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Hungary proposes screening of FDI

The Hungarian government has recently proposed legislative changes designed to enable regulatory screening of foreign acquisitions of certain Hungarian companies.

Designed to protect strategic businesses, the proposed changes would include oversight of certain services (such as finance and telecoms) and critical infrastructure and technologies subject to potential interest by non-European bidders.

Legislative motivation is on national security and public policy grounds.

Proposed oversight would be applicable for acquistions in excess of 25% of Hungarian companies (10% if the target is publically listed) or de facto control.

The Hungarian proposals are in parallet to that of the European Commission, which promulgated FDI screening regulations in September 2017. Prior to the proposals, Hungary has not had any meaningful screening on national security or public policy grounds akin to that already existing in the United States or in Germany.

The proposal contemplates prior ministerial consent to any proposed transaction; much akin to that procedurally existing under pre-merger clearance in the competition sphere.

Any ministerial order would be subject to administrative appeal, but such oversight would not be able to overturn a ministerial prohibition on a pending acquisition. Judicial oversight would only be based on procedural mistakes and not substantive positions.

If promulgated, the changes would become effective as of October 2018.