AUTHOR (name and surname)

Viktor Zoltán Kazai

COUNTRY

Hungary

YEAR

2022

Name of the act/s*

Anti-corruption legislative package

Act no. XXX of 2022 on the amendments to Act no. CXXX of 2010 on Law-making and Act no. CXXXI of 2010 on Public Participation in Preparing Laws in the interest of reaching an agreement with the European Commission (2022. évi XXX. törvény az Európai Bizottsággal való megegyezés érdekében a jogalkotásról szóló 2010. évi CXXX. törvény és a jogszabályok előkészítésében való társadalmi részvételről szóló 2010. évi CXXXI. törvény módosításáról) – T/705

Bill no. 706 on the amendment zo Act no. XC of 2017 on the Code of Criminal Procedure in the interest of reaching an agreement with the European Commission (Az Európai Bizottsággal való megegyezés érdekében a büntetőeljárásról szóló 2017. évi XC. törvény módosításáról szóló T/706 számú törvényjavaslat)

Act. no XXIX of 2022 on the amendments to certain acts on public interest asset management foundations, the National Tax Authority, and the European Anti-Fraud Office concerning the monitoring of the use of European Union funds (2022. évi XXIX. törvény az európai uniós költségvetési források felhasználásának ellenőrzésével összefüggő egyes, a közfeladatot ellátó közérdekű vagyonkezelő alapítványokat, a Nemzeti Adó- és Vámhivatalt, valamint az Európai Csalásellenes Hivatal ellenőrzéseit érintő törvények módosításáról)

Act no. XXVII of 2022 on the monitoring of the use of European Union funds (2022. évi XXVII. törvény az európai uniós költségvetési források felhasználásának ellenőrzéséről) – T/1260

Act no. XXVIII of 2022 on the amendments to certain acts on the monitoring of the use of European Union funds (2022. évi XXVIII. törvény az európai uniós költségvetési források felhasználásának ellenőrzésével összefüggő egyes törvények módosításáról) – T/1261

Act no. XXXI of 2022 on the amendments to certain acts on asset declarations, related to the monitoring of the use of European Union funds (2022. évi XXXI. törvény az európai uniós költségvetési források felhasználásának ellenőrzésével összefüggő egyes, vagyonnyilatkozattal kapcsolatos törvények módosításáról) – T/1311

Subject area

European Union, European Union funds, rule of law, conditionality mechanism, corruption

Brief description of the contents of the act

This anti-corruption legislative package was adopted by the National Assembly upon the proposals of the Government as a response to the concerns voiced by the European Commission following the triggering of the Conditionality Mechanism (Regulation 2020/2092).

The most important measures introduced by the legislative package:

1)     Establishment of an Integrity Authority and a new Anti-Corruption Task Force

Instead of joining the European Public Prosecutor’s Office, the National Assembly (Act no. XXVII of 2022) set up a state agency called Integrity Authority, and the Anti-corruption Task Force which serves as a forum to involve non-state players in the fight against corruption.

The Integrity Authority is charged with the task of protecting EU funds. Its role is complementary to other, already existing anti-corruption agencies. Most of the Authority’s powers are soft. It has the competence

-              to request information,

-              to carry out analyses,

-              to make recommendations,

-              to suspend temporarily ongoing public procurement procedures,

-              to request a court to declare that a state body competent to protect EU funds has failed to act and to comply with the Authority’s earlier request to act.

The president and the vice president of the Integrity Authority were selected in the following procedure. The Directorate General for Audit of European Funds (established by the Government and placed within the Finance Ministry) selected the three members of the Eligibility Committee. This Eligibility Committee published a call for application for the positions and shortlisted the candidates. The president and the vice-president of the Integrity Authority were selected from the short list by the president of the State Audit Office. The selected candidates were appointed by the President of the Republic.

The Anti-Corruption Task Force is a forum to that offers Hungarian NGOs a change to get involved in the fight against anti-corruption. It convenes twice a year. Its competence is limited to form an opinion on the anti-corruption framework, to publish an annual report, and to formulate recommendations.

2)     Introduction of an extraordinary legal remedy to bring corruption cases to justice by private prosecution

Bill no. 706 would allow private individuals and legal entities to take certain serious crimes related to corruption, such as embezzlement, misappropriation of funds, fraud, budgetary fraud, etc., to court if the prosecution service fails to do so. In this case, private individuals and legal entities can challenge the prosecutor’s decision, and after a long and complicated process, an investigate judge may order the prosecutor to continue the criminal proceedings. Alternately, private individuals and legal entities may bring the case to court as a private prosecutor.

3)     Introduction of new rules on asset declarations

In July 2022 the National Assembly amended the law on the MPs’ asset declarations. The duty to submit a declaration on an annual basis was abolished; and the obligation to submit a declaration only in case of a change in the MPs’ income and position occurs was introduced. In addition, MPs were required to declare their income within ranges (not the exact sum) and their family members were no longer obliged to a submit a declaration at all.

Act no. XXXI of 2022 bascially just withdrew most changes put in place in July.

4)     Introduction of new rules on conflicts of interest in public interest asset management foundations

Public interest asset management foundations are established by the State by operate as private foundations. In 2021 the National Assembly transferred EUR billions worth of public assets (including state companies’ stakes, properties, such as castles, resorts, parks, theater, and higher education institutions) to these foundations. Some of them are financed by the State, others receive their funding from previously state-owned companies. The assets transferred to the foundations cease to be public assets, and the State loses control over them. The members of the foundations’ board of trustees (who exercise the rights of the founders) were appointed by the current government.

The new legislation (Act XXIX of 2022) stipulates that public interest asset management foundations and the legal entities established or maintained by them fall under the obligation to carry out public procurements.

Also, according to the new rules on conflicts of interest, members of the boards and the supervisory bodies of the foundations shall not take part in the decision-making of the foundation in case of a conflict of interest with regard to that particular decision. Those affected by a conflict of interest, or the risk or appearance thereof shall report this before the concerned decision would be adopted.

Comment

1)     Establishment of an Integrity Authority and a new Anti-Corruption Task Force

According to the opinion of prominent Hungarian NGOs “even with its relatively soft tools, the Integrity Authority may make a difference in the way corruption has been tackled in Hungary since 2010 by simply identifying incidents where the existing authorities fail to take appropriate action and compel them to adequately fulfil their mandate”. They point out, however, that much depends on the selection of its leaders.

Scholars point out that “dependency is hard-wired into the way that the Authority’s officials are appointed” because several persons playing an important role in the selection process (such as the members of Directorate General for Audit of European Funds, the president of the State Audit Office and the President of the Republic) are either subordinated to the Government or have been selected by the ruling majority. The also highlight that “the Authority’s ability to investigate complaints is severely limited because it has no powers to do anything other than ‘invite’ others to give it information or delegate the investigation to ‘the organization with the tasks and powers in the field of monitoring the use of European Union funds.” And even if its investigations find something, the Authority must refer the case to the Chief Public Prosecutor’s Office that is often criticized for failing to investigate high profile corruption cases.

As to the Task Force, NGOs opine that its “role is very weak, and it will not be able to perform strong oversight functions, nor will it be empowered to initiate the procedure of either the Integrity Authority or any other state organ.”

2)     Introduction of an extraordinary legal remedy to bring corruption cases to justice by private prosecution

Scholars emphasize that “the new procedure is nearly impossible to use and adds little value to existing controls on the public prosecutor.” They point out the regulation introduces too many procedural hurdles for private individuals and legal entities and makes the prosecutorial service almost impossible to circumvent.

3)     Introduction of new rules on asset declarations

NGOs conclude in their analysis that the new rules basically just reastalblished the previous asset declaration system without addressing its most important shortcomings.

4)     Introduction of new rules on conflicts of interest in public interest asset management foundations

According to three prominent Hungarian NGOs, the new rules do not address the most important problems of the existing system. The argue in their report that the act “fails to address the main issue at stake: that public assets in unprecedented quantities were transferred to these special entities of private law and were hence basically privatised, while the government appointed to the foundations’ boards members or dependents of the governing majority and individuals with close ties to the governing party”.

Secondary sources/ doctrinal works (if any)

Hungarian Helsinki Committee, K-Monitor, Transparency International (2022), ‘Half-hearted Promises, Disappointing Delivery. An Assessment of the Hungarian Government’s New Measures to Protect the EU Budget and Related Recommendations’, Report, at: https://transparency.hu/wp-content/uploads/2022/10/Assessment-of-measures-to-protect-EU-budget.pdf  

Mészáros, Gábor; Scheppele, Kim Lane: How NOT to Be an Independent Agency: The Hungarian Integrity Authority, VerfBlog, 2022/10/06, https://verfassungsblog.de/how-not-to-be-an-independent-agency/

Drinóczi, Tímea: Sham and Smokescreen: Hungary and the Rule of law conditionality mechanism, VerfBlog, 2022/10/05, https://verfassungsblog.de/sham-and-smokescreen/

Scheppele, Kim Lane, Mészáros, Gábor; Bárd, Petra: Useless and Maybe Unconstitutional: Hungary’s Proposed Judicial Review of the Prosecutorial Decisions, VerfBlog, 2022/10/26, https://verfassungsblog.de/useless-and-maybe-unconstitutional/

Ésik, Sándor: Hungary’s Shambolic Anticorruption Proposals: A Practicioner’s View , VerfBlog, 2022/10/31, https://verfassungsblog.de/hungarys-shambolic-anticorruption-proposals/

*Act citation /year and number

Act no. XXX of 2022 on the amendments to Act no. CXXX of 2010 on Law-making and Act no. CXXXI of 2010 on Public Participation in Preparing Laws in the interest of reaching an agreement with the European Commission

Bill no. 706 on the amendment zo Act no. XC of 2017 on the Code of Criminal Procedure in the interest of reaching an agreement with the European Commission

Act. no XXIX of 2022 on the amendments to certain acts on public interest asset management foundations, the National Tax Authority, and the European Anti-Fraud Office concerning the monitoring of the use of European Union funds

Act no. XXVII of 2022 on the monitoring of the use of European Union funds

Act no. XXVIII of 2022 on the amendments to certain acts on the monitoring of the use of European Union funds

Act no. XXXI of 2022 on the amendments to certain acts on asset declarations, related to the monitoring of the use of European Union funds

Enacted by

Hungarian National Assembly

Official link to the text of the act

Act no. XXX of 2022

Bill no. 706

Act. no XXIX of 2022

Act no. XXVII of 2022

Act no. XXVIII of 2022

Act no. XXXI of 2022