In early January 2024, many managing directors in Hungary of companies with any agriculture-related activity could be surprised to receive a letter of the Hungarian Chamber of Agriculture stating that the company has become a member of the Chamber by law from 1st January. What does this chamber do, and what are the main consequences of the membership? Why it is worth to consider an opt-out from the Chamber? In this article, we address these issues.
- What to know about the Hungarian Chamber of Agriculture
The mission of the Hungarian Chamber of Agriculture (“Chamber”) is to strengthen the Hungarian agricultural and food sector and to promote its interests. The Chamber was established by Act CXXVI of 2012 on the Hungarian Agriculture, Food and Rural Development Chamber (“Act”).
The Chamber provides expert advice, e.g. on the choice of the right agricultural insurance company, provides continuous information to its members, organises training courses and operates the Arbitration Court attached to the Hungarian Chamber of Agriculture.
- Members of the Chamber
The members of the Chamber by law are i) persons registered as farmers, ii) any sole entrepreneur engaged in an agricultural activity iii) any person registered as a farmer or agricultural producer organisation iv) any organisation meeting the conditions laid down by law.
- Statutory opt-in regime from 1st January 2024
As a result of the amendment that entered into force on 1st January 2024, the group of companies whose membership in the Chamber is compulsory by law has been extended.
Previously, membership was required for companies whose main business was the activity specified in the annexes of the Act. With the amendment, membership will be compulsory for companies who registered any of the agricultural activities in the company register that is listed in the annex of the Act.
This list of the Act includes, for example, fishing, fish farming, the manufacture of beverages, the manufacture of tobacco products, the wholesale of food, beverages or tobacco, the wholesale of leather etc.
- Membership fee
One of the main obligations of the members is the payment of membership fees. As from 1st January 2023, the membership fee is 0.19% of the net turnover of the year, two years preceding the year in question.
The minimum amount of the membership fee is 1% of the average monthly gross income of the year preceding the year in question, and the maximum amount is four times the average monthly gross income of the year preceding the year in question.
- Special consequences in case of arbitration
The membership in the Chamber can have far reaching consequences. As mentioned above, there is a permanent arbitration court attached to the Chamber.
Members of the Chamber, intending to avoid state court dispute resolution in connection with agriculture related matters, shall stipulate the procedure of the Arbitration Court attached to the Hungarian Chamber of Agriculture.
In case Chamber members stipulate other arbitration institute, the arbitration clause will be null and void.
- How to opt-out of the new regime
With effect from 1st January 2024, The membership in the Chamber has become compulsory for all companies who have registered an agricultural activity in the company register years ago, even if they do not exercise it nowadays.
It is worth considering whether the company is actually engaged in the activity, because if not, the agricultural activity of the company can be deleted by 15th January 2024, and the company will not become a member of the Chamber with membership fees and other obligations from 2024.
By Richard Schmidt Managing Partner, and Agnes Bartus, Junior Associate, SmartLegal
