Category: Hungary

The amended Rules of Proceedings of the Arbitration Court attached to the Hungarian Chamber of Commerce and Industry (hereinafter referred to as “Rules of Proceedings”) entered into force on 31 December 2022, which apply to proceedings commenced on the date of the entry into effect or thereafter.

Some of the amended provisions seek to address problems and issues that have arisen in practice, including amendments that introduce significant changes. Other new provisions make minor changes or clarify the previously effective rules. Below is a summary of the main changes introduced in the Rules of Proceedings.

In this article, we cover:

• the most important amendments to the Rules of Proceedings
• the relevance of the amendment and
• what should be considered in proceedings under the amended Rules of Proceedings

1. Most important amendments to the Rules of Proceedings and their relevance

Stay of the arbitration

One of the most significant amendments is the inclusion in the Rules of Proceedings of the provisions on the stay of proceedings. The relevance of this lies in that the parties agree to arbitrate in order to obtain a prompt, binding resolution of their dispute in a single contractually-selected forum. A stay of arbitral proceedings is therefore prima facie contrary to the parties’ agreement to arbitrate their disputes. There are, however, several cases and circumstances which can (and have in practice) justified a stay of proceedings. However, in the absence of provisions on the stay of proceedings, the agreement to stay proceedings by the parties could only be reached on the basis of Article 31 of the Rules of Proceedings, which was practically the only way to achieve the stay of proceedings. However, even in the event of such an agreement, the issue arose that the parties did not generally agree on the details of the stay of proceedings and their conduct often led to a protraction of the proceedings. To remedy these issues, Article 5 of the Rules of Proceedings has been amended to lay down provisions on the stay of proceedings.

According to the new provisions, the proceedings are stayed if

• legal succession occurs on any party’s side, or
• the arbitration is hindered for reasons beyond control, or
• the arbitral tribunal suspends the proceedings until a preliminary issue affecting the outcome of the proceedings on the merits is decided by authority or court, or
• the parties submit a mutual request on the stay of the proceedings.

Article 5 of the Rules of Proceedings also stipulates that upon the first jointly submitted request of the parties the arbitral tribunal shall order, upon each further joint request it may order the staying of the proceedings. During the course of an arbitration the duration of the stay shall not exceed six months.

The Rules of Proceedings do not lay down detailed rules in this context, that is not their function, rather it is to lay down the foundations of the provisions on the stay of proceedings, which is fundamentally alien to the institution of arbitration. However, the declaring of a preliminary question as a ground for suspension in the case of a stay of proceedings or the establishment of a time limit in the case of a mutual request for a stay, pay regard to the original purpose of the arbitration agreement and at the same time to the potential need for a stay of proceedings.

Delivery of the decisions of the arbitral tribunal

The arbitral tribunal may, in consultation and agreement with the parties, determine the specific form of delivery, for example, it may provide that communications between the arbitral tribunal and the parties shall be by electronic means only. Thus, in practice, it is often the case that the parties receive the arbitral tribunal’s decision by e-mail beforehand, only after which the Secretariat of the Arbitration Court serves the hard copies. As a result, determining the date of delivery to a party has therefore raised problems in practice.

Therefore, in relation to the rules on delivery of documents, a new provision has been introduced to ensure that decisions of the arbitral tribunal, which may be subject to ordinary court proceedings at the place of arbitration shall be delivered to the parties by registered mail, by registered letter with notice of receipt. This is specifically applicable to awards against which an action for setting aside may be submitted, as well as the order on jurisdiction against which an objection may be raised before the court can be considered as such a decision. For such decisions the time limit to initiate court proceedings shall be calculated from the date of delivery of the registered letter with notice of receipt to the party.

Another amendment shall also be highlighted, namely, written communications sent by registered letter with notice of receipt shall be deemed to have been delivered on the eighth day of dispatch in case of a domestic addressee and on the fifteenth day of dispatch in case of a foreign addressee if they return with “not claimed” or “refused” postal remark.

Acceptance of the nomination or appointment

In order to ensure the efficient and expeditious conduct of the proceedings, the Rules of Proceedings introduce a new provision for arbitrators. It declares that the arbitrator shall submit his / her acceptance to the Arbitration Court within thirty days reckoned from receipt of the notification on the nomination or appointment at the latest. The Rules of Proceedings also explicitly highlight that the arbitrator undertakes to perform their duties as arbitrator in accordance with the provisions of the Rules of Proceedings by accepting the nomination or appointment.

Timeliness of the Case Management Conference

In order to enable the Case Management Conference to achieve its purpose and to clarify the framework of the dispute in an efficient manner, the Rules of Proceedings set an alternative deadline for the date of the Case Management Conference, namely the case management conference shall be held within thirty days following the constitution of the arbitral tribunal or the submission of the statement of defence or the expiry of the time limit granted to submit the statement of defence at the latest.

Taking of evidence

The arbitral tribunal may (for the purposes of investigating the circumstances relevant to the decision) order the taking of evidence, which include documents, witnesses, experts and the in-person inspection of an object or place. A practical novelty introduced by the Rules of Proceedings extended these evidentiary instruments that could be invoked by the arbitral tribunal and now provides for a possibility for the arbitral tribunal to call upon any legal entity (or any non-legal organization or entity). Thereby, the arbitral tribunal may request documents or information from the approached legal entity (or any non-legal organization or entity) facilitating the gathering of evidence. This provision may facilitate the discovery of the substantive justice that the arbitral tribunal is required to seek by the Arbitration Act.

Decisions by the arbitral tribunal

According to the new Rules of Proceedings, arbitral tribunals shall make their decisions by majority. Failing a majority standpoint, the Rules of Proceedings reinforce the outstanding practice and the Arbitration Act by granting decision making authority to the presiding arbitrator.

Two important amendments are introduced by the Rules of Proceedings regarding awards made by arbitral tribunals:

• Higher level of confidentiality is emphasized with regards to the dissenting opinion of arbitrators. Dissenting opinions to the award shall be placed in a closed envelope among the files of the case and should only be disclosed by a specific permit granted by the presiding arbitrator. Moreover, such dissenting opinion cannot contain information concerning the internal discussions and deliberations of the arbitrators.
• In order to facilitate the effectiveness of arbitral proceedings, arbitral awards not indicating a deadline for execution shall be executed immediately.

Correction and interpretation of the arbitral award

In line with the previous rules, a party may request the arbitral tribunal to correct the award (in respect of clerical, typographical or computation errors) or to give an interpretation of a specific part of the award. According to the newly introduced provision, the arbitral tribunal may send the party’s request to the opposing party with invitation to submit its observations.

Expedited proceedings

Expedited proceedings are further rationalized by two specific amendments introduced by the Rules of Proceedings as:

• the arbitration fee must be borne by the claimant in full (irrespective of the disputed amount); and
• further submissions of the parties may be allowed by the arbitrator in justified cases (previously the number of submissions were strictly limited to the statement of claim, the statement of defense and one further submission each in expedited proceedings).

Although we summarized the most important and practically relevant amendments to the Rules of Proceedings, further amendments exceeding the scope of this notice are also introduced as regards fees (e.g. the Arbitration Court is now entitled to decrease the arbitrators’ fees, should they not present their award within the framework of the applicable deadline), other technical amendments and mediation rules.

2. Nota bene

Also with regard to the newly introduced rules, it is worth taking into account the possibility provided for in Article 31 of the Rules of Proceedings which declares that by mutual agreement the parties may derogate from any provisions of the Rules as to how to proceed before the arbitral tribunal as long as such derogation does not result in the violation of a mandatory provision of the law applicable in the place of arbitration. The possibility to formulate procedural rules is rarely used by the parties in practice, although experienced arbitrators usually provide the parties with a detailed draft procedural order on which the parties may comment and make observations before the case management conference. Well-designed procedural rules facilitate the efficient conduct of the arbitration between the parties and are also of great importance from a litigation strategy point of view. With this in mind, we are glad to assist if the need arises to commence arbitration proceedings or to participate in arbitration proceedings as a respondent or otherwise.

By Zoltan Faludi, Partner and Timea Csajagi, Bela Madarasz, Daniel Peter, Associates, Wolf Theiss

In the last five years, the number of labour lawsuits in Hungary has dramatically decreased by because of the new Civil Procedure Code. However, due to the recent amendment of the Hungarian Labour Code from January2023, a new category of labour lawsuits may emerge. Do employers face a real risk because the new rules? We analyse this question below.

With the introduction of the new Code of Civil Procedure in 2018, starting a litigation in Hungary became more difficult than before, discouraging many employees with modest resources from suing their employers.

Although the purpose of the new code was to speed up litigations, the modification brought a much more formalistic approach than before, which led to a significant 60% drop in the number of new labour lawsuits in 2018, which has not changed much in the last 5 years.

However, in January 2023, the most significant amendment to the Hungarian Labour Code in recent years entered into force, introducing a new set of rules that may change the above trend.

Under the new Labour Code provisions employees raising a child under the age of eight years can request the modification of their labour contract by introducing “flexible working conditions” regarding the place of work, work schedule, and working hours.

In case the employee requests the amendment of the employment contract, the employer shall accept or reject the amendment proposal within 15 days. The rejection shall be justified, just like a termination notice in case of a dismissal. It means that the reasons shall be true, clear, and relevant.

The employee may challenge the rejection of the request before the labour court. In the litigation, the burden of proof is on the shoulders of the employer to prove that the justification is lawful, i.e., meets the above criteria. If the court finds the employer’s justification inappropriate, the judge can modify the labour contract of the employee in accordance with his or her initial request.

Due to the strict rules of justification, it is beyond doubt that the employer must pay particular attention in case it rejects an amendment proposal, especially, if we consider that it can be very difficult for the employer to prove before a court that the rejection was reasonable, if there are no solid reasons, why the employer needs the employee in the office in 8 hours per day.

For example, the rejection of an amendment request to work from home is probably reasonable in case of a blue-collar worker, who performs work in the factory. however, the situation in not that simple in case of a white-collar worker, who was able to perform his or her duties from home during the Covid pandemic.

The big question of the near future is whether employees will use their strengthened rights to request the amendment of their contract and whether they will take the case to court if, in their opinion, the initiative is unlawfully rejected. In case the right to amend the contract proves to be effectively enforceable in practice, a new category of labour lawsuits may emerge.

Due to the above, we recommend that employers prepare in advance to deal with possible modification requests, first and foremost by drafting clear and detailed job description, which is always a starting point when it comes to employment disputes. In addition, in case the employees request has to be rejected, before communicating the decision to the employee it is worth to have a second look on the rejection by a lawyer specialised in employment law disputes.

By Richard Schmidt, Managing Partner and Peter Gritta Attorney-at-law, SmartLegal Schmidt & Partners

Crucial amendments to the Hungarian Trademark Act entered into force on 1 January 2023. This Legal Insight briefly describes the most important changes.

Amendments aiming to accelerate the proceedings

1. New rules for deadline extensions

The legislator put an end to the practice of prolonging the Hungarian Intellectual Property Office’s (HIPO) proceedings by repeated, lengthy deadline extensions.

Until the end of 2022, the deadlines not specified by the Trademark Act could be extended upon request three times, by a maximum of three months per each extension (i.e. resulting already in a nine-month extension of the original deadline). In particularly justified cases, however, the deadline could be extended even more than three times, and for longer than three months per extension.

Following the amendment, the deadlines not specified in the Trademark Act may be extended once, by up to three months on request. Further extensions or extensions up to six months per request may be granted only in particularly justified cases.

2. Rules for postponing hearings

Following the amendment, the rules for postponing the HIPO’s hearing will be clarified in the Trademark Act. The hearing may be postponed only by a justified, joint request of the parties. If it is submitted at least three days before the hearing, the HIPO must postpone the hearing, otherwise it is up to the HIPO’s discretion. To prevent further delays, the new date for the hearing must be set at the same time when the HIPO decides on the postponement.

3. New deadline for serving the decision promulgated at the hearing

If the HIPO’s decision is promulgated at a separate oral hearing set for this purpose, it must be served in writing to the parties being present at the hearing immediately (i.e. the physical copy of the decision must be handed over to the parties). The HIPO must send the written decision to the parties who are not present at the hearing within three days.

Amendments to opposition and cancellation actions

1. Not only registered licensees can initiate proceedings

Before the amendment, only licensees registered in the Trademark Register could initiate opposition proceedings and cancellation actions in Hungary. As of 1 January 2023, any licensee holding a licence agreement can initiate these proceedings, irrespective of registration.

2. Electronic communication is not mandatory

Although electronic communication is mandatory for companies and legal representatives in almost all other types of proceedings in Hungary, proceedings before the HIPO remain an exception.

Nevertheless, the HIPO provides the possibility for electronic communication upon request. A welcome novelty of the new amendments is that it is no longer mandatory to appear in person at the HIPO’s premises to inspect case files. The HIPO can also provide access electronically.

3. Possibility to stay the proceedings

The amendments introduce the stay of the proceedings in cancellation actions upon joint request of the parties. The stay of the proceedings can be requested once, for a period of at most six months. The proceedings continue upon the request of any of the parties. In proceedings where ex officio continuation is not possible (e.g. if the cancellation action is based on relative grounds of refusal), and none of the parties request the continuation of the proceedings within six months, the proceedings terminate.

In opposition proceedings, parties may request the stay of the proceedings to reach an amicable resolution of the case even before the amendments. With the latest amendments, however, the maximum term is extended to six months from the previous four months.

4. Amendments concerning the filing of oppositions

Until the end of 2022, it was sufficient to set out the grounds of opposition within the opposition deadline, similarly to opposition actions before the EUIPO. Following the amendment, it will be mandatory to also provide the detailed reasoning of the opposition and all relevant evidence within the opposition deadline. But a loophole remains: if the opposition does not comply with the legal requirements, the HIPO is still obliged to invite the opponent to remedy the deficiencies. The opposition cannot be rejected outright simply for being deficient.

It has also been clarified that if the opposition is sent by registered letter, it is deemed to have been filed on time if it was dispatched before the deadline and if the HIPO received it within two months after the expiry of the deadline.

5. Eliminating an interpretation issue regarding accelerated proceedings

The amendments clearly set forth that a cancellation action can only be conducted in an accelerated proceeding if a trademark infringement procedure or an interim measure is still ongoing or in effect concerning the trademark at the time the request for accelerated proceedings is filed.

Entry into force of the new amendments

The above provisions entered into force on 1 January 2023. The amendments to the Trademark Act were part of a comprehensive and coordinated revision of all acts regulating intellectual property. Changes were also introduced to the Patent Act, Utility Model Act and Copyright Act.

Please do not hesitate to contact us for tailor-made advice on whether these latest changes may impact your business.

By Mark Kovacs, Attorney at Law, Schoenherr

In its judgment 2021:504 in Case C 439/19, the Court of Justice of the European Union stated that those national rules that oblige the public bodies registering penalty points to disclose such information to persons requesting access without a specific interest, is contrary to GDPR.

The penalty points for Latvian citizens are registered by the national register of vehicles and their drivers. Since the information relating to penalty points in the register was accessible to the public and had been disclosed, for purposes of re-use, to a number of economic operators, a Latvian citizen lodged a constitutional complaint with the Latvijas Republikas Satversmes ties (Constitutional Court) to examine whether the Latvian Law on road traffic is consistent with the fundamental right to respect for private life.

According to the Latvian Constitutional Court, it must take the GDPR into account in its assessment of the constitutional right at stake in the case. Therefore, it asked the Court of Justice to clarify the scope of several provisions of the GDPR and to determine whether the Latvian legislation is compatible with EU law.

The Court of Justice stated that GDPR must be interpreted as applying to the processing of personal data relating to penalty points imposed on drivers of vehicles for road traffic offences. Hence the provisions of the GDPR must be interpreted as precluding national legislation which authorises the public body responsible for the register in which penalty points imposed on drivers of vehicles for road traffic offences are entered to disclose those data to economic operators for re-use.

In the context of the main proceedings, the Latvian Parliament had confirmed that any person may obtain information relating to penalty points imposed on another person, either by enquiring directly at the Road Safety Directorate of Latvia or by using the services provided by commercial re-users. It stated that that provision is lawful, since it is justified by the objective of improving road safety. The public interest requires that persons infringing traffic regulations, in particular those disregarding them systematically and in bad faith, be openly identified and that drivers of vehicles, by means of that transparency, be deterred from committing offences.

In the present judgment, the Court of Justice has ruled that the Latvian legislation is contrary to the GDPR. The Court of Justice stated that it had not been proven that it was necessary to disclose personal data relating to penalty points for road traffic offences, in particular in view of the objective of improving road safety as invoked by the Latvian government.

By Rita Parkanyi, Founding Partner, KCG Partners Law Firm

The Hungarian Government is planning to amend its investment promotion regulation, therefore, it published the related documentation on 1 February 2023. The amendments would ensure that aid may be granted for primary agricultural production if the subject of the aid is a research and development project relating to primary agricultural production. In addition, aid for research and development would not only be available for investors that qualify as large enterprises, but also for medium-sized enterprises, in case their combined average statistical headcount reaches 100 persons.

A substantial amendment would be that the beneficiary can meet the conditions for receiving the aid with a project split into two parts. In this case, there must be a main investment and an additional energy investment which is in connection with renewable energy production or renewable energy production and storage. In this case, several conditions must be met for these investments. For instance, the eligible costs related to the main investment must exceed half of the total investment value. In case of the additional energy investment, the amount of aid per investment may not exceed 15 million euros and the aid application must be submitted at the same time as the application for the main investment.

In relation to the rescission right of the grantor from the aid agreement, there will be further changes as well. The grantor may not rescind the aid agreement if the investor ensures its obligation to maintain employment in a way that it employs persons on the basis of dual training, student employment contracts, vocational training employment contracts or apprenticeship contracts, and such employment reaches 60 hours per month. Furthermore, while under the current provisions, in case the investor fails to meet its obligations in terms of turnover or wage bill during the mandatory monitoring period, is a reason for rescission by the grantor, the amendment avoids the rescission if the grantor accepts the investor’s certified payment performed based on social responsibility activities in the framework of the co-operation with domestic educational institutions during the same period.

Under the current regulation, the deadline for submitting an application for aid is four months from the date of registration, however, under the planned amendments this period could be extended by further four months by the grantor at the request of the investor.
An additional relief would be that investors would be required to provide security only for at least 100% of the aid instead of the current 120%.

By Lidia Suveges, Attorney at law, KCG Partners Law Firm

Major changes have come into force under the 2023 tax law amendments in Hungary, which mainly include reliefs, such as the extension of the application of the 5% VAT rate on the sale of new housing on the one hand, but on the other hand, bring restrictions to real property related duties.

The applicability of the reduced VAT rate on the sale of new residential property has been extended to 31 December 2024. This reduced rate will continue to apply after 31 December 2024 to projects already started (until 31 December 2028), provided that the building permit has become final no later than 31 December 2024 or the construction has been notified by that date in accordance with the simple notification rules. The reduced VAT rate can be used for new real property that has not yet received its occupancy permit, or the occupancy permit was issued less than two years prior to the date of sale, or the total useful floor area does not exceed 150 square meters in the case of multi-family dwellings or 300 square meters in the case of detached houses. It is important to note that premises which are not necessary for the normal use of the dwelling (and thus do not qualify for the reduced VAT rate of 5%) are not classified as part of a housing property, even if they are built together (in particular garages or workshops).

Additionally, the rules on the reverse charge were clarified as well. As a result of the amendment starting from 1 January 2023, all construction, installation and other assembly works for the construction, conversion and change of use of real property that is subject to an official permit or notification will be subject to reverse charge.

The amendment also brought restrictions on the exemption from property transfer duty on immovable property transactions between affiliated companies. Starting from 1 January 2023, the buyer’s main business activity must be the rental or operation of owner-occupied, rented or leased real estate, or the sale of owner-occupied real estate and its turnover from these activities (in the previous year) must represent at least 50% of its total turnover. The party acquiring the property must declare to the tax authorities that it meets the criterion relating to the turnover.

If the declaration is not fulfilled, the transferor must notify the state tax authority, which will impose an additional charge of 50% on the transferor for the unpaid tax. If the transferor fails to comply with this obligation and the State Tax Authority establishes in the course of a tax audit that the declaration or undertaking has not been fulfilled, the transferor is liable to pay twice the amount of the unpaid tax.

By Eszter Kamocsay-Berta, Managing Partner, KCG Partners Law Firm

Employees are entitled to compensation from their employers for commuting from another town or city. Due to the significant increase in fuel prices, the corresponding thresholds have been doubled by the end of the ‘state of emergency’ in effect (end of June 2023, for now).

Background

According to the provisions of the Hungarian Labour Code, the employer is obliged to reimburse the employee for the necessary and justified costs incurred in the performance of the employment relationship.

Such justified costs include, for example, the employee’s travel expenses to and from work. If the term “commuting to work” as defined in the relevant Government Decree on the reimbursement of travel expenses in connection with commuting to work (“Decree”) includes the employee’s commuting to work, i.e. inter alia, the place of work and the place of residence are not located within the same municipality, the employer reimburses the cost of the pass or ticket for the employee’s commuting to work at the rate specified in the Decree, provided that the additional conditions set out in the Decree are met.

Commuting allowance

Additionally, if the employee travels to the place of work by private car and if the conditions laid down in the Decree are met – for example, there is no public transport available or if the employee has a child in day-care or in a public education establishment under the age of ten – the employer is required to reimburse a minimum amount to the employee and is free to supplement this amount under the given threshold tax-free based on the actual distance from the place of work.

In accordance with the Personal Income Tax Act and the new legislation on the threshold, the corresponding amounts are:

• 18 HUF/km as minimum reimbursement to be paid by the employers (60% of the threshold);
• up to 30 HUF/km supplementary, tax-free compensation limit to 15 HUF/km (subject to the discretion of the employer).

Employers are entitled to apply the increased threshold from January 2023 and are required to do so from February, with regard to the minimum reimbursement respectively. Both increased amounts are formally applicable by the end of the ‘state of emergency’ – end of June 2023 – that might be prolonged or implemented in the regular legislation afterwards.
Furthermore, the benefit applies in particular, but not exclusively, to commuting to work by private car, i.e. the employer is entitled to provide a tax-free kilometre-based contribution for employees travelling to work by bicycle, scooter or other vehicles up to the above amount.

By Bálint Zsoldos, Attorney at Law, KCG Partners Law Firm

The General Data Protection Regulation (‘GDPR’) offers more types of remedies to individuals whose rights were infringed. Can those remedies be exercised parallelly, or shall the person concerned choose among them? The Court of Justice of the European Union (‘CJEU’) provides an answer to this question in its fresh decision, delivered in a Hungarian case.

The above question arose in a case concerning the access request of an individual who is the shareholder of a Hungarian public limited liability company. After attending a general meeting, the shareholder asked the company to send him the sound recording made at the general meeting. The company complied with the shareholder’s request only partially as it only made available excerpts from the recording which reproduced his own contributions.

The shareholder decided to pursue administrative and civil law remedies parallelly under the provisions of the GDPR.

First, the shareholder requested the Hungarian supervisory authority to order the company to send him the whole recording which request was refused by the authority, consequently, he started an administrative litigation against the decision of the supervisory authority.

Second, he also filed a civil lawsuit against the decision of the company refusing his access request. In its final judgement, the civil court already established that the company has infringed the shareholder’s right to access to his personal data.

In the above context, the Hungarian administrative court sent the case to Luxembourg to the CJEU, to give preliminary ruling on the question whether the administrative remedies and the civil remedies under the GDPR may be exercised concurrently with and independently of each other or whether one of them has priority over the other. The Hungarian administrative court noted that parallel exercise of these remedies could give rise to contradictory decisions concerning identical facts.

The Luxembourg court first examined the wording of the respective provisions of the GDPR and highlighted that the remedies offered must be capable of being exercised ‘without prejudice’ to the others. According to the CJEU, the provisions of the GDPR do not provide for any priority or exclusive competence or for any rule of precedence in respect of the assessment carried out by the authority or by a court as to whether there is an infringement of the rights concerned.

Furthermore, while the GDPR handles the situation when the data subject initiates proceedings before the supervisory authorities or courts of several Member States, the Regulation does not lay down such rules in respect of cases where the data subject files a complaint with the supervisory authority and starts litigation before the competent civil court of the same Member State.

Moreover, the aim of the GDPR is to ensure a high level of protection of natural persons with regard to the processing of their personal data. To leave to data subjects the option to exercise administrative and civil remedies concurrently with and independently of each other is consistent with the said objective of the GDPR.

Thus, the Luxembourg court found that the administrative and civil remedies provided for by the GDPR may be exercised concurrently with and independently of each other. Double Trouble for Eu Data Controllers?

Finally, the CJEU admitted that the risk of contradictory decisions issued in parallel proceedings can call into question the consistent and homogeneous application of the GDPR which is capable of undermining legal certainty.

According to the Luxembourg court, each Member State shall lay down the detailed rules of administrative and judicial procedures to ensure the effective protection of the rights guaranteed by the GDPR, the consistent and homogeneous application of its provisions, as well as the right to an effective remedy before a court or tribunal.

By this decision the CJEU tried to strike a balance between efficiency of data subject rights under the GDPR and maintaining legal certainty, by outsourcing the latter partially to the Member States of the European Union.

As the CJEU made it clear that administrative and civil remedies under the GDPR can be exercised parallelly, data controllers may face a situation where they are hit by the investigation of the supervisory authority and by a civil lawsuit at the same time. Now the ball is on the side of the Hungarian legislator to ensure the rules which exclude that these parallel proceedings bring a completely different outcome.

By Richard Schmidt, Managing Partner and Anita Vereb, Attorney-at-law, SmartLegal Schmidt & Partners

Lakatos Koves & Partners has advised ConvergenCE on leasing over 1,000 square meters in the Kalvin Square Office Building to Singapore’s Trax. Colaw Kolcsey-Rieden and Partner reportedly advised Trax.

ConvergenCE is an asset, property, and project management company.

Trax is a Singapore-based software-as-a-service company.

According to LKT, Trax is “moving into the Kalvin Square Office Building, which was recognized with a BREEAM Excellent rating last September. Trax, which takes possession of its new office in February 2023, will enjoy a full floor of more than 1,000 square meters of panoramic, category-A office space. A company with offices in major cities around the world, [Trax] offers its clients a SaaS solution that helps them maximize every aspect of sales by optimizing their operations.”

LKT’s team included Partner Attila Ungar, Senior Lawyer Zsuzsanna Ilyes, and Lawyer Csenge Varadi.

The use of social media content – particularly posts and comments – in advertising has become a prevalent practice in recent years. However, it is crucial for businesses and advertisers to be aware of the potential legal implications associated with such use. Besides copyright and advertising law considerations, it has also become essential to understand the relevant provisions of data protection law when contemplating the usage of social media content in advertising.

Social media content as personal data

Pursuant to Article 4(1) of Regulation (EU) 2016/679 of the European Parliament and of the Council (General Data Protection Regulation or GDPR), personal data shall mean “any information relating to an identified or identifiable natural person (‘data subject’); an identifiable natural person is one who can be identified, directly or indirectly, in particular by reference to an identifier such as a name, an identification number, location data, an online identifier or to one or more factors specific to the physical, physiological, genetic, mental, economic, cultural or social identity of that natural person.”

Based on the above definition, it is apparent that usernames on social media platforms qualify as personal data. Posts and comments created by users on social media platforms are also considered to be personal data since they can be linked to a specific user (who is also an identifiable natural person).

Within social media, any information relating to an identified or identifiable natural person are considered to be personal data irrespective of the fact that the data subject has made it public of his or her own free will. This also entails a conclusion that personal data published on social media platforms shall enjoy the same legal protection as personal data that has not been made public at all.

Using social media content for advertising purposes

With regard to the fact that usernames, posts and comments in social media qualify as personal data, the provisions of the GDPR shall be taken into account in connection with the related processing activities.

Article 5(1) Point b) of the GDPR stipulates the principle of purpose limitation as follows: “Personal data shall be: (…) collected for specified, explicit and legitimate purposes and not further processed in a manner that is incompatible with those purposes; further processing for archiving purposes in the public interest, scientific or historical research purposes or statistical purposes shall, in accordance with Article 89(1), not be considered to be incompatible with the initial purposes.”

Based on the above, the principle of purpose limitation requires that personal data is processed in accordance with the initial purpose or in a manner that is compatible with such initial purpose. Even in the exceptional case of processing purposes specifically mentioned by the GDPR as compatible with the initial purposes (i.e. archiving purposes in the public interest, scientific or historical research purposes, statistical purposes), data processing activities may only be pursued with appropriate safeguards as set forth by Article 89 of the GDPR (e.g. by way of anonymizing personal data that is used later for scientific research purposes).

With respect to the above, the data processing purpose of using social media content in any kind of advertisement can hardly be considered as compatible with the initial data processing purpose specified by the given social media platform. On the other hand, it is also evident that such commercial purpose does not fall under the exceptions listed in the GDPR (archiving purposes in the public interest, scientific or historical research purposes, statistical purposes).

Nevertheless, it is still possible to lawfully use social media content in an advertisement from a data protection perspective. If there is a lawful basis for the data processing activity, the advertiser shall be entitled to use the chosen personal data for advertising purposes. In the present case, the only reasonable and secure lawful basis is the consent of the data subject (i.e. the user of the given social media platform). It is to be noted that according to Article 4(11) of the GDPR, the consent of the data subject shall mean the freely given, specific, informed and unambiguous indication of the data subject’s wishes e.g. a written, specific declaration of consent prior to which the advertiser provides the data subject with satisfactory information about the details of the processing activity.

In conclusion, the use of social media content in advertising can present a range of legal implications, the most important of which relate to data protection law. Businesses and advertisers must exercise caution and ensure that they obtain prior consent from the data subjects, otherwise they could easily face legal action entailing serious consequences.

By Zsuzsanna Lukacs, Senior Associate, Nagy & Trocsanyi