Category: Hungary

At the beginning of February 2021, a new decree of the Hungarian Minister of Finance (“Decree”) was published on the detailed rules of the execution of the Money Laundering Act for certain non-financial service providers and the development and the minimum requirements of the operation of the filtering system. The decree enters into force on 19 March 2021.

Under the new provisions, service providers performing activities in relation to real estate transactions, the providers of accounting, tax expert, certified tax expert services, tax advisory activities under agency or service contract, the providers engaged in exchange services between virtual currencies and legal tender, custodian wallet providers and seat service providers must classify their clients into low, average or high level of risk categories. The Decree defines clients where the classification of low-risk category may be applied, as well as the main factors of high risk at the establishment of the business relationship. The service provider must continuously monitor the business relationship and in the course of the monitoring activity, it must review the classification of its clients by risk categories at least once a year.

According to the Decree, one or more leaders must be appointed by the service provider who is responsible for the execution of the obligations of Money Laundering Act by the employees. The task of the appointed leader is for instance the performance of monitoring tasks relating to keeping the registers updated and the organization of training programs.

The Decree also details the minimum requirements of the operation of audited electronic means of communication, including their method of auditing, and the execution of client due diligence by such means. In addition, the Decree contains the cases and conditionality of strengthened procedures, and the detailed rules for training programs and for the suspension of transactions.

Finally, the Decree stipulates that at the time of the establishment of the business relationship and the acceptance of the business mandate, the service provider must compare the personal data of its whole client base recorded in its filtering system with the data of persons appearing in the European Union legal acts or in the resolutions of UN Security Council. The execution of filtering must be documented in writing, then these documents must be kept for 8 years and they must be presented in the course of a supervisory control. 

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

In the last decade, the amount of minimum wage and the guaranteed minimum wage has been rising year by year. However, the process of determining the minimum wage in 2021 was different from previous years in two ways: firstly, the agreement on the wage, after 7 negotiation sessions, was not reached by the end of December 2020, therefore, after reaching agreement at the end of January 2021, the new minimum wage figures are in effect from 1 February 2021, and secondly, the increase was lower as seen before in the last years.

Minimum wage was increased by 4%, while the guaranteed minimum wage for jobs requiring at least a secondary education or a secondary vocational qualification was increased by 3.8%. As a result, the gross minimum wage in Hungary is HUF 167,400 (ca. EUR 466) and the gross guaranteed minimum wage is HUF 219,000 (ca. EUR 610). Government Decree 20/2021. (I. 28.) contains in detail the amounts for weekly, daily and hourly wages and part-time work accordingly. Due to the effect date of 1 February 2020, the increase will be experienced for the first time in March, when the February wages are paid.

When comparing these new figures to those of 2010, minimum wage increased by 128 percent and the guaranteed minimum wage increased by 145 percent, however, Hungary now has the second lowest minimum wage in the EU, trailing only after Bulgaria.

The Government continues to work to ensure that wages continue to rise and that companies can perform better so that the Hungarian economy can bounce back from the effects of the coronavirus pandemic. The results of this work can be seen in the employment data, as the number of employees exceeds 4.5 million and the number of registered jobseekers is less than 300,000.

Finally, it is worth mentioning that it is possible to increase the minimum wage and the guaranteed minimum wage once again in 2021. In 2016, it was agreed in a 6-year wage agreement that, provided that real wage growth in the private sector exceeds 6% in 2020, the amount of mandatory minimum earnings could automatically increase by a further 1% from July 2021 if the social contribution tax is lowered to 13.5%. In this case, from July, the minimum wage may be HUF 169,000 (ca. EUR 470) and the guaranteed minimum wage may be HUF 221,200 (ca. EUR 616).

By Levente Csengery, Partner, KCG Partners Law Firm

Act Ban & Karika has helped Swiss-based Elpro, a manufacturer of environmental monitoring solutions for pharmaceutical, life science, biotech, and health care industries, establish its Hungarian office and implement relevant GDPR compliance procedures. 

Besides Hungary, Elpro has offices in Switzerland, Germany, Great Britain, Denmark, Netherlands, Singapore, Japan, and the United States. 

Act Bank & Karika’s team included Partner Gergely Ban and Attorney Dalma Guiditta Sipocz.

CMS has advised OTP Group affiliate OTP Mobile, a Hungarian online payment platform, on a FinTech cooperation agreement with Raiffeisen. 

The agreement between the two banking groups means that OTP Mobile’s SimplePay system, an online QR code-based instant payment system, is now available to Raiffeisen customers. 

CMS’s team included Managing Partner Erika Papp, Partner Dora Petranyi, Senior Counsels Katalin Horvath and Szabolcs Szendro, and Associates Gabor Kutai.

“The hot topic in Hungary right now is the January 2021 amendments to the Code of Civil Procedure” says Komor Hennel Attorneys Managing Partner Ildiko Komor Hennel. “The act passed in the 1950s had one previous major overhaul back in 2017,” she says, adding that the recent amendments were necessitated by “modern times, technological updates, procedural effectiveness and business reality – just imagine not being able to file documents electronically!”

The current amendments, although slight compared to the ones made four years ago, are still significant, though largely concerned with bringing greater sense and flexibility to court procedure. “These show that the lawmakers realized that there was still considerable room for improvement, particularly with respect to the harsh sanctions/penalties which the 2017 act imposed,” Komor Hennel says. “The voices of the legal community, those of both lawyers and courts, were heard and these most recent changes finally allow for a less constricted environment.”

The lawmakers have done a lot to improve the framework for civil litigation with these newest amendments, making it more, in her words “user-friendly,” while also retaining the effectiveness of the act. “It is clear that the last (2017) act was fraught with meaningless formalities and ineffective rules and provisions, and it is clear that the lawmakers wanted to get rid of these,” she says. “For instance, the court can no longer simply reject your letter of claim if you fail to include even some minor detail, but now has to set out all the errors you need to rectify, and gives each party one opportunity to put things right and to provide any missing information and statements,” she says.

The amendments have also created a “happy medium” to the Civil Procedure framework, Komor Hennel says, by removing certain “harsh provisions.” For example,  she says, “the letter of claim that you have to submit to the court has been streamlined significantly by eliminating many of the meaningless formalities and redundancies.” She also adds that the amendments now require the courts to let legal representatives know not just whether their letters of claim have been accepted, but also if they have been properly delivered to the opposing side. ”Just imagine being forced to pester the court to get an answer as to whether your letter of claim is deemed valid, and whether the adverse party has seen it at all – most of the time, lawyers were operating blind.” 

Another important gesture is to allow a hearing to be postponed once, should the original date clash with another hearing for one of the legal representatives.

Still, even with all these improvements, Komor Hennel says that disputes in Hungary remain a challenging prospect, even for highly qualified legal representatives. “It would still be more advisable for businesses to settle their differences more amicably – the procedure could still take two to three years and be very costly, not to mention that getting the proper legal representation to navigate these murky waters can be very difficult.”

Hungarian lawyer Geza Nagy has joined LyondellBasell in the Netherlands as Compliance Officer.

After obtaining his Juris Doctor from Hungary’s Eotvos Lorand University in 1994, Nagy joined Baker McKenzie. He spent a year with the firm and another with the EBRD, before embarking upon a nine-year-long stint at General Electric Consumer & Industrial. In December 2007 he joined Nokia Siemens Networks in Munich, staying with the company until his move to Sandoz in 2013. Nagy moved to Amsterdam in 2015 to join VEON, where he stayed for nearly five years, before joining LyondellBasell in September of 2020.

Zoltan Lengyel, the current Managing Partner of the Allen & Overy Budapest office, has announced that he will retire on May 1, with Counsel Miklos Kadar taking over the management of the Budapest office from that date.

Lengyel has been with Allen & Overy since 2000. He obtained his Law Degree from Eotvos Lorand University in 1994 and his LLM at Oxford University in 1996.

Kadar, who will be taking over from Lengyel, is also an A&O veteran, having been with the firm for 14 years. He graduated from the Faculty of Law of Pazmany Peter Catholic University in 2003 and obtained his LLM at Northwestern University School of Law in 2006. 

Speaking of his replacement, Lengyel commented that: “The Budapest office will be in very good hands!”

In 2016, Lengyel participated in a CEE Legal Matters round table discussion on the Hungarian legal market, a summary of which is available here. 

The book European Court Procedure – A Practical Guide (Bloomsbury-Hart, Oxford, 730 p.) has been written by professionals having a combined experience of 70 years as referendaires at the EU Courts or members of the European Commission Legal Service. It gives a detailed and practice-oriented overview of the whole spectrum of litigation procedure before the EU judiciary. It also presents the entire system of judicial avenues that enable litigants to enforce their rights under EU law against European institutions, Member States or private parties.

As to novelties, the book covers, among others, the case law on the application of the EU General Court’s Rules of Procedure of 2015, the new Practice Rules of the General Court of 2018, as well as the recent changes brought by the Practice Directions of the EU Court of Justice of 2020.

Synopsis

Part 1 – Enforcement of EU Law and Judicial Organisation of the EU. EU law enforcement is governed by some key principles, such as effective judicial protection, the complete system of judicial remedies, direct effect and the possibility to rely on EU law provisions in some situations even if there is no direct effect. Where the legality or the interpretation of EU measures is in question, cases normally reach the EU judiciary – the General Court and the Court of Justice – whose respective powers are duly delineated.

Part 2 – Enforcement of EU Law against Member States and Private Parties. There are essentially two judicial avenues available to litigants where they believe that EU law is breached by a national authority or a private party. First, the European Commission has the power to initiate infringement proceedings against a Member State that fails to fulfil its obligations under Union law, and private parties may certainly file complaints with the Commission that may trigger this mechanism (Chapter 2.1 Infringement Actions). Secondly, litigants may also assert their rights derived from EU law before national courts both against Member States and private parties. National judges have the duty to apply EU law. Chapter 2.2 Preliminary Rulings on Interpretation deals with the practical issues of raising EU law matters before national courts and the circumstances in which these courts may or must make preliminary references to the Court of Justice.

Part 3 – Protection against Acts of the EU. The EU legal system also offers appropriate protection against illegalities committed by EU institutions (such as the Commission and the Council) and bodies (such as the EUIPO and the ECHA). Most proceedings of this category must be initiated before the EU Courts directly against the EU institution or body as the defendant (Chapters 3.1 Action for Annulment; 3.2 Action for Failure to Act; 3.3 Action for Damages; 3.4 Staff Cases; 3.5 Intellectual Property Cases). Litigants must be aware of the admissibility criteria relating to each of these actions, such as, for instance, standing requirements, interest to act, and the concept of reviewable acts in the context of actions for annulment. When formulating claims and pleas in law in this regard, litigants must bear in mind the scope of the review of legality exercised by the General Court and the possible consequences of annulment. Judgments of the General Court may be further challenged before the Court of Justice through appeals, which should normally be limited to points of law; however, in some circumstances, pleas based on fact-related issues are also admissible (Chapter 3.6). Moreover, where the illegality of an EU act cannot be challenged directly before the EU Courts, the available judicial avenue is to bring a case before a national court against the national measures implementing the EU act, whereupon the national court may make a preliminary reference to the Court of Justice on the validity of the EU act (Chapter 3.8 Preliminary References on Validity). Litigants must have precise knowledge of the case law on the limits on standing to bring an action for annulment before the General Court, since, as a rule, they are only able to successfully raise the illegality of EU acts before national courts if they had no standing to bring a direct action for annulment before the General Court.

Part 4 – Procedure before the EU Courts. Once the case reaches the EU Courts, whether as an action or appeal directly lodged with the EU Courts or as a preliminary reference made by a national court, the Rules of Procedure of the Court of Justice or those of the General Court apply, along with other procedural rules such as the Statute, the Practice Directions and the Practice Rules. All these are further specified and interpreted by the detailed case law relating to procedural matters. In practice, the most difficult task is to draft the application, which sets a rigid framework for the litigation, in so far as it must include all the claims, pleas in law and (offers of) evidence. The book explains in detail, among others, the contents of actions for annulment brought before the General Court and gives practical suggestions as to drafting techniques, presentation of legal and factual arguments, and the rules on evidence. The application is normally followed by the defence, the reply and the rejoinder. The parties may request a hearing as well (hearings are no longer held automatically). Their representatives may receive various hints from the preceding written procedure on what to expect at the hearing. Procedural rules are considerably different depending on the type of proceedings, namely direct actions, such as actions for annulment and actions for damages (Chapter 4.2), intellectual property cases, ie actions brought against the EUIPO in trade mark matters (Chapter 4.3), appeals against judgments of the General Court (Chapter 4.4) and preliminary references made by national courts (Chapter 4.5).

Part 5 – Incidental and Ancillary Procedural Issues. One of the most important practical issues for legal representatives is to obtain access to documents held by the EU institutions, in case no access has been given in the administrative procedure. There are possibilities of obtaining documents through the EU or national courts even if the EU institution holding the information is not a party to the proceedings or is unwilling to give access (Chapter 5.1). Another frequent aspect of proceedings is the conditions under which litigants, whose matter is urgent, may request interim measures such as suspension of the application of the contested act (Chapter 5.2) or expedited procedure (Chapter 5.3). Other incidental aspects of the proceedings include interventions, including the confidential treatment of documents (Chapter 5.4), and the summary procedure applied in case of inadmissibility or where there is no need to adjudicate (Chapter 5.7). Finally, it is certainly useful to have a clear picture of the rules regulating the allocation and recovery of costs, including the case law that specifies what expenses qualify as recoverable and to what extent (Chapter 5.10).

More information about the book and its authors available here.

The book’s editor is DANUBIA LEGAL partner Viktor Luszcz, who also authored 55% of the book’s text. The co-authors are Martin Farley, Viktor Bottka (members of the European Commission’s Legal Service), Alexandre Geulette, Vivien Terrien and Milan Kristof (referendaires at the Court of Justice of the EU).

Csaba Rusznak has joined KNP Law Nagy-Koppany Lencs & Partners to lead the firm’s Dispute Resolution Practice Group. At the same time, Oliver Koppany has joined the firm as Foreign Legal Counsel.

Rusznak is a US-qualified international arbitration lawyer who specializes in representing parties in investment arbitration proceedings, as well as in litigation before US courts. Previously, he worked as an international arbitration lawyer at Arnold & Porter. In May 2020, Hungary appointed him to the ICSID Panel of Arbitrators and Conciliators (as a conciliator). Earlier in his career, Rusznak served as a law clerk to several courts in Louisiana and West Virginia.  

Koppany moved back to Budapest from Washington, D.C. to join the firm. He is an attorney and a member of the U.S. District of Columbia Bar, in addition to being a registered Foreign Legal Advisor with the Budapest Bar Association. He is a dual American-Hungarian citizen currently working on issues involving cross-border pharmaceutical transactions, including CEE regulatory approvals, as well as actively involved in advising clients on cross-border commercial real estate transactions. Prior to returning to Hungary, he gained experience during law school in Willkie Farr & Gallagher’s Global Trade & Investment Practice Group, as well as with Hogan Lovells and Foley & Lardner.

According to the firm, Koppany is “also responsible for several business development tasks at KNP Law, in addition to learning management skills and assisting in the day-to-day operations of the firm.” KNP Law Managing Partner Kornelia Nagy-Koppany stated that: “Oliver brings a new energy into the office. He is a part of the new generation of lawyers who bring a progressive outlook and dynamic approach to our management and operation.”

“Growing up, I spent my afternoons after school in the conference room of KNP Law, and it feels surreal to be back after planning this moment for so many years,” Koppany added. “I am thrilled to be in the city, the amazing Palazzo Hunyadi where KNP moved last year, surrounded by the historical Buda Castle area. It is a true privilege to work with such an amazing and motivated team.”

The supervisory activity of the National Media and Infocommuncations Authority (“NMIA”) and the operation of communication service providers will be highly affected by the implemented provisions of the European Electronic Communications Code that prescribes the applicable new European framework of electronic communications.

Hungary was one of the first EU country that implemented the European Electronic Communications Code by amending the Act C of 2003 on Electronic Communications in July 2020. The NMIA finalised this implementation procedure by elaborating the detailed national provisions at the end of 2020. Due to this comprehensive strategic work of the NMIA, 22 decrees have been either reviewed or adopted.

According to the NMIA’s communication director, the new provisions not only changed the name of the categories of the services, but also the scope of services falling under the regulations expanded significantly (e.g. e-mails and machine to machine M2M services). The newly applicable regulations modified the provisions on subscription contracts for electronic communication. This new decree redefined and reregulated the conclusion, amendment and termination of subscription contracts, the mandatory content of general terms and conditions and individual subscription contracts.

Furthermore, telecommunication service providers face another change, as they may only conclude a two-year-long fixed-term subscription contract at the request of a subscriber and only if the subscriber purchases a device. In any other cases the fixed term of a subscription agreement may not exceed one year. In addition, instead of services of the past (e.g. telephone line, telephone book) the affordable broadband internet services have been in the focus of the new set of regulations. The aim is to facilitate the deployment of very high capacity networks and the distribution of financial and other burdens between service providers.

The implementation of these new provisions will be monitored by NMIA during 2021. According to the authority, NMIA will monitor whether service providers are prepared for the new rules and apply them in practice, including the significantly amended basic rules for the subscription contracts.

By Rita Parkanyi, Partner, KCG Partners Law Firm