Category: Hungary

An amendment to the Medicines Thrift Act XCVIII of 2006, which came into effect in early 2022, has effectively eliminated what was fast becoming a booming market in the home delivery of over-the-counter (OTC) medicinal products and medical aids.

The repeated lockdowns and restrictions imposed to contain the spread of the pandemic caused the home delivery market to explode, enabling the delivery of meals, groceries, and OTC medicines at the click of a button. Pharmacies in Hungary had already begun investing huge amounts into online pharmacy, which extended to virtual consultancy regarding OTC medications and their subsequent rapid delivery via courier. Even the bigger food and restaurant delivery players were joining in on the pharmacy delivery market. Considering the limitations and fears caused by COVID-19, it was a fiercely competitive market that provided a remarkable level of comfort and ease for its customers. 

Pre-pandemic research projected that the global ePharmacy Market would reach $177,794.9 million by 2026, up from $49,727.7 million in 2018. Such meteoric numbers are reflected in online orders for specifically OTC products in recent years, and the pandemic provided fertile ground for commercial couriers to take advantage of a huge market share for home delivery services. More locally, organisational changes in response to the first wave of the pandemic ranged from 20% of pharmacy chains in Central Europe establishing a platform for home delivery, and 27% establishing new pharmacy services (e-shop). These investments created solutions that were particularly useful to patients who were quarantined, self-isolating, or had to stay at home for safety reasons.

However, in 2021, the Hungarian Association of Pharmacies lobbied the Government to change the legislation for OTC delivery, arguing that it threatened the existence of small town and village pharmacies, particularly considering the significant costs connected to running a pharmaceutical e-shop and delivery service. The Association further argued that an open market for OTC delivery services could create demand issues in pharmacies in larger towns and cities.

The amendment, announced mid-December 2021, set forth that it is only professional pharmacists themselves, or their assistants, who may home deliver OTC medications. Considering the limitations of those professionals in terms of time and capacity, as well as the limitations in terms of geographical scope for delivery, this has effectively put an end to a highly lucrative market. 

Many pharmacy chains and businesses in Hungary responded to the first pandemic wave by investing considerable amounts to introduce new pharmacy services practically overnight. These investments in ecommerce and home delivery services have effectively been made redundant without any hope for return, particularly considering the finality of the amendment.

By Milan Kohlrusz, Partner, Bittera Kohlrusz & Toth

Environmental sustainability is essential to mitigate the risks of climate change. In order to promote this and develop a green economy, it is essential to secure adequate financing from the private sector. To this end, banks have started making available financial products for environmentally sustainable purposes.

The world’s central banks are becoming increasingly active in promoting environmental sustainability and the National Bank of Hungary (MNB) has made climate change and environmental sustainability a strategic priority. In February 2019 the MNB launched its Green Program, with the purpose of supporting the domestic financial intermediary system to achieve environmental sustainability through financial products and services.

This approach was reinforced when the Hungarian Central Bank Act was changed in August 2021, one of the first ones worldwide to set the support of environmental sustainability as a priority objective of the MNB.

The MNB has been using a number of instruments to reduce the risks associated with climate change and other environmental problems, and to expand the financing of the domestic green economy. The range of programs and products to promote sustainable finance, both in the banking sector and in capital markets, is constantly expanding.

Environmental considerations have globally been most visible on the bond markets, and the Hungarian green market is also dominated by green bonds. The first green government bond was issued in 2020. Since then, the corporate green bond market has also started to “go green” and the number of green bonds has been steadily increasing. Most green bond issues take place through the MNB’s Growth Bond Program, launched in 2019 to increase liquidity in the corporate bond market, with a total volume of EUR 4.3 billion. So far, the issuance of corporate green bonds in Hungary has been linked to the property development sector – a key area for reducing carbon emissions and mitigating climate risks.

The development of the green asset market is also supported by the Budapest Stock Exchange (BET). In March 2021, the BET issued the ESG Reporting Guidelines for BET issuers. These guidelines provide guidance and recommendations for sustainability reporting by listed companies.

MNB introduced the Green Preferential Capital Requirement Program at the end of 2020 as part of its green initiative in the capital markets. Under this scheme, investors purchasing green corporate bonds receive a discount on the capital requirements for that asset.

In addition, the MNB has a Green Mortgage Bond Purchase Program for the purchase of green-rated mortgage bonds with the aim to promote green housing lending and also the National Sustainable Capital Market Strategy project in partnership with the EBRD to help the domestic capital market become a more supportive financier of environmental sustainability.

As part of its measures for the banking sector, the MNB issued its Green Recommendation in April 2021. It sets out expectations in terms of strategy formulation, corporate governance, risk management, and disclosure. The Green Recommendation aims to facilitate the transition of credit institutions towards sustainable operations and to prepare for mandatory regulatory changes relevant to climate change and environmental risks.

In order to encourage green lending on the retail side, the Green Preferential Capital Requirement Program for Housing came into force in early 2020. Under the regulation, banks can apply significantly reduced capital requirements for loans to finance the purchase or construction of energy-efficient properties and energy efficiency retrofits, in return for which they must offer customers an interest or fee rebate and fix energy efficiency features for new loans.

As part of the green toolkit strategy, the Green Home Program was also launched to facilitate the emergence of a green home loan market, under which the MNB provides refinancing funds to banks for the construction or purchase of green homes, which they can on-lend to retail customers.

In the corporate sector, the MNB also introduced the Green Preferential Capital Requirement Program for loans financing renewable energy production (mostly solar power plants) at the end of 2020. Since then, the range of products covered by the capital requirement discount has been extended and will continue to be extended to other categories (e.g., exposures related to electromobility, sustainable agri-food, energy efficiency investment, acquisitions related to green activities, and the financing of sustainable real estate investment).

By Erika Papp, Budapest Managing Partner and Head of Finance CEE/CIS, and Kitti Tulner, Associate, CMS

This Article was originally published in Issue 8.11 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

The European Data Protection Supervisor (“EDPS”) has issued a decision after a complaint was filed against the European Parliament (“Parliament”) due to unlawful data transfer to the US, a deceptive cookie banner and unclear data protection notices.

The Parliament entrusted a service provider to set up a website regarding Covid testing. This website used Stripe and Google Analytics cookies to gather data which are considered as personal data. The cookies were transferred to the US, since both companies are located in the US. The EDPS emphasized in its decision that “data transfers to the US can only take place if they are framed by effective supplementary measures in order to ensure an essentially equivalent level of protection for the personal data transferred”. Since the Parliament did not provide any documentation or evidence regarding an equivalent level of protection, the EDPS came to the conclusion that the requirements placed on data transfer to the US were not met.

The EDPS confirmed the violation of data protection laws on the grounds indicated in the complaint. Accordingly, the EDPS issued a reprimand and ordered the Parliament to comply with the relevant laws.

By Edina Czegledy, Counsel, and Laura Lukacs, Legal Advisor, Noerr

Schoenherr has advised Germany-based e-mobility company Tier Mobility on its new office lease agreement in the K6 office building in Budapest. Cerha Hempel reportedly advised the landlord.

According to Schoenherr, “with this lease Tier will be the core tenant of the K6 office building located in the fifth district of Budapest, at Astoria station.”

Schoenherr’s team was led by Attorney Laszlo Krupl and included Associate Adrian Menczelesz.

Szecsenyi & Partners has advised Wing on the sale of four office buildings to SkyGreen Buildings. DLA Piper advised SkyGreen.

The four assets are all part of the Infopark office park in Budapest. The total lettable area of the office buildings exceeds 30,000 square meters.

SkyGreen Buildings is a real estate company owned by the Green Real Estate Development Investment Fund, managed by Equilor Fund Management Ltd. 

The Szecsenyi & Partners team included Partner Balazs Vagvolgyi and Attorney Kitti Gaal-Toth.

DLA Piper’s team was led by Local Partner Szilard Kui and included Senior Associates Bettina Boncok and Attila Remes and Junior Associate Krisztina Kasza-Toth.

The upcoming Hungarian parliamentary election, scheduled on April 3, 2022, is one of the most pressing political issues, as united opposition parties are competing against the ruling party, according to Kapolyi Law Firm Managing Partner Jozsef Kapolyi.

“The opposition parties have formed an alliance and have agreed on a common prime-minister candidate to run against the ruling parties,” Kapolyi says. “This year’s election will definitely be different compared to the previous two ones in the past twelve years when the opposition parties were rather fragmented. To say the least, the elections in April will be more competitive compared to the past,” he adds.

Kapolyi highlights that the new act on compensation for long-lasting civil litigation procedures has been one of the major legislative developments. “A new act was adopted by the Hungarian parliament and entered into force as of January, establishing financial compensation from the state in case of excessively long civil litigations,” he notes. “It will be interesting to see the actual impact of this law on businesses and civil proceedings.”

According to Kapolyi, Hungary is facing some challenges with regard to the economy, similarly to the rest of the world. “Inflation and rising prices are very noticeable issues recently. In Hungary, we have one of the highest inflation rates in Europe. In January 2022, the inflation rate is expected to reach 7,4%, which may be reduced by the government’s official price cuts on fuels and many basic foods. Accordingly, the National Bank of Hungary is raising the interest rates, which will have a very big impact on investments in Hungary,” Kapolyi points out. “It is also worth mentioning that the government has fixed the interest rates on residential mortgage loans at the level of October 2021 and that this measure came into effect in early January 2022.”

“Another significant update is related to the National Bank’s NKP funding program (Growth Bond Program), which was launched to support the financing needs of companies,” he adds. “The program has been implemented for the past two and a half years, enabling 74 companies to issue corporate bonds through it. This program has provided approximately HUF 2,500 billion for the corporate sector. The program ends in January 2022, having an interesting impact on the finance and corporate sectors in Hungary.” According to him, many companies are now trying to receive the final financial support from the National Bank of Hungary, which creates high competition among them.

“In addition, more companies are trying to attract financial resources from capital markets, and launch IPOs,” he notes. “AutoWallis’ recent transaction is a good example, as it was a first IPO in the past five years which was aimed not only at institutional but retail investors as well.” According to him, “the AutoWallis deal was a significant success, with the shares oversubscribed in a very short period of time on a good price, as the interest from investors was quite high.”

“Other new companies have also arrived on the stock exchange recently, and a few are in the preparatory stage for the public offering of shares on the Budapest Stock Exchange,” Kapolyi adds. Accordingly, “the capital market has a high interest for new kinds of financing structures, like private investment funds,” he concludes.

Government Decree 598/2021 (the Decree) has allowed employers to order their employees to be vaccinated against covid-19 since 15 November 2021. Since it came into force, the Decree has been the subject of much discussion and interpretation by legal practitioners and commentators.

In Hungary, compulsory vaccination is generally a state responsibility. Under normal conditions, the ministry responsible for healthcare and the national chief medical officer may order compulsory vaccination. In order to prevent or mitigate the consequences of a human epidemic, the government may derogate¹ from the effective legislation, which has been the case since the outbreak of the covid-19 pandemic. Due to the fact that vaccines have been available in sufficient quantities, yet the willingness among citizens to vaccinate themselves has not been particularly high and the country was hit hard by the fourth wave, the government decided to make vaccines compulsory in several sectors (eg, the healthcare sector, the national public and higher education sector, the social sector and the public administration sector). In other sectors, the government has empowered employers to define vaccination as a term and condition of employment.

This article provides a short overview of the main rules and possible issues relating to compulsory vaccination as a working condition in line with the Decree.

Scope of decree

Overall, employers are entitled to prescribe vaccination as a precondition of work in certain jobs. As a consequence, employees who cannot prove that they have been vaccinated may be declared to be unfit for work. According to the Decree, the sole purpose of the mandatory vaccine uptake is the protection of employees’ health. Employers may only prescribe compulsory vaccination for employees who are affected by, or at risk from, covid-19. Hence, employers must determine the vulnerable group of employees by considering the characteristics of the workplace and the job from the perspective of the pandemic in their labour safety risk assessment.²

Information obligation and certification requirements

Based on the result of the labour safety risk assessment, if employers order compulsory vaccination, they must inform the identified group of vulnerable employees of:

• the ordered vaccine mandate,
• the deadline by which vaccination must have taken place; and
• the possible consequences of non-compliance.

It is advisable to inform the concerned employees on potential exemptions, but this is not a requirement of the Decree. Only health grounds may serve as an exemption from compulsory vaccination.

The information notice must be written either in paper or electronic (including email) format. It is recommended to ensure proof of receipt, which is essential if employers intend to apply penalties for non-compliance. For the sake of legitimate employment (ie, the guarantee of working environment health and safety), employers must make sure that the employees concerned get the vaccine. Therefore, employees must certify their vaccination within the given deadline set out by the Decree. They may show their EU digital covid-19 certificate or Hungarian covid-19 certificate, or other documents that are listed in the Decree, in addition to their identity card.

The Decree authorises employers to process employees’ health-related data in relation to vaccination.

Possible penalties

If employees fail to prove their vaccination by the given deadline, employers may apply only the penalties determined by the Decree.

The possible penalties for non-compliance have been heavily debated among practitioners, since the provisions of the Decree are not entirely clear in this regard. The majority considers that the Decree qualifies lex specialis, so the legal consequences set out by the Hungarian Labour Code (ie, termination of employment for non-compliance with employers’ instructions), as a lex generalis, may not be applied.

Accordingly, employers may order unpaid leave to employees who refuse to take up vaccination for a period of up to one year. If the employee does not prove either that they have been vaccinated during the term of the unpaid leave or that they have a medical exemption, the employer may terminate the employment relationship with immediate effect after the expiration of the one-year period.

Employees who cannot undergo vaccination for health reasons must substantiate such reasons with a medical professional’s opinion. For the sake of exemption, the medical examination must be initiated by the employee. It is not entirely clear which medical conditions may contraindicate the vaccination and it will be primarily up to the occupation health professional to decide. The Decree does not regulate the process to be followed if an employee cannot get the vaccine for health reasons. For the sake of maintaining the employment relationship, the parties must find a solution, which maybe another type of job – if there are any available – suitable for the exempted employee, or the situation could lead to the termination of the employment relationship.

Employer’s liability

Another debated area is the potential liability of the employer for potential health damages suffered by employees in connection with the jab. In Hungary, employers’ liability in connection with the caused damage is objective (no fault). Employers must provide compensation for damages caused to employees in connection with the employment relationship. Employers only may be exempted from liability if they can prove that:

• the damage was caused by circumstances beyond their control;
• they did not expect the damage to occur; and
• there was no reasonable cause to take action to prevent or mitigate the damage.

This leads to the question of whether employers are supposed to anticipate any adverse reactions to the covid-19 vaccination, and whether such reactions fall within their control. According to the Curia of Hungary, damage only occurs beyond the employer’s control if the employer has neither influence nor the possibility to exercise influence over the situation causing the damage. Based on the lack of case law, it is beyond the employer’s control if an employee suffers any health damage in connection with a vaccine that has been authorised by the competent medicine agency in Hungary. Due to the scientific evidence that the authorised vaccines have a protective effect by producing antibodies against covid-19, employers should be confident in the expertise of the competent medical authority (in respect of the effectiveness and safety of the vaccine) and healthcare professionals (who should be aware of the state of health of the patient). Therefore, this raises issues about the medical health profession, because the possibility of vaccination and the type of the chosen vaccine are subject to medical competence.

Comment

The legislation has attempted to follow the waves of the pandemic and prevent its further spread. In this context, the initiative to give employers the right to make the covid-19 vaccination compulsory in respect of their employees has created several debates.

In the private sector, Hungarian employers are facing a stark choice between protecting their employees (ie, vaccinating them) or losing them as a consequence of persistent vaccine hesitancy. Initial experience shows that few employers have made use of this option, partly due to the consequential workforce shortage. Employers are wary of losing valuable workforce if they compel unwilling employees to be vaccinated. Therefore, employers usually try to use softer measures, such as incentivising vaccinations and use regular testing to protect employees.

¹ Section 51/A of Act CXXVIII of 2011 concerning disaster management.
² The labour safety risk assessment is a general obligation of employers based on Act XCIII of 1993 on Labour Safety.

By Daniel Gera, Counsel, and Dorottya Gindl, Attorney at Law, Schoenherr

On June 4, 2021, CEE Legal Matters reported that Zavisin Semiz & Partneri and the Budapest office of Dentons advised GTC on the Serbian legal aspects of the deal. CEE In-House Matters spoke with Klara Bujdoso, Group Legal Counsel at GTC, to learn more about the sale.

CEEIHM: Tell our readers a bit about GTC

Bujdoso: The GTC Group is a leading real estate investor and developer focusing on Poland and capital cities in Central and Eastern Europe. During 25 years of its activity, GTC has developed 76 high-standard, modern office and retail properties with a total area of over 1.3 million square meters through Central and Eastern Europe.

GTC now actively manages a commercial real estate portfolio of 54 commercial buildings providing approximately 854,000 square meters of lettable office and retail space in Poland, Hungary, Bucharest, Belgrade, Zagreb, and Sofia. In addition, GTC has a development pipeline of 420,000 square meters of retail and office properties in capital cities of Central and Eastern Europe, of which 54,000 square meters are currently under construction.

GTC is focused on sustainable development and, to present its approach to environmental, social and governance issues, in 2021, GTC issued its first ESG report, covering the group’s activity across 6 CEE markets. 

GTC S.A. is listed on the Warsaw Stock Exchange (since 2004) and inward listed on the Johannesburg Stock Exchange (since 2016).

CEEIHM: Your company recently sold its Belgrade real estate portfolio to the Indotek Group. What was it about the assets that made them particularly attractive in your view?

Bujdoso: Intending to optimize its operations in Serbia, GTC has signed a sale and purchase agreement for the sale of 11 premium quality, recognizable office buildings within 5 business parks – Green Heart, FortyOne, Belgrade Business Center, 19 Avenue, and GTC House – occupying over 122,000 square meters in the business heart of Belgrade. The buildings have been showing very high occupancy rates and enjoy great interest from the best known international and local businesses since their development. This is a unique portfolio, which is one of kind in terms of the size but also quality and tenants base – that is what makes it so interesting.

CEEIHM: And what were the business drivers behind the sale? 

Bujdoso: We were not actively looking to sell the whole Serbian portfolio, however, we dispose of assets from time to time to recycle capital.

The sale of 11 premium class office buildings in Belgrade is a bold move that will allow us to complete our development cycle in Serbia and start a fundamentally different chapter on this market. This is a benchmark transaction in Belgrade demonstrating liquidity post-Covid. Selling some of our assets and relocating the free cash flow for the development of brand-new, ambitious projects in Serbia and other markets of CEE is truly an “exit on a strong note,” which will drive GTC forward. The funds from the sale of the assets in Belgrade will be reinvested in the countries with a higher rating, including Poland and Hungary.   

CEEIHM: What were some of the legal complexities of this deal and how were they handled?

Bujdoso: This deal is one of a kind for the Serbian real estate market due to its size, complexity, and cross-border nature. It also marks the largest as well as one of the first secondary-market transactions in the Belgrade office market and also involves the largest Serbian commercial real estate financing package to date. The deal involved a complex interplay of real estate, corporate, and financing aspects. For many issues faced during the negotiations, there was no customary or market standard solution that the parties could turn to, and both lawyers and business people needed to find alternative solutions. A particular challenge was to coordinate negotiations and sale of a number of project companies in two jurisdictions, all while juggling pre-completion activities and putting together very substantial cross-border bank financing.

CEEIHM: Why did you choose ZSP and Dentons as your advisor?

Bujdoso: To deal with all these issues and challenges, the expertise of experienced legal teams was vital. ZSP is our long-standing Serbian counsel and, besides having very valuable experience and knowledge with the development and operation of the projects now being sold, they also provide great transaction advice. Dentons is our go-to counsel in Hungary and elsewhere in CEE, especially when it comes to complex transactions requiring a business-minded and solution-oriented approach, working with very tight timeframes. Dentons and ZSP worked very well together and provided us with seamless support throughout all challenges of the deal (and there were a lot of them!)

Originally reported by CEE In-House Matters.

DLA Piper has advised Indian technology company HCL Technologies on its acquisition of Budapest-based Starschema, a provider of data engineering services.

“Joining HCL will enable us to keep our strategic focus and expand our data engineering capacity to provide a greater breadth and depth of services to clients,” Starschema Founder and CEO Tamas Foldi said. “As part of HCL’s full spectrum of technology services, we will leverage our expertise in data engineering and emerging data technologies to solve companies’ data challenges, through building fast, scalable solutions that make people more effective and companies more profitable.”

“Starschema will strengthen our data engineering capabilities, providing us with the ability to leverage its solutions and talent in Central and Eastern Europe,” President of Engineering and R&D Services at HCL Vijay Guntur said. “Engineering talent will continue to remain in high demand, and Starschema offers a specialized talent pool in a strategic growth area for HCL. Following the acquisition, HCL will be able to offer data engineering consulting and near-shore access to digital engineering services to a wide base of clients.”

DLA Piper’s team included Partners Gabor Molnar and Levente Torma, Counsel Biborka Jojart, and Lawyer Tamas Szkiba.

Dentons has appointed Gabor Kiraly as the new Country Managing Officer in Hungary effective January 1, 2022.

According to Dentons, Kiraly will be responsible for the day-to-day management and leadership of the Budapest office, in addition to serving clients as a partner in the Banking and Finance team. 

Kiraly started his career at the Hungarian National Bank in the early 1990s and has also worked for five years at CIB Bank. He joined Dentons in 2015, and after briefly leaving the firm to work for a private equity house, he rejoined as a partner in 2021 (as reported by CEE Legal Matters on July 1, 2021).

Kiraly takes over the leadership role from Istvan Reczicza, who served as Managing Partner for more than 23 years, including seven at Dentons. According to the firm, “Istvan Reczicza will continue to work at Dentons as a Senior Partner, where he will focus on supporting his clients while strengthening the advisory business.”

“It is a great honor and privilege that the leadership has entrusted me to take our market leader position in Hungary to a new level,” Kiraly commented. “Working together with Istvan Reczicza, I will blend innovative ideas with our well-established strategy, in order to build on the incredible success that the firm has achieved in recent years.”