A new proposal (“Proposal”) has been submitted to modify Act CXXV of 1995 on National Security Services, which, if adopted, would require persons holding citizenship of or companies registered in a country that is outside the European Economic Area to request prior permission from the relevant minister for certain investments in Hungary.

Investments of over 25% in already existing or yet to be established companies seated in Hungary with business activities deemed sensitive to national security would qualify. The relevant business activities include:

  • classically sensitive (e.g. production of arms and ammunition, of dual-use items; services related to nuclear energy and nuclear technology; services and products related to public health and to governmental or national registers);
  • financial services and financial auxiliary services as defined in Act CCXXXVII of 2013 on Credit Institutions and Financial Enterprises; and
  • electricity, gas, water, and telecommunications services.

The permission is to be sought prior to investing in the relevant Hungarian company, and the minister will have 60 days to decide on granting permission. (This deadline may be extended once by another 60 days.) In case the minister rejects permission, the investor may turn to the Hungarian government for appeal. In practice, this process may cause considerable delays in the investment.

The Proposal is in its initial phase and still leaves many questions unanswered. Parliament is expected to discuss the Proposal in November 2017. Once the Proposal, whether in this or in a modified form, is accepted we will update this article.