EU commission sues Hungary over foreigners' right to buy farmland

Reuters | 16 October 2014

EU commission sues Hungary over foreigners' right to buy farmland

(Reuters) - The European Commission started legal action against Hungary on Thursday over the right of foreigners to buy agricultural land, saying restrictions on such purchases violated the European Union's principle of free movement of capital.

"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," the Commission said in a statement.

"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," it said.

This is the first stage of the infringement procedures under EU law and Hungary has two months to respond.

(Reporting by Jan Strupczewski; Editing by Sonya Hepinstall)


MTI | 17 October 2014

EC opens infringement procedure against Hungary’s land law

The European Commission has opened an infringement procedure against Hungary in connection with cross-border investors’ rights to use agricultural land, the Commission said on Thursday.

The EC has formally requested Hungary to respond to criticism of a land law terminating certain contractual rights of investors to use farmland. In the Commission’s view, Hungary 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. The Commission noted that any restriction to these basic Treaty freedoms must be duly justified and comply with the principle of proportionality.

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 May 1, 2014. The Commission noted that the new law granted only four and a half months of transition to the usufruct-holders against a previously announced transitional period of 20 years. As 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 said.

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 took the form of a letter of formal notice, the first stage of infringement procedures. Hungary has two months to respond.

The ruling Fidesz party has called on the government to protect Hungary’s land law, the party’s press office told MTI on Thursday.

“Against any internal or external pressure” the government should you use all available means in defence of the law, which “promotes the interests of Hungarian farmers against foreign speculation”, Fidesz said.

In a statement, the ruling party criticised the European Union for a “renewed attack supported by strong lobby groups”. Signatories to the document insisted that those lobbyists hated the land law for its “preference for Hungarian farmers and family businesses” over large estates or foreign interests.

“We are committed to further strengthening small and medium-size ventures and insist that their ratio in proportion to large holdings should be increased from 50 percent currently to 80 percent”, the statement said.

The radical nationalist Jobbik party said Hungary should review its EU accession treaty since this was the only way to guarantee that Hungarian land stays in the hands of small and medium-sized Hungarian farmers.

Jobbik lawmaker Zoltan Magyar said in a statement that the infringement procedure is proof that Hungarian farmland cannot be protected through Fidesz’s “mud wrestling” with “the bureaucrats in Brussels”.

“The accession treaty should be reviewed and the section on farmland needs to be removed from the chapter on the free flow of capital, as has been done in some other EU countries,” he added.

The Hungarian government will defend the land law — which contains elements similar to those incorporated in the laws of other European Union member states — with every means available to it, Istvan Attila Simon, a senior farm ministry official, said. He added that the European Court was expected to have its final word on the matter in the summer of 2016.

The people affected will have to be called to account in line with civil law regardless of the fact that the land registration law does not make a provision for this.

The commission is expected to make a reasoned opinion next spring and the case will then go to the Luxembourg court, he said. The Hungarian government has a clean conscience and will protect Hungarian land from speculators, he added.

He told MTI that the size of land affected is impossible to estimate because out of the 225,000 usufruct contracts signed in Hungary, it is not known how many have been linked to speculation.
Original source: Reuters

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