Hungary: Thoughts on national security
The Hungarian Government adopted Act no. LVII of 2018 regarding investment control for national security purposes. Non-EU investors seeking to invest in Hungary must obtain prior ministerial approval under this legislation.
Scope of the Act
The legislation applies to investors from outside the EU, Switzerland, and EEA countries. It also covers EU-established companies with majority shareholders from outside these regions.
Required Approvals
Foreign investors must obtain ministerial approval when they:
- Acquire over 25% interest (10% for publicly listed companies) in Hungarian companies engaged in security-sensitive activities
- Acquire decisive influence in Hungarian companies
- Establish branch offices in Hungary
- Acquire rights to operate sensitive infrastructure
The Act includes provisions preventing circumvention, requiring approval when multiple foreign investors collectively exceed 25% ownership or when established companies shift into sensitive sectors.
Sensitive Activities
Protected activities include:
- Arms and dual-use equipment manufacturing
- Gas, water, electricity, and telecommunications operations
- State and municipal communication system development
Approval Process and Penalties
The minister has 60 days to decide, extendable by another 60 days. Full ownership disclosure is mandatory. Denied investors may appeal to Budapest’s Municipal Court. Violations incur fines up to approximately 3,100 euros for individuals and 31,000 euros for entities. The act became effective January 1, 2019.