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Survey: Corruption still the status quo EY’s report finds that many business people in Hungary still believe that bribery is a regular part of doing business here, and that those who play fair will be punished. 14 SPECIAL REPORT

Lawyers say business is growing As the Hungarian economy picks up, so does the legal business, according to local lawyers, who note improvements in a variety of sectors. 16-17 NEWS

Budget is early and attractive Apparently hoping to impress credit rating agencies, the government came up with a 2016 budget that proposes tax cuts while maintaining revenue. 03

Ádám Somlai Fischer, one of the founders of Hungary’s Prezi, talks about Brain Bar Budapest, an upcoming festival focusing on innovation and the human side of the digital revolution. 8

Challenging the status quo. Dentons. The Global Elite law firm created by Salans, FMC and SNR Denton.*

SOCIALITE

Lawsuit could take art treasures away Some 44 works on display in museums around Hungary may go into private hands if a court in Washington D.C. rules the art was looted by Nazis. 36-37 BUSINESS

Seeking to keep innovation at home *Acritas Global Elite Law Firm Brand Index 2013 and 2014. dentons.com © 2015 Dentons. Dentons is a global legal practice providing client services worldwide through its member firms and affiliates. Please see dentons.com for Legal Notices.

A conference in Budapest focuses on ways to ensure that great ideas founded in Europe don’t end up being owned by someone in Silicon Valley. 10

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Budapest Business Journal | May 22 – June 04, 2015

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Man and machine

BUSINESS

Lawyers say business is growing As the Hungarian economy picks up, so does the legal business, according to local lawyers, who note improvements in a variety of sectors. 16-17 NEWS

Budget is early and attractive Apparently hoping to impress credit rating agencies, the government came up with a 2016 budget that proposes tax cuts while maintaining revenue. 03

Ádám Somlai Fischer, one of the founders of Hungary’s Prezi, talks about Brain Bar Budapest, an upcoming festival focusing on innovation and the human side of the digital revolution. 8

Challenging the status quo. Dentons. The Global Elite law firm created by Salans, FMC and SNR Denton.*

SOCIALITE

Lawsuit could take art treasures away Some 44 works on display in museums around Hungary may go into private hands if a court in Washington D.C. rules the art was looted by Nazis. 36-37 BUSINESS

A conference in Budapest focuses on ways to ensure that great ideas founded in Europe don’t end up being owned by someone in Silicon Valley. 10

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Real tax overhaul will have to wait – again The good news on the 2016 budget proposal released in mid−May is that taxes may actually be edging down next year. Since the current government took over in 2010, and ushered in the new era of “unorthodox” economics, an increasing tax burden has been the norm. Finally GDP is growing at a good pace, and perhaps the ruling Fidesz party’s concern about its worsening poll numbers is also growing. For whatever reason, the leadership has apparently decided it can afford to reduce the tax bite without losing revenue. The bad news is that the tax bill is still based on the “unorthodox” formula, with a confusing hodgepodge of special taxes, including extra levies against banks, telecoms and anyone selling advertisements. We are still waiting for the tax overhaul that this country has needed for more than 50 years. Under communism, and in every government since then, bizarre tax regimes and overloaded bureaucracy have essentially added an extra obstacle to doing business in Hungary. Instead of seeking to fix this problem, the current government appears determined to make things more complicated and arbitrary than ever. The tax code often seems designed to favor government allies, an approach that creates an appearance of impropriety, and also has the effect of making the country’s business environment unpredictable, scaring away potential investors. Take the bank tax. Come 2016, banks can hope for a moderate reduction in their total tax burden, but they should not have been hit with this burden in 2010 to begin with. While the banking system clearly played a role in the 2008 financial crisis, so did bank consumers and other investors who thought there was no risk involved in

bargain−basement credit. Still, it’s easy to paint bankers as being rich and greedy. That may be why the government sees no political risk in a tax on banks – or in penalizing banks for fluctuations in foreign−exchange rates with the so−called “fair banking law”. Unfortunately, the result of the legal assault on banks has been that foreign banks are leaving, with Raiffeisen being the most recent institution to reduce its presence here. That means the government is achieving its goal of putting more bank ownership in “local hands”. As nice as that goal may sound, the problem is that the government is in a position to influence which “local hands” actually end up owning banks. After promising the European Bank for Reconstruction and Development earlier this year that the bank tax would be reduced without conditions, officials tried to backpedal. Now the prime minister and economics minister say that, even if banks will not legally be forced to “help Hungary” by loosening credit, they will be informally encouraged to do so. Given the government’s heavy involvement in the sector, and the fact that it currently controls two banks that it has said it will privatize, we have to wonder what kind of encouragement banks are receiving, and what kind of rewards might go to banks who cooperate with the leadership. The government’s meddling in the bank market runs a serious risk of reducing the kind of competitive environment that will really encourage loans. As with other sections of Hungary’s historically cumbersome tax code, it seems that the economic good of the country is almost a secondary consideration. Which means the real tax reform we need will be put off one more year – at the very least.

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Then and now North Buda’s Pünkösdfürdő swimming complex, designed by Hungarian Olympic gold-medal winning swimmer and architect Alfréd Hajós, is shown above in 1940, about five years after it was built, and more recently, at left.

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Economy minister backs tax chief

NEWS

Hungary considers a ‘Google tax’

macroscope

Budget 2016: Early and promising Proposed tax cuts are meant to impress credit rating agencies. Analysts are already impressed. ZSÓFIA CZIFRA

The budget of tax cuts and family allowances; that is how the government refers to next year’s budget. While analysts welcome some major figures, they still miss large−scale structural reforms in the healthcare and education systems. Apparently in the hope of a possible upgrade from international credit rating institutions, the Hungarian government drew up plans for next year’s budget well ahead of schedule in May so that Parliament can discuss and approve it before its summer break. According to the plans, the government would leave HUF 170 billion forints more with households next year. Savings would come from reducing the personal income tax rate from the current 16 to 15%, cutting the VAT rate on unprocessed pork to 5%, and increasing family tax credits while lowering state administration fees, Economy Minister Mihály Varga said when presenting the budget bill on May 13. The bill assumes gross domestic product would grow by 2.5% with an inflation rate of 1.6% and a budget deficit of around 2% of GDP in 2016.

Budget losers Definite losers in the bill are the healthcare and education systems. Funds for education will stagnate, and healthcare spending will practically be unchanged next year. When it comes to social security services, pension−related spending and expenditure for social purposes are to increase. The financing of cultural activities will rise tangibly It is worth noting that while the government’s intention is said to be reducing red tape, public administration could actually cost taxpayers HUF 250 bln more in 2016 than this year. This comes partly from a rise in defense expenditure and increased spending on law enforcement. The cabinet aims to spend HUF 180 bln more on road transport, while it is to slash the budget for other traffic and transport operations by HUF 340 bln. The bill targets a total revenue of HUF 15,790 bln. It sets VAT revenue at HUF 3.351.9 trillion, up from HUF 3.172.4 trn in the 2015 budget. Revenue from personal income tax is targeted at HUF 1.658.4 trn, up from 1.639.7 trn forints in 2015. Some – now permanent – sectoral taxes are lowered:

Economy Minister Mihály Varga, left, prepares to give the 2016 budget plan to Parliamentary speaker László Kövér on May 13.

The bill targets revenue from the bank levy of HUF 89.2 bln, down from HUF 144.2 bln in 2015. Revenue from the telco tax is set at HUF 56.0 bln, down from HUF 56.4 bln for this year. The target for revenue from the utilities tax was lowered to HUF 52.2 bln from HUF 54 bln. Revenue from the financial transactions tax is targeted at HUF 200.9 bln, down from HUF 206.2 bln. More revenue is expected, however, from the advertising tax: it is set to bring in HUF 10.9 bln, compared with HUF 6.6 bln planned for this year.

Positive reception Analysts’ responses to the government’s plans were positive overall: Erste Bank’s Gergely Ürmössy told online business portal portrolio.hu that he welcomes the decrease in the key figures – more than HUF 600 bln cut on the expenditure side, and more than HUF 500 bln less on the revenue side. He warned, however, that if the government modifies key figures in the fall, it will definitely destroy confidence. The main figures are in line with analysts’ expectations, said Dávid

KEY FIGURES Revenue target

HUF 15.789.564 trn

Expenditure target

HUF 16.551.199 trn

General government deficit

HUF 761.634 bln

Debt-to-GDP ratio (end-2016)

73.3%, as a result of HUF 28.803 trn public debt (according to the Stability Act) and HUF 35.188 trn GDP. (Foreign currency debt was calculated at EUR/HUF 303.70)

Inflation

1.6%

Source: Ministry Economy

Németh, senior analyst at K&H Bank. He thinks that both the 2.5% GDP growth and the 1.6% inflation rate are achievable. While he agrees that the 2% deficit target can also be maintained, he says he misses large−scale structural reforms in healthcare and education.

What’s ahead? May 27 – general debate of the budget bill (three days) May 29 – deadline for the submission of amendment proposals Detailed debate on the budget bill in committees June 11−12 – budget committee discusses the bill June 19−20 – Fiscal Council releases opinion on the final version of the bill Week starting June 22 – final vote

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Budapest Business Journal | May 22 – June 04, 2015

NEWS

Nato meeting in Budapest

IN BRIEF Varga: No reason to dismiss tax chief Ildikó Vida, the chief of Hungary’s National Tax and Customs Authority (NAV), has been performing her job without concerns that she could eventually be dismissed from her position, Hungary’s National Economy Minister Mihály Varga said on May 17 on commercial channel ATV. “It is not the government’s intention to dismiss her,” Varga said, commenting on recently surfaced news reports suggesting that Vida, who earlier admitted she was one of the individuals banned from entering the United States, could be fired this summer. Daily newspaper Népszabadság noted earlier that media oligarch Lajos Simicska, whose good relationship with Orbán had recently soured, is in a confidential relationship with Vida. She made headlines in October, after it was revealed that six Hungarians would be denied entry to the United States on suspicion of corruption. All six individuals were government employees or affiliated with the government, André Goodfriend, then chargé dʼaffaires of the United States embassy in Budapest, said, but he refused to give details despite Hungarian government entreaties, citing privacy laws. Vida admitted that she was one of the people to whom Goodfriend was referring, and initiated a lawsuit against Goodfriend on charges he libeled her when speaking about corruption in Hungary, and asked the Chief Prosecutor’s Office and the Budapest Municipal Court to request that U.S. authorities lift Goodfriend’s diplomatic immunity. The United States said it would not do so, and the Hungarian government withdrew the case.

Popularity of state television news program falls sharply The viewership of the recently reprogrammed state-owned television channel M1’s main evening news program has dropped by more than 50% in nearly two months, online news portal nol.hu reported on May 14. Nonetheless, the umbrella organization for public service media, MTVA, says it considers the reorganization of the state-owned television channels a success. Hungarian online daily hvg.hu earlier reported that, according to data from Nielsen Television Audience Measurement, Hungarian state-owned television channel M1 has been losing viewers since its renewal as an all-news channel on March 15.

Hungary could introduce ‘Google tax’ Hungary could introduce an extraordinary levy on “multinational internet-based companies”, commonly referred to as the “Google tax”, Tamás Deutsch, the government’s commissioner for online national consultation on digital developments (InternetKon), said at a conference on May 12 in Siófok, near Lake

Balaton. Deutsch referred to a question in the 20-item questionnaire, which raises the idea of potentially taxing internetbased multinationals, such as Google and YouTube, however, the exact details are still unknown. The item in the questionnaire translates as follows: 19. Should multinational, internet-based companies contribute financially to the development and sustainability of Hungarian-language content and services? a. Yes, but it is the market players’ responsibility to settle the issue among each other. b. Yes, the [Hungarian] government should support a European Union-wide, or even wider, regulation, as Hungary alone is powerless. c. Yes, until a European Union-wide, or wider, regulation is created, the Hungarian government should individually be involved by creating regulations or reaching agreements with Hungarian players, thus allowing companies to contribute to the development of quality Hungarian content and services. d. No, I do not believe this is a problem. e. I do not want to answer the question. The Hungarian government appointed Deutsch to launch a national online consultation following the government’s proposed levy on internet usage that users would be required to pay, a measure which resulted in approximately 100,000 people – according to Reuters estimates – demonstrating on the streets of the capital in opposition to the idea.

Varga opposes death penalty Hungary’s Minister of National Economy Mihály Varga is against the death penalty, the minister told Hungarian online daily origo.hu in an interview on May 11. In response to a query on whether Varga would be happy if the death penalty was reintroduced in Hungary, the minister said that it “would be strange” to “be happy about the death of someone”. “Life is a one time precious gift, which cannot be taken from someone, nor from ourselves. Therefore, I cannot agree either with the death penalty, or euthanasia,” the minister said. Varga added that should a vote be taken on the matter in Parliament, he would vote against it. At the end of April, Hungary’s Prime Minister Viktor Orbán said, in reference to a murder that took place in a tobacco shop, that a life sentence is not deterrent enough; as such, the death penalty needs to be kept on the agenda. As the notion of the death penalty collides with EU regulations, the prime minister’s comment triggered a Europe-wide backlash. Following the PM’s comments, Martin Schulz, the President of the European Parliament, initiated a phone conversation with Orbán. No information has since been made public on whether any conversation between the two took

Szilveszter E. Vizi, president of the Hungarian Atlantic Council, on May 15 addresses a session of the NATO Parliamentary Assembly, which held its Spring Session in Budapest. Topics discussed included Russia’s incursion into Ukraine. During a May 18 address, in Budapest, NATO Deputy Secretary General Ambassador Alexander Vershbow said ‘Russia has turned into an unpredictable and revisionist power.’ place. Hungary’s Christian democrat party KDNP, the governing coalition ally of Fidesz, rejected the introduction of the death penalty, as it is not in line with Christian principles, vice-president Bence Rétvári said earlier.

UNHCR calls on Hungary to protect refugees The UN Refugee Agency raised concerns over what it says are efforts by the Hungarian government to regard refugees as a threat to the country in leading questions being asked during a national consultation, the organization said in a press release. “We are deeply concerned by the way the government increasingly vilifies people who have fled from war zones like Syria, Afghanistan and Iraq and who desperately need safety and protection in Hungary,” said Montserrat Feixas Vihé, UNHCR Regional Representative for Central Europe, and who is based in Budapest. While UNHCR says it respects the right of every country to consult its citizens in any way it chooses, the agency is concerned about the wording of a questionnaire that is being sent out to eight million Hungarians over the age of 18 in a process announced in late April. UNHCR believes the questions intentionally attempt to confuse refugees and asylum-seekers with so-called “economic migrants” and wrongly blames refugees for a number of purported threats to Hungary and Europe. “We call on Hungary, as a signatory to the 1951 Refugee Convention, to respect the international laws it voluntarily pledged to honor,” Feixas Vihé stated. “Hungary simply cannot return refugees to countries where they would face threats to their lives,” he added. “Refugees

seldom have time to get passports or visas when their lives are in danger, or when they are facing persecution. This in no way invalidates their asylum claims and should never stand in the way of their access to a fair and efficient asylum procedure.”

Orbán confirms he had a hand in the distribution of EU funds “This hasn’t changed, this is the lawful process, only the Minister has changed since then,” Hungarian Prime Minister Viktor Orbán said in a television interview with RTL this weekend, in response to statements by former U.S. Ambassador to Hungary Eleni Tsakopoulos Kounalakis in her book. Kounakalis, who was the ambassador in Budapest between 2010 and 2013, cited former Minister of Development Lászlóné Németh in her recently published book, “Madam Ambassador”, saying that every week, Németh would sit down with Prime Minister Viktor Orbán to review the list of public construction projects, set their priorities and determine which public procurement tenders should win. The former minister reportedly added, “if a Hungarian company’s bid was competitive compared to an Austrian or German bid, then the Hungarian bid would be the winner”. The legislation regulating public procurement tenders and the use of EU funds signed by Viktor Orbán allows the Nemzeti Fejlesztési Kabinet (Cabinet for National Development - NFK) to decide on a number of questions, including, among others, operating programs, action plans and selection criteria, but it is not entitled to select winners. On May 18, Viktor Orbán

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Budapest Business Journal | May 22 – June 04, 2015

told online daily nol.hu that the practice was in line with the regulations and approved by the EU. Online news portal 444.hu, however, says that in an internal memorandum the European Commission questions NFK’s role in the public procurement process for bids above HUF 1 billion. Orbán has yet to refute Eleni Tsakopoulos Kounalakis’ allegations.

Referendum on developing Normafa unsuccessful

Government proposes bill on rollout of e-card The government has submitted a bill to Parliament that outlines the legal framework involved in the introduction of an electronic identification card for Hungarians, state news agency MTI reported. The government previously announced plans to roll out the card, which will combine Hungarians’ social security and tax cards. The biometric card will have eSIGN, eID and ePASS functions, according to the bill. It may also be used for some public transport services. The card will cost HUF 1,500 for Hungarians who replace their old identification cards within 60 days of their expiry, and will be free of charge for Hungarians under 18 years of age and those over 65. The estimated cost to produce each card is listed in the bill at HUF 5,000. The cards can also be personalized within the framework of a contract between the Central Office for Administrative and Electronic Public Services (KEKKH) and ANY Security Printing Company valid until August 31, 2017. The bill also contains amendments to the law on the security of electronic information at state and local government institutions.

Russia could exempt Hungarian companies from food ban Russia could exempt approximately 15 Hungarian firms from its embargo on food imports from the European Union, a senior Russian official told Interfax news agency on May 19, according to Hungarian news agency MTI. The head of Russia’s federal veterinary service Sergei Dankvert said the ban could be lifted for the Hungarian companies as well as a handful of Greek and Cypriot producers, about 20 companies in all, Interfax added. Russia introduced the ban on food imports from the EU last August in response to Western sanctions imposed on Moscow regarding its role in the Ukraine crisis. As a result, several food producers were denied access to the large Russian market. The Hungarian economy has reported losses of nearly €300,000 a day due to the embargo, according to Slovak business daily Hospodarske Noviny, which interviewed Hungary’s minister for foreign affairs and trade last October.

Seizures of illegal cigarettes up 150% since 2013 Hungary’s National Tax and Customs Authority (NAV) seized more than 100 million illegal cigarettes last year, up from an annual average of 60-70 million in the three preceding years, online daily Magyar Nemzet reported on May 19. Loose leaf tobacco was the real culprit of the latest seizures, up from 4.5 tonnes to 26 tonnes last year, the paper said. It’s apparent that many black market sellers consider the risk worth the reward given that profits reaped over the course of one night can often exceed HUF 6 million. Since Hungary initiated a state monopoly on retail tobacco sales in July 2013, black market activity has increased dramatically with many of the goods arriving from Ukraine.

Prime Minister Viktor Orbán and his wife Anikó Lévai cast their votes in a referendum on plans to develop the wooded area of Normafa in Buda’s District XII. Most of those voting favored plans for sports facilities and other developments, but turnout was too low for the referendum to succeed. Nielsen: Consumer confidence on the rise in Q1 Hungary’s consumer confidence was up slightly in the first quarter of the year, according to market research company Nielsen. It recorded an increase in the consumer confidence index of three points from last quarter, bringing Hungary to 57 points in Q1. The percentage of Hungarians who anticipate that their financial positions will improve in the next 12 months grew one percentage point to 23% in Q1 as compared to the previous quarter. The share of those who see job prospects as favorable in the next 12 months rose from 11% to 13% in the last quarter. According to Nielsen, its European and global confidence indices both rose one percentage point, to 97 and 77, respectively.

EBRD: Hungarian government fulfilling its contractual obligations The European Bank for Reconstruction and Development (EBRD) saw a favorable and improving picture of Hungary’s economic outlook, Antal Nikoetti, the Hungarian director at the EBRD, told Magyar Hírlap on May 19. According to the former Deputy Secretary of State, the Hungarian government is fulfilling its contractual obligations with the EBRD, adding that he believes economic growth is more important for the banking sector than the reduction of the bank levy. Nikoletti acknowledged, however, that the bank levy reduction is a prerequisite for increased lending activity, but warned that such increased lending must be adjusted to real demand rather than being artificially boosted. Nikoletti dismissed criticism that the government set increased lending activity as a precondition for decreasing the bank levy saying there is no such condition.

S&P: Three Hungarian banks’ ratings back to positive Standard & Poor’s Ratings Services on May 18 said it had revised its outlook on Hungary-based OTP Bank, OTP Mortgage

Bank, and Magyar Takarékszovetkezeti Bank (Takarékbank) from stable to positive, state newswire MTI reported. The positive outlook on OTP Bank and OTP Mortgage Bank has taken into account S&Pʼs expectation of a “more benign operating environment in Hungary, and to a certain extent, in the rest of Central and Eastern Europe”. S&P said: “We could raise our ratings [on OTP Bank and OTP Mortgage Bank] by one notch, if in the next 12 months, we concluded that conditions in the domestic real estate market and the purchasing power of households had improved, while credit demand picked up, leading to less credit risks and better earnings for Hungarian banks. Conversely, if economic risks for Hungarian banks don’t decrease as we currently anticipate over our outlook horizon, we could revise the outlook on OTP Bank to stable,” it added. “The positive outlook on Takarékbank reflects the improving economic environment in Hungary, and its expected tighter integration into the group of Hungarian savings bank cooperatives,” S&P said. S&P also affirmed its “BB” long-term and “B” short-term counterparty credit ratings on OTP Bank and OTP Mortgage Bank, and its “BB-” long-term and “B” short-term counterparty credit ratings on Takarékbank. S&P made the changes after completing a review of systemic risks in Hungary’s banking sector, as well as after raising its long-term sovereign ratings for Hungary to “BB+” on March 20.

Hungary could introduce ‘family bankruptcy protection’ Hungary’s Christian Democrat Party (KDNP), which is in coalition with the ruling Fidesz party, is planning to submit a bill to Parliament that would protect families with debts from bankruptcy, Hungarian daily Napi Gazdaság said on May 17. In the first round, people with mortgages would be eligible to apply for the scheme, which Bence Rétvári of KDNP referred to as “family bankruptcy protection”. Rétvári noted that the assistance would only be available to those who apply. A court decision would

determine how an individual distributes their income for paying their debts, and if the borrower acts according to the ruling for five years, they could become exempt from a portion of their debt. The daily did not, however, disclose any further details. Rétvári expects the proposed bill to be approved by the end of this spring.

Bitcoin creator could be a firstgeneration Hungarian The elusive Satoshi Nakamoto, known as the creator of the Bitcoin – a virtual payment system – could actually be an American computer programmer of Hungarian parentage according to New York Times journalist Nathaniel Popper. In his lengthy trail of investigative journalism, part of which was published last Friday, the author, who is currently researching a book on the history of the Bitcoin, attempts to reveal the true identity of the man behind the software. Popper links a number of peculiar facts about Satoshi Nakamoto with reclusive programmer Nick Szabo, who’s father fled communist Hungary and settled in the United States, were Szabo was born 51 years ago. Szabo began working on a remarkably similar software in the late 1990s known as bit gold, and as Popper notes, a number of similarities between Szabo’s and Nakamoto’s inventions are uncanny, such as smart contracts – a very specialized concept that has been attributed to Szabo and which also became an essential component of Bitcoin technology. The original Bitcoin was released in 2009, born out of several decades of complex programming by what was most likely a team of programmers and not just one man. After Nakamoto faded into obscurity around 2011, the open source code he had allegedly developed was revised by a group of programmers who did not hide their identities, Popper says. In a chance encounter with Szabo, Popper pressed him for information but Szabo denied any affiliation with Nakamoto or that he himself was Nakamoto. He did not deny, however, that he was heavily involved in building the foundation of what would become the virtual currency.

BBJ

2Business Wizz Air flies rebranded

Photo: Christian Keszthelyi

Hungarian low− cost airline Wizz Air unveiled its rebranded and rejuvenated aircraft livery designs on May 19, the day it marked its 11th anniversary, at Budapest Liszt Ferenc Airport, before organizing an extraordinary press conference on a Budapest−Warsaw flight. CHRISTIAN KESZTHELYI

Wizz Air sports its new colors in honor of 11 years since its foundation. Wizz Air’s first flight took off on May 19, 2004, departing from Katowice, Poland for Budapest. “We would have never thought that Wizz Air could get this far when our first flight departed from Katowice,” Wizz Air’s CEO József Váradi said at the press conference. “In 2004 we saw we had a mission to change peoples’ lives for the better and to create access for every person to fly,” Váradi said reminiscing about the beginnings. “Pricing is still a prevailing factor in our business model, and we strive for continuous improvement,” the CEO said of the present, adding: “We want to make people discover themselves with us.”

Wizz Air has become the largest low−cost airline in Central and Eastern Europe. Since its foundation in September 2003, the airline says it has carried 90 million passengers, and now operates a ﬂeet of 59 aircraft offering more than 380 routes in 38 countries. According to the airline, the newly reworked WIZZ brand now has a fresh, more vibrant, sophisticated look and feel. The carrier plans website upgrades for faster and easier bookings, the launch of a Wizz Air mobile site, a Lowest Fare Finder function on the website and Wizz Tours package holidays to become available in more countries throughout 2015.

COMPANY NEWS

K&H Bank books HUF 7 bln profit in Q1 K&H Bank’s consolidated ﬁrst-quarter aftertax proﬁt was up nearly 10% at HUF 7 billion as compared to the same period of the previous year, CEO Hendrik Scheerlinck said at a press conference on May 18. Increased revenue from corporate and SME lending, lower risk costs, and stricter cost management countered the negative effect of the compensation required under borrowers relief legislation, he said. K&H’s new loan outlays reached HUF 46 bln in Q1, giving it a 9.6% market share, up from 8.7% in the base

period. The bank’s share of loans ﬁnanced with cheap credit in phase II of the National Bank of Hungary’s “Funding for Growth Scheme” reached 20.2% or HUF 133 bln. The stock of client loans, excluding the impact of the borrowers’ relief settlement, rose 4% to HUF 1.424 trillion in the 12 months leading up to the end of March. The stock of client deposits increased almost 8% to HUF 1.349 tln. Scheerlinck said K&H is looking to assume 15-20% of the business of Hungarian borrowers who reﬁnance their loans once the conversion from FX to forints is

“Wizz Air has become mainstream as the airline matured, however we would like to make our services more vibrant and elegant, hence the rejuvenated design of our aircraft and ﬂight attendants’ uniforms,” Váradi said. Wizz Air is planning to offer new services in order to enhance the comfort of passengers. Answering a question from the Budapest Business Journal, Váradi said: “We keep ourselves to the basic principle that people should pay for services they need, therefore they only need to pay for them if they wish to use extra services.” Váradi added that extra services can always

be bought, and passengers will not be separated in the traditional sense of applying different classes. Envisaging the next ten years, Váradi said in response to a BBJ question about whether Wizz Air would ever introduce intercontinental destinations: “As the saying goes, ‘Never say never’, however, I believe that Wizz Air’s strength is in applying a clear business model.” According to Váradi, long−haul ﬂights are “a completely different story” and comparing those to short− and medium− haul ﬂights would be like “comparing handball to basketball”.

complete. About one-ﬁfth of all borrowers are expected to reﬁnance their loans.

OTP Bank raises capital at Ukrainian subsidiary

HB Reavis group’s profit increases by 26% in 2014

OTP Bank said a capital increase to UAH 3,668,186,135 (€155 million) from UAH 2,868,190,521 (€121 mln) was registered at its Ukrainian subsidiary, state news agency MTI reported. OTP Bank announced in an earnings report published May 15 that the subsidiary experienced a HUF 10.2 billion loss in the ﬁrst quarter of this year.

Leading CEE property development company HB Reavis group’s annual consolidated proﬁt grew by 26% to €89 million in 2014, the company’s annual report revealed. According to the company’s press release issued on May 18, growth was driven by an increased share of developments within its asset portfolio in regions characterized by higher returns. The company’s operating proﬁt grew by 29% in 2014 as compared to 2013, while return on equity grew to 10.8% from 5.7% a year earlier. The company’s balance sheet total reached €1.8 billion, up 18% from 2013. Main business drivers included a 28% increase of rental fee revenue, the opening of three new office developments, and new development site acquisitions.

PannErgy posts consolidated net earnings of HUF 118 mln in Q1 Hungarian geothermal-energy company PannErgy had consolidated net earnings of HUF 118 million in the ﬁ rst quarter of this year, in spite of a decrease in the selling price of thermal energy and high electricity prices, state news agency MTI

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Budapest Business Journal | May 22 – June 04, 2015

reported May 19. Earnings were up HUF 116 mln from proﬁts of HUF 2 mln from the previous year, the company’s consolidated IFRS preliminary report shows. Consolidated revenue amounted to HUF 886 mln, up 9% from the base in spite of a more than a 20% cut in centrally regulated prices in Miskolc, northeastern Hungary, which took effect from October 1, 2014. Sales of thermal energy from the Miskolc geothermal project were up, generating revenue of HUF 700 mln, an increase of 11% from last year. Direct cost of sales rose to HUF 615 mln from HUF 502 mln. EBIT came to HUF 131 mln, up HUF 2 mln from a year earlier. Financial proﬁt amounted to HUF 50 mln, up HUF 157 mln year-onyear. PannErgy is an Equities Prime-category issuer on the Budapest Stock Exchange.

MTel to focus on network developments

Gearing up for Sziget

Magyar Telekom, the Hungarian subsidiary of German telco giant Deutsche Telekom, expressed commitment to focus on developments this year in both its mobile and fi xed line networks in order to boost customer satisfaction, CFO János Szabó said on May 13. The CFO added that MTel expects to spend about HUF 105 billion on investments this year, according to guidance in the earnings report published on May 12. Last year, CAPEX came to HUF 86.8 bln. MTel’s net income fell by 48% to HUF 2.5 bln in Q1 as compared to the same period a year earlier, given higher financial losses, depreciation and amortization. With the acceleration of next-generation network developments, MTel aims to raise the number of households with access to the high-speed fi xed line network by 440,000 to 2.2 million, Szabó said, adding that coverage of MTelʼs 4G/ LTE mobile network is set to rise from 84% to 97% this year. A government official recently told Hungarian Parliament that, should internet service providers build new networks or upgrade existing ones, the cabinet would consider a reduction or even exemption of the utilities tax.

The head of the Sziget Festival, Károly Gerendai, at a May 14 press conference on the A38 boat and club, which is docked in Buda, announces plans for the Sziget music festival, to run August 10-17 this year. The festival hit record numbers, with 400,000 visitors last year, and this year it will feature pop star Robbie Williams as well as Avicii, Ellie Goulding, Kasabian and Limp Bizkit. Along with being one of Europe’s largest music festivals, Sziget is a major business in Hungary, and Gerendai’s Sziget organization is behind several other successful summer festivals.

Audi Hungary winds up HUF 5.4 bln engine development center

Ivanka seeking partners in Israel Leading Hungarian design company Ivanka has its sights set on becoming a well-known concrete brand in Israel, to build its network and to increase its partnerships within the architectural and design communities, the firm told the Budapest Business Journal on May 15 following the recent opening of its first store in Tel Aviv on May 5. Ivanka is present in 40 countries and the company is planning to expand further, but targets for expansion have not yet been made public, the company told the BBJ. It is also looking to expand its portfolio. “We have constant in-house developments – our latest products are Trinity and Gaudí,” said Ivanka. Despite its worldwide expansion, production is still based in Hungary; “As a Hungarian company, we prefer to keep production at home and also at the moment this is the most efficient solution in every respect,” the firm added.

Masterplast Q1 profit rises on financial gain Hungarian building materials manufacturer Masterplast had first-quarter after-tax profit of €900,000, improving from a net loss of €630,000 in the base period on a big financial gain, the company’s consolidated IFRS report published on May 13 reveals. Masterplast booked €1.1 million in revenue – most of it unrealized – from financial transactions, mainly on hedges for USD-based purchases and the stronger forint. Overall, financial profit reached almost €1 mln, compared to a more than €600,000 loss in the base period. To avoid further losses on the Ukrainian currency’s depreciation, Masterplast borrowed the equivalent of $1.2 mln in UAH at the end of 2014, which was used to reduce FX debt in Q1, it noted. Sales revenue edged ADVERTISEMENT

up 1% to €14.9 mln. Sales in Croatia, Ukraine, Slovakia and Poland fell between 9% and 17%, but the decline was offset by 14% growth in Hungary and a 9% increase in Romania. Cost of sales was almost ﬂat at €12.7 mln. Payroll costs edged down 2% to €1.9 mln. Headcount was little changed at 629. EBITDA doubled to a little more than €400,000, largely because of changes to inventories.

MOL calculates dividend as HUF 485.5 per share Hungarian oil and gas company MOL said on May 13 the dividend it will pay stakeholders

on last year’s earnings amounts to HUF 485.49 per share. MOL noted that the dividend on 1,530,080 “A” series and 578 “C” series treasury shares will be distributed among the remaining shareholders in proportion to their holdings. MOL shareholders approved payment of a HUF 50 billion dividend on last year’s earnings at an annual general meeting on April 16. The board’s proposal was “a continuation of last year’s gradually increasing pay-out trend of the regular dividend payment”. MOL had after-tax profit of HUF 120.5 bln in 2014 , according to Hungarian Accounting Standards.

German vehicle producer Audi has inaugurated a HUF 5.4 billion, 1,600 sqm engine development center at its base in Győr, northwestern Hungary, Hungarian news agency MTI reported on May 11. Minister of Foreign Affairs and Trade Péter Szijjártó said at the opening ceremony that Audi Hungária Motor had played a big role in increasing Hungary’s exports to Germany by 10% last year.

Le Meridien to be re-branded as The Ritz-Carlton Le Meridien, a luxury hotel in central Budapest, will soon be renamed The RitzCarlton, The Ritz-Carlton Hotel Company said in a statement after signing an agreement with the hotel’s proprietor, the UAE-based Al Habtoor Group, Hungarian news agency MTI reported. From early 2016, the hotel will undergo an extensive renovation that is due to be completed in the second quarter. “We are delighted to be partnering with The RitzCarlton for such an exquisite property to build on our unique portfolio of hotels,” said Al Habtoor Group CEO Mohammed Al Habtoor. “We look forward to welcoming guests to experience the renewed property in early 2016,” he added.

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Budapest Business Journal | May 22 – June 04, 2015

Startup founder on innovation festival Brain Bar Budapest, a series of events exploring the nexus of humanity and technology, will take over several Budapest venues in the capital on June 4−6 with a host of interesting speakers and events. The Budapest Business Journal spoke about the Brain Bar with Prezi co−founder Ádám Somlai Fischer, who will also be presenting at the event. you look at the current startup eco−system, you can see a lot of really enthusiastic entrepreneurs, who are making this environment better day−by−day.

CHRISTIAN KESZTHELYI

A horde of big−name speakers will be taking over venues all around Budapest to discuss technology for the June 4−6 event dubbed Brain Bar Budapest. The key topic of this event is how humanity and technology can work together. Along with making the tech world stop and reﬂect on its human side, the event is expected to put a focus on Budapestʼs home−town innovation scene. Musical events and other side entertainment are also planned. One of the speakers, Ádám Somlai Fischer, has already made a big name locally as one of the founders of Prezi, the unique presentation software. Here he tells us more about the startup scene in the capital, and the upcoming event.

Budapest is increasingly talked of as one of the top startup capitals in Europe. Why do you think Budapest is a good place to nurture innovative ideas?

Q Ádám Somlai Fischer: Invites people to come and be inspired. A: Any place is a good place to nurture innovative ideas, if there are enough curious people around and they are willing to work for their dreams. Of course, the education and other circumstances are also important, but the main element is always the inner drive of these people. If

What makes Hungary a good place for innovative industries? A: We have everything they may need: good universities, good companies, and a beautiful city. When we started, one thing was missing: Successful role models. Luckily in the past few years we saw several globally successful companies to emerge from Budapest, like Prezi, Ustream, NNG, and LogMeIn. Having role models is crucial to spark a region.

Why do Hungarian startups insist on keeping product development in Hungary? A: We have good engineers and they are more accessible compared to Silicon Valley or other startup hubs. It is good to see that engineers coming from all around the world are creating their own networks

and sharing their knowledge among each other.

What can be done to boost innovation in Hungary? A: Creating a culture that helps people to explore unknown areas without the fear of failure.

You will be among the speakers at the Brain Bar Budapest “inspiration festival”. Could you briefly outline what you will be talking about? A: I will speak about how visual communication helps end digital illiteracy.

What is unique about the festival? A: I really like the idea of exploring technology in the context of everyday human life, and I am happy to see such great speakers coming to Hungary, making their knowledge available for everyone in Budapest.

EXPERT OPINION

You are losing the work of one employee each year Medium-sized and large companies can save on printing costs with Epson’s new solution Research conducted by Coleman Parkes suggests that on average, around one working week per year per employee is lost as a result of IT systems and hardware downtime, equating to an annual productivity cost in the region of €24 billion across EU5 businesses. Of this, almost a third is attributed to printers, equating to around €7 billion. We asked Miklós Fábián, Branch Office Manager at Epson Europe B.V. Branch Office Hungary to tell us more about business printing and efficiency. Q: Is there any problem with current Miklós Fábián, Branch Office Manager, Epson Europe B. V. printing standards among medium- Branch Office Hungary. sized and large companies? A: Companies experience issues that are results of using the outdated and Q: What is the first step for printers provide speed, reliability and expensive laser-technology along with companies in the field of cost and cost effective solutions and we believe the centralized print model. Excessive time efficiency? there is room to expand the business centralization has a negative impact A: Hungarian businesses must inkjet market which is growing year by on working as it is associated with consider carefully how IT budgets are year, maintaining growth even in years queue times and the need to leave spent, in order to address the vast loss when laser sales have declined. We workspaces to retrieve prints. These in productivity they might face. The strongly recommend that companies factors impact employee motivation current IT spend on immediate and think carefully about the print and productivity, and ultimately short term issues needs to be reviewed technology and fleet distribution model business efficiency causing the and more focus should be put on most suitable for their organisation. mentioned loss in output. Some small strategic development that can deliver changes to printer type and fleet longer term cost and time efficiency. Q: How to avoid productivity loss structure can deliver a big change to Laser technology is widely used in caused by downtime? the bottom line. Businesses should be offices and it has its own advantages A: Modern workplaces and smaller aware that printing has a crucial role in but Epson’s new WorkForce Pro RIPS workgroups are more suited to the the office environment and therefore (Replaceable Ink Pack System) range inkjet technology and to the flexibility offers more. Our new business inkjet that distributed print models offer. need to be updated. NOTE: ALL ARTICLES MARKED EXPERT OPINIONS ARE PAID PROMOTIONAL CONTENT FOR WHICH THE BUDAPEST BUSINESS JOURNAL DOES NOT TAKE RESPONSIBILITY

Epson has developed the WorkForce Pro RIPS range, to offer medium-sized and large businesses a series of inkjet products that deliver uninterrupted printing for up to 75,000 pages without the need for a consumables change. The A3+ and A4 printers need little maintenance and consume 80% less power when compared to comparative laser products . The RIPS range uses the PrecisionCore technology and businesses can expect a 50% reduction in cost per page. As a smart alternative to laser products Epson’s business inkjet range offer a solution to avoid downtime caused by maintenance and other issues.

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Budapest Business Journal | May 22 – June 04, 2015

EXPERT OPINION

Out of the box and into the cloud Tibor Kovács Solutions Sales Professional HUMANSOFT KFT. Q: What is your role at Humansoft? A: I am the Microsoft Azure Partner Solutions Sales Professional at Humansoft Kft. My role is to develop and implement the Microsoft Azure sales strategy, as well as assist in the development of Humansoft’s cloudbased service portfolio. Q: Can you describe the key elements of the Microsoft Azure platform? A: Microsoft Azure is neither a product nor a service; it is a brand covering a broad cloud platform portfolio. The physical components of Azure are data centers, which are located in 19+ location around the world, at least two of them are in Europe. I would say that it provides backend computing and storage capacity for business solutions (like ERP, CRM, key line-of-business applications). Is it similar to a company’s outsourced data center, the main financial difference is in the flexibility. There is no need for the systems (hardware, software,

server room, etc.) to be sized and purchased in advance. In the case of Microsoft Azure, the resources can be scaled to the needs at hand (like huge traffic for a marketing campaign), and the client only pays for actual usage. Also the company’s IT staff can focus on more important business functions: the basic operational maintenance is provided by Microsoft and the systems can be supported by Humansoft. The expansion of the portfolio is really fast: Azure based cloud services are continuously being developed, new features are announced almost on a daily basis. Q: Why are local companies resistant to it and what is Humansoft doing in the region to increase the acceptance of Azure? A: Many confuse enterprise cloud services with consumer cloud services and the commonly perpetuated negative information or rumors which have become a basis for judging such solutions. It’s also common that potential users don’t have enough information about a given service, and they draw conclusions based on this lack of knowledge about every aspect of the service.

A typical false assumption is when decision makers believe that it is more difficult to achieve security compliance with Microsoft Azure than with on-premises traditional IT. Q: How do you persuade companies to switch to the cloud? Can you talk a bit about that process? A: Together with Microsoft we provide our customers with pilot and demonstration opportunities so businesses can get proof of the benefits without prior commitment or risk. To build confidence we first look at those less critical areas of a business, which still require a lot of resources, like development and testing environments. We also try to identify if backup, disaster recovery capabilities or huge data storage/archival needs are being addressed. When a user becomes aware of the advantages of Azure, they usually become more open to the cloud. This is where we can help with our consultation services to measure what should be moved into the cloud and what is better kept in a traditional system. We usually suggest a hybrid solution where certain services carry on operating in a conventional way and then utilize additional capacity from the cloud.

Q: What are the real or imagined security and privacy concerns of the Azure platform? A: As I mentioned earlier, the public’s opinion about cloud service security is based more on presumption than on facts. Microsoft has invested a great deal in the security of its data centers and services. Accordingly, Microsoft Azure’s services meet international, EU and Hungarian data privacy and security regulations as well as several industry regulations like financial sector (PCI-DSS), life sciences (GxP). Q: What are the first steps needed to make Azure more widely accepted? A: We are doing a great deal to popularize Microsoft Azure and of course, we are also active Azure users. Whether at events or in everyday client meetings, we try to convey to our clients the real advantages we’ve experienced with the cloud. I believe that the first and most important step is to try it. There are areas in every company where Azure’s services can be tested without risk and to gain practical experience. In such instances, Humansoft and Microsoft offer very good consultations, demos and pilots.

PROMOTION

Time to invest in the Balkans The former Yugoslav countries are potentially fertile ground for companies seeking new markets. The economic growth in the region will likely recover significantly in 2016, which highly improves the outlook for sales. However, new entrants still need time to identify the exact distribution channels, develop marketing strategies and generally come up to speed in a new market in the Balkans, according to a study by Hungarian Export Cooperation. The shortage of working capital in the region The difficulties suffered by local companies and even foreign firms is part of region’s Great Recession which manifests itself in weak competition caused by years of struggle. Local firms in particular suffer from a lack of working capital and access to financing, therefore they cannot compete effectively against most new entrants. “This phenomenon occurs especially in specific sectors, e.g., some retail sectors. While each of the seven countries is different, they have to be approached as a specific market. On the other hand, their shared cultural and legal background brings about many similarities, which allow the new entrants to expand from one ex-Yugoslav country to another with far less difficulty than moving from, for example, France to Italy,” said Iván Gyurácz Németh, partner of M27 ABSOLVO. However, the range of development levels found in the region – with Slovenia being close to on a par with Western European countries, on the

Iván Gyurácz Németh.

other hand, Kosovo remains quite undeveloped –is both a challenge and an opportunity. A challenge, because of all-important price/value tradeoff will differ from one ex-Yugoslav country to another. The new entrants with their products pitched to a number of different price points will be able to sell in all of these countries. Furthermore, the ex-Yugoslav market is relatively small. Serbia has the largest area and population with its more than seven

million inhabitants, and Montenegro is the smallest at around a tenth of that figure. This feature of the market can be an advantage and also a disadvantage. The entry costs are relatively low compared to larger countries, but their varying developmental and demographic characteristics could make the ex-Yugoslav countries only as a group of good test markets. “Croatia and Serbia in particular are benefiting from the EU funds. Croatia as a new EU member is dedicated to bringing its infrastructure and poorer regions up to EU standards, and Serbia is also keen to assist the practices towards general improvement and prosperity,“ added Gábor Kárpáti, Country Manager of Coface.

Top investments in the Balkans: Infrastructure, Agriculture, IT Business The infrastructural – including agricultural – and advisory projects for this reason will be undertaken in large numbers in both countries. In areas of infrastructure, water, rail and energy are the most promising areas. Because of the weak financial position of local

producers, agricultural products with the appropriate price/quality ratio could conquer the market. “The internet commerce could also be a possible winner, especially in Slovenia and Croatia. Slovenia in particular has considerable Internet penetration, while in Croatia there is much more potential for this sector because of its underdevelopment. A net presence is becoming increasingly important for all types of companies, whether they engage in Internet sales or not, since younger people are now using their smart phones constantly,” commented Gyurácz Németh Iván. Additionally, certain retail and distribution sectors are promising, because many local retailers and distributors have failed, and left specific niches open. Much like in Hungary, the key to the ex-Yugoslav retail market will be in developing for the foreseeable future with value for money pricing. This also includes potential opportunities for the so-called “white label” products. “On the investment side, more and more local real estate will be up for sale as banks and borrowers look for exits from over-indebtedness. Moreover, there are opportunities to purchase areas from producers no longer able to sustain production because of high debt loads,” Gábor Kárpáti said. To sum up the findings of the study, the former Yugoslav region should be put high on the list of potential markets, especially given its geographic proximity to Hungary, which allows Hungarian firms to easily and inexpensively keep a close eye on the success of their expansion efforts.

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Budapest Business Journal | May 22 – June 04, 2015

Europeʼs answer to Silicon Valley A Budapest conference on European innovation drives home the point that ideas are plentiful here – itʼs the support networks that are in short supply. ZSÓFIA VÉGH

Matchbox−sized power converters that increase battery life 2−5 times, do−it− yourself LED lamps for households with no electricity, and customer tracking systems that help predict future purchases are some of the brilliant new ideas that consumers will soon be able to buy. Aside from promising to help improve our lives, these innovations also have other traits in common: They were all invented here in Europe, and they were all shown in Budapest at the InnovEIT, a May 5−7 forum hosted by the European Institute of Innovation and Technology (EIT). What’s more, these innovations will also be commercialized in Europe, something that has not often been the case in the past decade when U.S. companies have bought up many startups.

“European universities are not always entrepreneurial enough, and businesses could engage more sufficiently to make sure they have the right level of talent.” According to organizers of the conference, which was held at the Budapest Congress Center, selling innovations overseas has meant Europe has lost its lead in innovation. What the Old Continent lacks, compared to the States, is cooperation. “We have excellent universities, researchers, and scientists, and have a lot of big businesses, but they do not work in an integrated enough manner,” Martin Kern, EIT’s interim director told the Budapest Business Journal. This is one of the first reasons why there is this gap in innovation capacities between Europe and the States, Kern said, adding: “European universities are not always entrepreneurial enough, and businesses could engage more sufficiently to make sure they have the right level of talent.” Europe is also fragmented. Hotspots such as Silicon Valley in California are not yet established in the Continent, and EU member states have different funding systems for companies, which curbs entrepreneurial ambitions. So does the risk−averse attitude ingrained in Europeans, according to Kern. It is more in the culture of America to set up a business, fail, and start again, he explained. The lack of an entrepreneurial mindset is, in−part, due to the European educational system, which penalizes

Networking at the conference.

Martin Kern, EIT’s interim director.

failure, said Corinne Vigreux, co−founder and consumer business managing director of TomTom, the only consumer electronic brand to emerge from Europe in the past 15 years and still be here.

Trying to catch up Pinterest, Facebook, Uber, and Airbnb are all American, but couldn’t these companies have come from Europe, Vigreux told reporters, adding that the Continent needed to get entrepreneurs and innovators back. She said she is not worried about the supply of innovators, as good ideas abound. “Europe is still holding its place, with 30% of the world’s science and technology production as measured by patterns and publications,” said Richard Pelly of RFP Advisory Services, CEO of the European Investment Fund until 2014. Yet much of that is being eroded by Asia and America, which are catching up fast, he added. Money should not be an issue either, Vigreux claims. “We often look at finances as an issue while there is a lot of capital around.” Pelly added: “The venture capital market is more buoyant: It has been raising more capital in the past two years than it did in the previous five.” Willingness to invest, though, varies by region. Investors in Hungary, for example, still think twice about where they put their money. This is a problem across the region, according to Pelly. “It needs a national effort to

stimulate investments by business angels and to create a better VC market”. To stop European innovations from being produced and commercialized elsewhere, EIT has introduced several tools. It gives an EIT Label to Master and PHD level programs whose curriculum include soft skills that help graduates start and run their own business. Europe−wide, EIT has identified more than 50 of these programs. After finishing his studies in China, Zhenyu Lin, a nominee for the 2015 EIT Change Award, took part in one such Masters program in Sweden and the U.K. Six months after graduating, Zhenyu founded his company, Sensory Media, which sells an intelligent LED lighting system that synchronizes with music emotionally. SoundGlow can “sense” rhythm and emits muted colors, say, for soft piano music, or flashy, vivid tones for electronic music. Among current and future customers are event centers and theaters. Multi−sensory experiences are already being developed and much in demand in the entertainment and dining industry, but these solutions are costly, Zhenyu said. He is offering a more cost− effective product.

Innovation hubs To ensure that good ideas become products in Europe, EIT supports startups through its community of Knowledge and Innovation Centers (KIC). These

EIT AWARD WINNERS Award 2015 EIT Change Award winner

Winner

Company

Govinda Upadhyay

LEDsafari lamp

2015 Innovator Award winner

Regnar Paaske

Nordic Power Converters

2015 Venture Award winner

Regnar Paaske

Nordic Power Converters

Venture aim to produce low-cost, DIY solar LED lamps for those having no access to electricity to become the new standard for electricity power converters for LED, chargers and other applications. to become the new standard for electricity power converters for LED, chargers and other applications.

select the most promising innovation projects and startups and decide who receives funding. KIC will receive roughly 95% of EIT’s overall €2.7 billion budget for 2014−2020. Currently three, covering InnoEnergy, climate and ICT, the community is to be expanded by five more centers by 2018. The KIC ICT Lab helped connect the members of the DA4RBI (Data Analytics 4 Retail Business Intelligence) project including Fabio Belloni, formerly principal researcher for Nokia Research Center now the CEO of Quuppa, a company in indoor location positioning. “We met at a partner event of the ICT Lab in Paris in 2013. We immediately realized this is a common interest, something we need to work together on,” Markus Löchtefeld, a researcher at DFK, a member of DA4RBI told the BBJ. The system helps physical stores analyze customer behavior by tracking their route within a shop and allows stores to predict future customer locations and buying decisions. Though two shops in Germany and two more in Italy are already using the system, interest in DA4RBI is more enhanced in the Unites States, Löchtefeld said. The group hopes to seal three contracts from different U.S. retail chains soon.

Awarding the best EIT also rewards the best projects/ products in three categories. The winner of this year’s Venture Award, Regnar Paaske, co−founder and CCO of Nordic Power Converters (NPC) claims to have revolutionized a system practically untouched for 30 years. Electric power converters are found in numerous devices from LEDs to chargers. Take an Apple charger, currently the size of your palm and reduce its size to smaller than a matchbox but with 2−5 times more charging capacity – and you get the idea. The technology used also helps NPC cut the cost of power converters, which represent 15−25% of production costs and take up most of the space inside an LED bulb today. NPC is entering a €20 bln market and plans to roll out its first product for the LED lighting market by the end of 2015. Currently negotiating a €1 million customer contract, Paaske hopes to have five business customers by the end of next year.

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2 Business

Budapest Business Journal | May 22 – June 04, 2015

EXPERT OPINION

Invitel awards innovation and creativity Hungarian tele- and info communications company, Invitel handed out its InnoMax awards for the sixth time on May 14 in an extended scheme, offering new categories, hence raising the number of possible applicants. The goal of the awards is to recognize innovators and encourage innovation. This year for the first time Invitel’s InnoMax awards for innovation were available for every Hungarian company, non governmental organization, young developer and as well as elementary and secondary school at the same time, offering awards worth HUF millions. On the sixth innovation muster of Invitel, this time cloud based technologies and integrated solutions were in the focus of the applicants’ entries.

“We believe Invitel is a very innovative infocommunications company,”Invitel’s Chief Operative Director Imre Mártha said at the event. “We have just announced monumental investments, which main aim is not physical network building only, but to bring the most modern technological solutions to a wider circle of users. Inter alia, this was the main reason we introduced a category for non profit companies last year and a category for elementary and secondary schools this year, because we would like to nurture innovation at every possible levels, as far as we can,” Mártha added.

The winners.

was allowed to enter the competition with their innovative solutions, and as opposed to earlier years, entrants were not required to present an already operating solution but could present project ideas. Awards were distributed in three subcategories based on firm size. Mol-Control Automatizálási és Fejlesztési Kft., the winner of Category I. of companies with 5-19 employees, received the prize from László Krisán for their project entitled “ECO-MODCLOUD SYSTEM®: Efficient energy management, building management and building monitoring based on cloud technologies”. Wildom Informatikai Szolgáltató és Tanácsadó Kft., the winner of Category II. of companies with 20-69 employees, was presented with their prize by Imre Mártha for their project entitled “Wildom Family-friend Software firm v2015.0”. Mediso Orvosi Berendezés Fejlesztő és Szerviz Kft., the winner of Category III. of more than 70 employees, received the award from Gerlei, for their project entitled “The development of a new nanoScan® Plus product family and combination of PET with high signal strength 7T MRI for real time data collection”.

Gyöngyvér Gerlei, Corporate Sales Director at Invitel, said that “InnoMax has grown into a brand in the past six years and has become one with the notions of innovation and Invitel.” She added that “we live in a fast-paced, changing and complex world, therefore we need easyto-use and simple solutions.”

WINNER OF INNOMAX LOYALTY This category is for recognizing the work of Invitel’s clients, in which companies were able to compete with projects already in operation, regardless their company size. Tolnagro Állatgyógyászati Szolgáltató és Kereskedelmi Kft., the winner of the category, was presented with the award by Gerlei for their project entitled “Development of Tolnagro telephony and call center with AVAYA solution”.

WINNERS OF INNOMAX BUSINESS CATEGORIES As of this year not only the clients of Invitel but any Hungarian company

WINNERS OF INNOSCHOOL The two subcategories of InnoSchool provided grounds for elementary and secondary schools to present their

computer applications in their learning process and the possible usage of one universal tablet for all their subjects. Budapest XV. Kerületi Károly Róbert Általános Iskola received a special prize by KAVOSZ for their project entitled “Dream, dream, sweet dream”. WINNER OF INNOMAX NONPROFIT According to Invitel the work of NGOs is priceless, yet their operations are difficult to carry out in the current economic situation. For recognizing and helping the work of the non profit sphere, Invitel has offered InnoMax for the second time this year. Boldogságban Felcseperedni Alapítvány – translates as “Being Raised in Happiness Foundation – received the prize from Antónia Erős for their project entitled “S.O.S. helpline” for the youth. The audience award, also presented by Erős, was given to Hungary’s Westie Rescue for its project entitled “Charity webstore and register for animal protection”. CEO David Blunck.

innovative ideas. Kőbányai Kertvárosi Általános Iskola, the winner among elementary schools, received the award from Peredy for their project entitled “The school of the future, how we envisage it”. When presenting the award Peredy noted that “creativity is the gateway leading to innovation”. Mártha presented Szentgotthárdi III. Béla Szakképző Iskola és Kollégium, the winner among secondary schools, with their prize for their project entitled “Digital School”. Both the elementary and secondary school winners emphasized the importance of fast internet connection in school, the involvement of fast responsive

WINNERS OF INNOAPPS Entrants could compete against each other in two subcategories “InnoApps - Ne szórakozz!” and “InnoApps - Szórakozz!”. While the former category was for applications that are not for entertainment, the second category was primarily open for game applications. Peredy presented the prize of InnoApps - Ne Szórakozz! to Ádám Fábián and Zoltán Regéczy for their project entitled “Anatomy all around the world”, which is an interactive iPad application portraying the complete anatomy map of the human body. The audience award of InnoApps - Szórakozz was presented by Blunck and Mártha to Viktor Kovács for a game application entitled “Pipa gazdák”.

NOTE: ALL ARTICLES MARKED EXPERT OPINIONS ARE PAID PROMOTIONAL CONTENT FOR WHICH THE BUDAPEST BUSINESS JOURNAL DOES NOT TAKE RESPONSIBILITY

The awardees were chosen by a board of judges except two categories – InnoApps Szórakozz and InnoMax Nonprofit – in which the awards were distributed based on votes that the audience left online. The voting for the audience awards was closed by CEO David Blunck with the help of an online application customized for this very purpose. The board of professional judges included László Krisán, CEO of KAVOSZ Zrt, dr. Zoltán Peredy, strategy and program planning professional of Hungary’s National Innovation Office (NKFIH), Péter Papp, the chairman of kancellar.hu and representing NGOs Antónia Erős, the founder of Egy Csepp Figyelem Alapítvány – translates as One Drop of Attention Foundation – helping people suffering from diabetes.

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2 Business

Budapest Business Journal | May 22 – June 04, 2015

Property investors finally grow bullish After a lull that has basically lasted since the economic crisis, liquidity appears to be returning to the real estate investment market. GARY MORRELL

A combination of improving economic indicators and more favorable investor sentiment is resulting in improved liquidity in the investment market after an extended downturn. This is reflected in research released by the consultants Eston International, which indicates growth in commercial property investment volume as transactions are being concluded in all market sectors. However, Hungary still lags behind Poland and Czech Republic in terms of investment volume, with a significant yield gap. In addition to the improving macro− economic environment, increasing investment activity is attributed to the comparatively inexpensive product on the

Adorján Salamon, managing director of Eston International. market compared to Poland and Czech Republic. Debt finance is increasingly available for Hungary. “We anticipate that a little under €1 billion of commercial property deals will be concluded this year, as currently €150 million of transactions should conclude by summer. Prime Budapest office yields

Budapest hotel market has 5-star year The Budapest hotel market performed outstandingly last year as the average hotel occupancy rate in the capital rose to 75%, and the average room price was 7% higher than in the previous period according to CBRE. “The improvement in hotel profitability indicators was even more striking, for example the gross operating profit per room increased by 20%, which was the best performance in Europe,” said Gábor Borbély, head of research and consulting at CBRE in Hungary. European hotel investment in CEE and Austria has also seen a sizable ADVERTISEMENT

increase in hotel transactions hitting €160 million in the first quarter of 2015. This is mainly due to a spill−over of capital previously looking at assets in Western Europe, based on attractive yields and healthy trading performance data according to CBRE. “The surge in hotel investment volumes indicates the continuing investor appetite in hotels as an asset class. The opportunity for strong returns across the hotel space, coupled with high levels of liquidity will continue to drive transaction levels for the next 12 months in most European markets,” said CBRE.

currently stand at around 7% and there is historically a yield gap between Hungary and Czech Republic and Poland. This currently stands at around 1%,” said Salamon Adorján, managing director of Eston International. With regard to sectors, negotiations are known to be underway for both office and

retail centers. In addition, the hotel market is attracting interest. All of the recent class “A” delivery and pipeline is attracting the interest of both Hungarian and international funds, with resulting competition for the limited quality product. Against the background of the reduced supply of well located, quality offices for both investors and potential tenants, building owners are upgrading and asset managing older stock to “A−”/“B+” status. “This provides higher yields of 8−10% in comparison to around 7% for class “A” office centers,” commented Dániel Pintér, head of PM at Eston International. He argues that it is important for owners to continue to invest in the asset management of a property to prevent it becoming a “ghost building”, as vacant space has a cumulative impact, causing existing tenants to relocate from an office center, leaving it unsustainable. From the perspective of tenants, rents can be €8−10 per sqm per month compared to €13−14 for top of the market office centers. For example the BFI building in South Buda, owned by the U.K.−based Guardian Asset Management, went from 40 to 80% occupancy in 14 months. South Buda, it is argued, could become the “new Váci út” due to its good transport links and connections to western Hungary.

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2 Business

Budapest Business Journal | May 22 – June 04, 2015

New CEU building grafted onto District 5 The first phase of the university’s total campus redevelopment is a new structure being added to existing elements in the UNESCO−protected area in the heart of Pest.

Cushman & Wakefield and DTZ to merge

GARY MORRELL

Phase One of the Central European University (CEU) Campus Redevelopment Project, a new building that is being built onto elements of the existing structures in the historical fifth district of Budapest, has officially begun with the cornerstone laying ceremony held in early May. This first phase is due to be completed in the summer of next year, with the second phase scheduled for completion in summer 2018. “We have outgrown our initial premises, we are here to stay so we thought it would be good to have a proper campus that is fit for the function of a university and our goals and ambitions,” said Liviu Matei, Provost and Pro−Rector of the CEU. The development will provide a central unified campus for the university. From a development perspective, Irish architectural firm O’Donnell and Tuomey were faced with how to construct a functional building that blends in and complements the surrounding protected Central European architecture of Central Pest. The project is one of the first non−commercial buildings to achieve BREEAM sustainability accreditation in line with the sustainability policy of the CEU’s board. According to the redevelopment plans, the three−phased project will consolidate the CEU into a 35,000 sqm campus across six buildings in the UNESCO World heritage area of Nádor utca. The first phase will include a five−story library with an extended auditorium for lectures and concerts. “CEU supports its mission and projects through a mixture of private philanthropic support, European research grants, corporate and foundation funding. Fundraising for the three−phase campus redevelopment project, which is estimated to approach €34 million, is ongoing. Loan finance is provided by the European Investment Bank,” said a CEU statement.

Years of planning O’Donnell and Tuomey where selected after an open tender and the concept developed over four years, during which time the design had to be negotiated with both the city planning authorities and the monument protection authorities. The process focused on issues of how does a 21st century functioning university building fit into the historic center of Budapest. “Such an enterprise raises a number of questions related to the interplay between contemporary architecture and urban cultural heritage,” recalls Sheila O’Donnell. “We were interested in preserving the old

Irish firm O’Donnel and Tuomey’s design for the new CEU building. courtyards and using these to connect the different parts of the existing buildings into a physical unit. This also creates an interaction with other classic buildings in the center of Budapest,” she continued. “In the design there is a focus towards the courtyards – ways of making interconnections between the buildings, not only on the ground floor, but also on the upper floors. The architects believe that respect for legacy is a very important part of design, which is imperative as CEU dwells in downtown Budapest,” O’Donnell added. Sustainable features were incorporated in the planning process from the outset. Furthermore, the developers have a commitment to developing a building that is energy efficient and conducive to an educational environment and that enhances CEU’s commitment to sustainable and green development. Energy efficiency is a major element of the development and the CEU campus has BREEAM (Building Research Establishment Environmental Assessment Methodology) accreditation. “It is expected that the university’s energy consumption will be reduced by one third as a result of the architectural solutions and installation of modern mechanical methods. BREEAM principles have been

used in the design in order to support CEU’s commitment to sustainability. We are currently working with BREEAM representatives at the design stage and we anticipate that accreditation will be confirmed some time this month,” said Pál Baross, director of the CEU Campus Redevelopment Office. The building will have glass roofs that take into consideration the extreme temperatures in Hungary and the need for air−conditioning in summer and efficient heating in winter. There will also be a system that will automatically open and close windows based on the outside temperature and also enable these to be opened manually. In addition there will be a roof top garden. O’Donnell and Tuomey have BREEAM “Outstanding” accreditation for their recent design of the London School of Economics building in London. The CEU accreditation is an interesting development, as previously it has tended to be commercial buildings that have achieved BREEAM or LEED accreditation. The number of higher quality green accredited offices is expected to grow to 30% by the end of 2015 according Norbert Szircsák, senior associate, Green Advisory Services at Colliers International.

Cushman & Wakefield (C&W) and DTZ have reached a definitive agreement to merge and are set to become one of the largest real estate services companies in the world. The new company, which will operate under the Cushman & Wakefield brand, will have revenues of more than $5.5 billion, more than 43,000 employees and will manage more than four billion square feet globally on behalf of institutional, corporate and private clients. “This transaction builds upon the considerable momentum we have achieved over the past 18 months and positions Cushman & Wakefield to deliver incremental value to clients worldwide from a broadened and strengthened global service platform,” said Edward C. Forst, president and CEO of C&W. Cushman & Wakefield has 259 offices in 60 countries and first began working in Hungary in 1993 as Healey and Baker. DTZ has more than 260 offices in 50 countries and was arguably the first international commercial real estate consultancy in Hungary when DTZ CEE was founded in Budapest in 1931. Representatives of the Hungarian offices have not commented on how the resources and customer-bases of the two companies will be divided. The transaction is due to be completed before the end of the year and is subject to customary closing conditions.

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2 Business

Budapest Business Journal | May 22 – June 04, 2015

Survey finds bribery still a problem here According to an EY expert involved in the report, the level of corruption in Hungary was found to be similar to that found in South Africa.

last two years. Some 16% see the level of regulatory activity in the last two years having had a positive impact on their company’s results. “It is a bit concerning that only 13% of respondents rated their services as ethical and good. These results are rather disappointing. What we recommend is that there are very basic building blocks that should be in place for effective compliance. And one of these is clearly walking the talk,” Bíró said. According to the expert and EY’s survey, the key for improvement is in the hands of the leadership and management. “It is vital that employees see the commitment of the management for ethical business practices, and that the management behaves in an ethical manner and with integrity. You need to communicate this through anti−bribery and anti−corruption training sessions, for which we still have a long way to go in Hungary,” Bíró warned. “Our economy and our market players need to get accustomed to such practices. That goes with a thorough understanding of your risks on the market and within your company and establishing appropriate measures to deal with these risks. It is even more important if you compare the results of how widespread corruption is said to be in Hungary; the results are like in India or South Africa,” Bíró added. EY’s survey also explored the willingness of businesses to indulge in manipulation of financial performance in order to enhance the overall image of the company. Hungary is among the leading countries in this respect, with 42% of the respondents saying that this practice does happen in the country. In countries of “rapid growth” 42% of the respondents said they believe this happens, while in Eastern Europe it is only 39%, and in developed countries only 33% reported such activity. EY’s compiled data suggests that 53% of businesses believe that revenues have increased in the past two years, while 25% saw revenues dropping. Some 18% experienced revenues increasing a lot, 35% saw them increasing a little, 11% saw revenues staying the same, another 11% saw revenues dropping a little, with 14% said revenues have dropped a lot.

CHRISTIAN KESZTHELYI

Corruption practices are widespread in Hungary, as they are across Central and Eastern Europe, even though regulations in the past two years have become stricter, according to an EY survey entitled “Fraud and corruption — the easy option for growth?” published on May 20. Survey respondents indicated that, in some cases, new regulations have in fact posed greater challenges for companies that are simply trying to do business. The researchers of EY, a global leader in assurance, tax, transaction and advisory services, conducted a total of 3,800 interviews with employees in 38 countries between December 2014 and January 2015, covering Europe, the Middle East, India and Africa. The firm, which has been conducting the survey for 14 years, carried out 100 interviews in Hungary. The research involved interviewing a sample of the largest companies in each country, including board directors, management and employees. Interviews were conducted on an anonymous basis in the local language online or in person.

“Our everyday experience is that we can see a wide range of schemes on the market, like conflict of interest schemes.” Bribery and corruption practices According to respondents of the survey, Hungary is a leading country in terms of bribery and corrupt practices. Some 73% believe that corruption is widespread in Hungary, while in Eastern Europe that figure is 63%. In countries of “rapid growth” the figure is 61%, while in developed countries only 35% of the respondents believe corruption takes place. Practices of bribery can take many forms. Some 14% of respondents from Hungary said that offering personal gifts is justifiable; 15% said it is alright to offer cash payments; 11% said that offering entertainment is acceptable; and 26% of the respondents said that any compensation of the aforementioned nature is justifiable. Although “the survey does not necessarily reflect on the forms of corruption taking place in Hungary, our everyday experience is that we can see a wide range of schemes on the market, like conflict of interest schemes,” Ferenc Bíró, Partner, Fraud Investigation & Dispute Services, EY Hungary told the Budapest

Business Journal. “Kickbacks and bid rigging is also a form of bribery that often appears. We see quite a lot of examples of asset misappropriation, either including cash or inventory type fraud schemes,” the expert added.

Regulations and compliance Some 53% of the queried companies say the level of regulation in their sector has increased in the last two years, 33% say greater regulation in their sector is increasing the challenges for the successful growth of their business, while 14% say regulatory activity in their sector had a positive impact on ethical standards in their company. The survey, however, suggests that the majority believe that if they followed their anti−bribery and anti−corruption policy very closely, it would not harm competitiveness in the market. Only 21% said they believe that following policies would hurt competitiveness as opposed to 61% who believe that following the guidelines of anti−bribery and anti−corruption policies do not affect competitiveness negatively. “Clearly, the regulatory environment has become tougher, from both the regulatory oversight and legal perspectives, so it is more difficult to comply. We certainly do see, not only in Hungary but across the region, that in tough times people are more likely to cut corners. Both our experience and the results of the survey show that effective

Way to fight corruption

Ferenc Bíró, Partner, Fraud Investigation & Dispute Services, EY Hungary. compliance is actually a requirement for sustainable success and sustainable business. I think it is paramount that many companies are actually committing themselves to doing business in an ethical manner and more companies continue to do so,” Bíró added. Considering compliance and ethics, EY found that only 13% of the respondents rated their company’s ethical standards when doing business as very good, with only 17% claiming that ethical standards have gotten better in their company in the

“I believe we see quite a lot of effort being exercised by various individual companies and government bodies to fight corruption in Hungary. I strongly believe that these efforts, though, need to be harmonized, because right now they are just being disbursed,” Bíró said. “Internally, among the market players, there is a lot to do in order to establish a compliance culture and to emphasize the importance of doing business in the right, clean way. Not only this survey but our other surveys clearly reveal that having a compliance culture and doing business in an ethical way does pay off. There is a direct correlation between how ethically you do business and to what extent you can defend your margin. The only way forward for sustainable growth and development for a company is to behave and act in a good manner,” the expert added.

BBJ

3Special Report Law firms

Rankings of local law firms

22-25

Deciding when to add legal muscle

Market judged favorably

As business improves in general, so do prospects for the local legal profession, lawyers say. Experts tell us about the state of the legal field in Hungary today.

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Budapest Business Journal | May 22 – June 04, 2015

Business is picking up Partners from some of Budapest’s law firms discuss the market and key legislation. Gabriella Ormai, Managing Partner CMS Cameron McKenna LLP

How is business in general? Are you busy these days and with what kind of work? We had a very promising start to 2015, and our teams are kept busy on a continuous basis. The nature of the work varies, as we provide full service to our clients, but of all the practice areas, I would definitely highlight M&A work within the banking sector (bank sales and purchases, portfolio transfers etc.), as well as disputes as a booming area, and recently real estate seems to be picking up, which is a really good sign after all those years. There are also some success stories, such as Apollo Tyres’ investment in Hungary, which requires significant resources and a coordinated approach of various practice areas across the firm. Are there any legal changes that have occurred recently that impact your business? Do you anticipate such changes soon? I would slightly turn this questions around, as I feel that the recent legislative changes most affect the operation of the businesses of our clients, which results in substantial additional work. One of our strengths, I would say, is providing quality regulatory advice to our clients. Such assistance and support is continuous and strengthens the relationship as clients do seek trusted advisors when it comes to regulatory requirements. How is your law firm especially equipped to handle the particular challenges posed by doing business in Hungary? Most importantly our full service offering is a great advantage, as we can advise in all areas of business law and therefore are best placed to assess the possibilities and challenges of doing business in Hungary (e.g. from a tax point of view) and come up with real solutions. For instance, when providing strategic advice we tend to involve our disputes team from the very beginning with the purpose of recognizing and handling possible disputes in a preventive way.

András Posztl, Country Managing Partner Horváth & Partners DLA Piper

How is business in general? Are you busy these days and with what kind of work? Investors are turning positive again on Hungarian assets; recent forecasts from the EU, IMF and credit rating agencies are indicating the improving performance of the economy. The International Monetary Fund raised its forecast for Hungary’s 2015 economic growth, the overall picture has become much brighter. However, the government’s interventionist policies and the extra tax burdens levied on certain sectors remain factors that can discourage private investors. M&A transactions, complex litigation and large infrastructural projects keep us busy – close to the pre-crisis level. Are there any legal changes that have occurred recently that impact your business? Do you anticipate such changes soon? As a result of the very “active” economic policy of the government, both in regulatory and ownership aspects, the public sector has become one of the largest sources of legal work for many local and some international law firms. As public sector clients often require a different type of client care, one can see a clear segmentation among these legal service providers’ quality, responsiveness and application of international professional rules, such as FCPA or the U.K. Bribery Act. The government’s rumored efforts to set up one or more centralized legal panels in order to replace the currently highly mixed legal adviser pool with a more coherent and select group of quality advisors can be interpreted both as an opportunity and a challenge: It is a great opportunity for those law firms that can get on these panels, but one can imagine how fierce the competition will be to achieve this. How is your law firm especially equipped to handle the particular challenges posed by doing business in Hungary? Horváth and Partners DLA Piper is one of the largest business law firms in Hungary, among the very few that can provide legal services in all aspects of business law. Our office contains professionals with extensive experience gained while working for premier international, regional and local firms, as well as the government and other public sector entities. Thanks to our expertise, supported by the global network and knowledge of DLA Piper and our experience with a very wide range of clients, we are well equipped for future challenges. Tailor-made client care and a deep understanding of our partners’ commercial needs help distinguish us from our competitors.

Zoltán Hegymegi-Barakonyi, Managing Partner Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie

How is business in general? Are you busy these days and with what kind of work? As the economy is getting stronger, we experience some growth in business. There are some positive trends on the transactional side, e.g. in corporate, real estate and banking & finance, but we are still waiting for bigger M&A deals. We are very busy in some special areas of law, e.g. tax, competition law and compliance work, where the increasing activity of the authorities and the increasing number of compliance programs mean a growing demand for specialized legal assistance for our clients. Are there any legal changes that have occurred recently that impact your business? Do you anticipate such changes soon? A number of legal changes have occurred recently which impact our clients’ business and, therefore, impact us as well: new rules implementing the Civil Code, new taxes, changes in the competition laws, just to mention some. It does not seem that the government’s legislative activity will be slowing down anytime soon. It is not only the volume of the legislative changes, but also the rapid implementation which presents a challenge to every business. There is very little time to get prepared for the changes which makes it difficult for both business and legal functions in any company. Outside counsel should help his or her client to be compliant and successful at the same time. How is your law firm especially equipped to handle the particular challenges posed by doing business in Hungary? Lawyers should keep an eye on legislative changes in the pipeline. The Parliament’s relevant webpage on draft bills is a site for us to visit every day. We have to anticipate what is going to happen and how it will impact our clients’ business, especially when a particular industry is affected. We have to inform our clients about the changes as soon as possible, possibly even before the new law has been passed. Brief, but informative client alerts are much appreciated. In other cases, we hold seminars or one-on-one consultations where practical discussions or “brain-storming” sessions help the client to adapt operations to the new legal regime. Many times we rely on the expertise of some of the other 76 Baker & McKenzie offices worldwide to find the right answers in solving these challenges.

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Budapest Business Journal | May 22 – June 04, 2015

How is business in general? Are you busy these days and with what kind of work? Transactional work is tending to come back and it is likely that 2015 will bring more of this type of work than in recent years. After several years of downturn, the market is still very tough and competition is strong. It shows in the hourly rates too. There are international firms that are said to go under the €100 hourly rate, even in transactional work. Oppenheim looks optimistically toward 2015 after a successful 2014, which was a positive trend setter. We hope we can maintain the upward trend.

Zsolt Cseledi, Partner Oppenheim

Are there any legal changes that have occurred recently that impact your business? Do you anticipate such changes soon? No. We hope there will be no changes in the regulatory environment for law firms in the future. Some have foreseen some kind of a sectoral tax for lawyers, but we have seen no sign to that end thus far. How is your law firm especially equipped to handle the particular challenges posed by doing business in Hungary? We are a local firm with strong international ties. Strategy is set locally and the business plan is prepared locally. Therefore we are more flexible in responding to the everchanging client needs than international organizations.

Kinga Hetényi, Managing Partner Schoenherr Hetényi Attorneys at Law

Zsolt Fábián, Partner Erős Ügyvédi Iroda/ Squire Patton Boggs (US) LLP

How is business in general? Are you busy these days and with what kind of work? The business went through significant changes in the last couple of years – the financial crisis and budgetary constraints just to name a few – that create constant challenges for all law professionals. Due to the healthy mixture of our client base, we can handle such changes fairly well. We have more commercial work; more cross-border M&A and less local M&A these days. Are there any legal changes that have occurred recently that impact your business? Do you anticipate such changes soon? The Civil Code that became effective last year introduced new institutions in several areas. Those impact most of our clients.

How is your law firm especially equipped to handle the particular challenges posed by doing business in Hungary? Following the legal developments and attending the forums where future changes are discussed is key for a law firm operating in Hungary. We monitor the changes and discuss them within the firm. It is a never-ending exercise we simply cannot afford to avoid.

How is business in general? Are you busy these days and with what kind of work? Business is absolutely booming since the second half of last year – and especially since the beginning of this year. The M&A market is roaring, the real estate sector has risen from the dead and even work related to the founding of new companies is back again. Due to the fact that the Competition Authority has recently become more active, we have also received quite a number of new competition-law related mandates. There is a very strong upward trend in food law and life sciences, reflecting the fact that evermore companies are entering the Hungarian market and starting to import wellness and health related products into Hungary. Are there any legal changes that have occurred recently that impact your business? Do you anticipate such changes soon? In addition to the recent developments mentioned above, the new Hungarian Civil Code, the restriction on the acquisition of arable land, the preparatory works for a new Code on Civil Procedure, the introduction of the EKAER system (electronic road transport control for VAT purposes), the draft new public procurement act, and numerous other legal and regulatory developments have helped to keep us exceptionally busy in handling our clients’ requests and needs. How is your law firm especially equipped to handle the particular challenges posed by doing business in Hungary? Schoenherr has a well-integrated team of lawyers with diversified knowledge. We hire specialists for the various legal areas, and help them to further develop their expertise and skills by regularly taking part in internal and external training. Our memberships in AmCham, DUIHK, JVSZ allow us to receive draft laws in time and comment thereon. We follow and use all the business development methods available to law firms to provide the most efficient and highest-standard legal services. The international know-how base of all Schoenherr offices also helps us to obtain the best practices from all jurisdictions in the entire CEE.

David Dederick, Managing Partner Weil, Gotshal & Manges LLP

How is business in general? Are you busy these days and with what kind of work? Business has been very good. 2014 was our best year in the past four years, and this trend has continued into 2015. Our M&A, Dispute Resolution and Real Estate practices have been especially busy. One notable development is the recovery of the commercial real estate market. Following the crisis in 2008, real estate development and investment activity saw a dramatic decline. This especially affected a number of law firms that were dependent on real estate business. During the past year or so, we have seen a noticeable uptick in activity and the arrival of new players. However, continuing problems in the banking sector and reluctance of banks in Hungary to lend may hamper the recovery. Are there any legal changes that have occurred recently that impact your business? Do you anticipate such changes soon? Since the current government came to power in 2010, there have been very significant changes in the legal environment. These include a new Constitution, new Civil Code and new Labor Code, not to mention a raft of other legislation. Such sweeping changes always generate opportunities for lawyers, and law firms in Hungary are no exception. The Hungarian State has also become an important participant in areas previously dominated by the private sector, in particular by making acquisitions in banking, energy and communications. This trend is likely to continue at least until 2018. How is your law firm especially equipped to handle the particular challenges posed by doing business in Hungary? Most international law firms that came to Hungary were primarily focused on transactional work, heavily driven by inward investment, privatization and development projects. Nowadays, privatization is no longer relevant and inward investment has diminished. Indeed, some foreign investors are leaving. We recognized these trends early, and almost a decade ago began to transition our business to a more balanced practice portfolio that includes dispute resolution (litigation and international arbitration), regulatory work and regional opportunities. These practices are now quite substantial. At any given time, dispute resolution can make up approximately a third of our production. Likewise, regional opportunities have grown. From Budapest, we generally cover the Southeast Europe region, where we work with our network of “best friend” corresponding counsel law firms. Some of our biggest projects in recent years have been in countries such as Romania, Croatia and Montenegro.

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Budapest Business Journal | May 22 – June 04, 2015

Local law firms stake their territory Local lawyers are holding their own against the high− powered international competition. NORÁ KROKOVAY

Once dominated by big international firms, the Hungarian business law landscape is now more of a mixed affair, as local talent stakes its place in the market. And the overall size of that market seems to be growing too. Two years ago, according to estimates, the market for legal business in Hungary was estimated to be worth about HUF 80−120 billion. Now, it is estimated at roughly HUF 150 bln. When it comes to getting a piece of that pie, local lawyers say they keep a close watch on business activity. In particular, financial and business law is quick to follow wherever investment goes, picking up business when new investment comes along. Evermore often, the lawyers getting that business are from local firms. A new generation of lawyers has grown into its own in Hungary since the democratic transition of the 1990s, when it was customary for lawyers to find work with big multinational firms initially, to learn the trade, Western−style. Twenty− five years on, they are ready to take on the work themselves, with that know−how no longer the exclusive trademark of foreign businesses. In fact, Hungarian firms now have the added advantage of local knowledge in legal advice, which they try to use to their advantage. Many multinationals left Hungary in the early 2000s or later, when the economic crisis hit, and Hungarian firms are now fully equipped to fill the void. The Budapest Business Journal asked representatives of some legal firms to share their experiences on the latest trends.

Clients happy with Hungarian firms Kinga Zempléni, a member of GSG Partners, a small lawyers’ association, describes how smaller firms set foot in the market. Big international firms left after privatization deals were no longer on the table and the crisis left lawyers dry of business, she said. Clients are happy to turn to Hungarian firms now, which provide the same quality of service, often for a lower fee, she says. In employment law, GSG’s main line of business, there is no drawback to employing a local firm. “It is simply cost−effective,” she says. This part of the market is especially keen to specialize to attract small− and medium−sized corporate clients, mainly Hungarians. Clients often choose to employ several lawyers, each for a specialized area, she adds. Contracts are generally short− term, flexible and are based on billing hours. Fees are lower in employment law than other areas, and Hungary is still lower−priced compared with other countries in the region, she says. Szecskay Law Firm, established in 1997 and independent since 2002, has gone another way, according to András Szecskay, managing partner at the firm. Its clients are mainly foreign, drawing

Zoltán Faludi, Faludi Wolf Theiss.

Pál Jalsovszky, Jalsovszky Law Firm.

Ágnes Szent-Ivány, Sándor Szegedi Szent-Ivány Komáromi Eversheds. Hungarian local knowledge. “We are what they call a boutique office”, he says, explaining that it has a select few products on offer, in which it tries to keep high standards. The classic line is tax consultancy, but M&A, property law, and competition law all followed. Jalsovszky Law Firm has experienced more property− related business over the past 18 months, he says; foreign investors are returning to the Budapest real estate market.

Prices vary

András Szecskay, Szecskay Law Firm.

“Lending slowed and the property business waned during the crisis, but other areas, like corporate and M&A balanced it out even then, so it was no tragedy.” on recommendations from international networks. Foreign companies settling in Hungary make up a large part of their clientele. M&A is one of their focal businesses, now catering more to optimization plans in a post−crisis phase. But besides this, they also get business from Hungarian firms, sometimes in decade−long client relationships, and they also reach out to SMEs and startups. Laws change a lot and this, in a way, is good for lawyers, Zempléni says. Clients who may have earlier seen through legislation and did some of the legal work in−house are now more inclined to hire an outside solicitor. “Whereas before clients only came to us when the roof was on fire, with the complex changes in 2012, firms are definitely giving us more business.”

From banks to real estate Last year, banking was a prime area of business, this year real estate deals seem to be picking up, too, she adds. Larger transactions, banking or financial business,

Kinga Zempléni, GSG Partners. still warrant a larger, international law firm, and it looks better, too, Zempléni explains. Ágnes Szent−Ivány, Managing Partner of the law office Sándor Szegedi Szent−Ivány Komáromi Eversheds, talks about a skewing market. She said the crisis left a dent in legal services, with clients economizing in every possible way on legal costs. Investments are too risky and this increases the time it takes to make decisions are made. Her firm saw business mainly in HR cases, most of which involved downsizing and layoffs. “The effects of the crisis linger on, growth has not yet started on the legal market,” she notes. Zoltán Faludi, Managing Partner of Faludi Wolf Theiss, describes a very competitive market, where the crisis is old news no one wants to hear about any more. “It was a long time ago, we can’t keep pointing to the crisis,” he says. Present since 2007, the global firm Wolf Theiss came to Budapest when many international firms left the region. “Lending slowed and the property business waned during the crisis, but other areas, like corporate and M&A balanced it out even then, so it was no tragedy,” he explains. Sectors that appear more resilient, such as energy and some types of commerce were also unaffected, he adds. Corporate loans and business acquisition is picking up again now. But property developments are still lagging. Although the past three years have seen some growth, the market has not returned to its pre−crisis state, he says. Pál Jalsovszky, whose firm celebrates ten years in business this year, also describes a growth path despite the crisis. Its recipe was combining the expertise acquired initially in an international environment with

Prices are extremely varied; the same service can be sold in a range of HUF 50,000 at the low end and HUF 1.5 million at the other, Jalsovszky says. The difference is down to prestige and a lack of local information for international clients, who choose the added security and are willing to pay a markup, he adds. But pricing is competitive. While offices used to bill by the hour with some flexibility, these days many clients like to see a pre−agreed cap on the billing. One difference between foreign and Hungarian clients is access. With the big multinational firms, there are different executives at the top in charge of decisions they do not necessarily communicate about, making it difficult for one business to attract the next. With medium−sized Hungarian firms, the company chief usually decides, and if they are satisfied, they give us business again, Jalsovszky says. Legal business can profit either from a growing or shrinking economy, the latter providing work related to downsizing. “The only thing we can’t stand is stagnation,” Jalsovszky says. The crisis has created business in liquidation, restructuring, mergers and lay−offs, as well as booming litigation, especially in tax−related matters. “The only downsize is that clients are much more sensitive to costs in a crisis,” he noted. Building a regional network for lawyers has not proven to be a worthwhile direction for growth, Jalsovszky says. Szecskay of Szecskay Law Firm agrees. But this does not stop the firm from building contacts with legal partners in even the smallest corners of the world, and recommending a lawyer, if needed in multinational cases. Hungary is not one of those countries where really big law firms have set sail, but a certain size is needed to give cases the attention and expertise they need.

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Budapest Business Journal | May 22 – June 04, 2015

EXPERT OPINION

Network Sharing – the 4G race KEY FINDINGS OF THE STUDY OF 2014 WERE: • most deals focused on Western and Central Europe with more blank spots in the southern parts of Europe • deals affected every possible network element whereas RAN sharing is the minimum • spectrum sharing is still not universal amongst deals mainly due to regulatory burdens • in terms of the coordination structure of deals the most common form is stand-alone horizontal agreements and asset light JVs

HERE ARE A FEW HIGHLIGHTS FROM THE 2015 STUDY’S FINDINGS • As more and more deadlines for completing roll-out obligations approach, active sharing with shared spectrum is becoming the norm for 4G networks. Almost all new deals belong to this type. One of the reasons may be that passive sharing has become such a commodity that these deals might not even be reported to the press anymore. • In terms of what changes we can expect in the regulatory arena, spectrum CMS’ telecoms team in CEE and sharing will clearly be the way forward. firm-wide is particularly engaged in To facilitate that, more regulatory supporting network sharing. We have clarity is required on the conditions of been involved in the first pilot network spectrum use on a national level, but in sharing projects and continue to advise addition to that, these efforts are to be in network sharing deals across the harmonised internationally. region and in Europe. Based on our • At the same time, due to the recent experience and due to the growing mergers in the EU, the role of the demand CMS has launched its first competition authorities in setting the network sharing study in 2014 and is scene for the future of the combined ready to soon launch the 2015 edition operations have increased. At the of the guide. The 2014 study covered 22 same time, competition authorities countries and summarised all network have an increased interest in the sharing deals, networks affected and alleged exclusion of third parties from specific regulatory issues. a sharing agreement.

REGULATORY SPECIFICATIONS I believe that spectrum sharing and related secondary trading still seems to be underutilized in Hungary and in most European countries, partly due to the lack of clear regulatory guidance. Harmonized and liberal network sharing regulations are inevitable not only on a national but most importantly on an EU level in order to enhance the effectivity of such sharings. This would require limitations on what grounds authorities may revoke or change licenses, and also well-defined, transparent and harmonised boundaries of potential license conditions within which users can trade or share their frequencies, while not having to worry about acquiring advance approvals of different authorities. To date in Hungary there were no regulatory changes, publications or guidance issued by the electronic communications or competition authorities that expressly relate to network sharing agreements. However, after the publication of the details of the regulatory approval of the sharing deal between Magyar Telekom and Telenor Hungary, it turned out that the spectrum sharing part of the network sharing agreement was called and approved as a “mutual lease” of the licensed spectrum. This shows that the Hungarian authority had in mind a special interpretation of the two accepted forms of spectrum trading (spectrum transfer and spectrum lease). Competition is another key factor. Assetheavy joint ventures are still less typical, considering that they are subject to more scrutiny by authorities than horizontal (commercial) agreements on sharing. Another important limiting factor is that “infrastructure-based competition” is still a leading topic on most regulatory authorities’ agendas, and there has been a concern

Spectrum sharing — — — —

Merger — — — —

CV Dóra Petrányi is an equity partner of the CMS Budapest office since 2009 and a freshly appointed Deputy Practice Group Manager for CEE. She co−heads the commercial practice and heads the Technology, Media, Communications (TMC), Lifesciences, Intellectual property (IP) and Competition practices within the Budapest office. Dóra also leads the Telecoms subsector of CMS and is the Head of the CEE privacy initiative. Previously she worked for the Hungarian incumbent for ten years. Areas of specialization include competition law, IP law, public procurement matters, general commercial contracts, corporate restructuring and M&A. that certain types of network sharing (e.g. spectrum, active infrastructure sharing) might pose a threat to such network based competition. We see a clear trend with respect to “4 to 3” mergers - network sharing is included as a remedy and therefore eased the process of obtaining clearance from the authorities. I think that it is necessary to at least redefine the notion of infrastructure-based competition. Another competition concern that has now drawn the attention of the authorities both on a local and on an EU level is whether the position of those market players not getting involved in network sharing should be protected or not. The number of local enquiries show the need for an EU level guidance in this respect.

www.cms-cmck.com Source: CMS Network Sharing Study 2014

NOTE: ALL ARTICLES MARKED EXPERT OPINIONS ARE PAID PROMOTIONAL CONTENT FOR WHICH THE BUDAPEST BUSINESS JOURNAL DOES NOT TAKE RESPONSIBILITY

ith the market trend for strong growth in mobile data demand set to continue, operators are facing an ever-increasing demand to invest in both infrastructure and spectrum. This, combined with falling revenues, means they are being forced to look for ways to reduce or consolidate the costs involved in rolling out highspeed mobile networks. Besides M&A, an alternative solution for service providers is to share access to their infrastructure and/or spectrum and therefore sharing deals are on the rise now across the region and in Europe. While passive infrastructure sharing was common in Hungary, Magyar Telekom and Telenor Hungary recently announced they would share their recently awarded spectrum in 800 MHz, and jointly operate and develop their 4G mobile networks in all parts of Hungary except Budapest. They expect to double the offered mobile internet speed available in the 800 MHz band and provide earlier roll-out to fast mobile internet services in a wider geographical area.

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Budapest Business Journal | May 22 – June 04, 2015

In-house vs. outsourced: A legal quandary Creative pricing methods by law firms in Hungary help encourage companies to outsource legal assignments. Targeted management can keep costs low when firms hand out legal matters to external lawyers. LEVENTE HÖRÖMPÖLI-TÓTH

The bigger an enterprise, the more likely it is to need legal assistance on a permanent basis. That’s when the question arises of whether it makes more sense for a lawyer to be added to the payroll, or to use such services on demand. “In−house legal staff are selected for dealing with a set of routine tasks or special, but frequently appearing problems,” says Dr. Péter Lakatos, managing partner at Lakatos, Köves & Partners. The structure of a particular business is also a factor; that is whether the company is a stand−alone entity or a subsidiary within a company group. “Several companies only have a general counsel which performs limited tasks and their major role is to oversee the performance of legal work outsourced to law firms,” Dr. Iván Bartal, partner at Oppenheim adds. “In certain industries such as IT,

“Among the main drivers for outsourcing are legal matters that require immediate and significant resources for a short-term period.” the engagement of a general counsel is inevitable if internal needs and expectations from the technical, sales, commercial and financial teams are to be conveyed to external counsels in an efficient manner,” he points out.

When outsourcing becomes inevitable All the same, outsourcing cannot be avoided under certain circumstances. “External law firms are engaged if specialization is needed or a solution for an unusual legal situation is sought. This way clients save the need to get immersed in a specific legal field or to handle that problem on their own,” Lakatos emphasizes.

Erika Papp. Indeed, sometimes it’s obvious at first glance that hiring a team from the outside is bound to be more efficient. When IP or industrial property rights are at stake, specialist knowledge is a must. István Szatmáry, senior counsel at DLA Piper draws attention to the peculiar status of competition law. “In competition authority proceedings, the right to defense must be ensured. However, the documents of in−house lawyers can be seized by officials and used as evidence, whereas the paperwork of a hired law firm is subject to privilege and authorities cannot access it. Outsourcing is of essence here,” he says.

Solutions that work for real “Among the main drivers for outsourcing are legal matters that require immediate and significant resources for a short−term period,” Dr. Erika Papp, partner and head of banking and finance at CMS Cameron McKenna stresses. “Also for cross−border legal matters, where assistance in several jurisdictions are needed, clients prefer to use one−stop−shop solutions and in this way secure themselves easy access to various legal systems and uniform legal advice across several jurisdictions via one single law firm.” As Lakatos further observes, external experts are independent from the client company’s executives, and so they are in a position to honestly outline pros, cons, and risks. “They must propose solutions that not only sound good, but also work for real.”

István Szatmáry.

Vera Nagy.

“In matters where there is a well-defined scope for the legal work, companies normally request capped or fixed fees in order to ensure that their legal budget is foreseeable.” This approach still applies, even though practice has changed somewhat because of the crisis. Prior to the recession, external help was always engaged for big projects and large− scale HR tasks such as massive lay offs. According to Lakatos, outsourcing became lucrative thanks to the guarantee provided by the solid liability insurance of law firms. High−quality services and clear accountability extended the list of pros.

Survival skills needed As a result of the crisis, though, annual outsourcing budgets shrank by up to one−third, which put an extra workload on in−house legal staff. Rational management can, however, work miracles. “In−house legal departments can get the most out of external law firms’ work by targeted management, through precisely defined projects and well− considered requests,” Lakatos says. Pricing has become a key issue here. “In matters where there is a well−defined scope for the legal work, companies normally request capped or fixed fees in order to ensure that their legal budget is foreseeable,” Papp says. But it takes a lot more creativity than capping to survive on the market.

“Clients need tailor−made offers that reflect that you’ve got the deep knowledge and the competence to get the job done efficiently,” Szatmáry says. Not merely supervision, but full engagement is expected on the part of senior attorneys and partners. On the other hand, if a transaction is frustrated, a discount fixed in advance is often expected. Others sign up for deals where, under a sort of hotline scheme, legal advice is provided in given legal fields for a fixed annual rate.

The default setting “Clients have become sensitive about getting educated about any major change in legal provisions or jurisprudence and they expect relevant, client−specific training as well. You can be competitive if such services are part of your package,” Szatmáry says. According to him, response times have been cut dramatically too, whereby clients want quick and specific answers with minimum turnaround time. All these extra demands have been the trend since 2010 and Szatmáry sees no change to come. “This has become the default setting. Things will never be the same again.”

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Smaller sized businesses in particular rely on their own resources in dealing with everyday legal matters, but in many cases turning to an attorney or a notary could save a great deal of trouble.

EXPERT OPINION

Are you ‘Unitary Patent ready’? The fast approaching new European patent system poses a challenge for every field of innovation. Review your licenses, even consider opting out.

Eszter Szakács Partner, attorney−at−law SÁR AND PARTNERS ATTORNEYS AT LAW With the fresh rejection on 4th May 2015 of Spain’s claims to The Court of Justice of the European Union (CJEU) that EU regulations establishing the Unitary Patent were invalid, the last barrier to a uniform patent protection stretching across the majority of the EU single market seems to have been removed. Latest estimates suggest the legal regime, with its new form of Unitary Patent protection and new Unified Patent Court (UPC), a connected pan-European patent litigation system, will come into effect at the beginning of 2017.

LEVENTE HÖRÖMPÖLI-TÓTH

Corporate giants rely on their own legal staff, while smaller firms are rather reluctant to hire, not to mention to employ, a lawyer. “Businesses tend to prepare a lot of documents of legal relevance in−house, especially if they concern routine working relationships with their partners,” Dr. Vera Nagy, attorney for corporate and European law at Simonfay & Partners points out. “There’s nothing wrong with that practice up to a certain extent. However, since normally it is templates downloaded from the internet that are used, in many cases they do not provide even for basic aspects such as defining jurisdiction or the competent court.”

Makeshift stuff has its price Unfortunately, such makeshift contracts will suffice only as long as there is no dispute. Mostly it is micro firms that strive to avoid the investment of consulting a lawyer, but SMEs are known for trying to save on legal expenses too, an approach that can then become very costly. Another typical phenomenon is that agreements are sent out to the other party, but are never signed by them, Nagy warns. This affects the burden of proof substantially. This way no written

agreement exists and therefore whoever disputes anything will have to prove it, no matter what the agreement says. There are situations, of course, where it is imperative to hire a lawyer. Property purchases cannot be completed without an attorney’s involvement. “Deals concerning higher contract value definitely should not be struck without having the provisions scanned for formal requirements and legal content by an expert. Contracts stipulating the use of collaterals or securities should also be drafted by an attorney, unless the parties are willing to take unnecessary risks,” Nagy notes.

Peace of mind found in the notary office It is also important to note when to get a notarized document; banks, for example, require their use for loan or surety agreements, but there are other occasions too. “If companies want to make sure that their claim is legally recognized as undisputed and enforceable with immediate effect, their best shot is to see a notary who then prepares a public instrument. By having such a document you can avoid taking the case to court,” Nagy says. “Where acknowledgement of debt or an installment payment scheme is at play, a notarized document can spare a lot of trouble for corporate clients.”

All innovative industry players, anyone with granted European Patents validated in relevant, contracting EU member states, anyone whose business is affected by such patents, and any entity engaged in research activity which may result in the creation of intellectual property (IP), needs to familiarize themselves with and understand the new litigation system, particularly the transitional period where national litigation forums and the UPC will enjoy parallel jurisdiction for European Patents. Many fail to realize, though, that the UPC’s jurisdiction will not only cover future Unitary Patents, but also extend to existing European Patents, where license agreements may already be in place. Here rights holders will need to decide whether to opt out their European Patent from the UPC’s jurisdiction. They will also need to evaluate the enforcement scenarios which the new system will typically give rise to and the resulting strategic decisions they may need to make. With probably less than two years to go, parties need to start reviewing patent license agreements to reflect their positions on the UPC. These should also be considered in negotiating new agreements; failure to do so may give rise to conflicting interests between IP owners and their licensees later and with the threat of infringement looming these may only be resolved at great expense and the risk of rights being lost. The new system also requires industry players to strategically rethink and position their patent portfolios, and weigh up the pros and cons of opting

out their granted European Patents from the jurisdiction of the UPC. Granted European Patents which are not opted out may be revoked centrally by the UPC resulting directly in any validated national patent based on the same European Patent being rendered invalid in every contracting EU member state. However, choosing not to opt out will enable the patent holder to stop infringers in Germany, France, the UK and other EU countries with a single infringement procedure, instead of submitting the patent to the decisions of a whole host of national courts. Under the current draft Rules of Procedure a first instance infringement decision from the UPC may be expected within 12-14 months. Those intending to launch a new product on the EU market which may be affected by an existing European Patent will have the opportunity to invalidate the blocking patent, provided this has not been opted out, in a single procedure before the UPC, saving the cost of separate national revocation actions. A few questions still need resolving, though. The exact fees for obtaining a Unitary Patent and the cost of litigation before the UPC, as well as the fee for opting out a granted European Patent from the exclusive jurisdiction of the UPC, are yet to be determined. The first publicly available proposal suggests renewal fees will be proportionate to those for validating a European Patent in four or five countries, so those who would otherwise validate a European Patent EU-wide will clearly benefit from the availability of the Unitary Patent. Importantly, any market player choosing to take the traditional approach to validating a national or European Patent will face no limitations in the new system, with national courts maintaining their jurisdiction for patents filed at national patent offices. With the Unitary Patent and the UPC broadening the horizon of protection of European Patents, all sectors of industry need to ensure they are fully prepared for the new system to make the most of the opportunities it will undoubtedly bring.

www.sarandpartners.hu

NOTE: ALL ARTICLES MARKED EXPERT OPINIONS ARE PAID PROMOTIONAL CONTENT FOR WHICH THE BUDAPEST BUSINESS JOURNAL DOES NOT TAKE RESPONSIBILITY

When skimping on a lawyer is a bad idea

Budapest Business Journal | May 22 – June 04, 2015

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Budapest Business Journal | May 22 – June 04, 2015

Top-ranked law firms BELOW IS THE LIST OF LAW FIRMS WITH INTERNATIONAL AFFILIATIONS OPERATING IN HUNGARY THAT HAVE BEEN RECOMMENDED IN THE MOST AREAS OF LEGAL ACTIVITIES IN 2015 (IN TOP CATEGORIES OF VARIOUS RANKING BODIES, E.G. BAND 1 WITH CHAMBERS EUROPE AND CHAMBERS GLOBAL AND TIER 1 WITH LEGAL 500 AND IFLR 1000). CHAMBERS GLOBAL 2015 BAND 1

CHAMBERS EUROPE 2015 BAND 1

LEGAL 500 2015 TIER 1

IFLR 1000 2015 TIER 1

TOTAL NUMBER OF RECOMMENDATIONS

CMS Cameron McKenna LLP

Réczicza Dentons Europe LLP

Siegler Ügyvédi Iroda / Weil, Gotshal & Manges LLP

Andrékó Kinstellar

Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie

Horváth & Partners DLA Piper

Oppenheim

Lakatos Köves and Partners

Szecskay Attorneys at Law

Allen & Overy Nagy & Trócsányi

Danubia Patent and Law Office LLC in cooperation with Sár & Partners

Faludi Wolf Theiss

Jalsovszky Law Firm SBGK Patent and Law Offices

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Budapest Business Journal | May 22 – June 04, 2015

Stability helps Kinstellar win top honors Seven years after being spun off from a major international company, a local law firm earned the highest ranking in Hungary from Chambers. ROBIN MARSHALL

For the managing partner of the Budapest office of Kinstellar, news that Chambers had made it the Hungarian Law Firm of the Year for 2015 is vindication of the stability and quality the office has offered its clients over the years. Kinstellar covers what it calls Emerging Europe and Central Asia, and grew out of a change in policy from the London−based Magic Circle law firm Linklaters. Although present in Budapest and the region from the year 2000, in 2008 Linklaters decided it wanted to concentrate on its core markets, and spun off the Bratislava, Bucharest, Budapest, and Prague offices. Dr. Csilla Andrékó had been managing partner of Linklaters Budapest, and stayed at the helm of Andrékó Kinstellar Ügyvédi Iroda. So did many of her colleagues. “Many of the senior people have been with us since we set up,” recalls Andrékó. “Personally, I am very proud of that, that these guys want to stay together; the quality we offer is high because of that. We have that continuity because senior people stayed and work with us – we aren’t packed out with junior staff as some offices are, and so we don’t have that high turnover of lawyers; that is also something different from other law firms.” The transformation wasn’t always easy, however, and one of the things that particularly pleases Andrékó about the Chambers award is that the organization is among the strictest in its rankings. “As Linklaters we were a top tier law firm.

have to rely on their market experience for interpretation and intent. “That is the real problem, matters are not 100% clear. Clients are really not happy to hear that; they want clear answers. That can be a difficult concept to ‘sell’ to foreign clients.” One of the reasons there are few rulings to draw on is that the system itself is slow to process cases. “We can see that Parliament is trying to push the judicial sector to work much faster; you can now transfer a matter from one court to another depending on workload, and that is good, but it still takes a lot of time.” Compounding that, however, is a lack of consistency. “Rulings of the Court of First Instance in particular are being overruled: You never quite know what is going to be the next step.”

“As Linklaters we were a top tier law firm. When we became Kinstellar, Chambers knocked us back to third tier: We had to prove ourselves all over again.” When we became Kinstellar, Chambers knocked us back to third tier: We had to prove ourselves all over again.” The award is based on projects each firm is asked to nominate for evaluation. Chambers investigates these and gets market feedback on their complexity and execution. For Andrékó Kinstellar, they included the refinancing of Budapest Airport and the sale of it by Hochtief to a Canadian pension fund, advising the South Stream pipeline joint venture, and representing a major creditor of bankrupt national airline MALÉV. The size and importance of these deals are an indication of how Kinstellar was able to maintain quality and cost effectiveness throughout the crisis; working on major deals, it did not have to chase after smaller, cheaper business. Andrékó says the market is still “very competitive”, but notes that money is returning, and new projects are being launched; investors are now looking to do more than just refinance existing deals. But even when the market was at its toughest, Kinstellar steered clear, as much as it could, of the price wars. On the one hand, it could not compete with local law firms on cost, though it could trump them on international quality, while on the other hand, the market, eventually, would have to come back. “I don’t like going down with prices. It makes it very hard to put them back up once clients have got used to paying less!”

The legal environment General market conditions aren’t the only challenge to running a successful law

Csilla Andrékó: ‘Very proud’.

firm: The legal environment also comes into play. Hungary, in recent years, has seen an almost frenetic pace of legislation; laws were passed in a matter of weeks, sometimes days. “You have to be very aware of the need to check things almost constantly,” says Andrékó. “If it’s an important piece of legislation, you need to check almost every day to see if there has been an amendment.” And these weren’t just common or garden laws. “The new Civil Code was introduced last year; now we can see through practical experience those provisions that were contradictory, or didn’t achieve what they set out to, or that need to be revised,” Andrékó says. The Civil Code is the backbone for much of the Hungarian legal system, so the simple fact of the introduction of a new version is always going to be big news. But it also affects major pieces of legislation that law firms like Kinstellar deal with on a daily basis, such as the Bankruptcy Act, or the Banking Act. A particular problem right now is the freshness of much of this legislation. “We do not yet have court cases, precedence, to draw from,” says the managing partner. And in the absence of that, attorneys

Magic Circle So what differentiates Kinstellar in the market? The Magic Circle background certainly helps. International clients have certain expectations, and know Kinstellar can match those. But it is also independent, meaning that when big unaffiliated American, German, or U.K. law firms are involved in cross−jurisdictional deals, they are free to collaborate. “We speak the same language, in the end, and they know they will be able to work well with us.” The Kinstellar focus – CEE, Southeastern Europe, and Central Asia – is also unusual. There are now eight offices, with Belgrade, Istanbul, Almaty, and, most recently, Sofia, joining the original four. Andrékó says more may follow: the partners are always prepared to look at new opportunities, but growth must be organic. Above all, the regional firm prides itself on offering the same Magic Circle−style quality of service in all its markets; finding the right partners takes time and lots of due diligence. The bar, if you will pardon the pun, is set high: This year, in addition to Kinstellar Budapest, the Prague office was also shortlisted for Czech law firm of the Year, Istanbul for the Turkish title, and the group itself for the CEE award.

CHAMBERS GLOBAL 2 015 LEGAL ACTIVITIES

BAND 1

Banking & Finance

Allen & Overy Andrékó Kinstellar CMS Cameron McKenna LLP Siegler Ügyvédi Iroda / Weil, Gotshal & Manges LLP

BAND 2

BAND 3

BAND 4

Horváth & Partners DLA Piper Lakatos, Köves and Partners Réczicza Dentons Europe LLP

Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie Faludi Wolf Theiss

Gárdos, Füredi, Mosonyi, Tomori

Corporate / M&A

CMS Cameron McKenna LLP Horváth & Partners DLA Piper Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie Réczicza Dentons Europe LLP Siegler Ügyvédi Iroda / Weil, Gotshal & Manges LLP

Andrékó Kinstellar Lakatos, Köves and Partners

Allen & Overy Forgó, Damjanovic & Partners Oppenheim Szabó Kelemen & Partners Szecskay Attorneys at Law Faludi Wolf Theiss Nagy & Trócsányi

Erős Ügyvédi Iroda Squire Patton Boggs Gide Loyrette Nouel - d’Ornano Schoenherr Hetényi Attorneys at Law

Dispute resolution

Nagy & Trócsányi Oppenheim Szecskay Attorneys at Law

CMS Cameron McKenna LLP Réczicza Dentons Europe LLP

Restructuring / Insolvency

CMS Cameron McKenna LLP Siegler Ügyvédi Iroda / Weil, Gotshal & Manges LLP

Andrékó Kinstellar Horváth & Partners DLA Piper Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie Lakatos, Köves and Partners Réczicza Dentons Europe LLP

Lakatos, Köves and Partners Siegler Ügyvédi Iroda / Weil, Gotshal & Manges LLP Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie

Horváth & Partners DLA Piper Sándor Szegedi Szent-Ivány Komáromi Eversheds Gárdos, Füredi, Mosonyi, Tomori

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Budapest Business Journal | May 22 – June 04, 2015

CHAMBERS EUROPE 2 015 LEGAL ACTIVITIES

BAND 1

BAND 2

BAND 3

Banking & Finance

Andrékó Kinstellar CMS Cameron McKenna LLP Siegler Ügyvédi Iroda / Weil, Gotshal & Manges LLP

Allen & Overy Horváth & Partners DLA Piper Lakatos, Köves and Partners Réczicza Dentons Europe LLP

Gárdos, Füredi, Mosonyi, Tomori Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie Faludi Wolf Theiss Hajdu & Pázsitka

Capital markets

Allen & Overy Siegler Ügyvédi Iroda / Weil, Gotshal & Manges LLP

Andrékó Kinstellar Horváth & Partners DLA Piper Réczicza Dentons Europe LLP

CMS Cameron McKenna LLP Gárdos, Füredi, Mosonyi, Tomori Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie Lakatos Köves & Partners

Competition/ Antitrust

Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie Oppenheim

Allen & Overy Andrékó Kinstellar CMS Cameron McKenna LLP Réczicza Dentons Europe LLP

Bán, S. Szabó & Partners Gide Loyrette Nouel - d’Ornano Szecskay Attorneys at Law

Corporate/ M&A

CMS Cameron McKenna LLP Horváth & Partners DLA Piper Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie Réczicza Dentons Europe LLP Siegler Ügyvédi Iroda / Weil, Gotshal & Manges LLP

Andrékó Kinstellar Lakatos, Köves and Partners Szabó Kelemen & Partners

Allen & Overy Forgó, Damjanovic & Partners Nagy & Trócsányi Oppenheim Szecskay Attorneys at Law Faludi Wolf Theiss

Dispute resolution

Nagy & Trócsányi Oppenheim Szecskay Attorneys at Law

CMS Cameron McKenna LLP Réczicza Dentons Europe LLP

Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie Kálmán, Szilasi, Sárközy and Partners Lakatos Köves & Partners Siegler Ügyvédi Iroda / Weil, Gotshal & Manges LLP Gárdos, Füredi, Mosonyi, Tomori Horváth & Partners DLA Piper

Employment

CMS Cameron McKenna LLP Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie Szecskay Attorneys at Law

Horváth & Partners DLA Piper Réczicza Dentons Europe LLP VJT & Partners

Forgó, Damjanovic & Partners Oppenheim Pál És Kozma Ügyvédi Iroda Szabó Kelemen & Partners

Intellectual property

Danubia Patent and Law Ofﬁce in cooperation with Sár & Partners SBGK Patent and Law Ofﬁces Szecskay Attorneys at Law

CMS Cameron McKenna LLP Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie Sár & Partners Attorneys at Law

Bird & Bird Forgó, Damjanovic & Partners Horváth & Partners DLA Piper Lakatos Köves & Partners Oppenheim

Life sciences

Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie Réczicza Dentons Europe LLP

CMS Cameron McKenna LLP Forgó, Damjanovic & Partners Law Firm Szecskay Attorneys at Law Siegler Ügyvédi Iroda / Weil, Gotshal & Manges LLP Andrékó Kinstellar

Private equity

Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie Réczicza Dentons Europe LLP Siegler Ügyvédi Iroda / Weil, Gotshal & Manges LLP

CMS Cameron McKenna LLP Horváth & Partners DLA Piper

Lakatos Köves & Partners VJT & Partners Andrékó Kinstellar

Projects and energy

Andrékó Kinstellar CMS Cameron McKenna LLP Réczicza Dentons Europe LLP Faludi Wolf Theiss

Budapest Law Firm No. 5000 Horváth & Partners DLA Piper Lakatos Köves & Partners Siegler Ügyvédi Iroda / Weil, Gotshal & Manges LLP Oppenheim

Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie Hajdu & Pázsitka

Real estate

CMS Cameron McKenna LLP Réczicza Dentons Europe LLP Lakatos Köves & Partners

Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie

CHSH Dezsö & Partners Cerha Hempel Spiegelfeld Hlawati Nagy & Trócsányi Siegler Ügyvédi Iroda / Weil, Gotshal & Manges LLP

Restructuring/Insolvency

CMS Cameron McKenna LLP Siegler Ügyvédi Iroda / Weil, Gotshal & Manges LLP

Andrékó Kinstellar Horváth & Partners DLA Piper Lakatos, Köves and Partners Réczicza Dentons Europe LLP

Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie Faludi Wolf Theiss

Tax including tax consultants

CMS Cameron McKenna LLP Horváth & Partners DLA Piper Jalsovszky Law Firm

Andrékó Kinstellar Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie

Faludi Wolf Theiss Lakatos Köves & Partners Nagy & Trócsányi

Technology, Media, Telecommunications

CMS Cameron McKenna LLP Réczicza Dentons Europe LLP

Bán, S. Szabó & Partners Lakatos, Köves and Partners Siegler Ügyvédi Iroda / Weil, Gotshal & Manges LLP

Allen & Overy VJT & Partners Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie

IFLR 10 0 0 2 015 TIER 1

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TIER 3 Burai-Kovács & Partners Erős Ügyvédi Iroda Squire Patton Boggs Faludi Wolf Theiss Gárdos Füredi Mosonyi Tomori Nagy & Trócsányi Oppenheim Partos & Noblet / Hogan Lovells Szecskay Attorneys at Law

Banking

Andrékó Kinstellar Allen & Overy CMS Cameron McKenna LLP

Horváth & Partners DLA Piper Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie Lakatos, Köves and Partners Réczicza Dentons Europe LLP Siegler Ügyvédi Iroda / Weil, Gotshal & Manges LLP

M&A

Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie CMS Cameron McKenna LLP Réczicza Dentons Europe LLP Siegler Ügyvédi Iroda / Weil, Gotshal & Manges LLP

Horváth & Partners DLA Piper Lakatos, Köves and Partners Allen & Overy Nagy & Trócsányi Szecskay Attorneys at Law

Andrékó Kinstellar Burai-Kovács & Partners Erős Ügyvédi Iroda Squire Patton Boggs Faludi Wolf Theiss Gide Loyrette Nouel - d’Ornano Oppenheim

Andrékó Kinstellar CMS Cameron McKenna LLP Réczicza Dentons Europe LLP

Faludi Wolf Theiss Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie Allen & Overy Siegler Ügyvédi Iroda / Weil, Gotshal & Manges LLP

Burai-Kovács & Partners Erős Ügyvédi Iroda Squire Patton Boggs Horváth & Partners DLA Piper Lakatos, Köves and Partners Nagy & Trócsányi Oppenheim Szecskay Attorneys at Law

Project finance

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Budapest Business Journal | May 22 – June 04, 2015

LEG AL 5 0 0 2 015 LEGAL ACTIVITIES

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Banking & Finance

Andrékó Kinstellar CMS Cameron McKenna LLP Horváth & Partners DLA Piper Lakatos, Köves and Partners Réczicza Dentons Europe LLP Siegler Ügyvédi Iroda/Weil, Gotshal & Manges

Allen & Overy Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie Oppenheim Szecskay Attorneys at Law

CHSH Dezsö - Cerha, Hempel, Spiegelfeld, Hlawati Deloitte Legal Szarvas, Erdös and Partners Law Firm Faludi Wolf Theiss Forgó, Damjanovic & Partners Gárdos, Füredi, Mosonyi, Tomori Gide Loyrette Nouel - d’Ornano Nagy & Trócsányi Partos & Noblet/Hogan Lovells Sándor Szegedi Szent-Ivány Komáromi Eversheds Schoenherr Hetényi Attorneys at Law Szabó Kelemen & Partners Attorneys

Capital markets

Allen & Overy Andrékó Kinstellar Horváth & Partners DLA Piper Siegler Ügyvédi Iroda / Weil, Gotshal & Manges LLP

CMS Cameron McKenna LLP Gárdos, Füredi, Mosonyi, Tomori Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie Lakatos, Köves and Partners Oppenheim Réczicza Dentons Europe LLP

Forgó, Damjanovic & Partners Law Firm Kapolyi Law Ofﬁce Partos & Noblet in co-operation with Hogan Lovells LLP Schoenherr Hetényi Attorneys at Law Szecskay Attorneys at Law

Competition

Andrékó Kinstellar CMS Cameron McKenna LLP Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie Oppenheim Réczicza Dentons Europe LLP

Allen & Overy Faludi Wolf Theiss Gide Loyrette Nouel - d’Ornano Schoenherr Hetényi Attorneys at Law Szecskay Attorneys at Law

bnt attorneys-at-law bpv Jádi Németh Forgó, Damjanovic & Partners Horváth & Partners DLA Piper Lakatos, Köves and Partners Partos & Noblet/Hogan Lovells Siegler Ügyvédi Iroda / Weil, Gotshal & Manges LLP Erös Ügyvédi Iroda/Squire Patton Boggs Szabó Kelemen & Partners

Corporate & M&A

CMS Cameron McKenna LLP Forgó, Damjanovic & Partners Horváth & Partners DLA Piper Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie Lakatos, Köves and Partners Oppenheim Réczicza Dentons Europe LLP Siegler Ügyvédi Iroda / Weil, Gotshal & Manges LLP

Allen & Overy Andrékó Kinstellar bpv Jádi Németh Faludi Wolf Theiss Nagy & Trócsányi Erős Ügyvédi Iroda Squire Patton Boggs Sándor Szegedi Szent-Ivány Komáromi Eversheds Szecskay Attorneys at Law VJT & Partners

bnt attorneys-at-law Bird & Bird CLV Partners Csabai, Lindner and Varga Law Firm Deloitte Legal Szarvas, Erdös and Partners Law Firm Gide Loyrette Nouel - d’Ornano Jalsovszky Law Firm Kapolyi Law Ofﬁce SRFF / Fábry és Társai Ügyvédi Iroda (PRK Partners) Partos & Noblet/Hogan Lovells Schoenherr Hetényi Attorneys at Law Szabó Kelemen & Partners

Dispute resolution

Nagy & Trócsányi Oppenheim Szecskay Attorneys at Law Lakatos, Köves and Partners

CMS Cameron McKenna LLP Faludi Wolf Theiss Forgó, Damjanovic & Partners Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie Réczicza Dentons Europe LLP Siegler Ügyvédi Iroda / Weil, Gotshal & Manges LLP VJT & Partners

Allen & Overy Andrékó Kinstellar Bird & Bird CHSH Dezsö & Partners Partos & Noblet/Hogan Lovells Erős Üqyvédi Iroda / Squire Sanders (US) LLP Szabó Kelemen & Partners

Employment

Andrékó Kinstellar Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie Réczicza Dentons Europe LLP VJT & Partners

CMS Cameron McKenna LLP Forgó, Damjanovic & Partners Horváth & Partners DLA Piper KCG Partners Law Firm Oppenheim Szecskay Attorneys at Law

bnt attorneys-at-law bpv Jádi Németh Bird & Bird CLV Partners Csabai, Lindner and Varga Law Firm Faludi Wolf Theiss Noerr Sándor Szegedi Szent-Ivány Komáromi Eversheds Schoenherr Hetényi Siegler Ügyvédi Iroda / Weil, Gotshal & Manges LLP Szabó Kelemen & Partners TaylorWessing e|n|w|c Attorneys at Law

Intellectual property

Danubia Patent and Law Ofﬁce LLC in cooperation with Sár & Partners SBGK Patent and Law Ofﬁces Szecskay Attorneys at Law Oppenheim

CMS Cameron McKenna LLP Bird & Bird Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie

Forgó, Damjanovic & Partners Horváth & Partners DLA Piper Lakatos, Köves and Partners Réczicza Dentons Europe LLP TaylorWessing e|n|w|c Attorneys at Law

Project and energy

Andrékó Kinstellar CMS Cameron McKenna LLP Horváth & Partners DLA Piper Oppenheim Lakatos, Köves and Partners Réczicza Dentons Europe LLP Siegler Ügyvédi Iroda / Weil, Gotshal & Manges LLP Faludi Wolf Theiss

Allen & Overy CHSH Dezsö - Cerha, Hempel, Spiegelfeld, Hlawati Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie

bpv Jádi Németh Attorneys at Law Forgó, Damjanovic & Partners Law Firm Gárdos, Füredi, Mosonyi, Tomori KCG Partners Law Firm Partos & Noblet/Hogan Lovells Sándor Szegedi Szent-Ivány Komáromi Eversheds Szecskay Attorneys at Law

Real estate & construction

CMS Cameron McKenna LLP Lakatos, Köves and Partners Réczicza Dentons Europe LLP Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie

Horváth & Partners DLA Piper Szecskay Attorneys at Law Law Firm Siegler Ügyvédi Iroda / Weil, Gotshal & Manges LLP

Nagy & Trócsányi Oppenheim Partos & Noblet/Hogan Lovells Schoenherr Hetényi Attorneys at Law Erös Ügyvédi Iroda/Squire Patton Boggs Szabó Kelemen & Partners

Technology, Media, Telecommunications

CMS Cameron McKenna LLP Horváth & Partners DLA Piper Réczicza Dentons Europe LLP

Bird & Bird Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie Lakatos, Köves and Partners Siegler Ügyvédi Iroda / Weil Gotshal & Manges LLP VJT & Partners

Allen & Overy Andrékó Kinstellar Bán, S. Szabó & Partners Faludi Wolf Theiss Forgó, Damjanovic & Partners Oppenheim Partos & Noblet/Hogan Lovells Sándor Szegedi Szent-Ivány Komáromi Eversheds

Tax

Andrékó Kinstellar CMS Cameron McKenna LLP Jalsovszky Law Firm Réczicza Dentons Europe LLP

Faludi Wolf Theiss Nagy & Trócsányi Horváth & Partners DLA Piper Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie Lakatos, Köves and Partners

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Budapest Business Journal | May 22 – June 04, 2015

EXPERT OPINION

AUTONOMOUS DRIVING – FACTUAL AND LEGAL CHALLENGES Eszter SieberFazakas, LL.M.

NOTE: ALL ARTICLES MARKED EXPERT OPINIONS ARE PAID PROMOTIONAL CONTENT FOR WHICH THE BUDAPEST BUSINESS JOURNAL DOES NOT TAKE RESPONSIBILITY

Attorney (admitted in Hungary and in Germany) NOERR & PARTNERS LAW OFFICE

Last week the autonomously driven truck, the “Freightliner Inspiration Truck” crossed the roads of Nevada, chauffeuring Nevada’s Governor Sandoval and Daimler-Truck-Chief Wolfgang Bernhard. Background is, that the Inspiration Truck became the first commercial truck to receive an autonomous vehicle license plate in Nevada which – not coincidentally – is also the first state in the United States to approve and regulate autonomous driving irrespective of test and normal operation. Testing of autonomous vehicles is already allowed in four U.S. States. In contrast, the legal regulations in the EU generally do not allow testing of autonomous cars – complicated and time-consuming special approvals must be obtained even for testing of autonomous techniques at traffic on public roads. DIFFERENT CONCEPTS While various concepts of autonomously driven cars is one of the leading research and development sectors in the automotive industry, the legal background in the EU cannot keep pace with the technical innovations. In the following some autonomous driving concepts shall be presented: Mercedes introduced its F 015 Luxury in Motion concept car. The interior looks nothing like the interior of today’s cars, more like a stylish and luxurious living room, with seats opposite each other or even with vehicle occupants with their backs to the dashboard. The A7 Sportback, autonomous car, called Jack, is able to change lanes on the highway autonomously, even managing to overtake other cars without human intervention. Jack drove 900 kilometers from Stanford to Las Vegas and was also tested in April on the busy German highway A 9. This concept car developed for driving long distances on highways requests the driver to take over the wheel when approaching populated areas. The newest test model of BMW, the BMW i3 however, was developed with the express purpose of making driving in city traffic

easier: after the driver gets out of the car and presses a button on his smartwatch, the car looks for a parking space on its own and parks in the selected space. It even rolls back out of it parking space at the command of its “owner”. LEGAL SITUATION IN EUROPE, IN PARTICULAR GERMANY AND HUNGARY In fact, the relevant legislation is not moving with the times in Germany or in Hungary. The 1968 UN Convention on Road Traffic (Vienna Convention) was implemented in Hungary by Statutory Rule No. 3 of 1980 and has been ratified by most European countries. Article 8(5) of the Vienna Convention does not differentiate between horse-drawn carriages and vehicles: “Every driver shall at all times be able to control his vehicle or to guide his animals.” The UNECE working party on Road Traffic Safety filed an amendment in connection with the most critical parts of the Vienna Convention at its meeting held between 24 and 26 March 2014, but the reform can come into force beginning in 2016 at the earliest. According to this possible amendment, the above conditions stated in Article 8(5) will be considered met if the vehicle meets the requirements mainly of the ECE regulations. The amendment of the Vienna Convention, i.e. the reference to the ECE Regulations, would clear the way for further levels of automation.

Title insurance protects When there are questions about a property deed, a special kind of insurance can protect investors and prevent conflicts with lawyers. GARY MORRELL

Somewhere at the nexus of the law business, real estate and insurance, Title Insurance (TI), commonly defined as “indemnity insurance against financial loss from defects in title to property”, is important in a property market like Hungary’s. “TI products can be issued for the benefit of owners, lenders or both, reduce risk in a variety of transactions, from purchase and development through to refinance and restructure. In an increasingly risk adverse market, the product provides assurance and security for lenders,” said Andrew Jackson, Managing Director of First Title Europe, who set up First Title CEE and began working in TI in Hungary and Central Europe about ten years ago. TI is seen as insuring against such issues as missing title documentation, third party rights, restitution claims, corporate defects, breach of legislative requirements, planning risks, registration gap, faulty public tender process, and illegal privatization process.

WHO WILL BE LIABLE? Another legal issue with respect to autonomous vehicle systems is liability: since a computer takes over control of the vehicle from the human driver, the human driver becomes a passenger. It is a fact of life that 90% of road accidents are caused by human error. It is, however, currently unclear how a differentiation should be made between human error and computer error, e.g. did the computer hand over control of the car to the driver too late or did the driver not react in time after the handover? It is questionable how applicable the traditional liability regime is, which holds the driver or operator of a vehicle liable. While some people think that the manufacturer’s product liability will come to the fore, others say that autonomous systems do not make any difference to the strict liability of the driver or operator of a vehicle. If the operator’s strict liability remains a key factor in the Hungarian legislation, it will be the task of the Hungarian High Court to determine the scope of strict liability for the operation of autonomously driven cars.

www.noerr.com

Andrew Jackson, Managing Director of First Title Europe. “In terms of how the market has changed, in 2005, 2006 and 2007 there was a whole wall of capital coming over to CEE because of the availability and liquidity in the market, and Central European countries joined the EU with the resulting optimism and growth. So as capital was rushing in, lawyers involved in transactions were identifying certain issues that were a block to deals going through, and we insured against some issues that were identified in the due diligence reports. Clearly there was a different profile of investors at that time who took a lot of risks and often did not undertake good underwriting, but

diligent investors used our product to cover specific risks,” added Jackson. It is argued that TI can help a company to get a mortgage at a better price, and can give equity investors more comfort by providing insurance. The issues in Hungary are around capital markets, for example when you have a counter party that cannot give an open warranty, if they are weak financially or they are a fund that has reached maturity, then insurance is used as a protection. Developers, investors and lenders are using TI more as a capital markets tool. So if it is a fund that has reached maturity then they use TI to facilitate a clean exit. The question is: “If I pay a premium, then do I have a better economic advantage?” There has been an evolution of the product over the last ten years. First Title defines its role as working hand−in−hand with lawyers. In this way a lawyer prepares the legal opinion and for this he has professional indemnity insurance, so that in the event of a problem a client will look to sue the lawyer to seek recovery against the legal opinion. However, the reality is that the opinion has caveats that tend to push the risk back on the client. In order to make a claim on the personal insurance cover of the lawyer, negligence has to be proven, which is difficult to do because it is not necessarily the case that the lawyer is negligent; information can come up later and the lawyer may have no way of knowing this. A TI policy insures against the title, the ownership generally, covered risks specifically or a combination of both and in the event of a claim, loss not negligence, has to be demonstrated. The cost of TI is put at between 10 basis points and 1% of the deal value. But typically First Title

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EXPERT OPINION

Compensation claims against the State for a breach of EU laws Balázs Kutasi Senior Associate GIDE LOYRETTE NOUELD’ORNANO IRODA

First Title defines its role as working hand-in-hand with lawyers. In this way a lawyer prepares the legal opinion and for this he has professional indemnity insurance. charges between 15−20 basis points of a transaction. In CEE the TI market has developed over the last ten years, so First Title tends to be approached by existing and new clients and the law firms that they cooperative with. The legal framework around title and ownership is regarded as being quite good in Hungary and almost in line with Western European standards. The company has been working closely with the investor Bluehouse Capital, as it is a condition within the fund that it uses TI. This is seen as a standard rather than due to problems or issues with what it buys. Similarly, First Title worked with Hetman when it acquired Alkotás Point from Aviva. The fund had reached maturity so it did not want to give any representations (also known as reps) and warranties (the assertions that a buyer and/or seller make in a purchase and sale agreement); First Title was able to provide a wrap of TI ensuring against unknowns. “Clearly the number one risk in Hungary is the political risk, although we can’t insure against political risk. However, you can provide TI to a municipality that has sold a building to the private sector, and the municipality has not followed the correct tender procedure. If the

political framework changes, then some of these transactions could be overturned. Sometimes there is a problem of the underlying structure of title, whether this is a long−term usage right or one that can make investors more cautious, and we can help them overcome these concerns. We have also had a number of investors exit because funds have reached maturity and they are not in a position to provide reps and warranties. Some private equity investors have TI as part of their underwriting criteria. TI is part of their overall acquisition strategy and due diligence procedure, whether there is a problem or not,” commented Jackson. “The Hungarian land registry is quite good; it is on−line and pretty reliable. However, the government has changed the law and now title can be challenged up to three years after the conveyance, which does create some uncertainty for investors. The law was changed to prevent retail owners of real estate being cheated, but it has had this other impact on institutional investors, creating more risk. But that risk is relatively manageable, ” he continued. Restitution is no longer a real problem in Hungary. Although Slovakia, Czech Republic and Poland are still dealing with the issue. From the total commercial transactions concluded this year around 40% of these have insurance, and the penetration is increasing according to First Title. This compares to Poland and Czech Republic, where 70% of transactions are insured. These are more liquid markets, and there are more transactions with two or three law firms doing most of the work in these jurisdictions, and they are advocates of using TI as part of a deal.

The State’s basic function is to impose new laws and to change old ones in order to fix problems for the future. The economic stakeholders must always try to adapt to the changing rules of play – this is a risk that all investors have to live with. However, there may be cases when a change in law makes it impossible to maintain a certain business activity, or results in serious disadvantages in relation to competitors. The new Civil Code of Hungary seems to let the genie out of the bottle, as it suggests a new litigation strategy for disappointed businesses seeking compensation.

ntil now, Hungarian judicial practice did not seem to accept the concept of the State’s liability for losses incurred due to legislative changes. Pursuant to the Supreme Court of Hungary, compensation for losses caused by the public administration was limited to administrative decrees taken in respect of individuals. No compensation was payable if the losses resulted from laws having a general effect. The Supreme Court found in several cases that the lawmakers enjoyed full immunity from damages, even if it turned out later that a law was breaching the constitution. Although the referred rulings originate from the time before Hungary joined the EU in 2004, we are not aware of any successful attempt in front of the domestic courts since then to challenge the concept of the State’s immunity for lawmaking. For an investor feeling deprived of his property, the only possibility was to turn to international judicial forums, such as the European Court of Human Rights (ECHR) located in Strasbourg, or, in the case of international investors, to the International Centre for Settlement of Investment Disputes (ICSID) located in Washington. A potential domestic litigation option could have been to base a compensation claim on the “Francovich judgement” of the Court of Justice of the European Union (hereafter: the “CJEU”). In this judgement, the CJEU stated that private individuals and companies are entitled to claim

reparation from a Member State of the EU for a loss or damage sustained as a result of the Member State’s failure to comply with EU law. Through this judgement and consequent rulings, the CJEU established the principle of state liability. The new Civil Code seems to remind its readers of this legal remedy. Although not in the main body of the new Civil Code, but in its official ministerial reasoning, it is expressly stated that compensation claims might be initiated against the State if a legislative act breaches the Constitution or obligations imposed by EU law. The reasoning says that the intention of the Civil Code was to change the Hungarian court practice that had been refusing such claims in the past. Concerning the conditions of State liability, the CJEU has laid down the basic conditions, while leaving it to the national courts to assess whether or not those conditions apply. Firstly, the breach must be obvious and sufficiently serious. This condition is met if the breach was already established as a result of a prior infringement procedure initiated by the Commission, or if the subject matter was already settled by prior case-law. Secondly, a direct causal link must exist between the breach of EU law and the loss or damage. In addition to that, Hungarian courts require that the injured party should prove the exact amount of the loss of profit or damage suffered. According to the CJEU, it should be irrelevant which State organ is liable for the breach, and as to whether the State acted in good faith (i.e. the liability is objective). If the claimant is successful in proving all the conditions, then the State must fully indemnify its losses, including the loss of profit. It must be noted that, as opposed to this procedure, the ECHR located in Strasbourg awards only a “just satisfaction” that is not always equal to the loss of profits. To conclude, the new Civil Code seems to open the possibility for anybody to initiate compensation claims against the State in front of domestic courts, in case a legislative act breaches EU law and causes losses. Since several infringement procedures are pending against Hungary in EU law forums, it cannot be excluded that the liability of the State might be sought on that basis in front of Hungarian courts.

www.gide.com

NOTE: ALL ARTICLES MARKED EXPERT OPINIONS ARE PAID PROMOTIONAL CONTENT FOR WHICH THE BUDAPEST BUSINESS JOURNAL DOES NOT TAKE RESPONSIBILITY

s clients, lawyers

Budapest Business Journal | May 22 – June 04, 2015

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Budapest Business Journal | May 22 – June 04, 2015

A lawyer’s-eye view of FX loan battles extent. Who should be responsible for that increase? Who should bear the damages of that? Why did banks not calculate with this possibility? The banks have a professional responsibility for the present situation. Hungarian society expected that the banks should shoulder that responsibility by themselves, or by court decisions, or by the new legal acts. It is not what happened. Now banks have to return to their clients only that money collected in an evidently dishonest way. All the exchange rate risks are still taken by the customers, although in most cases they were not aware of the level of risk that they were bearing.

Dr. Szilvia Drimál of Drimál Law Office has been representing borrowers who said they were saddled with unbearable foreign− exchange loans. She talks about the legal battles of the last few years and the impact of new legislation. ZSUZSA SZABÓ

How have the legislative changes on FX loans reshaped the legal

industry? A: In no way: Lawyers are seeking the legal breaches, those legal arguments on the basis of which FX−loan agreements may be contested even after the recent legislative changes. The volume of FX−loan lawsuits is not such that it could cause a real reshaping of the market.

Many law firms have received requests from unsatisfied borrowers about the expensive consequences of exchange−rate fluctuations in recent years. The borrowers sought restitution from the banks and the banks sought to defend against compensating clients. Which side has your law firm has taken, and why? A: Those law firms that represented the state or the banks in the legal actions came from a small group. All the other law firms have the possibility to be contacted by desperate debtors who need help and advice to solve their problems caused by FX loans. I am one of these attorneys.

Dr. Szilvia Drimál.

Can banks be held responsible regarding highly increased expensive foreign−currency mortgages? A: Banks are financial service companies and are traditionally expected to be

“Lawsuits can only be started on the basis of the law. In this case the law is unfair. I am not sure that further lawsuits are the instruments to resolve these problems.” in the possession of special financial knowledge and instruments needed to manage risks, which are hardly foreseeable conditions, and decide if a loan applicant is acceptable, or a financial product is ready to be marketed. In the case of FX loans, the problem is that the CHF/HUF exchange rates increased substantially, to an unforeseeable

In your view, has the latest law on the mandatory conversion of FX loans into HUF loans at current market rates brought a solution for the borrowers, or can further lawsuits be expected on this issue? A: No, it hasn’t: As I have already mentioned, the main problem with FX−loans is the extreme exchange rate. The latest laws obliged the customers to bear all the damages deriving from exchange rate changes until the date of conversion on the rates of November 7, 2014. In most cases it means that the debtors now owe the banks 150−200% as much money as they effectively received from the bank 5−10 years ago, although they paid the installments meanwhile. Borrowers and law firms are looking for possibilities to fight against the conversion of FX loans, as it is socially unfair and the burden on the customers is simply unbearable. People will lose their homes. Lawsuits can only be started on the basis of the law. In this case the law is unfair. I am not sure that further lawsuits are the instruments to resolve these problems.

Before the changes in the law, there was a lack of precedent and limited legal coverage for borrowers in these cases. How were law firms able to help?

A: Before the recent legal amendments, attorneys referred to the unlawful regulations of the loan contracts and asked for the cancellation of the invalid contract articles in lawsuits. Application of the law developed in that way. Developments created the basis of the recent legislation. But legal development did not have enough time to resolve all the unlawfulness. Legislation simply did not consider some important questions, including the responsibility for the exchange rate changes and the related risk management. The new legislation changed the legal circumstances and by turning the FX−loans into HUF loans at a defined rate declared that the responsibility for the exchange rate changes should be entirely held by the customer. The new acts amended the loan contracts by the power of the law, without the need of the approval of the contractual parties. It is the law. Attorneys and courts apply the law. So probably everyone feels that the situation is not correct; there is no real help on a legal basis.

To what extent have the requests for legal advice services increased in these last couple of years? A: As the exchange rate worsened for debtors, more of them asked for legal advice. The extent depended on the law firm specializing itself in the very special field of FX−loan contract law. There are/were law firms which took some hundreds of legal actions against banks based on a common template of statement of claim. But it is really not general; most law firms gave advice to their clients and brought lawsuits only if the clients had no other option.

Regarding suing banks under FX loan agreements, how many successful lawsuits resulted from your company? A: I usually did not bring lawsuits against banks. I carried out negotiations with them, and I described our objections in a letter informing them what they could

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EXPERT OPINION

New trends in construction contracts Eszter KamocsayBerta, LL.M. (Vienna) Managing partner KCG PARTNERS LAW FIRM The contractors are still generally punished under the commonly used contracting mechanisms in Hungary instead of being motivated, although in Western Europe contractual clauses facilitating the cooperation of the contractors are already widely applied – as highlighted in the sector specific summary of KCG Partners Law Firm. Although in the last year the construction sector, by reaching an annual 26.7% increase, has performed well from a quantitative perspective, the sector specific contractual safety is still below the EU level. According to the summary of KCG Partners Law Firm, one of the reasons for this difference is that contract templates are still commonly applied and several times reapplied in the sector, and such contracts primarily punish the non-contractual performance of the contractor instead of motivating good performance. Since construction investments may typically be carried out only under the cooperation of several contractors specialized in different sectors, well-functioning contractual mechanisms tailored to the given project would be crucial to interconnect the contractors’ work and support their cooperation. “Traditional Hungarian construction contracts usually apply different provisions for the performance of each contractor instead of handling the works in an interrelated way. This is an absolutely obsolete, inefficient structure which generates complex legal disputes if difficulties arise,” outlines Eszter Kamocsay-Berta, managing partner of the KCG Partners Law Firm. It is a frequent mistake that instead of looking for an immediate solution, the parties postpone the resolution of their dispute to a later date, so that the possible disputes do not obstruct the construction process. This strategy is however wrong, since this is why the impact of the non-contractual performance on completion time and budget cannot be recognized in due time. In such cases the contractors face the sanctions regulated by the construction contracts, like late performance penalties, or penalties for defective performance, or even deductions for defects by construction closing. It occurs in numerous cases that the rights and obligations negotiated at the closing of the project turn into financial and settlement disputes, or worse, terminate

in court. Investors and contractors could certainly also do a lot to establish a contractual system that ensures the successful completion of an investment. Thus, in addition to the traditional contractual securities (such as phased payments of contractor’s fee upon reaching the milestones set out in the time schedule, good performance retentions, good performance guarantees or penalties), other forward-looking instruments could have an enhanced role during the construction period. These instruments are for example the “real-time” project management method, the key points of which are the continuous communication and the active contract management. The realtime project management instruments enable the immediate, continuous and safe recording of the events of the construction process, the immediate access to the recorded data from anywhere with more equipment enabled. Such instruments may also show the possible impact of a proposed additional work on the construction schedule and on the investment costs. KCG Partners’ experience is that incentive schemes are getting more and more popular worldwide, whereby instead of imposing penalties, “benefits” are offered in the case of the successful execution of the projects. Incentive mechanisms show that the communication and cooperation between the contractors is essential for the successful completion of the project. In Western Europe, the idea of joint risksharing is already an established practice. In this case the motivating factors for the parties for the increased cooperation are the shares obtained, in a portion determined before, from the savings achieved during the construction, or, on the contrary, bearing the possible losses jointly. Establishing a bonus framework is also a commonly used motivation tool, from which the contractors can also benefit from the successful implementation of the completed investment. Last but not least, the contractors can be motivated for continuous and outstanding performance if they may share the social appreciation, the “glory” derived from a major investment and their firm names can be mentioned in connection with the investment. Unfortunately major investors usually limit this possibility by strict regulations, and they do not consider that publicity may have a huge incentive force that inspires better performance.

www.kcgpartners.com

NOTE: ALL ARTICLES MARKED EXPERT OPINIONS ARE PAID PROMOTIONAL CONTENT FOR WHICH THE BUDAPEST BUSINESS JOURNAL DOES NOT TAKE RESPONSIBILITY

expect if they sued my client. If a bank Has the increased activity initiates the lawsuit, it – and not my from FX loan cases driven client – must advance the expenses and up demand, and prices for the bank has to prove its statements, local law firms? not my client – this is important. In A: Not at all: As I have already mentioned, law the cases where firms working I notified the for banks bank of our objections, none “Debtors are usually in a very bad and the state of the banks are few, most took any kind financial situation, so they are not attorneys work of legal action for the debtors. against my able to pay high legal fees; often Debtors are usually in a very clients or their they are not even able to pay the bad financial guarantors or situation, so the owners of general legal fees.” they are not the mortgaged real estate. Most able to pay of my clients high legal fees; chose that way instead of suing. often they are not even able to pay the general legal fees. To work on What about the whole these cases it is necessary to create “legal market” specialized low fixed prices according to the type in FX loan agreement of case (legal advice, writing letters, lawsuits). cases? How did those cases go? A: Generally only a small part of Concerning legal advice the lawsuits of debtors initiated by and bringing a lawsuit in an law firms were successful, but these FX case, what kinds of legal successes developed the application of the law, so they were important costs are borrowers facing? successes. The new law suspended all A: The first meeting – looking over the these lawsuits; they could continue documents, checking the possible legal in these weeks, after receiving avenues – usually costs HUF 10,000− the bank settlements from the 30,000. Representation in a lawsuit debtors, but in completely new legal is about HUF 100,000−200,000 at circumstances. Budapest law firms in these cases.

Budapest Business Journal | May 22 – June 04, 2015

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30 3

Budapest Business Journal | May 22 â€“ June 04, 2015

Law firms with international affiliations NAME OF ASSOCIATE NON-HUNGARIAN LAW FIRM OR COOPERATION NETWORK WORLD HQ ESTABLISHED

NO. OF OFFICES WORLDWIDE YEAR HUNGARIAN OFFICE ESTABLISHED

TOP LOCAL EXECUTIVE ADDRESS PHONE FAX EMAIL

CMS Cameron McKenna LLP London 1779

59 1989

Gabriella Ormai 1053 Budapest, KĂĄrolyi utca 12. (1) 483-4800 (1) 483-4801 budapest@cms-cmck.com

â€“

)UHVKĂ€ HOGV Bruckhaus Deringer LLP London 1743

28 2007

Ulrike Rein 1053 Budapest, KĂĄrolyi utca 12. (1) 486-2200 (1) 486-2201 RIĂ€ FH#RSSHQKHLPOHJDO FRP

Dentons Europe LLP London 2013

More than 75 2015(2)

IstvĂĄn RĂŠczicza 1061 Budapest, AndrĂĄssy Ăşt 11. (1) 488-5200 (1) 488-5299 budapest@dentons.com

DLA Piper UK LLP London 2006

79 1988

AndrĂĄs Posztl 1124 Budapest, CsĂśrsz utca 49â€“51. (1) 510-1100 (1) 510-1101 budapest@dlapiper.com

CHSH - Cerha Hempel Spiegelfeld Hlawati Partnerschaft von RechtsanwĂ¤lten OG Vienna 1921

8 2004

$WWLOD 'H]VĹƒ TamĂĄs Polauf 1011 Budapest, )Ĺƒ XWFD Â˛ (1) 457-8040 (1) 457-8041 RIĂ€ FH#FKVK KX

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COMPANY WEBSITE

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RANK

Ranked by number of attorneys (with license to practice) in Hungary on May 1, 2015

CMS CAMERON MCKENNA LLP HUNGARIAN OFFICE www.cms-cmck.com

OPPENHEIM ĂœGYVĂ‰DI IRODA www.oppenheimlegal.com 41

â€“

RĂ‰CZICZA DENTONS EUROPE LLP www.dentons.com 40(1)

9(1)

11(1)

HORVĂ TH AND PARTNERS DLA PIPER www.dlapiper.com/hu/hungary 38

&+6+ '(=6Ĺ‚ e6 7Ă‰56$, ĂœGYVĂ‰DI IRODA ZZZ FKVK FRP HQ RIĂ€ FHV budapest.html 5

â€“

NOTES: (1) Data as of May 4, 2015. (2) Dentons (formerly Salans) has been in Hungary since 2006.

As well as providing legal expertise and traditional lawyering skills, law ďŹ rms need continuously to adapt and explore new ways to help their clients achieve their business objective and deliver

C H AL LE NG ING CON S ERVATIVE

results. Oppenheim is one of Central and Eastern Europeâ€™s most experienced and innovative law ďŹ rms.

Minds Open

www.oppenheimlegal.com

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NO. OF OFFICES WORLDWIDE YEAR HUNGARIAN OFFICE ESTABLISHED

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EuroJuris, Legalink, Legus, TerraLex, World Service Group, Dorda Brugger Jordis-Best Friends, Biolegis – –

András Szecskay 1055 Budapest, Kossuth Lajos tér 16–17. (1) 472-3000 (1) 472-3001 info@szecskay.com

PricewaterhouseCoopers Legal LLP London 1999

100 (approx.) 2000

László Réti 1055 Budapest, Bajcsy-Zsilinszky út 78. (1) 461-9888 (1) 461-9898 rap.central@ hu.pwclegal.com

Weil, Gotshal & Manges LLP New York 1931

20 1991

David Dederick 1054 Budapest, Szabadság tér 7. (1) 301-8900 (1) 301-8901 david.dederick@weil.com

8 2000

Csilla Andrékó 1054 Budapest, Széchenyi rakpart 3. (1) 428-4400 (1) 428-4444 marketing@kinstellar.com

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COMPANY WEBSITE

Budapest Business Journal | May 22 – June 04, 2015

SZECSKAY ÜGYVÉDI IRODA www.szecskay.com

RÉTI, ANTALL ÉS TÁRSAI ÜGYVÉDI IRODA PRICEWATERHOUSECOOPERS LEGAL

–

www.retianantallpartners.hu

1992

SIEGLER ÜGYVÉDI IRODA / WEIL, GOTSHAL & MANGES LLP www.weil.com 24

ANDRÉKÓ KINSTELLAR ÜGYVÉDI IRODA

Kinstellar 23

KAJTÁR TAKÁCS HEGYMEGI-BARAKONYI BAKER & MCKENZIE ÜGYVÉDI IRODA 7

www.bakermckenzie.com/hungary

Baker & McKenzie LLP Chicago 1949

77 1987

Zoltán Hegymegi-Barakonyi 1051 Budapest, Dorottya utca 6. (1) 302-3330 (1) 302-3331 budapestinfo@ bakermckenzie.com

–

International Alliance of Law Firms London 1990

62 1996

Tamás Szabó 1132 Budapest, Váci út 20. (1) 288-8200 (1) 288-8299 tamas.szabo@sz-k-t.hu

Clifford Chance London 1987

36 1991

Péter Lakatos 1075 Budapest, Madách Imre út 14. (1) 429-1300 (1) 429-1390 mail@lakatoskoves.hu

SZABÓ, KELEMEN ÉS TÁRSAI ÜGYVÉDI IRODA www.sz-k-t.hu 21

2008

www.kinstellar.com

LAKATOS, KÖVES ÉS TÁRSAI ÜGYVÉDI IRODA www.lakatoskoves.hu 9

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NO. OF OFFICES WORLDWIDE YEAR HUNGARIAN OFFICE ESTABLISHED

Lex Mundi Houston, USA 1989

600 1991

Pรฉter Berethalmi 1126 Budapest, Ugocsa utca 4/B (1) 487-8700 (1) 487-8701 EXGDSHVWBRIร FH#QW KX

Wolf Theiss Rechtsanwรคlte GmbH Vienna 1957

13 2007

Zoltรกn Faludi 1085 Budapest, Kรกlvin tรฉr 12โ 13. (1) 484-8800 (1) 484-8825 budapest@wolftheiss.com

Eversheds LLP London 1988

55 1987/1999

ร gnes Szent-Ivรกny 1026 Budapest, Pasarรฉti รบt 59. (1) 394-3121 (1) 392-4949 RIร FH#HYHUVKHGV KX

Squire Patton Boggs (US) LLP Washington 1890

44 1991

ร NRV (Uล V 1051 Budapest, Szรฉchenyi Istvรกn tรฉr 7โ 8. (1) 428-7111 (1) 428-7100 budapest@squirepb.com

Conference Bleue Alliance Brussels 2006

ยป

Kornรฉlia Nagy-Koppรกny, Istvรกn Varga 1051 Budapest, Vigadรณ utca 2. (1) 302-9050 (1) 302-9060 knplaw@knplaw.com

16 1990

Zoltรกn Nรกdasdy, Jรถrg K. Menzer 1011 Budapest, )ล XWFD ยฒ (1) 224-0900 (1) 224-0495 recepcio@noerr.com

ยป

6 2002

Arne Gobert 1061 Budapest, Andrรกssy รบt 2. (1) 270-9900 (1) 270-9990 RIร FH#JISOHJDO FRP

ADVOC, ELA โ

ยป

Istvรกn Gรกrdos 1056 Budapest, Vรกci utca 81. (1) 327-7560 (1) 327-7561 postmaster@gfmt.hu

NAGY & TRร CSร NYI ร GYVร DI IRODA 10

www.nt.hu

FALUDI WOLF THEISS ร GYVร DI IRODA 11

www.wolftheiss.com

โ

Sร NDOR SZEGEDI SZENT-IVร NY KOMร ROMI EVERSHEDS ร GYVร DI IRODA 12

www.eversheds.hu

โ

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32 3

(5ล 6 h*<9e', ,52'$ SQUIRE PATTON BOGGS (US) LLP www.squirepattonboggs.com 13

โ

KNP LAW NAGY KOPPANY VARGA AND PARTNERS www.knplaw.com 15

โ

2007

NOERR & Tร RSAI IRODA www.noerr.com 15

โ

Noerr LLP Munich 1950

BWSP GOBERT ร S Tร RSAI ร GYVร DI IRODA www.gobertpartners.com BWSP, Globalaw 13

1994/2012

Gร RDOS, Fร REDI, MOSONYI, TOMORI ร GYVร DI IRODA

โ

www.gfmt.hu

ALLEN & OVERY www.allenovery.com

PARTOS & NOBLET ร GYVร DI IRODA IN CO-OPERATION WITH HOGAN LOVELLS INTERNATIONAL LLP www.hoganlovells.com

ยป

ยป ยป

1993

ยป

Zoltรกn Lengyel 1075 Budapest, Madรกch Imre รบt 13โ 14. (1) 483-2200 (1) 268-1515 marketing_budapest@ allenovery.com

Hogan Lovells International LLP London, Washington 1899 / 1904

47 2006

Lรกszlรณ Partos 1051 Budapest, Vรถrรถsmarty tรฉr 7โ 8. (1) 505-4480 (1) 505-4485 RIร FH#KRJDQORYHOOOV FR KX

Allen & Overy 12

โ

1992

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LIDC, ECTA, DACH

Katalin Szamosi 1062 Budapest, Andrássy út 113. (1) 461-1000 (1) 461-1099 mailbox@sbgk.hu

Schönherr Rechtsanwälte GmbH Vienna 1950

13 2008

Kinga Hetényi 1024 Budapest, Buday László utca 12. (1) 345-8778 (1) 345-8777 RIÀFH KXQJDU\# schoenherr.eu

bnt attorneys-at-law – –

10 2003

Norbert Varga 1143 Budapest, Stefánia út 101–103. (1) 413-3400 (1) 413-3413 info@bnt.eu

bpv LEGAL – 2006

7 2000

Andrea Jádi Németh 1051 Budapest, Vörösmarty tér 4. (1) 429-4000 (1) 429-4001 budapest@bpv-jadi.com

–

International Business Law Consortium Salzburg, Austria 1989

89 1997

Chrysta Bán, Péter S. Szabó 1051 Budapest, József nádor tér 5–6. (1) 266-3522 (1) 266-1010 RIÀFH#EDQVV]DER KX

–

International Lawyers Network Westwood, USA 1988

91 1999

Pál Jalsovszky 1124 Budapest, Csörsz utca 41. (1) 889-2800 (1) 886-7899 RIÀFH#MDOVRYV]N\ FRP

–

Mackrell International Woking, UK 1987

160 1990

András Moldován 1051 Budapest, Dorottya utca 1. (1) 328-6010 (1) 328-6011 info@moldovan.hu

József K. Tálas 1051 Budapest, Bajcsy-Zsilinszky út 16. (1) 457-0550 (1) 214-8419 RIÀFH#VDUDQGSDUWQHUV KX

17 1993

Francois d'Ornano, Ákos Kovách, Franck Audran 1051 Budapest, Széchenyi István tér 7–8. (1) 411-7400 (1) 411-7440 hungary@gide.com

Zoltán Martonyi 1125 Budapest, Lóránt utca 7/C (1) 999-0140 (1) 267-6390 info@boltonmay.com

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Budapest Business Journal | May 22 – June 04, 2015

SBGK ÜGYVÉDI IRODA www.sbgk.hu 15

–

» »

1969

SCHOENHERR HETÉNYI ATTORNEYS AT LAW www.schoenherr.eu 12

bnt ügyvédi iroda www.bnt.eu

–

bpv JÁDI NÉMETH ÜGYVÉDI IRODA www.bpv-jadi.com 11

BÁN, S. SZABÓ & PARTNERS ÜGYVÉDI IRODA

–

www.bansszabo.hu

JALSOVSZKY ÜGYVÉDI IRODA www.jalsovszky.com 11

–

MOLDOVÁN ÉS TÁRSAI ÜGYVÉDI IRODA www.moldovan.hu 11

–

SÁR ÉS TÁRSAI ÜGYVÉDI IRODA www.sarandpartners.hu 16

EPLAW 11

–

» »

1998

GIDE LOYRETTE NOUEL D'ORNANO IRODA www.gide.com 10

MARTONYI ÜGYVÉDI IRODA www.boltonmay.com

–

Gide Loyrette Nouel A.A.R.P.I. Paris 1920

Bolton May London

2008

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NO. OF OFFICES WORLDWIDE YEAR HUNGARIAN OFFICE ESTABLISHED

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â€“

Sichenzia Ross Friedman Ference LLP New York 1998

3 2010

Ă gnes FĂĄbry 1024 Budapest, FĂŠny utca 16. (1) 336-0443 (1) 336-0444 kvago@srff.com

â€“

Prae Legal Cologne 2013

â€“

European Law Firm Eindhoven, the Netherlands 1989

â€“

RĂśdl & Partner GbR WirtschaftsprĂźfer, Steuerberater, RechtsanwĂ¤lte NĂźrnberg 1977

TaylorWessing e|n|w|c Natlacen Walderdorff Cancola RechtsanwĂ¤lte GmbH Vienna 1986

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34 3

SRFF / FĂ BRY Ă‰S TĂ RSAI ĂœGYVĂ‰DI IRODA www.srff.com 17

BURAI-KOVĂ CS Ă‰S PARTNEREI ĂœGYVĂ‰DI IRODA

â€“

www.burai-kovacs.hu

KAPOLYI ĂœGYVĂ‰DI IRODA www.keknet.hu

SĂ RKĂ–ZY RĂ–DL & PARTNER ĂœGYVĂ‰DI IRODA RĂ–DL & PARTNER ĂœGYVĂ‰DI TĂ RSULĂ S www.roedl.de

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BĂ NKI AND PARTNERS LAW FIRM IN COOPERATION WITH TAYLORWESSING e|n|w|c NATLACEN WALDERDORFF CANCOLA RECHTSANWĂ„LTE GMBH 19

www.taylorwessing.com

DELOITTE LEGAL 6=$59$6 (5'Ĺ‚6 e6 7Ă‰56$, ĂœGYVĂ‰DI IRODA

â€“

150 1989

JĂĄnos Burai-KovĂĄcs 1062 Budapest, AndrĂĄssy Ăşt 100. (1) 354-4300 (1) 354-4399 RIĂ€ FH#EXUDL NRYDFV KX

27 1998

JĂłzsef Kapolyi 1051 Budapest, JĂłzsef nĂĄdor tĂŠr 5â€“6. (1) 267-3975 (1) 267-3949 kek@keknet.hu

Âť

26 1995

Orsolya BĂĄnki 1051 Budapest, Dorottya utca 1. (1) 327-0407 (1) 327-0410 budapest@ taylorwessing.com

67 countries 2009

*iERU (UGĹƒV 1068 Budapest, DĂłzsa GyĂśrgy Ăşt 84/C (1) 428-6800 (1) 428-6801 deloitteinhungary@ deloittece.com

â€“

MSI Global Alliance London 1990

125 1992

Alice Dessewffy 1061 Budapest, AndrĂĄssy Ăşt 43. (1) 413-3340 (1) 413-3341 RIĂ€ FH#GHVVHZII\ FRP

Bird & Bird LLP London 1846

27 2008

Peter Knight 1054 Budapest, SzabadsĂĄg tĂŠr 14. (1) 799-2000 (1) 799-2088 budapest@twobirds.com

125 / 75 2003

Marianna Csabai 1126 Budapest, Tartsay Vilmos utca 3. (1) 488-7008 (1) 488-7009 info@clvpartners.com

â€“

www.deloittelegal.hu

Deloitte Legal s.r.o. Slovakia

Âť

DESSEWFFY Ă‰S DĂ VID VALAMINT TĂ RSAIK ĂœGYVĂ‰DI IRODA www.dessewffy.com 8

KNIGHT BIRD & BIRD IRODA www.twobirds.com

CLV PARTNERS CSABAI AND PARTNERS ĂœGYVĂ‰DI IRODA

â€“

Ius Laboris, Multilaw

Âť

2001 / 1990

http://clvpartners.com/hu

FORGĂ“, DAMJANOVIC Ă‰S TĂ RSAI ĂœGYVĂ‰DI IRODA

â€“

SĂĄndor SĂĄrkĂśzy, Stefan Sieferer 1062 Budapest, AndrĂĄssy Ăşt 121. (1) 814-9880 (1) 814-9898 budapest@roedl.hu

Alfa International Chicago 1980

145 2000

ZoltĂĄn ForgĂł, GĂĄbor Damjanovic 1123 Budapest, AlkotĂĄs utca 17â€“19. (1) 214-0080 (1) 214-0078 RIĂ€ FH#IGODZ KX

â€“

MME Legal AG ZĂźrich, Independent Legal Alliance (ILA) â€“ â€“

10 2014

Eszter Kamocsay-Berta 1054 Budapest, SzĂŠchenyi rakpart 8. (1) 301-3130 (1) 269-0016 reception@kcgpartners.com

www.fdlaw.hu

KCG PARTNERS ĂœGYVĂ‰DI TĂ RSULĂ S www.kcgpartners.com 21

â€“

WWW.BBJ.HU

â€“

Norton Rose LLP London 1794

30 1998

KĂĄroly Varga 1065 Budapest, Bajcsy-Zsilinszky Ăşt 53. (1) 302-9090 (1) 302-9092 halcsi@t-online.hu

Beijing Yingke Law Firm Beijing 2001

35 2010

Rupert VĂĄrnai 1037 Budapest, SzĂŠpvĂślgyi Ăşt 141. (1) 920-2040 (1) 247-2120 hungary@yingke.com

â€“

TELFA London 1989

30 2002

Tibor Bihary 1026 Budapest, PasarĂŠti Ăşt 83. (1) 391-4491 (1) 200-8047 RIĂ€ FH#ELKDU\EDODVVD KX

LUTHER Rechtsanwaltsgesellschaft mbH Cologne 1992

18 2014

Attila Fest 1054 Budapest, BĂĄthory utca 8. (1) 791-7060 (1) 791-7065 RIĂ€ FH#IHVWDQGSDUWQHU KX

Âť Âť

Âť

2014

Levente Antal SzabĂł 1031 Budapest, ZĂĄhony utca 7. (1) 796-3600 (1) 796-3636 info@klartlegal.eu

â€“

Warwick Legal International Network London 2001

52 1997

Thomas A. Squarra 1016 Budapest, Avar utca 8. (1) 474-2080 (1) 474-2081 info@squarra.hu

â€“

Studio Legale de Capoa e Associati Bologna, Italy 1986

6 2000

Krisztina SallĂł 1055 Budapest, HonvĂŠd utca 38. (1) 312-1683 (1) 269-2999 budapest@decapoa.com

â€“

YINGKE VĂ RNAI ĂœGYVĂ‰DI IRODA

NAME OF ASSOCIATE NON-HUNGARIAN LAW FIRM OR COOPERATION NETWORK WORLD HQ ESTABLISHED

TOP LOCAL EXECUTIVE ADDRESS PHONE FAX EMAIL

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7KLV OLVW ZDV FRPSLOHG IURP UHVSRQVHV WR TXHVWLRQQDLUHV UHFHLYHG E\ 0D\ DQG SXEOLFO\ DYDLODEOH GDWD 7R WKH EHVW RI WKH %XGDSHVW %XVLQHVV -RXUQDOÂˇV NQRZOHGJH WKH LQIRUPDWLRQ LV DFFXUDWH DV RI SUHVV WLPH While every effort is made to ensure accuracy and thoroughness, omissions and typographical errors may occur. Additions or corrections to the list should be sent on letterhead to the research department, Budapest Business Journal, 1075 Budapest, MadĂĄch Imre Ăşt 13â€“14., or faxed to (1) 398-0345. The research department can be contacted at research@bbj.hu.

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4 Socialite State may loose dozens of masterpieces A decision in a Washington D.C. court is likely to determine whether 44 valuable pieces of art can still be exhibited in museums in Hungary, or whether they must be returned to the heirs of their private collector. ANDRÁS ZSÁMBOKI

The Herzog art collection court case has recently entered its final, discovery phase, the Budapest Business Journal has learnt from attorneys close to the case. The law suit has been on−going at the U.S. District Court for the District of Columbia since 2010 between the Hungarian State versus David de Csepel, great−grandson of the late Mór Lipót Herzog, one of the greatest art collectors of interwar Hungary. At stake are 44 paintings, together valued at more than $100 million from the one−time Herzog collection. The plaintiffs, namely de Csepel and two other descendants of Herzog, claim the ownership rights of the 44 works of art, which are all exhibited in Hungarian public collections such as the Museum of Fine Arts and the Museum of Applied Arts. Crucial questions related to Hungarian history are also being raised at the current stage of the court process: who stole the art treasures, the Nazis or the Communists? One thing is certain: theft is theft. Hungarian public collections have no acceptable moral grounds on which they ADVERTISEMENT

could keep the property of the Herzog heirs against the heirs’ will. Compared to that, it seems to be a question of secondary importance to whom the expropriation should be attributed: the anti−Semitic Horthy regime, in place until mid−October 1944, or to the anti−bourgeois Communists? From a legal point of view, however, it seems there is a big difference between the two. The plaintiffs are trying to prove that the disputed part of the Herzog collection was treasure looted in the Holocaust. Representatives of the Hungarian state, on the other hand, want to hold Hungarian Communist leaders responsible for the expropriation. “In all earlier cases brought to court in the United States, in which the loss of property could be related to the Holocaust, it was determined that U.S. courts did have the authority to rule,” Péter Komáromy, senior partner of Eversheds law office familiar with the case, told the BBJ. The plaintiffs apparently would like to represent the expropriation of the Herzog art treasures as Nazi theft assisted by complicit Hungarian officials. Opposed to that, the Hungarian state wishes to prove that the expropriation was a Communist move carried out in 1948−1953.

The adventurous story of the Herzog collection The destiny of the Herzog collection goes back to the final years of the Second World War. The first time when many owners of art collections decided to hide their treasures was in 1943, the year when Hungary and Budapest was first bombed by the Soviets. The Herzog heirs joined that trend, hiding many of the paintings in their possession in wine cellars at Budafok outside Budapest. They placed the rest of their art treasures in various private apartments. German troops occupied Hungary on March 19, 1944; Hungary lost her

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sovereignty as a result, but the country’s head of state, Admiral Miklós Horthy, remained in office. Owners of art collections faced radical policies under the occupation: Hungarian authorities, subservient to German demands, ordered the registration and sequestration of art treasures in the possession of persons classified as Jewish according to the racial laws in effect at the time. A state bureau called the Government Commission of Sequestered Jewish Property, headed by Dénes Csánky, was set up in May 1944. All descendants of the art collector Lipót Mór Herzog (who had died in 1934) were considered Jewish, and fell under the effect of the anti−Jewish laws, regardless of the fact that Lipót Mór Herzog and all three of his children had converted to Christianity (i.e. Calvinism) earlier. This meant they were supposed to register their art work as well; they did not do so, but soon after the German occupation an anonymous informer reported them to

El Greco: Agony in the Garden. the authorities. The Herzogs’ art treasures hidden in the Budafok wine cellars were seized by the Hungarian authorities and transported to the Museum of Fine Arts (the director of which was also Dénes Csánky). The Herzogs received a receipt of deposit for each piece of art from the Government Commission, which specified the artwork’s title, description, the owner’s name and the statement that the piece in question was taken into deposit. After the coup d’état of the pro−Nazi Arrow Cross Party headed by Ferenc Szálasi, Csánky continued to serve as head of the Government Commission of Sequestered Jewish Property, and took an active part in the transportation of such property – including valuable works of art

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4 Socialite

Budapest Business Journal | May 22 – June 04, 2015

– to Germany. Four trains were dispatched from Budapest; the first one, carrying part of the Herzogs’ art, did not make it past Szentgotthárd, where its cargo was deposited in the cellars of a local monastery. The remainder of the Herzog collection, carried in the other railway cars, came under the control of American troops around April 1945 in southern Germany. As was always the case in such situations, the seized goods had to be returned to their country of origin under the terms of international agreements – in this case, to Hungary. In the meantime, the Soviet Red Army had liberated the country by April 4, 1945. Soviet troops were looting Budapest, taking many art treasures with them during that year; those items of the Herzog collection that had remained in private apartments since 1943 became the war booty of the Soviets stationed in Budapest in 1945. After liberation, a parliamentary system was briefly restored in Hungary. A coalition government was set up, in which the Communists – now a legal party in Hungary – also participated. The new Ministry of Religion and Public Education, headed by Gyula Ortutay, had to manage the task of returning deposited property such as art treasures to the original owners. Within the ministry, a special commissioner, namely art historian Sándor Jeszenszky, was appointed to handle the issue of restitution. That, however, turned out to be a long−drawn−out process, which went on for years. In the spring of 1948, it was brought to the attention of the authorities that several pieces of art freshly returned to their owners were being transported to Switzerland without the permission of the Hungarian government. As a result, Jeszenszky abruptly stopped the entire process of restitution. In the summer of 1948, the Communist party in Hungary seized power, backed by the Soviet Union. The Sovietization of public life in Hungary accelerated, and legislation lost its independence. On the grounds that two Herzog heirs had abetted/ suborned/sponsored the smuggling of certain art works in their possession to Switzerland during 1948, a court ordered that all members of the Herzog family be deprived of their art, taking those works into state ownership. By that time, however, all members of the Herzog family were living abroad. Between 1950 and 1953, the Museum of Fine Arts catalogued all pieces of the Herzog collection as the museum’s own property. ADVERTISEMENT

Moral considerations In the next phase of the lawsuit, the central issue to be investigated will be whether the art treasures came into the possession of the Museum of Fine Arts thanks to the persecution of Jews in Hungary, or if their expropriation was rather related to the unlawful practices of Stalinism. The judgment of Csánky’s activities is extremely controversial. According to the Holocaust narrative, he acted as a vassal of the German occupiers, assisting them in depriving Jewish people of their property. After the Arrow Cross coup in mid−October 1944, he took an active part in the transportation of Jewish treasures out of Hungary. “This fact determined Csánky’s reputation throughout the whole Communist period,” László Mravik, art historian and expert on art treasures looted in Hungary during and after World War II, reminisced. “This approach, however, conceals the fact that the part of the Herzog collection Csánky took into his ‘care’ were preserved and eventually returned to Hungary, whereas those items of the Herzog collection which had been placed in private apartments throughout Budapest all fell victim to Soviet looting and disappeared from Hungary forever. It is a well−known fact that the Herzog collection in the interwar period consisted of 2,500 works of art; the 44 pieces which the Herzog descendants are now claiming back – a mere fraction of the total – are the ones Dénes Csánky had ‘rescued’ during World War II,” Mravik added. Those are the objective facts. The story, however, has a subjective dimension as well: what did a Hungarian state official in May 1944 think about the sequestration of Jewish treasures. By accurately documenting the deposits, did he intend to cover up his participation in state− administered murder and robbery, or did he want to help preserve the property of people in case they happen to return? Csánky had been friends with some wealthy Jewish art collectors previously, and some of those people had in fact entrusted their collections to Csánky for safekeeping voluntarily, well before the German occupation of Hungary. “In 1944, the Allies landed in Normandy. Csánky at that point might have thought that Germany would lose the war. The other thing to consider is the way Csánky looked after the paintings after leaving Hungary on a

train and taking the art treasures with him in November 1944. Although he surely encountered several situations in which he might have made things easier for himself by selling a few paintings, he never did so between November 1944 and April 1945. On the other hand, being aware of the dangers of transporting art treasures to besieged Germany, he ordered part of the collection to be dug up in a monastery’s cellar in Western Hungary,” Mravik said. The other period that might call for interpretation is that between 1945 and 1948. “The situation orchestrated by Minister of Culture Gyula Ortutay was characterized by a double−faced policy: One principle was that property should be returned to the owners, but the other principle was that owners should be convinced to offer their property up for sale to the Hungarian state,” Mravik explained. The government knew that art treasures were the only significant remaining property of once wealthy Hungarian Jews, or those classified as such under earlier racial legislation. The factories and other large enterprises of the former bourgeoisie had by then either been damaged or nationalized; gold had been taken before 1945; cash and savings had been eaten up by the soaring inflation of 1945−46. “When, in 1946, Minister Gyula Ortutay returned the first transport of art treasures to the Herzogs, he was sitting on his desk shaking a large bag of tingling gold, and asked

the Herzog descendants if they perhaps preferred to offer up the items of their art collection to the Hungarian state,” Mravik narrated. This is how the Hungarian state managed to purchase eight paintings from the Herzog heirs. But that was not the only method. There was a harsher measure too: namely the state supervision of art treasures and the limitations placed on their export or shipping abroad. The ban on shipping art work was definitely part of the bargaining process when it came to determining the price of paintings and exerting a declaration from the owners about the intended sale of their property. The reason why the Hungarian authorities responded so harshly to the disclosed cases of art smuggling is because it had the potential to undermine the whole system of bargaining devised by the Hungarian state. “The Communists applied methods quite different from those used by the coalition governments up until 1948,” Mravik pointed out. They responded to the transportation of art abroad, commissioned by Mrs. István Herzog, by ordering the confiscation of all pieces of the collection from all Herzog heirs. That was when the remaining part of the Herzog collection was taken over by the Hungarian state once and for all. Subsequently, museum curators were instructed from above to catalogue the items of the Herzog collection as the property of their museums.

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4 Socialite

Budapest Business Journal | May 22 – June 04, 2015

EXPERT OPINION

Dubai’s Atlantis, The Palm, for intimate, tailored events

Wine: Szekszárd No longer just Villány’s low−rent neighbor, the region is shining, especially when it comes to Kékfrankos. The Kadarka, however, still has room to improve. ROB SMYTH

NOTE: ALL ARTICLE S M ARKED E XPERT OPINIONS ARE PAID PROMOTION AL C ON TEN T FOR WHICH THE BUDAPE S T BUSINE S S JOURN AL DOE S NOT TAKE RE SP ONSIBILIT Y

Long considered a cheap and cheerful – albeit less sophisticated – alternative to its traditionally more coveted southern neighbor of Villány, Szekszárd is confidently setting sail on its own course with its ever concentrated, and now increasingly complex and polished, reds. Indeed, many of its reds now outshine their Villány counterparts. But before we get onto the full−bodied,

muscular creatures that were unveiled at Szekszárd’s annual tasting in the capital earlier this month at the Corinthia Hotel Budapest, let’s take a look at the Kadarka grape – the lighter and more sensitive side of Szekszárd’s red wine scene. A Kadarka masterclass that preceded the main tasting represented what could politely be described as a real mixed bag of Kadarkas that stretched back to the 2000 vintage. This thin−skinned grape that is synonymous with Szekszárd, and which legend has it was brought to Hungary by

n Dubai, United Arab Emirates, Atlantis, Centre offers a venue for incentive groups, the Palm, HAS long known for unmatched meetings, exhibitions, product launches, conference, banqueting and entertainment gala dinners, celebrity events and weddings. facilities and the largest unique capacity for Perfectly situated for all commercial districts delegates in Dubai. More recently, the hotel including Dubai’s Media and Internet Cities, has also focused on boutique and tailored Dubai Financial Centre and Downtown Burj events for smaller numbers of Meetings, Dubai, the resort has excellent transport incentives, conferences, and exhibitions access and is within a comfortable distance (MICE) delegates. from the other Emirates. “This year we are going to surprise everyone The resort has unrivalled facilities when by focusing on small events,” says Carl it comes to post-meeting activities and Palmlund, Vice President of Group Sales backdrops to special events. ShuiQi Spa & at Atlantis, The Palm. “We are launching a Fitness features 27 treatment rooms offering new “Small Events” section to our sales and bespoke pampering and beauty programmes. events team, focusing on boutique events to The Lost Chambers is an underwater world satisfy smaller delegations with tailored and of avenues and passageways where the ruins and relics of Atlantean life are found unique programmes.” Atlantis, The Palm is perfectly suited to intertwined with over 65,000 marine animals. smaller events of 50-200 delegates with a Adrenalin seekers and water lovers can sophisticated choice of intimate venues that splash out at Aquaventure Waterpark, the are suited to all types of meetings, events number one water attraction in the region & incentives groups. The Palm Grove and featuring dare devil slides and river rapid Nobu Japanese Garden offer stylish outdoor rides; whilst Dolphin Bay is a dolphin options in tranquil garden settings while education centre and interactive marine casual outdoor and evening events can habitat. Guests of Atlantis have unlimited be hosted on the Aquaventure Beach with complimentary access to The Lost Chambers traditional Arabian barbecues and hospitality. and Aquaventure Waterpark. Inside, The Royal Bridge and Grand Atlantis The Royal Towers offers 1,539 guest rooms Suites are perfect for smaller, exclusive and and suites, each with private balconies and intimate gatherings, private tasting events boasting the latest in technology, in-room and bespoke dinners with butler service and amenities and conveniences for business the 20 restaurants cater to group bookings. travellers, including a 32” flat-screen The new outdoor terraces at Michelin star Samsung LCD, digital movies, and Internet restaurants Nobu, Ronda Locatelli and access. What’s more, the Imperial Club is a Rostang, The French Brasserie provide an ‘resort within a resort’ with over 150 rooms excellent atmosphere to sit back and relax and suites, exclusive services and private outdoors. club lounge. For those in search of something The Silk and Spice Ballrooms offer two special, The Lost Chambers Underwater separate spaces with similar flexibility, Suites, Poseidon and Neptune, are three functioning either as one large ballroom storeys high with floor-to-ceiling glass walls or as two or three large rooms. Each in the master bedrooms offering mesmerising can accommodate from 25 delegates in views directly into the Ambassador Lagoon boardroom layout, up to 100 in theatre style FOR INFORMATION, CONTACT: or up to 200 as a reception. With facilities to suit intimate and large groups Tel: +971 4 426 1000 alike, the world-class Atlantis Conference Web: atlantisthepalm.com

The great value and varietally pure 2013 Blaufränkisch from Rust biodynamic winery Feiler-Artinger is just one of many excellent labels available at the recently opened KisBécs wine bar (Németvölgyi út 36-38, entrance from Hollósy Simon utca, www.ausztriaborai.hu), which sells exclusively Austrian wine and light food. Its very well thought out selection has 16 wines available by the glass and 120 by the bottle, offering a great overview of Austrian grapes from whites, such as Grüner Veltliner, Neuburger and Rotgipfler, to reds including the likes of Zweigelt and St. Laurent, and takes in all the regions. Another awesome Austrian wine selection is offered by Drop Shop (Balassi Bálint 27, District V, www.dropshop.hu).

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4 Socialite

Budapest Business Journal | May 22 – June 04, 2015

comes into its own Serbs fleeing Ottoman invaders, produces pale colored reds of very light body and tannin structure, with a trademark playful acidity. Kadarka is a tricky grape in the vineyard and prone to some underwhelming vintages. It is also very much a work in progress and considerable research is currently being carried out to find and establish the best clones. Kadarka is at its classiest, at least in Szekszárd, when its unique spicy character and vibrant red fruit notes are allowed to come to the fore; when it’s covered in an oaky and tannic cloak, Kadarka starts to lose its varietal characteristics.

Clonal research Jáni Márkvárt makes perhaps the most vibrant and dynamic Kadarka for my taste buds. His comes from 10 different clones of low−yielding bush vines planted in 1935 and sees no oak, being fermented and aged in the tank to keep the freshness firmly in focus. Old vines are said to make more sophisticated wines and this is about as complex as it gets for Kadarka, with a plethora of spices, red fruit, rose hip and black pepper all gliding gracefully across the palate. Other top Kadarkas made in a similar vein from Szekszárd come ADVERTISEMENT

from the likes of Heimann and József Vesztergombi (more on this family later), who both channel the spiciness into the glass. Heimann is also involved in clonal research with the Pécs Research Institute, along with Villány powerhouse Sauska. Incidentally, Sauska’s Kadarka comes from Villány’s sultry Ördögárok vineyard and actually has the body and concentration to handle ageing in oak without losing too much of its individual character. Kadarka plays an important supporting role in making Szekszárd’s Bikavér (Bull’s Blood) with just a smidgen in the mix bringing spice, lively aromas and further local flavor to back up the starring role played by the Kékfrankos grape. Indeed, winemakers in the northern region of Eger, which is also famed for its Bikavér, are busy replanting Kadarka in a bid to spice up their blends. Kadarka was culled from Eger under communism for its inability to buy into the collective cause: it simply couldn’t produce huge yields with minimum fuss. Nevertheless, it is with Kékfrankos that the most progress has been made in Szekszárd over the past few years, with the grape now producing increasing bottlings of harmonious medium−bodied single varietal wines oozing juicy sour cherry and Morello cherry aromas and flavors.

Full-bodied Heimann’s Alte Reben (German for old vine) Kékfrankos 2012 has taken the grape to the next level and is at least worthy of sharing the same table with high−end Blaufränkisch from Austria’s Burgenland. Burgenland producers have led the way with this pan−Central European grape and have shown it is capable of greatness. Finally, the Hungarians are catching up now that they realize their future lies with this grape. Szekszárd’s Péter Vida, whose reds are so much more exciting and consistent since he introduced temperature−controlled fermentation a few years back, also impresses with his Hidaspetre 2013. Another quality Kékfrankos, and quite a full−bodied one at that, comes from the Ferenc Vesztergombi winery. Its 2012 has a stunning nose of blueberries alongside sour cherry with lots of weight and depth on the palate.

Flagship blends Kékfrankos is also making its presence felt in some of the key producers’ flagship blends, such as Barbár by Heimann and Regnum by Takler, with its vibrant acidity breathing life into what could otherwise be overly intense offerings. With its more restrained tannins and lower alcohol than the Bordeaux varieties of Cabernet

Sauvignon, Cabernet Franc and Merlot soak up from Szekszárd’s warm climate and loess soils, Kékfrankos can also take the teeth−coating edge and burn off some of the big blends. In fact, Heimann’s Barbár is not quite the barbarian its name suggests, but rather a polished and accomplished specimen of great structure and breeding. Ferenc Vesztergombi does not, however, put Kékfrankos into his flagship blends, the Csaba and Turul cuvées, which nevertheless manage to approach impressive Bordeaux−esque elegance. The 2011 and 2012 Turul (Cabernet Franc and Merlot) Cuvées each achieved the remarkable feat of being awarded five stars in the 2014 and 2015 issues of the Hungarian Wines of Excellence yearbook, respectively. Not bad for what is Vesztergombi’s second top label blend. The 2011 version of the winery’s top blend, Csaba Cuvée, only got three stars in the 2014 edition but is currently drinking beautifully. It’s full−bodied and powerful, but most importantly balanced, with soft and round fruit, classy cassis, various spices and a smooth texture from the ripe tannins. Csaba Cuvée is named after Ferenc’s son, who is heavily involved in the winemaking. Csaba says that although the wine carries his name, it is very much a group effort. Ferenc is the brother of the aforementioned Kadarka maestro József Vesztergombi.