers. What do they mean for businesses? 

This report is designed to help companies to understand the requirements and how they have been implemented.

Implementation of EU Directive on Work-Life Balance (EU Directive 2019/1158)

Has the directive been implemented in the jurisdiction?

Yes.

What is the status of the implementation or draft implementation?

The Hungarian Parliament has adopted the amendment to the Hungarian Labour Code (Act I of 2012 on the Labour Code) and that is implementing the directive. The amendment came into force on 01 January 2023.

What are the key changes for employers and employees?

1. Paternity leave (“apasagi szabadsag”)

• The leave is to be used by a father (birth or adoptive) to care for a child.
• The leave lasts up to 2 weeks (10 working days).
• It can be taken at the latest up until the end of the second month following the birth of the child, or in the case of adoption, after the decision authorising the adoption becomes final.
• It qualifies as service period for the purpose of notice period and severance payment calculation.

The leave will be paid:

1. From day 1 to 5: 100% of the absentee pay
2. From day 6 to 10: 40% of the absentee pay.

2. Parental leave (“szuloi szabadsag”)

• This is a new type of leave.
• Both parents are entitled to it.
• Its length is 44 days.
• Conditions: the employee shall have a service period of at least 1 year, and it can be taken until the child’s 3rd birthday.
• It qualifies as service period for the purpose of notice period and severance payment calculation.
• It is paid at a rate of 10% of the employee’s absentee pay minus any child-care benefits paid for the same period.

3. Release from work for caregivers

• Employees shall be released from work for 5 days per year to care for or support a relative in need of significant care or support, or a person living in the same household as the employee, for a serious health reason.
• This leave is unpaid.
• It qualifies as service period for the purpose of notice period and severance payment calculation.

4. Flexible working arrangements

• Parents of children aged up to 8 years and caregivers who have a service period of at least 6 months can request flexible working conditions relating to the place of work and working schedule, or they can request telework or part-time work.
• The employer’s decision concerning the requests outlined above cannot be discriminatory and must be objectively justified. The court may provide the consent of the employer.

5. Protection

• The employer – at the employee’s request – even in the absence of the obligation to provide reasons, shall provide reasons for the termination of the employment relationship, if, according to the employee’s reference, the termination of the employment relationship occurred, because the employee exercised his/her right to: (i) take days off to care for or support a relative in need of significant care or support, or to a person living in the same household as the employee, for a serious health reason; (ii) take paternal or parental leave; (iii) go on unpaid leave to care for his/her child; or (iv) request flexible employment.
• The employers are not allowed to terminate the employment relationship with ordinary dismissal during the periods of paternity leave, parental leave and release from work for caregivers.
• For a child born after 02 August 2022, the father may also be entitled to additional paternity leave, and if the employee’s child turns 3 between 02 August 2022 and 30 June 2023, parental leave shall be allocated at a time that corresponds to the employee’s request during the period preceding 30 June 2023 at the latest.

What are the main actions for HR departments in preparing for the changes?

• Review, revise and prepare HR documentation such as:
  • Policies, processes and forms;
  • Objective criteria for granting flexible working conditions;
  • Job descriptions, to assess whether flexible working conditions can be applied.
• Training to acquaint HR colleagues with the new rules.

Implementation of EU Directive on Transparent and Predictable Working Conditions (EU Directive 2019/1152)

Has the directive been implemented in the jurisdiction?

Yes.

What is the status of the implementation or draft implementation?

The Hungarian Parliament has adopted the amendment to the Hungarian Labour Code (Act I of 2012 on the Labour Code) and that is implementing the directive. The amendment came into force on 01 January 2023.

What are the key changes for employers and employees?

1. Probation period

• In the case of a fixed-term employment relationship being extended, or the re-establishment of a fixed-term employment relationship within 6 months of its termination, no probation period shall be stipulated for the employment in the same or a similar position.
• The duration of the probation period shall be proportionate in the case of an employment relationship that is established for a maximum of 12 months.

2. New elements of the information on employment terms which should be provided to the employee within 7 days of work starting

• Start date and term of the employment relationship;
• Place of work;
• Days of the week on which working time can be scheduled;
• Possible start and end time of the scheduled daily working time;
• Possible duration of overtime work;
• Specific nature of the employer’s business activity;
• Number of vacation days;
• Rules relating to the termination of employment, in particular those rules for determining the notice period;
• Employer’s training policy and the amount of time available for training the employee;
• The name of the authority to which the employer pays public charges relating to the employment relationship.

3. Information regarding posts abroad

New elements of information that the employer is obliged to provide:

1. Remuneration applicable at the place of work, as well as the rules and conditions relating to the reimbursement of travel, food and housing expenses.
2. The availability of the single official national website that contains important information relating to the rights and obligations of the employer that is providing cross-border services and of the employee that it sends to do the work.

4. Cost reimbursement

• Employers must provide employees free of charge with all training required to perform their tasks that is requested by the laws of the EU, national laws or collective bargaining agreements.
• The employer shall bear the necessary and reasonable cost of the mandatory training required to perform the job, and its duration is included in the employee’s
  working time.

What are the main actions for HR departments in preparing for the changes?

• Harmonisation of the employee notification letter, employment agreement and other documents with the new rules.
• Preparation of the training policy.
• Amendment of the letter informing the employee that they are being posted abroad and about the terms of
  the posting.

By Brigitta Gal, Head of Employment Practice, and Lili Albert, Senior Associate, Deloitte Legal

This communication contains general information only, and none of Deloitte Touche Tohmatsu Limited (“DTTL”), its global network of member firms or their related entities (collectively, the “Deloitte organization”) is, by means of this communication, rendering professional advice or services. Before making any decision or taking any action that may affect your finances or your business, you should consult a qualified professional adviser. No representations, warranties or undertakings (express or implied) are given as to the accuracy or completeness of the information in this communication, and none of DTTL, its member firms, related entities, employees or agents shall be liable or responsible for any loss or damage whatsoever arising directly or indirectly in connection with any person relying on this communication. DTTL and each of its member firms, and their related entities, are legally separate and independent entities.

Hungary has adopted new laws covering various areas, prioritizing electronic registration processes and the construction industry, while also making significant advancements in the energy field, according to Nagy es Trocsanyi Partner Orsolya Kovacs.

“Digitalization is a constant point of discussion for Hungarian lawyers, and it goes beyond just concerns about artificial intelligence,” Kovacs says. “In particular, the recent legislative updates related to e-procedures make it one of the prominent topics in Hungarian lawyers’ live.”

According to Kovacs, starting from February 1, 2024, there will be a new property and real estate registry system in Hungary, known as the e-land registry system. “This transition is not merely an electronic system update but a multifaceted procedure,” Kovacs emphasizes. “Lawyers will be required to take an exam to acquire a certificate enabling them to access the electronic system and perform official registrations. Given that this process encompasses legal and technical complexities, it may be particularly demanding for lawyers.”

Another notable legislative development, according to Kovacs, is related to the construction and real estate sectors. “The entire construction industry is affected by the impending implementation of laws, such as the changes in the law on public construction and the new Act on Construction, which is still in the preparatory phase. These changes are scheduled to be implemented this autumn. In addition, there is new legislation on the construction right which is a marketable right based on which the holder has the right to construct a building and use the real property for this purpose, as well as the right to possess, use, and benefit from the building constructed” she says. “Numerous discussions have been made by the concerned sectors regarding these developments.”

“Additionally, recently, our focus has shifted towards energy and renewable energy sources laws,” Kovacs continues. “It applies not only to energy regulations but also incentives, subsidies, and the various company structures involved in operating energy businesses, including both renewables and non-renewables. The prices of energy have become a significant topic of discussion here in Hungary, particularly due to the increase in energy prices during the crisis and following the onset of the war.” According to her, the conclusion of PPAs at high prices has become a major issue for the economy, “as all participants in the economy are burdened with these elevated costs. As a result, production expenses have risen, making it challenging to manage economic stability.”

“In terms of litigation, we are facing a special type of litigation cases in Hungary related to cartel damages,” Kovacs says. “The key concern is how to effectively recover these damages if any. In Hungary, a specific law is known as the ‘presumption of 10%,’ which assumes that the prices are 10% higher than normal prices, making litigation a very complex process,” she adds. “Other than that, the economy is facing challenges with slow growth, but specific e-commerce transactions are experiencing a notable increase,” Kovacs concludes.