Category: Hungary

CMS has advised 4iG on the acquisition of Vodafone Hungary together with Corvinus Nemzetkozi Befektetesi representing the Hungarian state. Slaughter & May reportedly advised Vodafone.

According to CMS, “the transaction, valued at around HUF 660 billion (approximately EUR 1.67 billion), will see 4iG become the majority owner of 51% of Vodafone Hungary, while the Hungarian state will acquire a 49% stake. With this acquisition, 4iG will expand its activities and become a major player in mobile telecommunications in Hungary.”

“We are delighted to have advised 4iG on this transaction, which is one of the most significant deals in the telecommunications sector in Central and Eastern Europe in recent years,” CMS Partner Helen Rodwell commented. “The acquisition will allow the company to play an even greater role in the country’s digital transformation, and we were excited to have been part of it.” 

The CMS team was led by Rodwell together with Managing Director Dora Petranyi, Of Counsel Emma Tuppen, Consultant David Cranfield, and Associate Yavor Danailov and included lawyers from the firm’s Budapest and other European offices.

Editor’s Note: After this article was published, Lakatos Koves & Partners announced it had advised Vodafone, together with Slaughter and May. The LKT team included Partners Ivan Solyom and John Fenemore, Head of Tax Balazs Kantor, Counsel Pal Rahoty, Associate Gyorgy Toth, Lawyer Nora Szigeti, and Trainee Lawyers Soma Schober, Anna Handlery, and Nora Kertai.

The PK Law Office reportedly advised the Corvinus state holding company.

Circular products, extended producer responsibility, mandatory return system: new terms and new concept behind the new green tax regulation coming in 2023 in Hungary. The modification of the Green Tax Act has been already adopted, and the governmental decree with the specifications is to follow.

Extended producer responsibility system

As of 1 July 2023, MOL Plc will be solely responsible for the waste recovery activity, which MOL Plc will finance from the newly implemented ‘extended producer responsibility fee’, which will not replace green tax (environmental product charge) but will be deductible from it.
The new legislation introduces the concept of circular products, which covers green tax products (packaging, batteries, electrical and electronic products, tyres, etc) and some new items (textile products, wooden furniture, single-use plastic products, motor vehicles, cooking oil and fat). Under the so-called extended producer responsibility system for circular products producers and, in the case of foreign production, distributors are to pay an extended producer responsibility fee for MOL for the collection, transportation, and treatment of waste from their products. Exemptions and assumptions under the green tax system will not be applicable in this regard. The above also follows that the former individual waste management concept and corresponding green tax reduction will be abolished.

Mandatory and voluntary return system

As a second step, from 1 January 2024, the current ‘deposit-fee’ system for plastic, glass and metal bottles of beverage products will be replaced by the mandatory return system. Under the new rules, the price of such products will already include a so-called ‘return fee’, which would be refunded to the consumer when the bottles are returned. Therefore, distributors (above a certain sales area size) will have to provide automatic return facilities. In addition, producers and distributors will be allowed and encouraged to expand the return system to other circular products at their discretion (voluntary return system) since the application of the return system is expected to be exempt from both the extended producer responsibility fee and the environmental product charge as well.

Administration

Taxpayers already subject to green tax in Hungary should re-evaluate their position under the new rules and the extended product scope and applicability on foreign webshops might trigger tax obligations for new taxpayers as well. The new regulation also implies significant administrative tasks for the taxpayers. As a first step, to comply with the July 1 start of the new system, taxpayers subject to extended producer responsibility fee are required to register in the new extended producer responsibility system by 30 April 2023 at the latest.

By Balint Zsoldos, Attorney at law, KCG Partners Law Firm

Former Jalsovszky Partner Gabor Pazsitka has joined the Budapest office of Cerha Hempel as a Partner and the new Head of Banking & Finance.

Before joining Cerha Hempel, Pazsitka spent seven years with Jalsovszky. Before that, he spent almost nine years as a Partner and co-owner of the Hajdu & Pazsitka Law Office. Earlier, he spent over seven years with Linklaters between 2000 and 2007. He began his career as a Trainee with Clifford Chance in 1997, spending close to three years with the firm.

“We have been successful in growing our firm despite the crises that have rocked the world in recent years, and that growth included the addition of new partners in areas such as M&A, competition law, and construction law,” commented Managing Partner Tamas Polauf. “We continue on this path as we welcome Gabor, an internationally recognized and highly experienced lawyer, who will further strengthen our Banking & Finance practice group. We are pleased to welcome him to our team and wish him continued success.”

Oppenheim has advised Skanska on leasing 3,300 square meters of office space in H2Offices in Budapest to the DBH Group.

Skanska is a construction and development company based in Sweden. 

The DBH Group is an investment and service group focusing on venture capital, flexible infrastructure, and corporate business services.

“During the pandemic, DBH Serviced Office realized that large corporate clients are more and more open to premium flexible office solutions,” DBH Group CEO Sandor Erdei commented. “Regarding H2Offices, DBH is writing a new story: keeping the premium, while incorporating a tailor-made corporate flexspace model which consists of individual seating density, on-demand furniture & corporate identity interior design implementation, and custom IT solutions.”

Oppenheim’s team included Partner Mark Pinter and Associate Mark Ratkai.

As of 1 January 2023, the Labour Code was amended on several points, creating significant new obligations on the employers’ side. We summarize the most impactful parts of the amendments, as well as the novel employers’ obligations resulting from such amendments.

With regard to employment disputes, it is of note that the burden of proof now rests on the shoulders of the employer in cases concerning the breach of the prohibition of the abuse of rights. Unlike under the previous regime, should the employee wish to bring action for the abuse of rights (e.g. in relation to termination by the employer) it is sufficient to allege such abuse, and the burden of proof will shift to the employer to show that it has not abused its rights. The significance of this issue is further enhanced by the fact that if the court finds that the employer’s termination constituted an abuse of rights, the employee may request the reinstatement of the employment relationship, a matter on which the court has no discretion, i.e. the court is bound by law to order the employer to reinstate the employment at the employee’s request. This also entails that, as a legal consequence of wrongful termination, the employer is not only liable to pay an amount equivalent to 12 months’ absence pay as compensation for lost wages, but must pay the full amount of lost wages due up until the date when the employment relationship was restored. In certain cases, this can be particularly disadvantageous for the employer. Therefore, before making any notices potentially giving rise to a dispute, it is advised to record the circumstances that demonstrate not only the legality of the measure taken, but also the employer’s proper exercise of its rights.

A new feature in relation to the termination of employment is that, even if the law does not require the employer to provide reasons for termination (e.g. due to the fact that the termination with immediate effect occurs during the probationary period or the employee is an executive), the employer may still be obliged to provide reasons. This may be the case when the employee claims that the termination was due to certain specific reasons, e.g. for taking a paternal leave, parental leave or unpaid leave for childcare. It is therefore essential that, even where there is no obligation to provide reasons, the employer should only terminate the employment if valid and demonstrable reasons are available.

Another important change with regard to the termination of employment is that the employer is no longer obliged to unilaterally terminate the employment relationship if the employee is found to be unfit for work by the assessment of the occupational physician. In such cases, the employee may not be assigned work and is not entitled to downtime pay. The new rule is essentially the codification of the case law of recent years, eliminating uncertainty on the issue.

The scope of the prohibitions on termination has been expanded as well: the employment relationship can no longer be terminated by notice during paternity leave, parental leave and leave to care for a relative with serious health problems.

The scope of the notification under Section 46 of the Labour Code has been significantly expanded: employees need to be notified of several additional circumstances and employment conditions, with the notification deadline reduced to seven days. In light of this, it is our view that a new employee notification template should be drawn up, with expanded and clarified contents. 

A change affecting the employer’s obligation to amend the employment agreement is that employers must inform employees about the possibilities of full-time or part-time employment, teleworking and indefinite term employment. The employees may, in turn, expressly request the amendment of their employment agreement on the basis of such information. Furthermore, irrespective of the information provided by the employer, an employee raising a child may, for the period lasting until the child turns 8 years old, request a change in the place of work and working hours, or to be employed part-time or within a teleworking framework. The employer is required to respond in writing within 15 days. In the event of refusal, the employer must state the reasons for its decision, which must meet the requirements of truthfulness, clarity and reasonableness. Timely communication and correct wording of the reasoning are of paramount importance as, if such reasoning is unlawful or not given at all, the employer’s consent may be replaced by the court, resulting in the employment agreement being amended in accordance with the employee’s request.

In the case of definite term employment agreements, the proportionality requirement for the probationary period is now also regulated by law, in that the length of the probationary period must be determined on a pro rata basis, taking as a basis a probationary period of up to 3 months for definite term agreements of up to 1 year.

A major change regarding employees raising a child is the introduction of paternity leave and parental leave in line with the relevant EU legislation. The duration of the leave fathers are entitled to in the event of the birth or adoption of a child is uniformly set at 10 working days. Paternity leave is to be granted in no more than two segments. Parental leave is to be granted to both parents for a total of 44 working days within the period spanning up until the child turns 3 years old. The parental leave needs to be granted at the time requested by the employee. 

By Zsolt Cseledi, Partner, Livia Mihovics, Counsel, Oppenheim

On 1 January 2023, a new act on the transfer of agricultural farms entered into force. The management of generational issues and the smoothing of generational change in agriculture is essential for the future of the Hungarian agriculture. In addition, the security of Hungary’s food production could be jeopardised if farm succession is not carried out properly or at all, therefore, the new act aims to help the agricultural sector to renew itself generationally.

The scope of the act covers the transfer of farms of agricultural farmers and self-employed persons engaged in agriculture, forestry and ancillary activities. The act determines the definition of the farm, the farm transferor and the farm receiver. The farm transfer contract is introduced as a new legal instrument and can be concluded under the provisions of 4 types of contracts: sale and purchase contract, contract of gift, maintenance contract or life-annuity contract. The farm transfer contract must be recorded in a public deed or a private deed countersigned by a lawyer, with the statutory content prescribed by the new act. The farm transfer contract must be submitted to the agricultural administration body for approval within 60 days of its conclusion.

From 1 January 2023, certain provisions of the act on the turnover of agricultural and forestry land were also amended. For instance, it is clarified that the land transfer contract must also contain the statutory commitments and declarations relating to the pre-emption right designated by the party acquiring the land. Furthermore, if the land being the subject of the ownership transfer contract is affected by a land use contract in force or not yet in force at the time of the conclusion of the contract, the contract must contain information on the duration of and the consideration for the use of the land. In addition, the fact of the submission of a contract for the transfer of ownership can be recorded automatically based on cooperation between the authorities in case the contract is not refused immediately in the course of the preliminary examination by the authority.

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

Lakatos Koves & Partners Head of the Litigation and Dispute Resolution group Balazs Fazakas has been appointed as a Partner with the firm on January 1, 2023. 

According to LKT, “specializing in litigation and arbitration, and also having been active in the Corporate and M&A group, [Fazakas] joined LKT in September 2010, as a Trainee Lawyer right after his university years.” In 2019, he was appointed as the firm’s Head of Litigation and Dispute Resolution (as reported by CEE Legal Matters on October 24, 2019).

“Balazs has been instrumental in leading the dispute resolution practice at LKT with tireless dedication in the last few years,” Managing Partner Peter Lakatos said. “He is a very talented litigation and arbitration lawyer with outstanding expertise.”

“Being promoted to Partner at LKT is an honor for me and an important milestone in my professional career,” Balazs commented.

Following the elections in April 2022, an independent ministry was created in Hungary to manage, control and regulate construction and investment activities. Shortly after meetings with the representatives of professional organizations were held to provide the basis for further legislative work on the preparation of a new framework law on the institutional, substantive and procedural rules governing public investment.

Contrary to the plan that the bill would be submitted to the Parliament in the autumn of 2022 and would be in force from January 2023, the legislative process is still ongoing. The two acts in question are the act on public investment and the Hungarian construction industry framework. The aim of these acts is to improve the efficiency and predictability of public construction investments by creating legal guarantees for their implementation, and to consistently support domestic companies in the fields of design, implementation and the production of construction materials. By doing so, it is primarily intended to assert national sovereignty, national self-sufficiency and the nation’s capacity for self-reliant growth, meaning that whatever is built in Hungary with state money must henceforth be built largely with Hungarian labor and engineering skills, with Hungarian materials and technology, and with the Hungarian economy in mind.

In the recent decades, Hungary is heavily relying on imported materials and labor force, therefore foreign dependence on the Hungarian construction industry has to decrease and the operation of domestic, and local businesses need to be strengthened.

However, the development and retention of a dominant share of Hungarian-owned construction companies will not be achieved by hindering competitive market conditions, but through programmes and regulations to improve competitiveness in the sector. It is not enough for a business to be Hungarian, it must also provide professional services and good quality. Additionally, the acts also aim to will speed up investment processes by weeding out bureaucratic rules that unnecessarily complicate the lives of those in the construction industry.

Currently, the Hungarian construction market is in recession, ongoing investments are still driving the industry, but their phasing out is already posing significant challenges for the sector. With the receding housing opportunities, unpredictable markets and shrinking public resources, the output of the Hungarian construction market is already declining.

The idea of legislation set out to increase the efficiency of public construction investments and to enhance stability and predictability in their implementation is generally well received by the public and the experts, especially in light of the goal of Hungary to become one of the European leaders in successful public investment by 2030.

By Gabriella Galik, Partner, KCG Partners Law Firm

Former MET Group Senior Legal Counsel Daniel Varga was appointed as the company’s new Green Assets Division Legal Director.

The MET Group is a Swiss-based European energy company with activities in the natural gas and power markets, focused on multi-commodity wholesale, trading and sales, renewable energy, and industrial assets. 

In his new position, Varga will be in charge of managing the full scope of legal matters related to the renewable portfolio of the MET Group. Before joining the MET Group in 2022, he spent three and a half years with Schoenherr as an Attorney at Law, re-joining the firm’s Budapest office in 2018 (as reported by CEE Legal Matters on August 10, 2018). Earlier, he had spent over three years with DLA Piper. He began his career with Schoenherr in 2012, where he initially spent over three years.

Originally reported by CEE In-House Matters.

Schoenherr has advised China’s Shanghai Electric Power on its full acquisition of five project companies developing a 200-megawatt PV project in Northeast Hungary from Chint Solar Hungary Projects. Kinstellar advised Chint Solar.

Shanghai Electric Power, listed on the Shanghai Stock Exchange and owned by State Power Investment Corporation Limited, is a Chinese energy enterprise company. According to Schoenherr, “with sustainable development of thermal power generation as its main business, SEP has been committed to the development of clean energy, new energy, modern power service, circular economy, etc.”

Chint Solar is a company active in project development, financing, realization, and operation of solar parks.

According to Schoenherr, the project, dubbed Tokaj, has a “planned installed capacity of 200 megawatts and is expected to make a significant contribution to the renewal and decarbonization of Hungary’s energy sector. It is currently in the construction phase and is to be commissioned in 2024. This is SEP’s first flagship investment in Hungary, which may be followed by further significant projects in the region.”

Schoenherr’s team was led by Attorneys at Law Laszlo Krupl and Gergely Horvath and included Associates Viktoria Magyar, Zsofia Rideg, Akos Kovacs, and Aron Hegyi.

Kinstellar’s team included Partner Balazs Sepsey, Managing Associate Barnabas Sagi, Senior Associate Peter Gullai, and Associates Csenge Koller and Bertalan Vanya.