Family-Tie Provision in Hungarian Property Law Draws Court’s Ire

(CN) - Europe’s highest court scolded Hungary on Tuesday for enforcing a law that says individuals must have a close family tie to a property owner if they plan to make use of said land.

Hungary had invoked the law in question against in 2014 and 2015 to cancel what are known as rights of usufruct held by the Hungarian company Segro and Austrian national Gunther Horvath.

Contending that the law conflicted with the principle of the free movement of capital, Segro and Horvath brought annulment actions before the Administrative and Labour Court in Szombathely, Hungary. This court in turn asked the European Court of Justice in Luxembourg to weigh in.

Ruling Tuesday, the court sided against Hungary.

“By depriving in that way nationals of member states other than Hungary, who are entitled to benefit from free movement of capital, of enjoyment of the property in which they invested capital, the national legislation at issue in the main proceedings constitutes a restriction on such free movement,” the opinion states.

Restrictions of this kind “are likely to discourage nonresidents from making investments in a member state,” the court added, concluding that the law thus restricts the fundamental freedom guaranteed in Article 63 TFEU, short for Treaty of the Functioning European Union.

Though the referring judges in Hungary must make the ultimate conclusion here, the court also agreed with the recommendation of its advocate general that the legislation disadvantages“nationals of other member states more than Hungarian nationals, and that it is thus liable to conceal indirect discrimination based on the usufructuary’s nationality or the origin of the capital.”

It also must be left for the referring court to determine whether even an indirectly discriminatory restriction on the free movement of capital resulting from that legislation may be justified.

Hungary failed to sway the court meanwhile that the legislation at issue is justified by a public interest relating to the farming of agricultural.

“Since the national legislation at issue ... appears … to be neither appropriate for securing in a consistent manner the attainment of the public interest objectives relating to the farming of agricultural land that are invoked nor limited to the measures necessary for the purpose of pursuing such objectives, the restrictions on the free movement of capital to which it gives rise cannot be justified by those objective,” the ruling states.

Follow @bleonardcns

Subscribe to Closing Arguments

Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.

Email *

Submit