9 June 2014 – The Hungarian Parliament adopted Act CLXV of 2013 on Complaints and Whistleblowing (the “Act”) entering into force on 1 January 2014. By this Act, Hungary follows international tendencies concerning the efficient protection of whistleblowers and the fight against corruption both in public and private sectors. 1. Progress concerning the public sector Besides the integration of the legislation in force that applies to central and local government entities, the Act introduces an electronic whistleblowing system operated by the commissioner for fundamental rights (ombudsman). Whistleblowing reports are registered by an anonymized code, and published on the Internet in a form accessible to everyone without any data relating to the identity of the actual whistleblower. Thereafter, the ombudsman transfers the report to the competent authority for investigation and ensures adequate data protection measures during the whole procedure. The Act emphasizes the protection of the whistleblower (as required by the UN Convention against Corruption). 2. Progress concerning the private sector A new whistleblowing system of companies has been introduced to report infringement of rules of conduct (compliance rules) of employers. Employees, contracting parties and those who have legitimate interest to remedy the infringement may file a report 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 elect to set up such a system, it must comply with the new law. The whistleblowing rules shall be published on the website of the company in Hungarian; and, even if the information mostly concerns employees, the company must submit an application to the Hungarian Authority of Data Protection and Freedom of Information for registration into the data protection register to be able to process such data. In addition to that, it seems based on the wording of the new law that all kinds of rules of conduct (Code of Conduct, Harassment Policy etc.) and related rules of procedures (e.g. rules of internal investigation), which are of public interest or significant private interest, must be published in order to ensure the rights of employees by publicity, in case these rules were in non-compliance with their personal rights. The law is silent regarding the consequences of the absence of such publication. However, such rules of conduct may qualify as information of public interest, and in case of failure to publish, the Hungarian Authority for Data Protection and Freedom of Information may start an investigation. In addition, the absence of a publication, may have an effect on the validity of the employer’s action based on the rules of conduct in question. The entity that is entitled to collect and/or examine the whistleblowing reports may be the company itself. However, following the German model, the company may decide to retain an independent attorney, acting as an “external ombudsman” for this purpose. Such attorney may only be someone, who does not have any other mandate from the company (and had not had such in the preceding five years). To this relationship, the statutory attorney-client privilege and confidentiality is applicable to protect the whistleblower. The person subject of the whistleblowing also has an opportunity to present a defense, and strict data protection rules shall apply in order to assure the functional and efficient operation of the system. By Zoltán Hegymegi-Barakonyi and Tibor Farkas-Molnár
Zoltán Hegymegi-Barakonyi serves as managing partner of Baker McKenzie’s Budapest office, where he heads the Antitrust & Competition practice. Benchmark publications consider him as one of the most recognized competition law practitioners in Hungary. Mr. Hegymegi-Barakonyi is the vice-president of the Hungarian Competition Association and a member of the the Scientific Board of the Competition Law Research Institute at Pázmány Péter Catholic University, where he lectures in the postgraduate competition law course. He regularly speaks on competition law related matters at Firm and third-party conferences.