“We are living in historic times,” says Janos Toth, Wolf Theiss Partner in Hungary. “Not only our legal system is transforming, but also a whole new approach to business is evolving.”
Toth singles out the proposed draft of a new Insolvency and Bankruptcy Law in Hungary as among the most significant changes. According to him, the new law is long-awaited, as the previous Law on Insolvency and Bankruptcy was introduced nearly 30 years ago. Although that previous law was amended several times, Toth says that it “no longer served the recent legal trends or reflected how business in Hungary has changed since the early 90s.” According to him, it had caused many problems, especially when “prominent businesses with huge customer bases run into trouble creating loud social turbulence.”
“Obviously, those were the signs for lawmakers that something should be done differently,” Toth says, noting that in the meantime the government already reformed other substantial cornerstones of the country’s business laws, such as the Hungarian Civil Code and Civil Procedural Law. “It was really high time to do something on the bankruptcy front,” he says.
Toth reports the new law will be combined with further changes to a law on corporate registration and should be introduced soon so that the parliament is able to vote on it this upcoming Fall. At the moment the draft law is expected to go through public consultations and discussion with various stakeholders. Toth says that the expectation is that the process will result in “legislation following the most eminent trends in Western Europe and the US.” Ultimately, he hopes to see increased legal predictability and business security, expedited and efficient processes, and a decreased burden on creditors.
Once passed, the law is scheduled to come into force in mid-2020, he says, “which gives the current government ample time to fine-tune the law if necessary and see how it works.”
In the meantime, Hungary is “delicately balancing” between political powers, trying to keep a positive relationship with each of the important global actors, says Toth. Indeed, within the past month Hungarian Prime Minister Viktor Orban has met with both US President Donald Trump and Premier of the Republic of China Li Keqiang. “The primary interest of our government is to maintain excellent relationship with each of those mammoths, as well as Russia,” he says, adding that such relationships help to attract new investments, pointing to the Russian-built Paks 2 Nuclear Power Plant and the Budapest-Belgrade railway that will be financed by the Chinese government.
How the economic clashes between the US and China and Europe will evolve is unknown, says Toth, noting that the outcome of the continent-wide EU parliamentary elections held on May 26, 2019, would certainly play a role in that process. “No one can really predict how it will play out in terms of business outlook,” he says, suggesting that keeping the “European economies abreast with the rest of the world would be at stake.”