Trustworthiness Pays Well: German Law Firms in Hungary
With the economy doing well and continuing to attract foreign capital, law firms with a strong German background are also flourishing. While the Hungarian legislative system could be improved regarding predictability, market players tell the Budapest Business Journal, things are moving in a good direction.
Big law firms with a strong connection to Germany operating in Hungary are expanding, thanks to the economic climate that keeps foreign money flowing into the country and, not least, to their expertise and trustworthy background.
The four law firms the BBJ has interviewed mostly deal with a wide range of corporate law cases and all agree that their international network and experience enable them to handle cross-border and more complex cases.
“Our German background is a serious guarantee for German investors in Hungary,” Sándor Sárközy partner at Rödl & Partner says.
György Zalavári, senior partner at ECOVIS shares this view, saying that “it is obvious” that cases that run in several countries at the same time would not form part of their portfolio if they were just a local Hungarian law firm.
“We find the information coming from our international network very useful as it serves a good basis for comparing the effectivity and maturity of the different legal systems,” he says.
Yet, being a member of an illustrious group of firms is not enough in itself, nor does it come for free. “First of all, you have to speak the investor’s language very well,” Sárközy points out. Márton Karika from Bán & Karika Attorneys at Law, a firm that became a member of German ‘act legal’ international network early this year, agrees, adding that it is not the headquarters being in Germany that matters so much, as the perfect language command, which “is an important factor for German-speaking clients”.
However, understanding German mentality and needs, which can differ from the Hungarian in many ways, is also a must, according to Sárközy.
“German thinking is more structured and detailed,” Zoltán Nádasdy, co-head of Noerr’s Budapest office notes. German standards regarding work discipline and effectivity are high, quick and professional administration has to be provided, while clients also have to be permanently updated. All these have to be part of the daily routine for Hungary-based offices too. “As such, foreign clients have a trust in us as well,” Karika says.
But while there are differences in the approach, the similarities are equally, if not more important, Sárközy points out.
“To a German investor, you do not have to explain what employee representation means in a company’s life, since they already know it from their home country and are often used to even stricter regulations.” Still, it is better to be careful with some legal terms and it is useful to be familiar with the German law, too, since similar terms might cover different things in Germany and here, he adds.
Zalavári agrees. “Some legal procedures or concepts that are self-evident for businesses here might be outlandish or cover a different content for the management of a foreign company. This could easily lead to difficulties or misconception if the parties or their legal representatives do not realize the situation in time.”
Still, as part of global networks, intercontinental cases also appear in the practices of most of the law firms we asked, imposing an even more complex challenge.
“In such cases, our focus goes beyond pure legal services, as European clients take a different style in communication and general approach than those who, for example, come from the Far East,” Zalavári explains.
Although the institutions of the German legal system bear a resemblance to those in Hungary, international legal support has, of course, its special flavors.
“The extended administrative deadlines that sometimes occur are more difficult to explain and make understood, not to mention some inevitable anomalies which are so well-known for the Hungarian lawyers,” Karika says.
According to Sárközy, clients still find the Hungarian legal and investment environment far too bureaucratic but the biggest problem is the frequent changes of the legislative environment which they have to adapt to from time to time.
“They want predictability,” Nádasdy agrees adding that the long period of rapid legislation at the beginning of the decade “was very demanding for everyone”. Although this fast pace has fortunately eased somewhat, since big legislative changes were made, the judicial practice still has to catch up. Quandaries are still apparent among all law enforcement bodies, including judges, yet this will become clearer over time, Nádasdy predicts.
As an example, he mentions the change of the Code of Civil Procedure early this year. After this, courts had been rejecting lawyers’ proceedings en masse.
“It is unfortunate, when law enforcement bodies are not prepared for the changes. In this very case, the large number of rejections can be considered as a criticism.” However, as the former regulations were old and obsolete, and so the changes fundamental, it is understandable if the implementation of the new laws become smooth only after some time. “Such anomalies could happen in any other country, too,” Nádasdy notes, “though in Germany, for example, these problems would probably not take that long [to resolve].”
Others also say that a lot of very old regulations, including many that had been inherited even from the era before 1990, had to change.
“After the change of regime, the legal system was not coherent in some cases. The previous Civil Code, for example, covered the catching of bees, which nowadays does not have to be regulated at such a high level, while it excluded lease contracts as well as franchise agreements,” Karika says.
However, the new regulations are more up-to-date and adapted to the technological and economical challenges, our interviewees agree.
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