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50 Shades of Governmental Interference in Hungary: A Buzz Interview with Zoltan Faludi of Wolf Theiss

50 Shades of Governmental Interference in Hungary: A Buzz Interview with Zoltan Faludi of Wolf Theiss

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The Hungarian government is actively shaping the market and there are both positive and negative effects on many levels, according to Wolf Theiss Managing Partner Zoltan Faludi.

“Looking at the current investment climate, there are a few interesting matters of note,” Faludi begins. “The good news is that investors' appetite is still positive and strong and we have noticed inbound investment coming along in a quite vibrant fashion, despite the after-effects of the COVID-19 pandemic and the ongoing war in Ukraine.” As he sees it, it's all “a matter of balance between predictability and transparency, measuring the effects of governmental interference and activity in the short term against the long run.”

According to Faludi, the Hungarian government has taken quite an uncustomary approach to many business areas and sectors. “There is a discussion underway regarding the new concept of the Architecture Act, which intends to extend the scope of regulatory intervention over a wider range of construction materials,” he says. “This imposes quite a hit on building material manufacturers, especially when it comes to the potential export of their products. The increase of regulatory reach in this area impacts construction endeavors the most, increasing industry uncertainty.”

Furthermore, Faludi reports that there has been some friction with respect to the recently introduced tax on extra profits. “The new tax impacts a wide area of sectors, most so energy, banking, and pharmaceuticals. Questions of justifiability abound and, while there are some good reasons as to why it was introduced, its entering into effect did not resonate well with everyone.” Additionally, he says that the recent implementation of the FDI screening control mechanism has also created an air of uncertainty, to an extent. “The screening mechanism, while by no measure unprecedented, does appear to be somewhat overarching. For example, it is treating intra-EU and extra-EU investments the same, which might be, to an extent, more stringent than its original purpose.”

However, not all governmental interference causes friction, and Faludi reports a number of positives. “There have been a lot of subsidies targeting investors, primarily via cash incentives and favorable regulations,” he reports. “This has led to an uptick in business activities across sectors, primarily in automotive, which is a big ticket for the Hungarian economy.” Additionally, he says there is finally a plan for a new regime for investing in wind-powered renewable energy sources. “The last time we’ve seen a tender for wind power was in 2016, and things have been quiet since. However, recently, and within the auspices of the Hungarian Recovery and Resilience Plan, on-shore wind power sources are back in action,” he says. “At long last, in addition to solar subsidies, we will soon see a new regime targeting wind projects and allowing for more vibrant investments to take place.”

Finally, Faludi says that “looking at the big picture, investments are going strong and the climate outlook is rather positive. Investor appetite abounds and I hope that governmental interference won’t create any pushback.” He concludes by saying: “with many companies relocating their production centers to Hungary, brands like BMW setting up an electric car production facility, and further new production plants emerging in the high-tech sector, we are looking at good things to come.”

Hungary Knowledge Partner

Nagy és Trócsányi was founded in 1991, turned into limited professional partnership (in Hungarian: ügyvédi iroda) in 1992, with the aim of offering sophisticated legal services. The firm continues to seek excellence in a comprehensive and modern practice, which spans international commercial and business law. 

The firm’s lawyers provide clients with advice and representation in an active, thoughtful and ethical manner, with a real understanding of clients‘ business needs and the markets in which they operate.

The firm is one of the largest home-grown independent law firms in Hungary. Currently Nagy és Trócsányi has 26 lawyers out of which there are 8 active partners. All partners are equity partners.

Nagy és Trócsányi is a legal entity and registered with the Budapest Bar Association. All lawyers of the Budapest office are either members of, or registered as clerks with, the Budapest Bar Association. Several of the firm’s lawyers are admitted attorneys or registered as legal consultants in New York.

The firm advises a broad range of clients, including numerous multinational corporations. 

Our activity focuses on the following practice areas: M&A, company law, litigation and dispute resolution, real estate law, banking and finance, project financing, insolvency and restructuring, venture capital investment, taxation, competition, utilities, energy, media and telecommunication.

Nagy és Trócsányi is the exclusive member firm in Hungary for Lex Mundi – the world’s leading network of independent law firms with in-depth experience in 100+countries worldwide.

The firm advises a broad range of clients, including numerous multinational corporations. Among our key clients are: OTP Bank, Sberbank, Erste Bank, Scania, KS ORKA, Mannvit, DAF Trucks, Booking.com, Museum of Fine Arts of Budapest, Hungarian Post Pte Ltd, Hiventures, Strabag, CPI Hungary, Givaudan, Marks & Spencer, CBA.

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