EU judges demolish Hungary's bid to control construction prices

(CN) — On Thursday, EU judges said Hungary’s plan to cap prices of construction materials misfired, focusing on a special mining levy that landed hardest on foreign-owned firms.

The Court of Justice of the European Union agreed with the European Commission that the “additional mining fee” breached core EU rules by distorting competition against companies from other member states. Even though the levy was drafted in neutral language, judges looked past the wording to its real-world effects and found that it mainly caught foreign-owned operators, putting them at a structural disadvantage.

While the court dismissed some of the commission’s wider claims, it left little doubt about the heart of the scheme. By tying price controls to a punitive levy, Hungary crossed the line from market oversight into unlawful discrimination, dealing a setback to its crisis-era attempt to steer the construction materials sector through taxes and regulation.

That levy formed part of a broader set of emergency rules Hungary adopted in 2021, first during the Covid-19 pandemic and later as the war in Ukraine disrupted markets. The government fixed reference prices for basic construction materials such as sand, gravel and cement below market levels. Large producers that sold above those prices were required to pay an “additional mining fee” equal to 90% of the difference, sharply narrowing their margins once they crossed the threshold.

What mattered most for the judges was how the system played out in practice. Although framed in neutral terms, the levy fell almost entirely on foreign-owned companies, something EU law does not allow.

The structure of the scheme made that effect hard to miss. Out of roughly 340 companies active in the sector, only four were caught by the levy, and three of those were controlled by groups based outside Hungary. Because eligibility was tied to turnover recorded back in 2019, the same small group of firms remained subject to the fee year after year, even as market conditions changed.

The judges agreed with the commission that this design came at a real economic cost. By squeezing margins so tightly, the levy discouraged investment and made it harder for affected companies to remain or expand in the Hungarian market. On that basis, the court found the additional mining fee amounted to an unlawful restriction on the EU freedom of establishment.

Hungary defended the measure as a way to manage supply pressures, protect consumers and stabilize the construction sector after repeated shocks. The court was unconvinced. EU law allows governments to interfere with the internal market only in exceptional cases, and Hungary, the judges said, failed to show the levy was necessary or proportionate.

The court also made clear that ensuring steady supplies of everyday materials like sand, gravel and cement does not qualify as an overriding public interest capable of justifying such a restriction.

Not everything went the commission’s way. Judges declined to strike down a separate Hungarian rule requiring certain mining operators to extract a minimum volume of materials each year, finding the obligation did not restrict market access or distort competition in practice.

The court took the same approach to recent amendments to Hungary’s mining law, which expanded the state’s powers to intervene in the sector and set the conditions under which mining activities could be restricted or directed.

Because those changes merely established a legal framework and were not backed by concrete implementing measures or evidence of real-world effects, the judges said they could not, by themselves, be found to breach EU law.

That mixed outcome does little to ease a longer-running standoff between Brussels and Budapest over economic intervention.

In recent years, Brussels has repeatedly taken Hungary to court over measures it says undercut the EU’s single market, from emergency curbs on exporting construction materials to state intervention in the energy sector and regulatory changes affecting universities and agriculture. EU judges have sided with the commission in several of those cases, finding violations of core market rules.

Seen in that context, Thursday’s ruling is less a turning point than a continuation. Without weighing Hungary’s wider strategy, the court focused on the mining levy itself, concluding that it crossed an EU red line by disadvantaging foreign-owned firms.

Geert Van Calster, a law professor at KU Leuven, said the court had little appetite for Hungary’s attempt to cast the levy as crisis management tied to the pandemic and the war in Ukraine. Instead, he said, the judges treated the case as a fairly standard internal market dispute, applying a narrow and technical reading of EU law.

That choice mattered. By keeping its focus tight, Van Calster said, the court avoided wading into the broader political arguments surrounding Hungary’s economic strategy, while leaving unresolved questions about what really lay behind the policy.

On a practical level, he added, the effects were easier to grasp. The levy was always likely to discourage investment in Hungary’s mining and construction-related sectors and to squeeze the margins of companies already operating there.

Whether the ruling will be enough to change that picture remains uncertain. “It remains to be seen of course whether foreign companies will regain their interest in the Hungarian market,” he said, noting that the need to challenge government measures across multiple courts can itself weigh on investment decisions.

Graham Butler, a law professor at Linnaeus University, zoomed out from the Hungary dispute and framed the judgment as a reminder of three broader points. Member states have limited leeway to justify market restrictions, courts will look past neutral legal wording to real-world effects and the burden of proof in infringement cases still sits squarely with the commission.

That last point mattered here, Butler said, because Brussels prevailed on the mining levy but not on every argument it raised.

“This reinforces the view that a heavy burden of proof still falls on the commission to fully investigate its claims, before bringing such actions to the court,” he said.

The Hungarian government and the European Commission did not immediately reply to requests for comment.

The judgment is final and cannot be appealed. Hungary must now bring the additional mining levy into line with EU law, and the European Commission can return to court if it believes the ruling has not been properly carried out.

Courthouse News reporter Eunseo Hong is based in the Netherlands.