Brussels, 16 October 2014
Free movement of capital: Commission opens infringement procedure against Hungary on rights of cross-border investors to use agricultural land
The European Commission has today decided to formally request Hungary to submit its observations on its legislation terminating certain contractual rights of investors to use agricultural land.
In the Commission’s view, Hungarian legislation has restricted the rights of cross-border investors in a way that may violate EU law on free movement of capital and freedom of establishment. Any restriction to these basic Treaty freedoms must be duly justified and comply with the principle of proportionality. Even though Member States are permitted to set their own rules governing the system of property ownership, this must be done within the limits of EU law.
The first contested provision is contained in a Hungarian law from December 2013 which terminated certain usufruct contracts (contracts giving the right to use a property and to profit from it) on 1 May 2014, i.e. giving a transitional period of only four and a half months to the usufruct-holders.
This rule replaced a previously announced transitional period of 20 years. Investors had expected to continue using the land on the basis of this earlier transitional period and had made their investment decisions accordingly. The new law thus seems to deprive the affected parties of their acquired rights and of the value of their investments.
The Commission also contests a second provision of the same law which allows for the unilateral termination of certain land lease contracts concluded more than 20 years ago, subject to a very short notice period. This raises concerns similar to those expressed in the context of the termination of the usufruct contracts.
The Commission's request takes the form of a letter of formal notice, the first stage of infringement procedures under Article 258 of the Treaty on the Functioning of the European Union. Hungary has two months to respond.
Further information on free movement of capital rules can be found at: http://ec.europa.eu/internal_market/capital/framework/index_en.htm
On the October infringement package decisions, see MEMO/14/589
On the general infringement procedure, see MEMO/12/12
For more information on infringement procedures: