Until now, Minister for National Economy Márton Nagy could only prohibit a foreign investor from acquiring ownership in a Hungarian company. From now on, however, the Hungarian state can even step in and take the place of the buyer. Based on a governmental decree amendment announced on 23 June, the state is granted a right of pre-emption, which it may exercise in protection of state interests. Practically anything can be declared as a state interest: according to the legal definition, it is a “public interest related to economic strategic interests that are fundamental from a national economic perspective.”
The now amended government decree was adopted at the end of 2022, citing the emergency situation due to the Russian-Ukrainian war. It enabled the minister responsible for the domestic economy to prohibit foreign buyers from acquiring ownership in Hungarian strategic companies. At the time, the government’s concern was that the conflict raging next door may prompt owners to sell off Hungarian companies suddenly and below value, making them easy prey.
As per the decree, such sales had to be reported — under penalty — before they were carried out, and the relevant minister had to decide within 30 days (45 in case of an extension) whether to approve or prohibit the transaction. We asked the Ministry of National Economy how many times they have exercised the power of prohibition, for what reason, and in which companies’ cases, but we have received no reply so far. The Ministry also has not answered why the cabinet deemed the measure so urgent that the amendment signed by Viktor Orbán entered into force the very next day after it was announced. The official justification reads as follows:
It has become necessary to review and amend the provisions relating to proceedings closed by a prohibitive decision, given that in certain cases, it is necessary to grant the state a right of pre-emption in order to protect Hungary’s state interest.
This introduction and the hasty entry into force already suggested that there may have been an ongoing acquisition behind the rush.
But the amendment also explicitly states that the right of pre-emption relating to company shares must be applied to ongoing cases as well — meaning that the possibility of state pre-emption also applies to transactions not yet closed as of 24 June 2025.
In other words, it appears that the target of the state’s pre-emption is already known and the competent minister has already prohibited the sale of the given company share to a foreign investor. And since we are still within the 90-day pre-emption period, the state can easily take the company away from the chosen buyer under the terms of the decree amendment.
Compared to this, a smaller — though not insignificant — change is that the maximum administrative time has been tripled: the base period for assessing the notification has been extended from 30 to 45 days, and the extension period may increase from 15 days to as much as 90 days. This serves as a safety guarantee for the state: if the minister prohibits the transaction, the state acquires a right of pre-emption and has 90 days to decide whether to exercise it.
Dr. Lóránt Horváth, lawyer and president of the Lawyer Circle Association (Ügyvédkör), reminded that retroactive application violates legal certainty and the protection of acquired rights. A new law can only be applied retroactively if it improves the situation of the legal subjects, but not if it worsens it — he cited the Constitutional Court’s practice. It requires no explanation that the extension of this decree amendment to ongoing proceedings lengthens the administrative deadlines, and the establishment of a previously non-existent state pre-emption right (for 90 days after a prohibitive decision) puts parties of already notified transactions at a disadvantage.
From retail to telecommunications, state pre-emption could be on the way
To get the full picture, it’s worth noting that there have already been examples of state pre-emption rights — for instance, by the end of 2023, the decree was amended so that the Hungarian state was granted a pre-emption right in respect of domestic strategic project companies implementing photovoltaic (solar power plant) projects that foreign investors may have intended to acquire. However, the current amendment significantly expands the scope of this possibility. While it cannot be said that the regulation is entirely boundless, the strategic sectors listed in the annex of the original 2022 decree — 64 TEÁOR (NACE) codes — do cover the majority of Hungary’s GDP, ranging from the chemical industry, electricity generation, and logistics, through financial services, food and pharmaceutical manufacturing, and waste management, all the way to higher education, as well as tourism and hospitality.
It is telling that the decree is referred to in the professional literature as an “alternative FDI regime”, highlighting the expansion of the scope and the tightening of pre-emption rights. (FDI refers to foreign direct investment, when an economic actor based abroad acquires a long-term interest in a company operating in another country.)
State pre-emption rights are not unknown within the EU’s FDI toolkit — although currently marginal, they are increasing in prevalence. Finland applies them to real estate, strictly limited to specific geographical zones; Slovakia has extended them to critical infrastructure, though its practice is still evolving. Poland achieves similar results through forced sales — replied Lóránt Horváth when asked about foreign examples. However, no country has gone as far as Hungary with its general mechanism extending to corporate shareholdings. The key issue in EU regulation is that pre-emption rights must be applied in a sufficiently narrow and transparent manner; otherwise, legal disputes within the Union and reputational risks may arise — projected the president of the legal association.
Following the amendments that entered into force on 24 June, the Hungarian state now extends its 90-day pre-emption right to all prohibited transactions across all “strategic” sectors — from media to pharmaceutical manufacturing — not just solar power plants. This step fundamentally changes the transactional ecosystem in Hungary.
Uncertainty and a risk premium may appear on the market, as a transaction could be delayed by 6–7 months in cases of prohibition and pre-emption.
Since every buyer will know that the contractual price and structure will be public to the authorities, the pricing of risk will drive offers downward. Transaction costs will surge, disproportionately burdening small- and mid-sized deals. Competition and innovation will be distorted by the emergence of the state as a “competitor”, since the state will not remain merely a regulatory authority, but could become a potential market player. This may distort competition, as the state makes decisions about the same transaction in which it might later appear as the owner.
The exit path of investments becomes uncertain, which may push shareholders to place their investments into foreign holding structures from the outset, so they can close the financing cycle abroad. From now on, investors will need to defend themselves not only against regulatory risks but also against state acquisition — either through pricing or by seeking alternative structures (an EU-based buyer, minority stake, or sale at holding level). This way, transaction planning will shift towards legal and political considerations, and corporate management must now carefully monitor when and how the Hungarian state might forcefully enter their path — warned Lóránt Horváth when outlining the likely consequences.
Devaluation done perfectly
If state pre-emption is implemented in this form, it could paralyse the world of transactions — summarised his opinion Béla Seres, a financial advisor well-versed in the world of corporate acquisitions. Hungary is already not exactly a favourite of foreign investors looking for companies; after this measure, transactions will become even more cumbersome and expensive. Imposing a state pre-emption right on private property — in his view, while not entirely extreme, it certainly does not aid in facilitating sales.
We have seen similar cases with real estate, where state pre-emption rights were imposed on properties located in World Heritage sites. This made it more difficult to sell apartments in such areas, but the transactions could be smoothly orchestrated so that the prestigious properties would end up in the “right hands” via the state’s interposition. As an example, Seres brought up the buildings on Andrássy Avenue, which ultimately ended up in private hands, some of them still generating profits for their private owners as hotels. It is now commonly understood in the real estate market that the process is slower and more cumbersome due to the pre-emption right, while the outcome is also uncertain. Consequentially, investors tend to avoid such targets.
When it comes to selling companies, however, the transaction process is orders of magnitude more expensive than in real estate. In the case of a larger company, the bill can include as much as 5-6 months of labour on the part of auditors, legal experts and (tax) advisors — the cost can reach 3-5 percent of the company’s value. In the case of a €20 million company, the sale preparation costs could reach half a million euros — an acquisition therefore requires a lot of time and an absolutely non-negligible expense. According to Béla Seres,
the introduction of the state’s pre-emption right reduces the attractiveness of Hungarian companies and devalues them.
Due to drastic state interventions, frequently changing tax rules, and special sectoral burdens, Hungary was already not an investor-friendly landscape — and this new measure now distances Hungarian companies even further from participating normally in the European economic ecosystem.
Entrenching state acquisitions
According to Gábor Gadó, lawyer and former state secretary of justice, the utilisation of emergency decrees is inappropriate in this case. The intervention opportunity embedded in the decree has nothing to do with the wartime situation — the emergency justification is unrelated to pre-emption rights. As long as the state of emergency remains in place, basic entrepreneurial rights can be suspended. No other European country is in a state of emergency due to the war in Ukraine, but the Hungarian government continues to maintain it. Every six months, the emergency is extended like clockwork, enabling Orbán to continue governing by decree.
Pre-emption rights are more severe than a ban on acquisition — he emphasised. This is not a situation where a sale is temporarily blocked and can proceed after the emergency ends. Rather, if the minister prohibits the sale, the shares in question can only be sold to the Hungarian state — no one else.
Nor is this a temporary measure that will expire with the emergency. Instead, they are creating a permanent rule based on a temporary situation, effectively cementing state acquisitions.
According to Gadó, state acquisition is only justified when it relates to functions exclusive to the state — the extremely broad range listed in the decree, therefore, is not justified. And the regulation of state ownership can be handled differently — the advisor referred to the asset law, which included an annex defining the companies to remain under permanent state ownership.
Strategic Targets
State-led company acquisitions have never been foreign to Fidesz governments. At the beginning of Viktor Orbán’s second term, in 2011, the government bought back 21.2% of MOL (Hungary’s largest petrol company) from its Russian owner for €1.88 billion (funded from a previously acquired IMF loan — the shares have since been distributed to foundations created for outsourcing universities). They also bought out several energy companies, and most recently, set a record by acquiring a majority stake in Budapest Airport Plc., the operator of the Liszt Ferenc International Airport, for HUF 1,400 billion. There have also been numerous cases where private ventures of government-linked businessmen (“NER-knights”) were inflated by state-owned companies, turning MBH Bank into a rival of OTP, and building 4iG into a telecom actor comparable to Magyar Telekom (Hungarian subsidiary of Deutsche Telekom). Orbán has never hesitated to spend public funds on such deals and has consistently promoted the goal of achieving over 50% Hungarian ownership in strategic sectors.
However, this objective has not yet been reached in all sectors — in fact, foreign market share appears to be increasing in retail. Except for France’s Auchan, no other chain has been successfully brought under Hungarian control, despite the fact that the political intent is evident — at least based on the memorable interview with the CEO of Spar Austria. (Due to the reporting of these claims, Viktor Orbán sued several Hungarian newspapers, including 24.hu; we are currently awaiting a decision from the Court of Justice of the European Union.)
It would not be surprising if any of the six large international chains operating in Hungary considered selling, given the impact of windfall taxes and price control measures (currently margin caps). Spar has been running at a loss for three consecutive years, and last year, both Spar and Aldi reported losses exceeding HUF 20 billion. Special sectoral taxes are also burdening cement manufacturers and brick/tile producers in the construction materials industry. Meanwhile, Minister of Construction and Transport János Lázár bluntly suggested foreign construction companies to simply pack up and leave.
The government also has plans for the media sector: RTL, the main competitor of state advertisement-filled TV2, has long been in the crosshairs. Former oligarch Lajos Simicska once claimed that Orbán wanted to buy and then shut down the channel — according to Simicska, the Prime Minister hoped Russia would finance the operation. But now, if the owners wanted to exit the Hungarian market and sell to foreign investors — even in the framework of an internal corporate restructuring — the state’s right of pre-emption would immediately come into play.
A temporary solution?
After dissecting the severe implications of yet another instance of state intervention, investor circles have begun circulating the notion that the measure might only be temporary. Legislation has been passed regarding the elevation of emergency decrees to the level of law, and it appears that the state’s pre-emption right will no longer be in effect after 19 August 2025. The notorious December 2022 government decree — the amendment of which introduced the pre-emption right — is listed among the provisions set to expire. At least, this is the conclusion derived by the lawyers of the Hungarian Private Equity and Venture Capital Association (HVCA) — in response to our inquiry, the organisation claimed that their legal interpretation “has been confirmed by contacts on the state side”.
If this is indeed the case, the window for the state to exercise its pre-emption right would only last for less than two months. However, nothing can be taken for granted: under the ongoing state of emergency, the government may override any law with a decree at any time.
The post Orbán’s government cites state interests to justify controversial pre-emption rights first appeared on 24.hu.
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