Recent legislative developments
Gábor Erdos and János Tóth
Wolf Theiss
Budapest
Gábor Erdos (Bio)
János Tóth (Bio)
The results of the parliamentary elections in Hungary in April 2010 allowed the former opposition conservative party alliance to take a convincing two-thirds majority in the parliament. Such an unprecedented mandate has enabled the governing party to dominate the lawmaking processes and adopt new pieces of legislation at their absolute discretion.
The most significant and noteworthy recent developments in the Hungarian legislation have been the passing of the country's new constitution, the reshuffling of the new Civil Code and the restructuring of the Hungarian pension system.
The new constitution of Hungary
In April 2011, the Hungarian parliament adopted and the president promulgated the new Hungarian constitution, which is scheduled to enter into force on January 1 2012.
The new constitution has great symbolic and practical significance. It strengthens Hungary's commitment to individual freedom, democracy and the rule of law and preserves the traditions of Hungarian parliamentarianism and the institutions of state.
Regarding public finances, the constitution introduces strict rules that will prevent any future government in Hungary from bankrupting the country. For this reason, under the new constitution, no government will be able to adopt a budget that increases the level of state debt and the president will be entitled to dissolve parliament if a budget is not approved. Furthermore, only those entities will be permitted to bid for government contracts, which have transparent activities and fully disclosed ownership structures. Certain powers of the chairman of the Hungarian National Bank have also been curtailed in order to strengthen the parliament's fiscal decision-making power.
The competence of the Hungarian Constitutional Court has also changed, and unless the public debt falls below 50% of GDP, it will not be able to rule on tax and budgetary issues. Furthermore, the Hungarian Constitutional Court will have 15 members (instead of the current 11), who will be elected by the parliament for 12 years (instead of the current nine-year term).
The recent status of the implementation of the new Hungarian Civil Code
In 2009, the Hungarian parliament adopted Act CXX of 2009 on the new Civil Code and Act XV of 2010 on the entry into force and implementation of the new Civil Code. According to the implementation act, the new Civil Code, which took almost ten years to prepare, would have entered into force in two phases, on May 1 2010 and on January 1 2011, respectively.
On April 26 2010, the Constitutional Court annulled the implementation of the new Civil Code, stating that the period allowed for examination and preparation had been too short and the fact that the provisions of the Civil Code would have entered into force in two different phases was contradictory to the basic principles of law. Such a decision enabled the Hungarian government to begin with a complete overhaul of the new Civil Code. According to the plans of the government, the new Civil Code will be finalised after an extensive revision in the autumn of 2011, and the final voting is scheduled for December 2011.
The restructuring of the Hungarian pension system
At the end of 2010, the government introduced material changes to the former three-pillar pension system in Hungary by eliminating the so-called mandatory private pension funds pillar and nationalising the underlying assets, unless the individuals concerned elected to opt out and decided to remain under the private scheme.
On December 13 2010, Act CLIV of 2010 on the Pension Reform and Indebtedness Reduction Fund was adopted, on the basis of which all savings of the members of the private pension funds are to be transferred to the state budget, unless members make a special declaration stating that they choose to stay in the private pension fund. According to the new act, however, those people who decide to stay under the private pension scheme will not be eligible for payments from the state pension scheme, even though their state pension contribution (levied at 24% of their taxable income) will still need to be channeled to the state system.
The Hungarian government stated that the reasons for the change of the system were the reduction of the state debt and the correction of the large deficit in the state pension. After the implementation of the new act, only 100,000 members decided to opt out from the state pension system out of the total of three million private pension members disposing over assets worth Ft 2800 billion (€10 billion). Those private pension funds, which have less than 2000 members after the exit of their current members, must cease their operation and transfer their remaining portfolio to other funds.