Category: Hungary

Dentons has advised a syndicate of underwriters including BNP Paribas, Citi, and J.P. Morgan, on Wizz Air’s successful issue of EUR 500 million 1.350% fixed Rate guaranteed notes due 2024 under Wizz Air’s Euro Medium Term Note Program, which was oversubscribed with books exceeding EUR 2 billion. The notes were guaranteed by Wizz Air Holdings Plc. Clifford Chance and Ogier advised Wizz Air on the deal.

Dentons’ team was led by London-based Partner Nick Hayday and included Senior Associate Victoria Wyer and Associates Niharika Khimji and Zeeshan Hussain. 

Schoenherr’s Budapest office, working with lead counsel Hengeler Mueller, has advised Andros Deutschland on its acquisition of fruit and vegetable processors Spreewaldkonserve Golssen in Germany and Schenk es Tarsa in Hungary.

Financial details of the transaction were not disclosed.

According to Schoenherr, “Spreewaldkonserve Golssen is known for its brand ’Spreewaldhof,‘ which was one of the few brands of German Democratic Republic which survived after Germany’s reunification in 1990.“

Schenk es Tarsa is a Hungary-based company which operates in vegetable and fruit preservation and specialty food manufacturing sectors.

The Schoenherr team was consisted of Managing Partner Kinga Hetenyi, Attorneys-at-law Laszlo Krupl and Alexandra Bognar, and Associates Adrian Menczelesz and Anita Vertes.

Hengeler Mueller’s multi-office included, in Berlin, Partners Jens Wentzel and Fabian Quast, Senior Associate Jan Krusche, and Associates Tobias Schilling, Moritz Muller-Leibenger, Anja Hofelmeier, and Tom Pleiner; in Frankfurt, Partner Hendrik Bockenheimer, Senior Associates Sebastian Adam and Henning Hilke; in Munich, Partner Markus Ernst; in Dusseldorf, Senior Associate Anja Balitzki; and in Brussels, Partner Markus Rohrig.

Schoenherr did not identify the sellers, nor their counsel.

Gergely Szabo has made Partner at Ban, S. Szabo & Partners Law Office in Budapest. In addition, the firm announced that it has changed its name to Ban, S. Szabo, Rausch & Partners Law Office.

Szabo, who joined Ban, S. Szabo & Partners in 2009, specializes in energy law, corporate law, real estate law, and competition law. He received his Juris Doctor from the Karoli Gaspar Reformed University in 2008, his first Master of Laws Degree from the Central European University in 2009, and his second from the University of Pecs in 2013.

According to the firm, “with the name change we acknowledge the devoted and successful work of Dr. Janos Rausch, who for more than 20 years as a partner of the firm has developed a prestigious portfolio and as lead lawyer on numerous complex transactions has contributed significantly to the growth of the office.” 

In March 2020, the coronavirus crisis urged the Hungarian government to introduce extraordinary measures to mitigate the economic consequences. This led to a general moratorium for all retail and corporate financings until the end of 2020. As one of the last measures of 2020, the Hungarian government decided to prolong the moratorium due to the second wave of the pandemic.

Under the first moratorium, capital, interest and fee payment obligations for all loan, credit and financial leasing agreements were suspended in both the retail and corporate sectors. The moratorium was voluntary for borrowers (opt-out) and mandatory for banks, i.e. debtors may continue performing their contractual obligations if they wish to.

In October, the moratorium was extended until 30 June 2021 for certain people in need (e.g. unemployed, pregnant or retired) and companies in financial difficulties. The prolonged moratorium remains voluntary for borrowers and mandatory for banks. It has also been clarified that it is applicable only to lenders having a seat or branch office in Hungary. The moratorium is applicable to contracts concluded before 18 March 2020 and loans that have already been utilised.

Unfortunately, the pandemic did not relent in December. The government therefore decided that the prolonged moratorium will apply not only to the above limited group, but to any debtor who has capital, interest or fee payment obligations arising from a contract concluded on a commercial basis.

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

The new year ushered in a new era for drone users in Hungary. On 1 January 2021, new regulations entered into force, introducing a new framework for drone usage, although many details remain unregulated. A significant part of the drone regulations is set forth on the EU level by Commission Delegated Regulation (EU) 2019/945 and Commission Implementing Regulation 2019/947. The new rules in Hungary promote the proper implementation of the relevant EU Regulations, and in some instances prescribe even stricter rules for drone users.

Drones and their owners must be registered

EU and Hungarian legislation define drones as “unmanned aircraft” (“UA”), which means any aircraft operating or designed to operate autonomously or to be piloted remotely without a pilot on board, e.g. multicopters, RC planes, RC helicopters, etc. A drone and its remote-control equipment together are referred to as “unmanned aircraft systems” (“UAS”).

Operators of toy drones will not be much affected by the new regulations. Pursuant to Hungarian laws, unmanned toy aircrafts do not fall under any registration or licensing obligations. All drones fall into this category if they can be considered a toy in terms of the toy safety rules of Directive 2009/48/EC, are not equipped with a data recorder (e.g. a camera), do not exceed a take-off weight of 120 g, and cannot fly more than 100 metres away from the pilot.

Depending on various factors such as the size of the drone (e.g. below or over 25 kg) or the nature of use (e.g. flying over assemblies of people, transporting people, carrying dangerous goods), the applicable legislation differentiates among three operation categories: open, specific and certified operations.

However, before commencing any drone operations, drone owners or operators are obliged to register drones not falling in the toy drone category with the air traffic authority of Hungary. Furthermore, the owners or operators must be also registered with the same authority. This general registration obligation is somewhat stricter than those prescribed by EU legislation, since Commission Implementing Regulation (EU) 2019/947 requires only the registration of UAS whose design is subject to certification and for UAS operators whose operation may present a risk to safety, security, privacy, and protection of personal data or environment.

Pursuant to the EU Regulations, specific and certified drone operations (e.g. using drones for agricultural spraying of pesticides or flying over assemblies of people) are subject to operational authorisations and certifications, depending on the nature of use. 

How to become a drone pilot

Having a drone registered with the air traffic authority and procuring the respective authorisations or certifications in line with the relevant UAS operation category is only part of what is needed to operate a drone. To lawfully fly a drone, pilots must undergo a training programme and take an exam. However, the relevant decree specifying the details of the training programme (e.g. certification of training centres, exam requirements) has not been adopted yet. Certificates issued before 2021 will not be acknowledged under the new drone regulation regime, meaning that all drone pilots currently active in the field are required to pass a new exam.

How to use the airspace

Save for no-fly zones, flying a drone over an uninhabited area does not require a specific airspace licence. However, commencing a UAS operation above an inhabited area is subject to a permit issued by the Ministry of Defence, in which a temporarily designated airspace is specified for a definite period. The request for a temporarily designated airspace must be submitted to the Ministry of Defence at least 30 days prior to the intended use. However, according to the practice of the Ministry of Defence, it is advisable to submit the request 45 or even 60 days prior to the intended use of a drone. The designation procedure is free of any administrative fees.

No-fly or no-drone zones may be designated by law with respect to the facilities found there or to the nature of the activities carried out within certain areas. In order to identify no-drone zones before taking off, drone pilots are obliged to sign in and use a mobile application maintained by the government. The details of this mobile application will be governed by a government decree that has not been published yet. If there is a connection issue (e.g. there is no signal) and the drone operator cannot use the mobile application, using the drone is forbidden due to the inability to identify the local no-fly or no-drone zones.

New fines and criminal consequences for violating drone regulations

The new regulations introduced a rather strict sanctioning system, according to which an aviation fine of up to HUF 100,000,000 (approx. EUR 280,000) may be imposed for violations of drone operation rules. The amount of the fine depends on various factors, including the level of hazard created by the violation.

Furthermore, recording sound or images of another person’s residence or other premises or a fenced area (e.g. a garden, etc.) during an unauthorised UAS operation qualifies as a misdemeanour and may be punished with 60 days’ confinement. If the recording of sound or images is done regularly and the images are published, the pilot may face imprisonment of up to one year.

Conclusion

The new rules have made drone operations more burdensome, and many details, especially regarding training and qualifications and the compulsory drone app, are still unclear. In addition, the need to request temporarily designated airspace at least 30 days before the intended use makes life especially difficult for drone pilots. Time will tell if the new drone operation rules will promote or unreasonably restrict drone usage.

By Daniel Varga, Attorney at Law, and Akos Kovacs, Associate, Schoenherr

The Court of Justice of the EU (CJEU) clarified in its decision published on 1 December 2020 that the Posted Workers Directive 96/71/EC should be applied to drivers in the international road transport sector.

The case involved three transport companies (i.e. a Dutch, a German and a Hungarian company) which were owned by the same group. The Dutch company concluded contracts with both the German and the Hungarian companies for international transport of goods. For the performance of the transport services, the German and the Hungarian companies sent their employees (lorry drivers) to the Netherlands. The shift of the drivers started in the Netherlands and the journeys ended there, however, most of the transport operations took place outside the territory of the Netherlands. The question was whether the lorry drivers can be regarded as posted workers.

Under the Directive, the posted worker is a person who, for a limited period of time, carries out his work in the territory of an EU Member State other than the state in which he normally works. Despite the fact that posted workers are still employed by the sending company and subject to the law of that Member State, they are entitled to a set of core rights that are ensured for employees in the host Member State. The purpose of this regulation is to avoid “social dumping” where foreign service providers can undercut local service providers due to their lower labour standards.

The CJEU ruled that in order for a worker to be regarded as a worker posted ‘to the territory of a Member State’, the performance of his work must have a sufficient connection with that territory. In the specific case, the CJEU concluded that the lorry drivers were posted workers to the Netherlands, to whom the basic conditions of employment under the Dutch collective labour agreements should have been applied.

By Eszter Ila-Horvath, Attorney at Law, KCG Partners Law Firm

Schoenherr’s Budapest office has helped BOE, a subsidiary of Austria’s List Group, conclude a management agreement to manage the Vorosmarty Garage in Budapest. 

The List Group manages parking garages with around 13,000 spaces in urban locations in Austria, Hungary, Germany, and Slovenia. The Vorosmarty Garage is a two-story parking garage located in the central business district of Budapest.

The Schoenherr team was led by Attorney at Law and Head of Real Estate Laszlo Krupl.

Noerr has advised Chinese lithium batteries precision parts manufacturer Shenzhen Kedali Industry on a EUR 40 million investment in a new battery production plant in Godollo, Hungary.

According to Noerr, “as part of the investment, Kedali acquired a 3.5-hectare real estate property for the development of their future production facility from the Indotek Group, an investment fund manager and real estate developer in Hungary.”

Noerr’s team included Partners Zoltan Nadasdy and Jorg Menzer, Senior Associate Yifan Zhu, and Associate Eszter Hegedus.

On 12 November 2020 the European Commission published the new standard contractual clauses (SCCs) on data transfer (model clauses), which would replace clauses C2C and C2P under Commission decisions issued under the European Data Protection Directive. The bill subjects international transfers to significantly stricter administrative conditions in the light of the Schrems II decision. The draft act is open for feedback for 4 weeks. Feedback will be taken into account for finalising the initiative.

Key takeaways regarding the draft implementing decision and the SCCs include:

• the SCCs cover (i) controller-to-controller transfers, (ii) controller-to-processor transfers, (iii) processor-to-processor transfers and (iv) processor-to-controller transfers (in particular where the EU processor combines personal data received from the third-country controller with personal data collected in the EU).
• the general clauses impose stricter conditions and accountability requirements, notification and regulatory reporting obligations; in addition to the conclusion of the general clauses, the parties shall document, inter alia, an impact assessment on data transfers.
• controllers and processors should select the module clauses applicable to their situation and tailor their obligations under the SCCs to their corresponding roles and responsibilities in relation to the data processing at issue. 
• controllers or processors may incorporate the SCCs into a broader contract and may include additional clauses or safeguards, provided that they do not contradict directly or indirectly the SCCs or prejudice data subjects’ fundamental rights or freedoms.
• controllers and processors may continue to rely on the existing SCCs during a transitional period of one year from the adoption of the new SCCs, provided that the contract remains unchanged, with the exception of the inclusion of necessary supplementary measures to ensure that the transfer of personal data is subject to appropriate safeguards.

The adoption process for the SCCs requires an opinion of the European Data Protection Board and the European Data Protection Supervisor, and the positive vote of EU Member States through the comitology procedure. The final SCCs are expected to be adopted in early 2021.

By Adrienn Megyesi, Partner, KCG Partners Law Firm

The Hungarian Competition Authority (‘HCA’) was less active in abuse of significant market power cases in the past years, but the outcome of the competition supervision proceedings recently conducted against Spar Magyarország Kereskedelmi kft. (“Spar”) leads to a forward-looking solution unprecedented in such cases so far: the supermarket chain will develop a new regional supply system as a proactive reparation for the infringement. The programme with a budget of HUF 1,7 billion will not only improve small producers’ sales opportunities but will also create new jobs.

Established infringement

The Hungarian Trade Act prohibits the abuse of significant market power by imposing unfair conditions upon suppliers. This prohibition concerns only non-food products, whereas similar but even stricter provisions are included in the Food Supply Act concerning food products.

In this case the HCA concluded that Spar abused its significant market power between 2014 and 2015 by introducing and applying a prohibited fee for suppliers of non-food products, namely the progressive bonus system implemented by the supermarket chain unilaterally required the payment of fees by suppliers in order to get their products stocked on the shelves of Spar, without any incentive effect or any service rendered by Spar for the suppliers.

Earlier fines for a similar abuse of the Trade Act

This is not the first case that the supplier fee of the supermarket chain was found to be infringing the Trade Act, but case law has been scarce so far: the HCA imposed a HUF 50 million fine on Spar in 2012 for an ex-post supplier fee applied by Spar between 2009 and 2011. Although Spar modified its bonus-system after 2012, the newly introduced supplier fee investigated in the current proceeding entailed similar infringing effects in the HCA’s view. The supermarket chain has amended its fee structure in 2016 after the commencement of the proceeding which was considered to be more in compliance with the Trade Act than the one applied in the previous years.

The record fine of HUF 1,06 billion for a similar infringement of applying unallowed fees on suppliers was imposed on Auchan in 2015, which was finally upheld by the Curia, Hungary’s highest court only a few weeks ago in November, i.e. towards the end of the current proceeding against Spar.

The outcome of the proceeding: how could Spar avoid the fine despite of the establishment of infringement?

In the HCA’s previous decision of 2015 against Auchan the HCA has rejected commitments offered by Auchan for the reason that they only entailed the termination of the application of the infringing supplier fee but would not have contributed to public welfare.

In the current decision against Spar the HCA has also rejected accepting commitments as an alternative to establishing the infringement in light of the circumstances of the case, in particular since the supermarket chain has committed a similar infringement in the past (i.e. the one established in 2012). However, as opposed to the Auchan case, the HCA has now accepted the compensation programme offered by Spar as a fine reducing factor because it serves public welfare. The HCA considered that the social benefits of this measure outweigh those of the fine as the compensation programme will not only serve the public interest in general but will do so directly and effectively, which is evidenced for instance by the fact that the programme is going to have a budget of HUF 1,7 billion and will create 23 jobs. The HCA has also particularly appreciated the employment target pointing to the economic downturn due to the COVID-19 pandemic. The programme was labelled by the HCA as a forward-looking solution also because it allows to avoid further disputes (i.e. Spar will not go to court). Therefore, since the proposed budget of the programme is higher than the calculated amount of the fine (which was calculated at HUF 1,575 billion), the HCA ordered Spar to fulfil the commitments instead of imposing a fine.

The benefits and further details of the future programme

The commitments consist of the establishment of 6 regional supplier centres (Győr, Hódmezővásárhely, Nyíregyháza, Pécs, Székesfehérvár, Zalaegerszeg) instead of the existing centre-based supply system to improve the sales opportunities of small local producers. This regional system will offer opportunities to a large extent (90%) to micro, small and medium suppliers, while it will also favour Spar’s existing small producer partners – an increased number of their goods will be placed on the shelves of the supermarket chain. In addition to the above, Spar committed to offer training opportunities on several topics – such as quality assurance and marketing – to support the activities of suppliers. The programme will therefore improve the situation of local small domestic producers, contribute to the development of the local economy by effectively improving the market access of Hungarian products, which is especially important because it is more difficult to sell Hungarian goods abroad during the global COVID-19 pandemic. At the same time the programme will also serve as guidance for other multinational retail chains on how to increase the percentage of Hungarian products on their shelves instead of imports, as explained by the HCA.

Interesting to note that although the established infringement only related to non-food products, the imposed commitments are not limited to non-food, but also apply to suppliers of food products.

The commitments also include a method allowing the HCA to verify compliance, namely Spar has committed to authentically evidence its expenses by annually submitting reposts audited by an independent auditor. Moreover, if its expenses will be below the estimated HUF 1.7 billion, Spar will split and transfer the excess amount to charity.

Takeaways

This case clearly shows the willingness of the HCA to waive fines if the public interest can be effectively benefited thereby. However, this comes at a significant cost for Spar: the cost of the programme will cost Spar more than the fine which the HCA would have imposed. However, this solution will have a fruitful effect on local economy and on the demand for local goods, from which Spar can also benefit indirectly, and several local producers directly. Furthermore, by cooperating with the HCA, Spar can also avoid lengthy future legal disputes (as opposed to the Auchan-case, where five years of litigation followed the aforementioned decision). It is not the first time the HCA established an infringement without imposing a fine, the HCA reached a similar solution in several consumer protection cases – the new trend in HCA’s practice seen earlier in consumer protection cases now seems to be visible in unfair trading practices, as well. However, this decision, as well as the Curia’s final decision in the Auchan case may also mark a new era for the sector, where large retail chains are likely to face stricter enforcement practices, including possible new proceedings from the HCA.

By Anna Turi, Counsel, and Dora Balogh, Associate, Schoenherr