Hungary

Whenever products and technologies qualifying as "dual use", come from a Member State and are exported or transferred to Hungary, no authorization needs to be acquired. Only for a number of items directly related to the production and management of military material and chemical weapons it remains necessary to seek prior authorization from the relevant state authority.

1. Those who carry out VAT-relevant transactions in Hungary must open a Hungarian VAT number, bearing in mind in any case that the standard rate in that state is among the highest in Europe.

The standard rate in Hungary is one of the highest in Europe.
1. Those wishing to export to Hungary should remember that Hungary has concluded numerous free trade agreements with countries and supranational organizations other than the European Union and its member states. Trade activity with such countries is generally carried out without the need for any license except in the case of export to Hungary of certain products (e.g., potentially dangerous chemicals), specified in a special government decree, for which a license è is required.
The Hungarian government has also issued a license for the export of certain products.
2. Those wishing to export to Hungary goods classified as "dual use" must necessarily comply with the rules prepared in this regard by the European Union, which has over the years issued various regulations (see today EU Regulation 388/2012) that provide precise rules for the export of such technologies and/or products within the territory of the EU.

The foreign entrepreneur wishing to invest in Hungary will first have to make sure that he or she has taken steps to register his or her trademark or patent, so that he or she can fully enjoy the tools recognized by the law to protect intellectual property.

Hungary is a party to numerous agreements on intellectual property protection including the Madrid Protocol; in addition, as a member state of the European Union, it is a signatory to the European Patent Convention. Under Hungarian law, trademarks are protected if they are registered with the National Patent and Trademark Office or with the World Intellectual Property Organization. Registered trademark protection lasts for ten years while the protection granted to patents lasts for twenty years. Hungarian law also recognizes the patentability of production processes.

Before registering one's trademark, it is advisable to carry out, not only, a check on the’existence or non-existence of another trademark already registered in the country that is identical or too similar, but also, a careful study on its transliteration into Hungarian, in order to avoid that a trademark considered particularly attractive in one's own language takes on an entirely different meaning in Hungarian. Finally, it should be remembered that in order to proceed with the registration of the patent, both foreign nationals and firms must necessarily make use of an on-site representative who can also be a Hungarian lawyer.

As noted earlier, due to its geographical location, in the center of Europe, and thus of the major communication networks, not only road and rail, but also waterways Hungary is one of the most attractive countries as a "hub" for anyone about to carry out programs of commercial penetration from the West to the East, and vice versa.

In this sense, one of the natural and most logical choices è is to appoint agents on the spot who can take care of the development of the marketing of a given product or service not only within the country but also in neighboring countries of interest. Let us therefore proceed in the analysis of this important type of contract. The main regulation of the agency contract and the relationship with commercial agents was constituted, until March 2014, by Law No. CXVII of 2000 by which Hungary had essentially transposed Directive No. 653/86/EC on commercial agents, bringing its national legislation into line with that of the other member states, especially with regard to minimum protective standards for the commercial agent, who is considered a weaker party to the relationship.

Following the reform of the Civil Code, which came into force on March 15, 2014, Act No. CXVII of 2000 è was repealed and the agency contract è is now fully governed by the rules of the new Civil Code. The new Hungarian Civil Code departs from the logic of Act CXVII of 2000 and the European Directive on Independent Commercial Agents, as it does not regulate the commercial agency contract in an autonomous form.

The new Hungarian Civil Code, on the other hand, provides for the existence of an intermediary contract (“közvetitői szerződés”), the rules of which are general in nature, regulating all relations having as their object the performance of activities aimed at the conclusion of a contract between a principal/principal and a third party. The code now distinguishes between two types of brokerage contracts: a noncontinuous brokerage contract (“nem tartós közvetitői szerződés”) to which the rules of the mandate apply, and a continuous brokerage contract (“tartós közvetitői szerződés”) to which certain special provisions apply, which appear to be basically a transposition of Directive 653/86/EC.

When a foreign company intends to enter into an agreement with an agent in Hungary, it must carefully consider whether it is appropriate to use Hungarian law as the law applicable to the relationship, bearing in mind, moreover, that the new Civil Code, has not transposed certain provisions of Directive 653/86/EC, namely those relating to the commission due to the independent commercial agent (Articles 6-12 of the Directive).

The regulation of the commission payable to the independent commercial agent è provided for today by Government Decree 65/2014 (III.13.), which generally concerns the commission payable to the broker in the framework of a continuous brokerage contract. The foreign company will also have to consider that entering into an agency contract in Hungary may require the adoption of special formalities in certain sectors, such as pharmaceutical or chemical, and will therefore be subject to constraints or requirements arising from specific administrative and tax regulations.

It should be noted that the provisions of the new Civil Code and Government Decree 65/2014 (III.13.) apply only to contracts concluded after March 15, 2014; on the other hand, independent commercial agency relationships that arose previously continue to be governed by the provisions of Law CXVII of 2000 and the Civil Code of 1959 with its subsequent amendments; under the former regulations, the parties could freely determine the content of the contract and establish the duration of their relationship, but there were certain provisions of the Hungarian law - established in order to provide greater protection to the'agent - that were mandatory and mandatory, including the duty to pay the agent a severance payment, calculated on the basis of the amount of commission lost by the agent due to the termination of the relationship, and theprincipal's obligation to pay the agent a commission due when the negotiated contract had been concluded as a result of the agent's activity or if the principal had concluded a contract with a customer previously acquired by the agent for a similar contract. Lastly, it is necessary to point out that a foreign company that enters into an agency contract with a Hungarian agent that is a legal person will be required to include in the contract a clause providing for the exclusive jurisdiction of an arbitration court to hear and decide any disputes. When, on the other hand, a contract is entered into with an agent who is a natural person, it should be remembered that the agent will necessarily have to be sued before the court of the country in which he or she is domiciled, while the parties may establish the jurisdiction of a different court only by virtue of an agreement after the dispute has arisen.

In Hungary, unlike other states especially members of the European Union, commercial agency disputes are not reserved to the functional jurisdiction of the labor court, not even if the agent operates as a natural person: the labor court will be competent only if the exact extremes of employment are met.

Hungary, like many jurisdictions, until the recent reform of the Civil Code that came into force on March 15, 2014, did not know any law specifically regulating the distribution contract; therefore, for the regulation of the distribution contract it would have been necessary to refer to the contractual models adopted in international practice, the rules on contracts in general already present in the Hungarian Civil Code, and the rules provided for in the law on agency as applicable.

After the reform, the Civil Code has introduced a new section specifically dedicated to the distribution contract and precisely the foreign investor who wants to enter into a contract with a Hungarian distributor will have to consider well whether it is convenient to choose to regulate his contract with the Hungarian law, which now provides for some mandatory rules that place specific obligations on the parties.

The new rules of the code define the distribution contract as a contract under which a supplier assumes the obligation to sell tangible movable goods to a distributor, who, in turn, undertakes to purchase the supplier's products and sell them in his own name and on his own behalf.

Bearing this in mind, the law stipulates specific duties on the parties, including one placed on both parties to protect the good name and image of the product. The supplier also has information obligations regarding the product and the right to give instructions to the distributor on how to promote distribution. To this end he may also, in return for payment, provide the distributor with the necessary advertising materials to promote sales of the product. The distributor, on the other hand, will have to comply with the supplier's instructions, even when the instructions are unreasonable but the supplier insists on them (provided that if the distributor has warned the supplier in advance about the unreasonableness of the instructions, it will be the supplier who will be held liable for all damages caused to third parties). In case, on the other hand, the instructions are contrary to the law or administrative regulations, dangerous to safety or harmful to the property rights of others, the distributor has a real duty to refuse to comply. The code also specifies that the provisions on distribution contracts also apply mutatis mutandis to contracts for the provision of services.

For the rest, the content of the distribution contract remains left to the contractual freedom of the parties and no special formalities are required for its conclusion: the written form is not a condition for the validity of the agreement. Those who promote the sale of a product in Hungary è are also obliged to comply with mandatory legal provisions on advertising, which prohibit certain forms of advertising, including subliminal advertising.

Also in this case, converà finally, consider whether to include in the distribution contract a clause providing for the exclusive jurisdiction of an arbitration board to decide any disputes and avoid having a defendant before a Hungarian court.

Franchising è has long been an underutilized contract in Hungary; however, in recent years it has è gradually established itself, especially for the most famous and renowned brands. In particular, Hungary has good potentials for the development of franchise networks in the clothing sector, which are highly appreciated by Hungarian consumers, especially by young people.

Today, the franchise contract è defined by the Hungarian Civil Code as a contract under which a person called franchisee undertakes to produce and supply (in his name and on his behalf) the goods and services by virtue of a concession in favor of a person called franchisor, through the use of intangible assets such as brand image, know-how, etc., owned by the latter.

The franchisor è required to guarantee the franchisee the right to use for commercial purposes its trademark and to market its products using the business formula it has already tested in the market. In return, the franchisee agrees to periodically pay the franchisor a sum of money calculated on its turnover. In addition, the franchisor undertakes to guarantee the franchisee the uninterrupted use of the above intangible assets for the entire duration of the contract, while the franchisee takes all necessary measures to protect the know-how placed at its disposal.

The rules of the reformed Civil Code apply to all contracts concluded after March 15, 2014.

Hungarian Civil Code: regulation of the franchise contract

In any case, even before the recent reform, the Hungarian Franchising Association had long recognized both the Statutes and the Code of Ethics of the European Franchising Federation, which had been incorporated into the "Hungarian Code of Ethics". On the basis of these acts, the Hungarian Franchising Association, over the years, has issued many measures classifiable as soft law instruments of which è especially well-known is No. 2002/1 "Regulation on the Obligation to Provide Information on the Content of the System before Signing".

It should be pointed out, however, that the new Hungarian Civil Code, unlike the laws in Europe and in many countries outside the United States, does not provide for specific pre-contractual information and disclosure obligations on the franchisor and towards the franchisee. Therefore, in this respect, it may be advantageous for a franchisor intending to establish a Franchise network in Hungary to choose as the law applicable to contractual relationships, Hungarian law. The Hungarian Civil Code, to date, provides only for the obligation to act in good faith in making reports or reports and some specific security obligations regarding the network created.

Another peculiarity introduced by Art. 6:381 of the Civil Code is to apply to the franchise contract, in the event of termination, the same minimum notice period as provided for in Directive 653/86/EC on commercial agency, which is summarized as follows:

• one month's notice for the first year of the contract term;
• two months for the second year;
• three months for subsequent years.

Regardless of the amended rules of the Civil Code, the rules set forth in the EU regulations on limits to the conclusion of vertical agreements of violation of competition rules, which remain imperative, also apply to the Franchise Agreement in Hungary.

Today, therefore, those who want to establish a Franchising network in Hungary will have to bear in mind that both certain mandatory provisions of European origin and Hungarian mandatory rules on Franchising apply to the contract.

It should be noted that a foreign company wishing to establish a franchise network in Hungary will have to include in the contract a clause providing for the exclusive jurisdiction of an arbitration board competent to hear and settle any disputes that may arise.