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Anti-Corruption in Hungary

By Zoltán H. Barakonyi* and Angéla Tóth* (Baker McKenzie Budapest)

1.      Domestic bribery (private to public)

1.1       Legal framework Bribery of public officials is regulated by Articles 293-294 and 297-299 of the Act C of 2012 of the Hungarian Criminal Code. Additionally, Act CIV of 2001 of Measures Applicable to Legal Entities under Criminal Law contains relevant provisions. 1.2       Definition of bribery Individuals can commit this crime by trying to directly or indirectly corrupt a public official. Acts of the public officials also constitute a crime. In addition to that, under the given circumstances, legal entities may be 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 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, including any individual that exercises public functions. This concept includes not only public servants, but also members of parliament (both the national parliament and the autonomous community parliaments), persons working at public authorities (if such activity is attached to the ordinary operation of such authority), notaries, and bailiffs, amongst others. 1.4       Consequences of bribery In some cases, punishment may be reduced without limitation (or dismissed in special cases)if, before authorities discover the bribe, a confession is made revealing the circumstances of the bribe, and the (unlawful) advantage is surrendered. (a)        For the individuals involved: The Hungarian Criminal Code provides different penalties for public officials and individuals that corrupt public officials. The penalties are the following: For individuals corrupting public officials:

  • Up to two years in jail if corruption is committed by way of negligence by an executive officer/person entitled to supervise the payor
  • Up to three years in jail for corruption; also if committed by an executive officer/person entitled to supervise the economic operator
  • From one 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
  • From one to five years in jail for being corrupted
  • From two 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
  • From five to 10 years if more serious circumstances are present

(b)        For the company/legal entity (if the legal entity benefited from an intentional crime, which was caused by its executive officer, representative, employee, member of the supervisory board):

  • A fine of an amount three times the required advantage (at least HUF500,000, approximately EUR1,650)
  • Dissolution of the legal entity
  • Restriction of the activity of the legal entity
  • Prohibition from carrying out certain activities (as determined by the court)
  • Prohibition from benefiting from public aid, entering into contracts with the public sector or into concession, taking deposits by public tender; may not be qualified as a public benefit company

1.5       Political contributions Contributions to political parties are regulated by 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 person, and – with exceptions provided in the Act – prohibited by legal entities. 1.6       Limitation applicable to hospitality expenses (gifts, travel, meals, entertainment, amongst others) The Criminal Code does not establish quantitative or qualitative limitations on hospitality expenses. Case law has established two criteria to determine when a hospitality expense could be considered bribery: (a)        The hospitality offered or received is not “socially acceptable.” (b)        The hospitality offered or received may presumably affect the judgement of the receiver. 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 above. Also, the Code of Ethics for Government Officials determines that the value of an acceptable general gift may not be more than 10 percent of the remuneration base (approximately EUR12). 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 of value that is equal to or less than their monthly remuneration (approximately EUR800), which is related to their mandate. The breach of this rule may result in the declaration of conflict of interest and the termination of the mandate. 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 by Act C of 2012 of the Hungarian Criminal Code, Articles 290-291; 295-296; 298-300 and Act CIV of 2001 of 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 (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 (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 (active corruption in 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 (passive corruption in 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 case of a confession revealing the circumstances and surrendering the (unlawful) advantage before authorities discover the case. (a)        For the individuals involved: For corrupting individuals:

  • Up to three years in jail for corrupting
  • From one 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
  • From two to eight years in jail if more serious circumstances are present

For corrupted individuals:

  • Up to three years in jail for being corrupted
  • From one 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
  • From two to eight years in jail if committed in criminal association or on a commercial scale, or more serious circumstances are present
  • From five to 10 years in jail if more serious circumstances are present

(b)       For the company/legal entity: As defined in Section 1.4 (b) above 2.4       Limitation applicable to hospitality expenses (gifts, travel, meals, entertainment, amongst others) The Criminal Code does not establish quantitative or qualitative limitations on hospitality expenses. Case law has established two criteria to determine whether a hospitality payment could be considered private bribery: (a)        The hospitality offered or received is not “socially acceptable. (b)        The hospitality offered or received could affect the judgement of the receiver. 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 above.

3.      Corruption of foreign public officials

3.1       Legal framework Corruption of foreign public officials is regulated by Act C of 2012 of the Hungarian Criminal Code, Articles 293(3) and 294(4) and by the Act CIV of 2001 of 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 above. 3.3       Definition of foreign public official For the purpose of this crime, a 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 organisation created under international treaty, whose activities form part of the organisation’s activities
  • Any person elected to serve in the general assembly or body of an international organisation created under an international treaty (including members of the European Parliament elected abroad)
  • 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 courts activities

3.4       Consequences of corruption of foreign public officials (a)        For the individuals involved See the definition in Section 1.4 (a). (b)          For the legal entity See the definition in Section 1.4 (b). 3.5       Limitation applicable to hospitality expenses (gifts, travel, meals, entertainment, amongst others) The Criminal Code does not establish quantitative or qualitative limitations on hospitality expenses. Case law has established two criteria to determine whether a hospitality payment could be considered a crime of corruption of a public official: (a)        The hospitality offered or received is not “socially acceptable.” (b)        The hospitality offered or received could affect the judgement of the receiver. 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 above.

4.      Facilitation payments

The Criminal Code does not recognise so-called facilitation payments. However, case law 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 judgement of the receiver.

Hungarian anti-corruption rules are rather strict, even if such facilitation payment is lawful in the country of the person involved, it may still constitute a crime, according to Hungarian law.

5.      Compliance programmes

5.1       Value of the compliance programme in mitigating/eliminating the criminal liability of legal entities The Hungarian Criminal Code does not recognise compliance programmes as instruments to mitigate or eliminate the liability of legal entities before the crime of corruption has been committed. 5.2       Lack of a compliance programme as a crime Under the Hungarian Criminal Code, the lack of a compliance programme is not a crime. 5.3       Elements of a compliance programme (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 programme. (b)        Recommended practice: Since 1 January 2014, codes of conduct, issued by employers for the purpose of protecting public interest or significant private interest, must be made available for the public. Detailed rules of the whistleblowing system must be published in Hungarian on the website of the employer. Simultaneously, the employer must report the data management to the Hungarian Authority for Data Protection and Freedom of Information with regard to the applicable whistleblowing proceeding (to be registered in the data protection registry). Failure to meet this requirement may lead to an investigation by the Hungarian Authority for Data Protection and Freedom of Information and may affect the validity of an employer’s actions based on such codes of conduct.

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. * Zoltán H. Barakonyi is a partner, Angéla Tóth is an associate in Baker McKenzie’s Budapest office.

The above article is a chapter of Baker McKenzie’s publication “Overview of Anti-Bribery Laws in EMEA” (2014). Please send us an email if you would like to receive a copy of the print version of the publication or click here for the pdf.