Anti-Corruption in Hungary

Zoltan Hegymegi-Barakonyi* and Janos Puskas* (Baker McKenzie Hungary)

1. Domestic bribery (private to public)

1.1       Legal framework

Bribery of public officials is regulated under Articles 293-294 and 298-300 of Act C of 2012 on Hungarian Criminal Code. Additionally, Act CIV of 2001 on Measures Applicable to Legal Entities under Criminal Law contains relevant provisions.

1.2       Definition of bribery

Individuals can commit bribery, but the acts of public officials in this regard also constitute a crime. In addition, under the given circumstances, legal entities may be criminally punished for bribery of public officials.

(a) By an individual

This refers to any person who attempts to influence a public official in connection with his or her actions in an official capacity by giving or promising an (unlawful) advantage to such person or to another person on account of such person (active corruption).

(b) By a public official

This refers to any public official who requests or accepts an (unlawful) advantage in connection with his or her actions in an official capacity, for himself or herself, or for a third party, or accepts a promise of such an advantage, or is in league with the person requesting or accepting the advantage for himself or herself, or for a third party on his or her behest (passive corruption).

1.3       Definition of public official

The Hungarian Criminal Code has a broad definition of “public official,” and it includes any individual that exercises public functions. This concept includes not only public servants, but also members of parliament, persons working at public authorities (if such activity is attached to the public function of such authority), notaries and bailiffs, among others.

1.4       Consequences of bribery

In most cases, punishment may be reduced without limitation (or dismissed in special cases) if, before authorities discover the bribe, a voluntary disclosure is made revealing the circumstances of the bribe, and the (unlawful) advantage is surrendered.

(a)        For the individuals involved
The Hungarian Criminal Code provides for more stringent penalties for public officials than for individuals that corrupt public officials. Company executives may be criminally punished if they fail to exercise proper oversight and such failure results in public bribery. The penalties are the following:

  • For individuals corrupting public officials
    • Up to two years in jail for negligent criminal offense if a company executive or anyone being in an oversight function at a company (e.g., a compliance officer) fails to exercise proper oversight in connection with the prevention of such crime
    • Up to three years in jail for corruption; also if committed by an executive officer/person entitled to supervise the economic operator
    • Up to five years in jail if the advantage is to induce the public official to breach his or her official duty, to exceed his or her competence, or abuse his or her position of authority
  • For corrupted public officials
    • Up to three years in jail for failure to report a bribery known by him
    • Up to five years in jail for the basic scenario (see above as passive corruption)
    • Up to eight years in jail if committed by a high- ranking public official; if the public official breaches his or her official duty, exceeds his or her competence or abuses his or her position of authority to gain the unlawful advantage; also, if it’s committed in criminal association or on a commercial scale
    • Up to 10 years if more serious circumstances are present

In addition to the abovementioned penalties, the Hungarian courts have broad discretion to permanently confiscate the individual perpetrators’ assets under certain conditions, regardless of whether the confiscated assets are related to a corrupt conduct.
(b)        For the company / legal entity (if the legal entity benefited from an intentional crime that was caused by its executive, employee or board member)

  • A fine of an amount three times the required advantage (but at least HUF 500,000, or approximately EUR 1,625)
  • Dissolution of the legal entity
  • Prohibition from carrying out certain activities (as determined by the court)
  • Debarment from public contracting and state/EU subsidies

1.5       Political contributions

Contributions to political parties are regulated under Act XXXIII of 1989 of the Operation and Financial Management of Political Parties. In general terms, contributions to political parties are allowed only by natural persons and, with narrow exceptions, prohibited by legal entities.

1.6       Limitation applicable to hospitality expenses (gifts, travel, meals, entertainment, among others)

The Criminal Code does not establish quantitative or qualitative limitations on hospitality expenses. Case law has established the following two criteria to determine when a hospitality expense could be considered bribery::

(a) The hospitality offered or received is not “socially acceptable.”

(b) T(b) The hospitality offered or received may presumably affect the acts of the receiver in connection with his or her official function.

Whether a hospitality expense could be considered bribery will need to be determined on a case-by-case basis, taking into account all the facts and circumstances surrounding the case and applying the two criteria referred to previously. Also, the Code of Ethics for Government Officials has established that the value of an acceptable general gift may not be more than 10% of the remuneration base (approximately EUR 12), and such gift may be accepted only in connection with the government official’s participation to an event.

More stringent hospitality expense limitations may apply in the pharmaceutical / life sciences industry.

It is important to mention that Act XXXVI of 2012 on the Hungarian Parliament provides that members of the Parliament (MPs) may accept a gift or benefit, which is related to their mandate, of value that is equal to or less than the base amount of their monthly remuneration (approximately EUR 2,400).

This specific provision does not give MPs any exemption from the anti-bribery rules of the Hungarian Criminal Code.

2. Domestic bribery (private to private)

2.1       Legal framework

Private bribery is regulated under Articles 290-291, 295-296, 298-300 of Act C of 2012 on Hungarian Criminal Code; and Act CIV of 2001 on Measures Applicable to Legal Entities under Criminal Law..

2.2       Definition of private bribery

(a) General

Any person who gives or promises unlawful advantage to a person working for or on behalf of an economic operator, or to another person on account of such employee, to induce him or her to breach his or her duties commits active corruption.

Any person who requests or accepts an unlawful advantage in connection with his or her activities performed for or on behalf of an economic operator, for himself or herself or for a third party, or accepts a promise of such an advantage, or is in league with the person requesting or accepting the advantage for a third party on his or her behest, commits passive corruption..

(b) In judicial proceedings

Any person who promises or gives an unlawful advantage to another person for himself or herself or for a third party for him or her to refrain from acting in accordance with his or her duty or in the exercise of his or her rights in court, arbitration or other judicial proceedings or proceedings of an international criminal court installed under international convention promulgated by an act, or under a statutory resolution adopted by the United Nations Security Council, or by the Court of Justice of the European Union, commits active corruption in the context of a judicial proceeding.

Any person who requests or accepts an unlawful advantage to refrain from acting in accordance with his or her duty or in the exercise of his or her rights in a court, arbitration or other judicial proceedings, or proceedings of an international criminal court installed under international convention promulgated by an act, or under a statutory resolution adopted by the United Nations Security Council, or by the Court of Justice of the European Union, for himself or herself or for a third party, or accepts a promise of such an advantage, or is in league with the person requesting or accepting the advantage for a third party on his or her behest, commits passive corruption in the context of a judicial proceeding.

2.3       Consequences of private bribery

In most of the cases, punishment may be reduced without limitation (or dismissed in special cases) in the case of a voluntary disclosure, including revealing the circumstances and surrendering the (unlawful) advantage before authorities come to know about the case..

(a)        For the individuals involved

  • For corrupting individuals
    • Up to three years in jail for basic commercial bribery
    • Up to five years in jail if corruption is committed against a person entitled to act individually on behalf of the economic operator, committed in criminal association, or on a commercial scale
    • Up to eight years in jail if more serious circumstances are present
  • For corrupted individuals
    • Up to three years in jail for being corrupted
    • Up to five years in jail if breach of duty for the unlawful advantage by a person entitled to act individually on behalf of the economic operator
    • Up to 10 years in jail if committed in criminal association or on a commercial scale, or if more serious circumstances are present

As to the confiscation of individual perpetrators’ assets, see Section 1.4 (a).
(b)        For the company/legal entity

As defined in Section 1.4 (b)

2.4       Limitation applicable to private/commercial hospitality expenses (gifts, travel, meals, entertainment, among others)

The Criminal Code does not establish quantitative or qualitative limitations on private/commercial hospitality expenses. Case law has established two criteria to determine whether a hospitality payment could be considered private/commercial bribery::

(a) The hospitality offered or received is not “socially acceptable.”

(b) The hospitality offered or received could affect the acts of the receiver in connection with his or her function.

Whether a hospitality expense could be considered bribery will need to be determined on a case-by-case basis, taking into account all the facts and circumstances surrounding the case and applying the two criteria referred to previously. In general, hospitality expenses are socially more acceptable in the private sector..

3. Corruption of foreign public officials

3.1       Legal framework

Corruption of foreign public officials is regulated under Articles 293(3) and 294(4) of Act C of 2012 on Hungarian Criminal Code and by Act CIV of 2001 on Measures Applicable to Legal Entities under Criminal Law.

3.2       Definition of corruption of foreign public officials

Please see the definition in Sections 1.2 and 2.2.

3.3       Definition of foreign public official

With regard to this crime, “foreign public official” means:

  • Any person that has a legislative, judicial, administrative or law enforcement function in a foreign country;
  • Any person serving in an international organization created under an international treaty, whose activities form part of the organization’s activities;
  • Any person elected to serve in the general assembly or body of an international organization created under an international treaty (including members of the European Parliament elected abroad); or
  • Any member of an international court that is vested with jurisdiction over the territory or over the citizens of Hungary, and any person serving in such international court whose activities form part of the court’s activities.

3.4       Consequences of corruption of foreign public officials

(a)        For the individuals involved

  • Please see the definition in Section 1.4 (a).

(b)        For the legal entity

  • Please see the definition in Section 1.4 (b).

3.5       Limitation applicable to hospitality expenses (gifts, travel, meals, entertainment, among others)

As defined in Section 1.6.

4. Facilitation payments

The Criminal Code does not recognize so-called facilitation payments. However, case law has established two criteria to determine whether a payment could be considered as a corrupt payment:

(a) The payment offered or received is not “socially acceptable.”

(b) The payment offered or received may affect the act of the receiver in connection with his or her function.

As Hungarian anti-corruption rules are rather strict, even if such facilitation payment is lawful in the country of the person involved, it most likely constitutes a crime under Hungarian anti-corruption laws.

5. Compliance programs

5.1       Value of a compliance program in mitigating/eliminating the criminal liability of legal entities

As to corporate criminal liability, the Hungarian Criminal Code does not recognize a compliance programs as an instrument to mitigate or eliminate the liability of legal entities before the crime of corruption has been committed.

As to personal criminal liability of corporate executives or employees being in an oversight function (e.g., a compliance officer), an existing and proactively managed compliance program may provide immunity from personal criminal liability in connection with negligent criminal offense for the failure to exercise proper oversight.

5.2       Absence of a compliance program as a crime

Under the Hungarian Criminal Code, the absence of a compliance program is not a crime. However, the absence of a compliance program can be effectively used by the public prosecutor in the case of charging corporate executives or employees being in an oversight function (e.g., a compliance officer), in connection with negligent criminal offense for the failure to exercise proper oversight.

5.3       Elements of a compliance program

(a) Legal framework

Act CLXV of 2013 on Complaints and Whistleblowing prescribes certain data protection, as well as procedural and other legal requirements for whistleblowing systems operated by employers or their parent companies in the context of their compliance program. Mandatory criminal reporting obligation in the internal investigation context has also been introduced in order to fight white-collar crime, which is an unusually stringent regulation within the Hungarian legal system.

(b) Recommended practice

Employees, contracting parties and third parties who have legitimate interest to remedy the misconduct may file a complaint by submitting their information and a declaration that they are acting as whistleblowers in good faith. The operation of a whistleblowing system is optional for the companies; however, if they have a whistleblowing system (including a global or any other whistleblowing system available to the employees of a local subsidiary), this whistleblowing system must comply with the local whistleblowing laws. The company’ whistleblowing policy must be published on the website of the company in Hungarian, even if the information mostly concerns employees. Filing an application with the Hungarian Authority of Data Protection and Freedom of Information for the whistleblowing system’s registration into the data protection register is mandatory.

Failure to meet this requirement may lead to an investigation by the Hungarian Authority for Data Protection and Freedom of Information.

Pursuant to the Whistleblowing Act, if the internal investigation carried out on the basis of the whistleblowing establishes that a criminal offense (not limited to bribery, but also including corporate fraud or any criminal offense) was most likely committed, disclosure to the criminal authorities is mandatory.

6. Regulator with jurisdiction to prosecute corruption

All corruption activity is subject to public prosecution, but investigating authorities may differ, according to the crime concerned. Pursuant to Act XIX of 1998 on Criminal Proceedings, most crimes of bribery are investigated by the police but in some cases (e.g., corruption in connection with a high-ranking public official, failure to report a bribery and influence-peddling in connection with foreign public official), the public prosecutor’s office has jurisdiction to conduct the investigation.


Hegymegi-Barakonyi és Társa Baker McKenzie Ügyvédi Iroda
Dorottya utca 6.
1051 Budapest Hungary

Zoltán Hegymegi-Barakonyi

Zoltan Barakonyi is highly experienced in competition law and compliance matters, including litigation work in these areas. He represents companies in unfair competition, cartel, dominant position and merger control cases, and he advises on antitrust and other corporate compliance programs. Zoltan represents clients before Hungarian and EU authorities in various antitrust and anti- corruption cases. He works for major international and Hungarian companies in a number of sectors, including the banking, energy, telecommunications, automotive and pharmaceutical industries. He practices law in Hungary as well as at EU level, including the European Commission and the Court of Justice of the European Union..

andreas.lohner@bakermckenzie.com

Tel: +36 1 302 3330 (ext. 316)

Hegymegi-Barakonyi és Társa Baker McKenzie Ügyvédi Iroda
Dorottya utca 6.
1051 Budapest Hungary

János Puskás

Janos Puskas specializes in compliance and investigations, government enforcement and litigation. As an investigation practitioner, he assists clients with internal and government investigations, anti-corruption due diligence, compliance and ethics inquiries, risk assessment, risk minimization strategies, and creating and implementing compliance programs. He also focuses on disclosure issues and represents clients in civil and criminal procedures initiated in relation to violations. Janos has a proven track record in government enforcement cases, in which he represented several multinational companies in administrative litigation against the regulator, including extraordinary judicial review procedures before the Supreme Court.

janos.puskas@bakermckenzie.com

Tel: +36 1 302 3330 (ext. 367)