Blocked Deals and State Buy-ins: Legal Consequences and Policy Challenges in Hungary’s FDI Screening Regime

By Bálint Kovács*

On 23 June 2025, Hungary introduced two substantial changes to its foreign direct investment (FDI) screening legislation.[1] These amendments entered into force the next day following their publication, with direct implications for both future filings and pending screening procedures. The primary objectives of the reform are twofold: first, to extend the deadline for the screening authority; and second, to broaden the scope of the state’s pre-emption rights. This analysis seeks to provide a concise overview of these legislative changes, situating them within the broader context of Hungary’s evolving investment screening framework.

Extended screening deadline

As outlined in the Country Note on Hungary’s FDI screening regime, the Hungarian framework casts a wide net across the economy, designating a broad range of sectors as strategically significant.[2] The amendment extends the duration of the screening process from 30 to 45 business days. Moreover, the authority is now permitted to prolong this period by an additional 30 business days—up to three times—whereas the previous regulation allowed for only a single extension. The notifying party must be informed in writing of any such extension prior to the expiration of the existing deadline. These changes effectively prolong the timeline for completing affected transactions. According to the Government Decree, this adjustment was deemed necessary in light of the insufficiency of the former time limits to enable a comprehensive and factually grounded assessment of notified transactions.

State’s pre-emption right

The current amendment builds on legislative changes introduced in late 2023[3], which introduced a pre-emption right for the state, enabling it to acquire any strategic enterprise engaged in the generation of renewable energy through solar power plants, provided that the transaction involving such an enterprise was notified under the applicable screening rules. This rule has quite a narrow scope, it also involves a recommendation from the part of the minister responsible for energy policy, and the acquisition must be carried out strictly by the state-owned Hungarian National Asset Management Inc.[4] As of date, there is no publicly available information indicating that the state has ever exercised this pre-emption right.

The current amendment extends the scope of this prerogative by turning it into a general right of pre-emption vested in the Hungarian state. From now on, this right applies to all transactions that have been duly notified under the screening framework and are subsequently prohibited by the competent screening authority. Only in such cases is the state entitled to step in and acquire the target of the transaction. The right of pre-emption can be exercised within 90 (calendar) days following the issuance of the blocking decision. The state may exercise its pre-emption rights not only via Hungarian National Asset Management Inc., but also via any other designated entity. In line with the general requirements of fairness and neutrality, the legislation provides that the state’s right of pre-emption must be exercised under the same terms and conditions as those set out in the original transaction.

Context and commentary

The most recent amendment to Hungary’s investment screening regime is particularly relevant as it offers at least a partial response to a pressing question: what are the legal and practical consequences for the target company when a proposed transaction is blocked under investment control measures?[5]

This amendment comes three years after the Hungarian screening authority’s prohibition of the takeover of insurance company Aegon by Vienna Insurance Group (VIG). The case attracted significant attention within the investment screening community. It was particularly noteworthy due to its ultimate resolution through a negotiated settlement between VIG and the Hungarian state. As part of the settlement, the state—acting through the state-owned investment fund Corvinus—acquired a 45% equity stake in VIG’s Hungarian operations.

The VIG transaction raised a critical question of general relevance. In the context of FDI screening, states assert their right to protect national security by blocking transactions involving strategically significant entities. As national security determinations are often characterized by considerable opacity, the public will usually be left guessing the precise reasons behind the blocking decision. But what happens with the target company afterwards? If a company is classified as strategically important and the state intervenes to block the transaction, does this entail a broader responsibility of the state? While the formal legal answer may be a straightforward ‘no’, the practical ramifications—both for the affected company and the broader business environment—may compel the state to adopt more proactive or innovative measures in response.

The pre-emption right introduced into Hungary’s FDI screening regime only partially conforms to the general principles typically associated with such rights. While the amendment authorizes the state to acquire the target company following a blocked transaction, it does not provide for the automatic lifting of the prohibition should the state choose not to exercise this right. As a result, the target company is left to seek a new investor, which may in turn necessitate a renewed screening process, potentially reactivating the state’s pre-emption right.

This amendment to the Hungarian FDI regime represents a significant development in the evolving role of the state within the context of the broader geoeconomic turn. State interventions inevitably produce ripple effects within the economic landscape. For the target company, the consequences can be particularly severe—especially in situations where there are no alternatives to the blocked transaction—potentially leaving the firm in a vulnerable or even unsustainable position. If similar cases begin to accumulate, the cumulative effect could pose a broader risk to entrepreneurial confidence and, by extension, to overall economic stability.

*Bálint Kovács, PhD is a lecturer in international economic law at the University of Szeged and a senior researcher at the Ferenc Mádl Institute of Comparative Law, in Hungary. He is also CELIS Assistant Country Reporter for Hungary.

[1] Government Decree no. 163/2025 (VI. 23.) amending Government Decree no. 561/2022 (XII. 23.) on the differing application during the state of emergency of certain provisions related to the economic protection of Hungarian companies (in Hungarian: A Kormány 163/2025. (VI. 23.) Korm. rendelete a magyarországi gazdasági társaságok gazdasági célú védelméhez szükséges egyes rendelkezések veszélyhelyzet ideje alatti eltérő alkalmazásáról szóló 561/2022. (XII. 23.) Korm. rendelet módosításáról), published in the Official Journal of Hungary no. 75 of 23 June 2025.

[2] Csongor István Nagy, Bálint Kovács, CELIS Country Note on Hungary 2024, https://www.celis.institute/celis-country-reports/country-note-hungary-2024/

[3] Government Decree no. 566/2023 (XII. 14.), supplemented with further clarifications via Government Decree 363/2024 (XI. 28.).

[4] For more information on Hungarian National Asset Management Inc.: https://www.mnv.hu/en

[5] See Bálint Kovács, Collateral Damage: What about the Casualties of the Geoeconomic Turn?, CELIS Blog, 28 May 2025 https://www.celis.institute/celis-blog/collateral-damage-what-about-the-casualties-of-the-geoeconomic-turn/