June 20, 2016

The European Commission (EC) has referred Hungary to the European Court of Justice in Luxembourg for failure to comply with European regulations that speak to the rights of foreign investors in agricultural farmland. The EC claims that a Hungarian law passed in 2013 that terminated “usufruct rights,” or contracts allowing for the use of and profit from a property, strips agricultural investors of their rights and their investment without an offer of compensation. And although it was originally intended for the contract holders to have a transitional period of 20 years, all contracts were terminated on May 1, 2014. The EC is also opposed to another clause in the law that allowed for the unilateral termination of farmland leases concluded more than two decades ago.

The EC sent a letter of formal notice in October 2014 and a reasoned opinion in June 2015 calling for Hungary to amend the law to come in line with EU law, but no action to do so has yet been taken.

The EU contends that the law “violated the principles of free movement of capital and freedom of establishment” reports Hungary Today, and stated that, “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.”

In response, Janos Lazar, Hungary’s government office chief, told a news briefing on Thursday that Hungary’s stand on the matter was “defensible,” adding however, that he expected the law in question banning foreign acquisition of farmland to start a “war” between Budapest and Brussels, reports the Budapest Business Journal.

As a concession, Hungary contends that it is ready to compensate around 200 Austrian farmers whose farmland contracts were terminated. However, the Hungarian government intends to continue its policy of banning foreigners from purchasing farmland, according to Daily News Hungary.

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Lynda Kiernan