EC refers Hungary to Court of Justice over farmland law

EU

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After launching an infringement procedure against Hungary at the end of May, the European Commission has now referred Hungary to the Court of Justice over its farmland law, claiming it does not comply with EU rules on the acquisition of agricultural land, according to reports.

The EC said it believes that Hungary stripped domestic and foreign investors alike from their rights and from their investment, without offering compensation, Hungarian news agency MTI reported.

The EC sent a letter of formal notice in October 2014 and a reasoned opinion in June 2015 requesting Hungarian authorities to bring their rules in line with EU laws, however, the EC has since yet been notified of any measures taken by Hungary, MTI reported. The EC said legislation published in late 2013 terminated certain usufruct contracts, or “pocket contracts” in Hungarian, that confer rights to use a property and profit from it. The contracts were terminated on May 1, 2014, although earlier it was announced that holders of the contracts would enjoy a transitional period of 20 years.

The EC also contested provisions in the same law that allow for the unilateral termination of certain land lease contracts concluded more than 20 years ago, subject to a very short notice period, MTI added.

“The law deprived existing investors of their acquired rights and the value of their investments in a way that did not ensure legal certainty and the respect of the right to property, as enshrined in the EU Charter of Fundamental Rights,” the EC said. “The Commission is of the opinion that this violates the principles of free movement of capital and freedom of establishment,” it added.

The EC noted that a Hungarian court had earlier referred the matter to the Court of Justice for a preliminary ruling.

When the EC launched a procedure on May 26, it said Hungary “adopted new laws regulating the acquisition of agricultural land”, and these new rules “contain several provisions which the Commission considers to be a restriction to the free movement of capital and freedom of establishment”. The EC believed these rules could discourage cross-border investment.

The EC added that some of the “restrictions may be pursuing justifiable objectives as they aim to combat speculative purchases, or serve planning purposes and rural policy objectives; however, in order to be lawful, they must be proportionate and cannot be discriminatory towards other EU citizens.”

On the same day that the EC announced the launch of the procedure, Cabinet Chief János Lázár said he anticipated a “war” over the matter. Lázár said the government does not want to allow foreigners to buy farmland in Hungary, and he expects a feud to erupt over this issue.

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