Category: Hungary

Crowdfunding is a type of intermediation where the service provider operates a platform (e.g. website) open to the public. The purpose of that platform is to match enterprises seeking financing with prospective investors. The enterprises typically receive small amounts of money from many investors (usually natural persons), via lending (lending-based crowdfunding) or investment into shares (investment-based crowdfunding). Some of the best-known crowdfunding platforms are Kickstarter or Indiegogo. By introducing a single European regulatory framework, the uncertain Hungarian legal environment might change, potentially giving a boost to the crowdfunding market.

The Hungarian legislator recently harmonised the national laws to comply with Regulation (EU) 2020/1503 of the European Parliament and of the Council. The goal is to establish a single regulation on crowdfunding within the European Union, thus facilitating cross-border crowdfunding services.

Single European regulation

Previously, there was no uniform regulation on crowdfunding at the EU level. The existing rules vary between different Member States. Some have introduced a separate regulatory framework for crowdfunding, while others (like Hungary) assess such activity pursuant to the existing rules. As a result, the national rules differ to such a degree that the cross-border provision of crowdfunding services is obstructed. Nevertheless, crowdfunding is an increasingly established form of alternative financing for start-ups and SMEs. The regulation establishes a uniform regulatory framework for crowdfunding services, aiming to facilitate cross-border provision of services (and cross-border investments) and eventually the free movement of capital.

The regulation is applicable from 10 November 2021. It covers crowdfunding services involving only enterprises (i.e. not consumers) seeking financing of up to EUR 5m. The regulation covers both lending-based and investment-based crowdfunding.

Authorisation is mandatory

The regulation aims to introduce uniform, proportionate and directly applicable requirements for crowdfunding service providers (i.e. platform operators). Pursuant to the regulation, crowdfunding service providers must obtain authorisation from the supervisory authority of the Member State where the service provider is established. To obtain it, the service provider must comply with a number of conditions (e.g. have internal policies and internal procedures complying with professional requirements). The European Securities and Markets Authority (ESMA) maintains a register of all crowdfunding service providers.

Once the crowdfunding service provider has obtained the authorisation, it does not need to obtain further authorisations from other Member States to provide cross-border services. By notifying its supervisory authority, the service provider may provide its crowdfunding services to other Member States on a cross-border basis.

Investor protection

The regulation further aims to ensure a high level of investor protection. It therefore distinguishes between sophisticated and non-sophisticated investors and introduces stricter rules for the latter. Crowdfunding service providers are required to run an entry knowledge test of non-sophisticated investors to ascertain their understanding of the investment. In addition, crowdfunding service providers are required to issue risk warnings. A reflection period must be ensured for non-sophisticated investors during which they may revoke their offer to invest without stating a reason or being penalised. Conversely, an entry knowledge test and risk warnings are not required in the case of sophisticated investors.

To ensure a high level of investor protection, the regulation requires enterprises seeking finance to draw up a key investment information sheet. This document enables investors to make informed investment decisions. Key investment information sheets do not require supervisory approval.

The Hungarian regulatory environment

Hungarian law does not contain any rules on crowdfunding, meaning it is assessed pursuant to the existing rules. The Hungarian National Bank did conclude that certain elements of crowdfunding may require authorisation. For example, in the case of lending-based crowdfunding, the investor’s activity may be deemed a lending activity, which requires authorisation. In such a scenario, the platform operator is deemed an agent of the investor (which also requires authorisation or notification). Plus, in certain cases the Hungarian National Bank regarded the activity of the enterprise seeking finance as collecting deposits from the public, which requires authorisation as well. In that case, the platform’s operator will be the agent of the enterprise. Since investors are typically natural persons and enterprises are SMEs or start-ups, complying with the necessary requirements for the authorisation is not possible for them. This strict interpretation undermined the crowdfunding market in Hungary.

With the application of the regulation, the above practice will be replaced by a single European regulation. Since the regulation introduces a completely new regulatory regime that is directly applicable, only a small number of changes were necessary in the Hungarian rules. Crowdfunding falls under the scope of the Hungarian Capital Markets Act, which sets forth liability rules and the supervisory competence of the Hungarian National Bank. The Hungarian rules derogate from the EUR 5m threshold of the regulation for a limited time and apply a EUR 1m threshold until 10 November 2023.

What the future holds

Due to the new regulatory framework, the crowdfunding market will probably boom within the European Union, particularly cross-border crowdfunding. This also means that there will be a completely new basis to the regulatory requirements in Hungary. The Hungarian market will likely heat up as well, since market participants that were scared away by the regulatory environment will now easily access the Hungarian market with their authorisation obtained in another Member State.

By Gergely Szaloki, Partner, and Virag Palguta, Attorney at Law, Schoenherr

The global pandemic has impacted all markets, with subsequent ramifications for M&A. Investors are now seeking greater protection against general lock-downs and supply-chain disruptions, while governments aim to protect critical supplies and services by imposing new regulations on foreign investment in crucial or strategic industries. If you are considering investment opportunities in Hungary, take a look at this overview to get insight into the regulations on foreign investment in strategic industries.

​The following overview is an extract from the Foreign Direct Investment in Central Europe publication, which gives insight into the regulations on foreign investment in strategic industries in the region.

Have FDI screening rules been implemented (or will they be implemented) in the country?

Yes. The Hungarian Parliament adopted Act LVIII of 2020 on the Transitional Regulation Related to The Cessation of The State of Emergency and The Epidemiological Preparedness (hereinafter “the Act”), applicable as of 18 June 2020, provides, inter alia, special provisions regarding the FDI, which shall apply until 31 December 2021.

Definition of FDI

For the purposes of the Act, any of the following type of transactions qualify as an investment:

• transfer of shares or quotas of strategic companies;

• transfer of essential assets of strategic companies;

• capital increase in strategic companies;

• transformation, merger or demerger of strategic companies;

• issuing bonds in strategic companies;

• establishment of usufruct rights on shares or quotas of strategic

Definition of foreign investor

According to the Act, a foreign investor is a citizen of / a legal person established in:

• a Member State of the European Union,

• a country of the European Economic Area,

• the Swiss Confederation or

• a third country,

who intends to make a transaction, which falls under the scope of the Act.

Do the following scenarios trigger the screening?

1. Acquisition of 10% or more of voting rights in the company: Yes

2. Establishment of a new branch: No

3. The production of new products: No

4. Establishment of a new company in which foreign investor will have more than 10% voting rights: No

5. The transfer of use or operational rights in infrastructure or assets that are indispensable for the operation of strategic companies: Yes

6. Other screening triggers: N.A

Deadline for notification of the relevant screening body

The official language of the procedure is Hungarian and the notification needs to be filed with the Minister of Innovation and Technology within 10 days of the date of the transaction. During the whole process legal representation by a Hungarian attorney at law is mandatory. The notification shall contain certain data of the foreign investor, the detailed description of the transaction with the relevant circumstances and the complete set of documentation regarding the referred transaction.

Screening procedure

The Minister of Innovation and Technology reviews the transaction. The decision on the review is limited to whether the FDI poses a threat to state interest, public security or order of Hungary, in cases where it affects strategic companies. Government Decree No. 289/2020. (VI. 17.) (including, but not limited to,: the chemical sector; the communication sector; the energy sector; the financial sector; transportation and logistics) and points a)-e) of para. 1 of Article 4 of the Regulation (EU) 2019/452 of the European Parliament and of the Council of 19 March 2019 establishing a framework for the screening of foreign direct investments into the Union (including, but not limited to,: critical infrastructure, physical or virtual, including infrastructure in the fields of energy, transport, water, health, communications, media, data processing or data storage, the aerospace sector, and defense, electoral or financial infrastructure and sensitive facilities, as well as land and real estate, which are essential for the use of such infrastructure or land and real estate located in the vicinity of such infrastructure; the supply of critical resources, including energy or raw materials, food safety, medical and protective equipment; and freedom and pluralism of the media, but excluding financial infrastructure) determines the scope of strategic companies.

In determining whether a FDI may affect state interest, public safety order, the Minister takes into account, in particular:

• whether the foreign investor is directly or indirectly under the control of the government, including state authorities or the armed forces of a third country, including through an ownership structure or significant funding;

• whether the foreign investor has already been involved in activities that affect security or public order in a Member State;

• whether there is a serious risk that the foreign investor is engaged in illegal or criminal

Screening decision

The Minister shall, no later than 30 working days after the receipt of the notification – if the specified circumstances do not apply – acknowledge the receipt of the notification in writing. If the specified circumstances exist, the Minister prohibits the transactions, which decision the Minister is obligated to argue. Under special circumstances, the Minister can extend the deadline with 15 days. The applicant can contest the prohibition decision. 

Are fines or other penalties prescribed due to failure to notify the FDI?

Yes. If an investor fails to notify the Minister of a transaction, which would fall under the effect of the Act, the Minister can impose a penalty. In case of natural person foreign investors, min. 100 000 HUF, and in the case of a legal persons or other organizations, the amount of the penalty is the minimum of the 1% of the last business year’s net sales’ of the strategic company involved in the transaction. In both cases, the maximum amount of the penalty is up to twice the value of the transaction. Moreover, as specified by the Act, the transaction will be deemed as null and void.

Additional comments on FDI review aspects (e.g. any peculiarities, exemptions, broader definitions etc.).

No inspection or infringement proceedings may be instituted for failure to notify, if 6 months have passed since the Minister became aware of the transaction, but at the latest 5 years after the circumstances. According to recent changes, the provisions described above shall no longer be applicable to intra-group transactions.

By Peter Gondocz, Partner, Deloitte Legal Gondocz and Partners

Freshfields Bruckhaus Deringer has advised Japanese petroleum company ENEOS on its acquisition of JSR Corporation’s global elastomers business.

JSR is a Tokyo Stock Exchange-listed company engaging in the manufacture and sale of synthetic rubber and fine chemical materials. Its elastomers business provides tire materials, such as solution polymerization styrene-butadiene rubber, a raw material for treads of fuel-efficient and high-performance tires.

According to Freshfields, “JSR will establish a new company and will transfer the elastomer business and the shares of international subsidiaries and affiliates related to this business to the new company by splitting the company. ENEOS will subsequently acquire all of the shares of the new company, making it a wholly-owned subsidiary. The transaction is expected to complete on April 1, 2022.”

Freshfields’ team in Tokyo was led by Senior Counsel Tomoko Nakajima and Partner Takeshi Nakao, with support from the firm’s office in Hungary.

Freshfields did not reply to our inquiry on the matter.

Editor’s note: After this article was published, CEE Legal Matters learned that Freshfields’ local cooperating law firm in Hungary was Oppenheim. The firm’s team included Partner Mihaly Barcza and Associate Gabor Kordovanyi.

Hungary was one of the last EU countries to introduce a register of ultimate beneficial owners. While the provisions of the Fourth and Fifth AML Directives were already implemented in the Hungarian AML Act, the technical conditions on the actual operation of the UBO register were only adopted by Act XLIII of 2021 (“UBO Register Act”) and are in force as of 22 May 2021.

What does UBO mean and why is it important?

The UBO or ultimate beneficial owner is the person who ultimately benefits from an entity’s financials. Generally, a person who owns at least 25 % of the voting rights or shares, or otherwise has a major influence on the management of the entity, is considered the ultimate beneficial owner.

In practice, complex fraud or money laundering cases may put authorities to the test, because the perpetrators tend to obfuscate their identities through the use of entities or even a network of entities. That being said, knowing the persons standing behind any entity enhances corporate transparency and pushes back against malicious corporate/economic activities.

Therefore, identifying UBOs became a central element for the EU’s anti-money laundering policy and each EU country is required to have a central electronic register for UBOs.

The Hungarian UBO Register and uploading data

Although the UBO Register Act established the framework of the UBO Register, the content of the register will be provided in several phases and will be managed by the National Tax and Customs Administration of Hungary (Tax Authority).

First, after extensive negotiations and modifications, ultimately banks managing commercial bank accounts are responsible for submitting the names of their clients’ beneficial owners to the Tax Authority with only a 21-day deadline expiring on 12 June 2021. From then onwards, the banks will have to report monthly.

After 1 February 2022, other service providers will also gain access in order to compare their client’s beneficial ownership data with the content of the register. From the same date, in compliance with their legal obligations, authorities, prosecutors, and the courts will be able to download and disclose data, while third parties will have access to the content of the UBO Register for a fee only after 1 July 2022.

Classification of clients

Clients will be assessed on a 10-point reliability index (TT index) and each client starts with 10 points. If an authority, public prosecutor, court or other service provider detects a material discrepancy between the data it knows and the data uploaded to the register, it may notify the Tax Authority.

Based on the notification, the Tax Authority will amend the client’s TT index. As a result, the client’s TT index will be reduced by two points if the notice is submitted by an authority, prosecutor or court. If the notification is submitted by another service provider, the client’s TT index will be reduced by one point.

If a client’s TT index decreases below 8, it will trigger an “uncertain” label, while a decrease below 6 will eventually result in an “unreliable” label. Clients will be notified of this by the Tax Authority and will have a five-day grace period to amend the data at their banks.

Consequences and sanctions

The UBO Register Act refrained from imposing any fine on “uncertain” or “unreliable” clients. However, it imposed other severe sanctions.

First, clients labelled as “unreliable” will be published on the Tax Authority’s website, while clients labelled as “uncertain” will be published after 180 days, unless the client regains their 10-point TT index by duly updating their data.

Second, all service providers under the AML Act (including lawyers, banks, domiciliary service providers) must refuse to participate in transactions exceeding HUF 4.5m with an “unreliable” client due to the high risk tied to it from the AML perspective.

The UBO Register Act allows for remedy against the above sanctions.

***

Based on the current rules, it is apparent that in case of rapid changes of ownership it is easy to slip into the “uncertain” or even “unreliable” labels, even if the entity complies with the law. This is because banks must report on a monthly basis, while courts, including registry courts, will be allowed to report whenever they see a discrepancy.

Although data updates and remedies are possible by law, we will have to wait a long time to see how changes of already registered data will be handled in practice. The TT index categorisation will come into force only on 1 February 2022 and the sanctions will only follow from 1 July 2022. Moreover, the UBO Register will only be linked to the European Central Register on 1 February 2023.

By Alexandra Bognar, Attorney at Law, and Anita Vertes, Associate, Schoenherr

Dentons has advised Central Europe Alfa Asset Management Ltd. and its sole investor, Optima Investments Limited, on the acquisition of the Budapest Metropolitan University from Central European Education Holding Zrt for a cash consideration of USD 50 million. CMS advised the seller.

Optima Investments Limited is an asset manager owned by the foundation established by the National Bank of Hungary. Central European Education Holding was ultimately owned by CEE Equity Partners.

Dentons’ team included Partners Rob Irving and Istvan Reczicza, Counsel Tunde Gonczol, and Associates Nora Jakab and Brigitta Kovacs. Impact Advisory, Denton’s joint venture advisory firm also advised on the deal.

CMS’s team included Partner Aniko Kircsi, Senior Counsel Zoltan Poronyi, and Associate Szabina Marsi.

Hungary is one of the first countries in CEE to fully implement Directive 2019/790 on Copyright in the Digital Single Market (“CDSM Directive”) and Directive 2019/789 (“SatCab 2.0 Directive”). The so-called “Copyright Reform Act” (Act XXXVII of 2021) was published in the Official Gazette on 6 May 2021, and the majority of the new rules will be effective as of 1 June 2021.

According to the reasoning behind the Copyright Reform Act, many of the rules of the CDSM Directive that aim to strengthen the position of authors and performers were already an existing part of the Hungarian copyright system, and so only fine tuning was needed.

The main novelties introduced by the Copyright Reform Act

However, other than the fine tuning mentioned above, a number of institutions are being newly introduced to the Hungarian copyright system in line with the Directives. The Copyright Reform Act allows cultural heritage institutions (e.g. museums, libraries) to make easier use of works protected by copyright that are no longer commercially available. For example, libraries are now allowed to digitalise and make available on their websites those literature works that exist only as part of the library’s collection. It clarifies the responsibility of online platforms for the use of content under copyright protection uploaded on their platforms. I.e., content sharing platforms such as Youtube are responsible for infringement of copyright if they do not filter the content uploaded by users with “best efforts”, however, at the same time they must also pay attention not to prevent the “free use” of copyright such as parodies. The Copyright Reform Act also strengthens the position of press publishers in relation to online use. By establishing a new neighbouring right, a fee must be paid to press publishers for online reproduction of news content.

In many cases the Copyright Reform Act goes beyond the provisions of the CDSM Directive and renews and broadens existing obsolete rules in order to adapt copyright law to the modern digital environment. Most notably, the Copyright Reform Act introduces a general parody exception as a new case of fair use of copyright works – thereby giving the green light, for example, to the free creation of memes. The Copyright Reform Act also relaxes the strict criteria of written form for copyright license contracts in many cases, making it easier to use the works in an online environment.

Conclusion

The Copyright Reform Act complies with the aims of the Directives, and in some cases exceeds those: the broader scope of fair use cases serve the interests of the users, while the newly regulated liability of online platforms and the new rules of license contracts strengthen the position of the authors.

It is not an exaggeration to say that the new rules will affect everyone (be a user, intermediary or author), so if you have any questions about the detailed rules of the copyright reform, the Schoenherr IP team can guide you in this regard.

By Mark Kovacs, Attorney at Law, Schoenherr

In any economy transport infrastructure is vital for enabling the flow of goods and people. Two salient features of the transport environment in Hungary are the country’s location “between East and West” and, within the country, the significant work which has been done to develop the motorway network. Many of the issues referred to below can be traced back to one or both those factors.

Supply Chains. Hungary has developed and maintains an important position in many global supply chains. Whether for companies from outside Europe seeking a manufacturing or distribution base in Europe, or for German or other Western European companies seeking a cheaper but reasonably proximate manufacturing base, Hungary’s location and its motorway network, effectively bringing most of Europe within a 24-hour truck journey from a plant in Hungary, are attractive.

Logistics. Both to support those supply chains and generally – and specifically in the post-COVID world – to enable efficient distribution, logistics are vitally important. Our firm has seen significant work for our Real Estate practice in the continuing development of logistics parks and distribution centers, dealing with both domestic and international distribution, and for our Corporate team, advising the Hungarian company Waberer’s, which is one of Europe’s largest transportation and logistics companies.

Electric Vehicles. The automotive industry is heavily invested-in in Hungary and currently we see significant activities in relation to electric vehicles, with car plants in Hungary being among the first to re-tool for electric vehicle production. In addition, car battery manufacture is becoming important, with, for example, several battery plants being currently constructed, and suppliers to these plants are establishing operations. Much of this activity is being led by Korean and Japanese corporates. Building out electric-vehicle-charging infrastructure is expected to generate activity, requiring as it does the extensive reconfiguration of service stations.

Autonomous Vehicles. The Hungarian government has actively encouraged development in this area, with the establishment of a vehicle test track, and several companies – including Bosch, JLR, Continental, Knorr–Bremser, and ThyssenKrupp – have associated R&D facilities in the country.

Air Transport. Taking advantage of Hungary’s geographical location and the increasing importance of its position in supply chains, air transport is increasingly important, with freight representing a significant proportion of Budapest Airport’s activity. The last year has seen both an investment in a new cargo terminal and, because of Covid, a significant growth in the proportion of the airport’s traffic represented by freight. On the passenger side, WizzAir has grown in the last decade to become one of the leading and more dynamic carriers, both within Europe and beyond, replacing former national airline Malev as the main airline operating from Hungary. Lakatos Koves & Partners’ market-leading Aviation practice has been closely involved in that development, in particular on the financing of the Wizz fleet (currently standing at over 120 aircraft).

Rail. Rail forms a vital part of the logistics infrastructure, with, for example, both Audi in Gyor and Daimler in Kecskemet relying heavily on it both to bring parts to their plants and to transport the engines and vehicles they produce to their plants in Germany and West European markets and ports for shipment worldwide. Further growth in the use of the rail network and the resulting need for the network to be upgraded can be anticipated arising from environmental factors that favor the use of rail and the possible growth in popularity of long distance rail travel. A notable project in this sector is the development of the Belgrade-Budapest rail link being financed and developed by the Chinese, forming part of China’s Belt and Road Initiative and providing work for our firm’s Banking & Finance practice.

River Transport. Certain heavy goods are transported by boat, and at least pre-Covid, there was a significant flow of cruise ships on the Danube. However substantial development of the ports on the Danube and of intermodal logistics systems has been inhibited by the inability to guarantee navigability at all times because of the lack of sufficient water levels throughout the year. For both exports (for example, of cars) and imports (for example, of liquefied natural gas), the rail links to ports such as Koper in Slovenia are more important.

However digital our world becomes and however quickly the Internet of Things develops, actual things still need to be moved around, even when, because of lockdowns, people cannot move. In Hungary, as elsewhere, transport and transport infrastructure will continue to be vitally important, to require major investment, and to generate significant business activity in coming years.

By Richard Lock, Founding Partner, Lakatos, Koves & Partners

This Article was originally published in Issue 8.3 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Shortly after the Hungarian Competition Authority’s (“HCA”) notice related to fines in antitrust cases came into force on January 1, 2021, the HCA issued an amendment, which came into force on April 22, 2021 (the amended notice being the “New Notice”). The New Notice seems to strengthen the wide derogated powers of the HCA in antitrust cases and may lead to higher fines. However, companies may be able to reduce fine amounts by offering compensating remedies.

The New Notice includes elements that may motivate companies to offer compensation as part of a pro-active remedy instead of paying a fine. Prior to the New Notice, such compensation served to indemnify the persons harmed by the antitrust violation. Now, this compensation may be offered to foster other public interest objectives as well.

Less predictable fine amounts

The notices applicable prior to the New Notice contained detailed guidelines for companies and courts as to the circumstances to be considered by the HCA when determining the precise fine in competition supervision proceedings.

In recent years, the HCA has determined the starting amount of the fine by using a scoring method and assigning minimum starting rates to certain infringements. For instance, with respect to a public procurement cartel, the fine was calculated based on three times the amount of the turnover affected by the violation (typically the value of the winning public procurement bid). The starting amount was 30% of the turnover concerned. This starting amount was then subject to modification based on aggravating or mitigating circumstances. Any such modifications could increase or decrease the starting amount by not more than 75%. A multiple of the amount thus calculated could be imposed as a fine on companies repeatedly committing the same violation.

As a result of the detail contained in the notices applicable prior to the New Notice, companies had a good idea of the fine the HCA might impose before it actually issued its decision. For the sake of legal certainty and predictability, the HCA essentially restricted its own discretion, since it was required in all cases to provide a reason for any deviation from the method of calculating the fine as described above.

Below are the highest fine amounts imposed in antitrust cases in the past three years. These fines were established using the method of calculation described above.

• Vj/20/2017. Restriction on the granting of debt settlement loans, reduction of fixed rate early repayments (recalculation of the fine) – HUF 4,905,000,000
• Vj/19/2016. Public procurement procedures for the procurement of diagnostic imaging apparatus – HUF 1,677,138,000
• Vj/61/2017. Fixing the minimum fee and other terms of temporary employment and personnel recruitment services – HUF 1,000,000,000
• Vj/80/2016. Public procurement procedures for the procurement of neuropacemaker devices – HUF 658,000,000
• Vj/77/2016. Public procurement procedures for the procurement of waste management tools – HUF 559,140,000

The New Notice breaks with the fine calculation method described above. In the New Notice, ratios and percentages are replaced with a list of factors to be considered by the HCA when setting the fine amount. In the New Notice the reasoning provided as to the basis for these factors is brief. For instance, unlike prior notices, the New Notice does not state that certain cases of abuse of dominant position presumably pose only a slight threat to competition and that they therefore should result in the imposition of a lower fine. However, the New Notice does, like its predecessors, provide that the HCA will continue to consider restrictive practices relating to public procurement procedures (e.g., dividing tenders among participants) as particularly serious violations. Furthermore, the New Notice states that the HCA will consider collusion with respect to procedures financed from public funds as a circumstance demonstrating intentional misconduct.

Pro-active remedies

The essence of a pro-active remedy is that the company, which committed the violation, provides either partial or full compensation for the negative impact of the violation in order to obtain a reduction in the fine. The compensation may even result in the removal of the entire amount of the fine. The payment of such compensation does not necessarily reduce the financial burden on the company, it only restructures how that financial burden is allocated.

In recent years, when considering a potential reduction of a fine, the HCA primarily examined whether the compensation to be provided served the well-being of consumers directly affected by the relevant violation or provided indemnification to the companies negatively impacted by the violation. For instance, the indemnification of the entity which wrongly paid a higher purchase price could be deemed a pro-active remedy in the case of a public procurement cartel, and thus a factor in reducing the fine. The impact of the proposed compensation on job creation, market access, foreign trade and tax revenues will also be taken into consideration by the HCA under the New Notice. Similar considerations recently led to the HCA accepting a pro-active remedy in the amount of HUF 1,700,000,000 offered by SPAR Magyarország Kereskedelmi Kft. in a case involving abuse of a dominant position. The compensation aimed at setting up a regional supplier chain, thereby presumably contributing to the expansion of opportunities for local small producers impacted by the improper conduct and to an increase in jobs.

Under the New Notice, the HCA may also consider the positive impact of pro-active remedies on sustainability and environmental protection. Companies may make commitments that are largely unrelated to the violation, if such commitments serve sustainability and environmental objectives. There has not been an example of such a commitment to date. When such a commitment does take place, it will be of interest to examine how the commitment impacts actual fine amounts.

Conclusions

Based on the New Notice, preliminary calculations of fines will become more difficult. In addition, if the reasoning provided for decisions is as general as the reasoning provided in the New Notice itself, the HCA’s fine-setting practices may become less transparent. Such a turn of events may render review of HCA decisions by the courts more difficult.

Extending the application of pro-active remedies provides an opportunity for companies to invest the entire value or a part of the contemplated fine amount into projects that may be useful for both the public and the company itself.

The provisions of the New Notice concerning calculation methodology will be applied as of January 1, 2021 in antitrust cases, where, as of December 28, 2020, no preliminary position has been issued. The provisions of the New Notice concerning pro-active remedies are to be applied as of April 22, 2021 in cases where the preliminary position is issued after December 28, 2020.

By Tihamer Toth, Of Counsel, Tunde Gonczol, Counsel, Aron Karolyi-Szabo, Associate, and Gergely Barnabas, Junior Associate, Dentons

Over the past few months, the intellectual property specialists at Komor Hennel Attorneys have been busy. “We focus on a lot of corporate-related practice areas, but IP is our main focus and driver,” says Ildiko Komor Hennel, Managing Partner. “We have more than 20 years’ experience in IP, handling different aspects of the practice area, and we have a good grasp of how to keep levels high even during these times.” 

And things are going well. “The three most important drivers behind this IP uptick have been general IP advisory matters, IP rights registration (mainly national-, EU- and international trademarks and designs), and IP-related court proceedings and dispute resolution.” Komor Hennel says that the broad scope of intellectual property matters which the firm handles allows them to adapt quickly to changing needs and demand.

“Sure, with Covid there have been changes when it comes to how we work, but in terms of volume, we’ve been doing pretty well,” Komor Hennel says. “It has been extremely interesting to see how businesses have reacted to the pandemic and sought to protect their capital and investments, especially when it comes to establishing new business ventures.”

According to Komor Hennel, failing to perform proper IP due diligence before registering a business or brand name is a mistake many companies make. “This is where we come in and raise awareness of the need to seriously consider IP issues from the word go,” she says. “If you have an IP right you can register, you should do precisely that and if your IP right cannot be registered, you should always look to document it and keep it confidential for as long as possible.”

Komor Hennel expects there to be an even stronger flow of IP-related work in the future. “I hope and believe there will be a strong uptrend in IP work as businesses start living the post-Covid future,” she says. “Business growth of any kind means you have to think about your IP.” Komor Hennel highlights the strong synergy that can be achieved between the increasing digitalization in all spheres of work and intellectual property law activities. “IP is both a unique value and the definitive tool for protecting innovations that drive growth for every business.”

The Budapest office of Noerr has advised Polish pesticide distributor Chemirol on its acquisition of a 10% shareholding in Hungary’s Chemark Zrt.

According to Noerr, Chemark is the second-largest independent agrochemical manufacturer in Europe.

Noerr’s team was led by Counsel Akos Mates-Lanyi and included Partner Zoltan Nadasdy, Counsel Akos Bajorfi, and Junior Associate Esztella Cseh.