Category: Hungary

The Hungarian Parliament passed a law at the beginning of October 2022 to set up a new anti-corruption authority called “Integrity Authority” as a part of a legislative package, that was aimed to reach a compromise with the EU regarding the withholding of funds.

The Integrity Authority can initiate proceedings upon the notification from citizens or ex officio. The Authority will be led by a president and two vice presidents, who will be chosen after an open tender and their mandate is not renewable. The Authority will be starting its work from the middle of November 2022 and it will be preparing risk assessments to identify and reduce systemic corruption. If the Authority detects fraud, it must also notify the relevant European bodies, including the European Anti-Fraud Office (OLAF) and the European Public Prosecutor’s Office.

Next to the Authority, a working group is also set up, that consists of the president of the Authority and 10-10 government and non-government members. It is an independent body for analysis, proposal, opinion and decision-making. It examines existing anti-corruption measures, may propose new ones and produces an annual report on the risks. The government must justify any diverging from any of its recommendations.

Another element of the legislative package was the modification of the Hungarian Criminal Code. The amendment establishes a new system, where the coercive prosecution mechanism will no longer be the only mechanism available in certain corruption cases. Anyone can ask the court for a review if the investigating authority or the prosecution refuses to prosecute. The investigating judge has the power to order the opening or continuation of criminal proceedings, that could had previously been ordered by only the prosecutor. The scope of persons entitled to initiate the procedure and the deadline for submission are also extended.

By Rita Parkanyi, Partner, KCG Partners Law Firm

According to a new government decree published in the Hungarian Gazette on 26 September 2022, taxpayers can pay their local business tax advance and local business tax from 1 January 2023 by transferring the amount in euro or US dollars. Taxpayers belonging to a special economic zone can pay the local business tax to the account opened for this purpose by the National Tax and Customs Authority.

The amount transferred will be converted into HUF at the current exchange rate of the National Bank of Hungary (at the time of crediting the collection account) and transferred to the relevant local municipality or to the account of the National Tax and Customs Authority.

The government decree will remain in force until the expiry of Act VI of 2022 on the elimination of the consequences of an armed conflict or humanitarian disaster in a neighbouring country. Earlier in August 2022, the Hungarian Government decided that the corporate income tax could be paid in euros or US dollars, citing the war economic situation. The change may bring great relief typically for companies whose income is received partly or entirely in a foreign currency.

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

Dentons has advised Groupama Gan REIM on its acquisition of the Freedom Palace in Budapest. 

According to Dentons, Groupama Gan REIM is a French portfolio management company that acted on behalf of SCPI Affinites Pierre. “This is Groupama’s second investment outside of France and the first one ever in Central Europe.”

According to the firm, “designed by Arthur Meining and built in 1901, Freedom Palace was refurbished to the highest standards and offers more than 6,500 square meters of premium office and mixed-use premises … The investment reflects the desire and commitment of SCPI Affinites Pierre to position itself in landmark buildings located on prestigious sites and leased to quality occupiers.”

Dentons’ team included Budapest-based Partner Marcell Szonyi and Associates Franko Zsombor and Eszter Szolnoki, with further team members in Paris.

Editor’s Note: After this article was published, Baker McKenzie announced that it had advised La Societe Generale Immobiliere on the sale of Freedom Palace. The firm’s team included Partner Benedek Kovacs and Associates Zsofia Tillinger and Botond Tass.

Former Dentons Partner Annamaria Csenterics has joined Kinstellar in Budapest as a Partner to co-head the Corporate/M&A service line, including Real Estate and Private Equity, together with Gabor Gelencser.

Prior to her move, Csenterics had been with Dentons since 2017, when she joined from Weil Gotshal and Manges (as reported by CEE Legal Matters on May 11, 2017).

She was an Attorney-at-Law with Weil between 2010 and 2017. Before that, she was an Attorney at Law and a Member of the Board of Directors of InterCom International Communications Services, between 2005 and 2008. Her experience includes working as an Associate with Hogan & Hartson, between 1999 and 2002, and as an Associate and In-House Counsel with PricewaterhouseCoopers in 1999.

Andersen Legal has advised Solar Markt on a long-term strategic agreement with investor Hiventures. Moore Legal Kovacs advised Hiventures.

According to Andersen Legal, “the Hiventures Capital Fund, already active in domestic energy projects, announced its support – via a long-term strategic agreement with a HUF 4.5 billion budget – of Solar Markt’s preparing, planning, and grid connection activities, of which the main aim is for Solar Markt to develop renewable power plants in a way that meets the green power needs of corporate consumers through direct long-term power purchase agreements.”

“As part of the cooperation, two solar power parks with a peak capacity of 50-50 megawatts are being prepared in Eastern Hungary,” Andersen Legal informed. “The 200-hectare investment will be followed by the preparation of three additional high-capacity facilities, through which the portfolio of Solar Markt, which is active in investments related to green energy, can reach a solar power plant capacity of more than 250 megawatts.” 

Andersen Legal’s team included Managing Partner Peter Vincze, Partners Szilvia Fehervari and Balazs Dominek, and Attorney at Law Dorottya Rebeka Tarba.

Moore Legal’s team included Partner Marton Kovacs, Senior Attorneys Aron Kanti and Balint Juhasz, and Junior Attorney Andras Zsirai.

There are substantial recent developments in dispute resolution and litigation in Hungary, with some uncertainty about the application of the CJEU’s jurisprudence to domestic litigation, as well as new arbitration rules coming into force, according to Provaris Managing Partner Istvan Varga.

“One of the cutting-edge problems in Hungary is dealing with the jurisprudence of the CJEU and its effective implementation in Hungarian civil procedural law and jurisprudence,” Varga says. “A few preliminary rulings have recently been referred back to the Hungarian courts by the CJEU, and these days the Hungarian Supreme Court and also lower courts will have to apply and effectively accommodate those CJEU rulings in pending high profile litigations.”

“The problem with that is we have cases where Hungarian courts are split on the issue – with some courts taking the position that a substantial implementation of those CJEU decisions has taken place and other instances considering that they rather seem to have been misapplied and misinterpreted,” he continues. “Occasionally, CJEU decisions are implemented in a way that does not entirely mirror the spirit and the nuances of those decisions. In such cases, there should be a retrial, similarly to those cases when the constitutional court annuls a law – this is analogous to what we are facing now.”

On top of that, Varga says, “in 2021, the Hungarian legislator introduced a new remedy against the Hungarian Supreme Court’s decisions, referred to as the ‘legal uniformity procedure.’ By means of this remedy, even the Hungarian Supreme Court’s decision can be repealed on the ground that the decision is allegedly deviating from the Hungarian Supreme Court’s previously established case-law.” He pointed out the question “whether even CJEU decisions can be ignored, based on the legal uniformity principle, and what the prerequisites are.”

“Additionally, there are substantial new developments in the Hungarian truck cartel class litigation, involving a recently announced preliminary ruling in the CJEU’s Volvo case, now to be implemented by the Hungarian Supreme Court,” Varga points out, noting that “the Supreme Court’s handling of that new CJEU ruling on issues of a statute of limitations will most probably be another milestone in the fate of pending EU-law related damages actions.”

“As for the Hungarian arbitration practice, some modifications of the Rules of Arbitration of the Permanent Arbitration Court attached to the Hungarian Chamber of Commerce and Industry are planned to enter into force in late 2022, digesting experiences piled up over the past five years,” he notes. “Among others, the revised rules will include a new provision on standstill. There will also be new rules on dissenting opinions, specifying the procedural framework of their handing down and accessibility.” Finally, Varga highlights that a new case management system is envisaged to further strengthen and accelerate the process in the early stage of the arbitral proceedings.

“Ultimately, in litigation, cases are decreasing in number,” Varga says. “Though the lasting crisis was expected to increase the caseload, with the enactment of the new Civil Procedure Code some years ago, with which the proceedings have become more formalistic, parties seem to be waiting for more legal certainty, or have been disillusioned by a series of highly formalistic dismissals of actions, which have resulted in a decrease in case numbers.” As for arbitration, Varga notes that there is a slight increase in numbers, especially when it comes to institutional arbitration. “We are very close to Vienna and other arbitration hubs in Europe, making it hard to strengthen the standing of Hungary as a preferred place of arbitration but, at the same time, motivating us to maintain a healthy competition,” he concludes.

The dynamic M&A and Private Equity practice has been the standard bearer for Jalsovszky in the past few months, mainly driven by the post-pandemic release of investment funds and booming production and healthcare sectors in Hungary, according to Practice Leader Agnes Bejo.

“In general, as an independent law firm with a wide plethora of specialties, we have an equally wide set of clients,” Bejo begins. “From large multinational corporations all the way to local, private individuals, so we engage with all parts of the market.” As such, Bejo highlights the firm’s M&A and Private Equity practice as having been the most active of late.

“We have seen a strong uptick in the number of mandates since early spring,” she says. “What is interesting is that we’ve been engaging more sellers than purchasers, but that might just be a random occurrence – all of our projects have been most colorful and quite varied,” she explains. “What we have seen is a market shift from venture capital and private equity investments dominating to more of a strategic M&A landscape.”

And, speaking of the most active industry areas spurring the work of Jalsovszky’s M&A and Private Equity practice, Bejo reports “the production, software/IT, and healthcare sectors are quite active. Early this year, we closed the biggest private healthcare transaction, the acquisition of the Da Vinci clinic,” she says. “Up until now, this year, despite general expectations, I have to say that we have not felt any market fluctuations or uncertainties.”

The drivers for such strong levels of the firm’s activity are not as specifically outlined. Bejo attributes this, instead, to wider post-pandemic market flows. “After the brunt of the pandemic passed, we have seen clear tendencies on behalf of investors to get back into action. A lot of funds were sitting unused out there, and the money that had laid dormant during the pandemic began to flow and fuel deals,” she explains. Such strong investor appetite being satiated was reflected in vibrant transaction markets. “We have experienced a minor slowdown in August, but I believe this to be more because of the holiday season.”

Finally, looking ahead, Bejo remains confident and hopeful about Jalsovszky’s M&A and Private Equity practice activities. “While there have been some warning signs that there might be market slowdowns on account of the war and the energy crisis, especially in the light of the FDI screening regime becoming somewhat more rigid recently, we are yet to feel any consequences of these in our work,” she reports. “Of course, these aren’t easy times, and clients might become a little bit more cost aware and cautious, which could, in turn, lead to a smaller investment appetite. Still, we do not expect our practice to be adversely impacted in any great way and are looking forward to more interesting work to report on,” Bejo concludes.

The very vibrant levels of work in Provaris’ Digital and Technology practice are being driven by the latest ECJ decisions, legislative changes, and a rising tide of privacy awareness, according to Partner Adam Liber, Co-Head of the firm’s Digital and Technology practice.

“Our firm mainly does work in privacy, and IT matters,” Liber begins. “Following the wave of GDPR and the wider increasing awareness of these issues, we’ve decided to place all of our efforts into creating a highly specialized team in these matters.” Liber reports that their practice benefits the most from “mandates previously sent to German, Belgian, and UK firms” but that “clients in Hungary recognized that we, as a local provider with an international legal and consulting background, also have the necessary expertise to deal with sophisticated technology and legal issues, and have started approaching us as well, as of late.”

Liber reports a rather busy 2022 for the Digital and Technology practice, especially when it comes to “international data transfers. It has been a quite busy sector, especially given that the ECJ declared the US Privacy Shield Agreement illegal and the EU Commission released a new set of Standard Contractual Clauses – so there is an ongoing switch to a new set along with the documentation of data transfer impact assessments that drives a lot of work,” Liber reports.

Furthermore, Liber underlines digitalization as being a major driver of work for the practice. “With more and more brick-and-mortar businesses going digital, we find ourselves advising clients on software and platform development and digital services use,” he says. “We utilize a one-stop-shop approach to providing advice related to copyright, e-privacy, e-commerce, consumer protection and distance sales regulations, privacy by design, data protection impact assessments, database consolidation matters, and the use of dark patterns,” he explains.

“The international data transfer work is driven by new court decisions and the enactment of new laws, as well as the challenge presented by increased privacy awareness on these issues and consumers becoming ever-more sophisticated with their requirements,” Liber further elucidates. “Some consumers retaliate against companies even more – when their consumer protection claims are refused – by filing data protection access requests which may cause a lot of headaches for businesses.” Liber reports that such consumer behavior might be costly for tech companies, “which is why more and more external legal counsel is engaged to tackle this work.”

Finally, looking ahead, Liber shares that he expects the Digital and Technology practice will continue to grow. “Due to new legislation incoming and the booming ECJ practice, we soon expect a resolution of several cases the outcome of which will surely influence the work of the IT and data protection practice,” he explains. Liber concludes by adding that, in expectation of such strong levels of work, the Digital and Technology practice has “started expanding through hirings” but that it is also quite “challenging to find suitable people. A strong interest in the technology itself is needed, alongside an in-depth knowledge of the law. This is no longer privacy notice preparation work anymore, we are setting up complete process pipelines for our clients now,” he says.

Former CMS Senior Counsel Csongor Tompa has joined Bird & Bird’s Budapest office as Head of the Banking & Finance and Capital Markets practices.

According to Bird & Bird, “Csongor joins the firm with over 15 years’ experience, providing advice … in all areas of banking and finance … His practice also includes a wide range of financial market regulatory work.” Before joining Bird & Bird, Tompa spent over ten years with CMS, more than seven of which as a Senior Counsel.

“Joining the top Banking & Finance and Capital Markets practices in the country is a great privilege and opportunity, and I am excited to be part of such a forward-thinking team,” commented Tompa. “I am very much looking forward to working with the ambitious, talented, and experienced lawyers of the Budapest office, and I truly hope to contribute to Bird & Bird’s further growth and continuous success in Hungary and the CEE.”

“We are happy to welcome Csongor, who is a strong addition to the Budapest team,” added Co-Head of Country and Head of the Corporate/M&A practice Pal Szabo. “He is a sought-after lawyer for such important sectors, and there is no doubt with Csongor at the helm the Budapest team will be well led and taken to a new level, and it will continue to deliver first-class service for clients.”

Ban, S. Szabo, Rausch & Partners has advised Focus Ventures and Hiventures on their investment in Continest Technologies.

According to BSRP, “Focus Ventures and Hiventures are investment fund managers managing municipal investment funds across Hungary. Continest is a company that has developed innovative foldable container technology and is currently rapidly expanding the sale and lease of such containers in various industry fields, including defense and health.”

BSRP’s team was led by Partner Balazs Unger, supervised by Managing Partner Janos Rausch, and included Associates Diana Aszodi, Viktoria Utassy, and Kinga Laszlo-Boelcskei. 

BSRP was unable to provide additional information on the deal.