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
engaged in certain critical or strategic activities. These FDI regimes apply alongside and not instead of the sector-specific approval requirements or merger con - trol clearances. In 2018, before the EU FDI Regulation (Regulation (EU) 2019/452) was passed, the Hungarian Parlia - ment implemented its first FDI screening regime by enacting Act LVII of 2018 (the “2018 FDI Act”) seek - ing to protect national security by overseeing certain investments into Hungarian companies that engage in activities of critical infrastructure (eg, energy, water or defence), critical technology and dual-use items (eg, AI, nuclear technologies and nanotechnologies). In 2020, a parallel FDI screening was introduced by a governmental decree, which was replaced by an act in the same year (Act LVIII of 2020). In 2022, an emer - gency governmental decree (Governmental Decree No 561/2022), effectively replaced Act LVIII of 2020. Most recently, this parallel screening mechanism was incorporated into Act L of 2025, which introduced transitional provisions necessary for the economic protection of Hungarian strategic companies in view of the armed conflict in Ukraine (the “2025 FDI Act”). The 2025 FDI Act is not only applicable to investments that involve Hungarian companies engaged in certain business activities in a strategic sector (such business activities are listed by their relating NACE codes and involve sectors such as transport, energy or commu - nications) but also to the acquisition of infrastructure, facilities and assets that are essential for conducting such activities, as well as to the acquisition of usage and operation rights relating to the above. The 2025 FDI Act will cease to have effect on 31 December 2026. The 2018 FDI Act and the 2025 FDI Act established two separate FDI regimes which apply in parallel with each other. If an investment triggers both FDI regimes, two separate notifications must be filed with the competent ministers, and the investment must not be completed until the prior approvals of both minis - tries are obtained. This also means that the investor shall not exercise any shareholder rights in the target company, nor shall it conduct any planned business activities until obtaining the respective approvals.
Investors are advised to be particularly careful when dealing with 2025 FDI Act-related matters as it has an exceptionally broad scope which has triggered filings in cases that usually do not fall under the scope of similar laws. Nevertheless, transactional structuring could be key as, in certain scenarios, filing under the 2025 FDI Act might be avoided by relying on one of the exemptions set out in the Act (see 7.1 Applicable Regulator and Process Overview ). Furthermore, the Hungarian state has a pre-emption right with respect to the sale and purchase of Hungarian companies engaged in the solar power plant business; therefore, investors in the renewables space face additional reg - ulatory complexities that demand heightened atten - tion and careful planning. Similarly, a careful approach to the 2018 FDI Act- implemented regime is also advisable. The applicabil - ity of the 2018 FDI Act is rather limited as it may only be triggered by investments in very specific industries that have traditionally been under governmental scru - tiny. It is worth noting, however, that the 2018 FDI Act may also apply to the formation of a new company in Hungary and even to the adoption of a new activity by an existing Hungarian company that is controlled by a foreign investor. Typically, neither of these actions would be considered when assessing regulatory requirements in connection with dealings in Hungary. Please see 7. Foreign Investment/National Secu- rity for a more detailed explanation of the regulatory framework for FDI in Hungary. 2. Recent Developments and Market Trends 2.1 Current Economic, Political and Business Climate Hungary’s Path Through 2025 Amid EU Tensions, the Russia-Ukraine Conflict and US Policy Divergence The year 2025 was anticipated to mark a turning point for Hungary’s economy after years of turbulence shaped by the pandemic, the ongoing Russia-Ukraine armed conflict, and strained relations with both the EU and the USA. However, hopes for robust recovery have proven elusive. Whilst Hungary avoided slipping
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