HUNGARY LAW AND PRACTICE Contributed by: Pál Szabó, Barnabás Simon, Eszter Katona, Ádám Simon, Mihály Harcos, Karim Laribi, Gábor Kutai and István Szalay-Csala, Bird & Bir d
1. Legal System and Regulatory Framework
Civil Law Jurisdiction Being a civil law jurisdiction, codified sets of statutory rules are the primary sources of law in Hungary and have, therefore, a greater significance than case law. Accordingly, the powers of the Hungarian courts were limited to interpreting legislative instruments enact - ed either by the legislative or the executive branch. Although ruling courts tended to adjudicate in line with the relevant decisions of higher courts, until recently, they were not required legally to do so, which some - times resulted in confusing or in many cases, even contradicting judgments, creating, in certain areas, inconsistent court practice. On rare occasions, incon - sistencies in areas of great interest (such as corporate law) have been resolved by the legislator amending the legal provision that allowed different interpreta - tions by courts. An amendment in 2020 to the Code of Civil Procedure made a significant step towards a more consistent court practice by stipulating that the judgments of the Supreme Court that are published in the Register of Court Decisions ( Bírósági Határozatok Gyűjteménye ) may not be contradicted in questions of law unless the ruling court provides sufficient reasons in its own decision as to why the case in question demanded deviation. As a consequence, investors contemplating mak - ing investments in Hungary are advised to seek legal advice not only on general statutory rules, but also on the case law of the Hungarian Supreme Court that might apply to their matter. 1.2 Regulatory Framework for FDI Investments in a Hungarian entity may be subject to sector-specific clearances (such as approvals by the National Bank of Hungary or the Hungarian Energy and Public Utility Regulatory Authority (MEKH)) if addi - tional scrutiny applies, for example where an invest - ment is made into a regulated target or clearances are triggered by other factors (eg, market concentration and foreign investment in certain industries). In an attempt to monitor FDI, there are two separate regulatory frameworks that need to be considered by investors when contemplating an investment in, or the acquisition of, a Hungarian company that is
1.1 Legal System Legislative System
As a member state of the EU, Hungary’s legislative system consists of two levels: the EU level and the national level. EU law applies either directly or through implementation by a national legislative instrument. The national level comprises the following legislative instruments: • the Fundamental Act of Hungary, being the consti - tution of Hungary; • acts adopted by the legislative branch, the Hungar - ian Parliament; • decrees adopted by the government and the Gov - ernor of the National Bank of Hungary; • decrees adopted by the ministers of the govern - ment; • decrees adopted by the chairperson of autono - mous regulatory agencies; and • municipal decrees relating to local affairs of soci - ety. The fundamental rule that governs legislation is that no legislative instrument may contradict another leg - islative instrument which is superior to it based on the above-described order of precedence. Role of the Courts Hungary has a four-tiered judicial system, where, depending on its complexity, a case may be tried at first instance either in the district court ( járásbíróság ) or the regional court ( törvényszék ). The regional court also hears appeals of cases tried in the district court, while the high court ( ítélőtábla ) may only act as a court of appeal. The highest court in Hungary is the supreme court ( Kúria ), which only hears appeals of great importance and is also vested with the power of issuing statutory interpretations that are binding on lower courts (see below). Constitutional matters, such as unconstitutional court decisions and (both prior to and post-enactment) legislative instruments are reviewed by the Constitutional Court of Hungary ( Alkotmánybíróság ). Decisions of the Constitutional Court of Hungary are binding on the ordinary courts, the legislative branch and the executive branch.
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