With ESG and AI becoming increasingly important for all businesses, the two are set to impact law firms in Hungary as well while the country looks to tackle immigration reforms and enhance consumer protections, according to Schoenherr Hungary Managing Partner Daniel Gera. Against this background, a noticeable trend of FDI sources tilting East is registered.
"ESG and AI are the buzzwords right now," Gera begins. "We are betting on ESG becoming a key area of focus for law firms, significantly impacting both our corporate and real estate practices. AI is another major area, not just in terms of how we use it in our practices, but also how it will affect our clients and the legal areas it touches," he says. For instance, in the area of labor law, Gera reports that "clients are starting to use AI to scan CVs or assess behavior which will have interesting legal implications. Even in our own practice, we have decided to use the Harvey software for AI applications. Also, there will be new legislation on the use of AI at the EU level."
Focusing on the wider legislative landscape, Gera says that "the change in immigration laws at the end of last year is noteworthy. January and February saw a grace period where procedures were on hold, but now the process for granting work permits has changed." According to him, "the aim was to make it easier, but in practice, we have not yet seen much advantage. Hungary generally still faces a shortage of workforce, and while importing workers could help sectors like construction, it does not solve the broader problem, especially for white-collar jobs. Hungary is not particularly attractive for white-collar workers, making it difficult to bridge this gap," Gera explains.
To address these workforce shortages, Gera says that companies are "implementing measures to enhance their attractiveness as employers, focusing on retention and involving previously inactive groups like those returning from maternity leave, offering flexible solutions, targeting youth, or reactivating pensioners. While importing workers might help certain sectors, it's more realistic to focus on these internal reserves."
Moreover, Gera says that changes were made to the consumer protection and competition law framework, "setting new obligations for online accommodation intermediaries, including a requirement to operate a customer service and complaint handling mechanism in the Hungarian language, as well as a prohibition of certain unfair commercial terms in contracts with accommodation providers." As for the wider topic of FDIs, Gera says these are nowadays "primarily coming from Asia, not only China but also South Korea. This is particularly evident in the car manufacturing and battery sectors, which have sparked political debates." Additionally, Gera shares that there has "also been an uptick in activity in the energy sector, especially in wind and solar projects, largely driven by Asian investors. While smaller energy projects are up for sale, this sector is generally booming."
In conclusion, Gera feels that it is fair to give a cautious yet steady outlook for the Hungarian legal market. "The focus on ESG, AI, and energy sectors, along with adapting to new immigration and competition laws, will shape our work in the coming years," he says. "While this year may not be the best of the decade, it could still be reasonably good despite some market caution. Political developments, such as the government's acquisition of the airport and pressures on food retail chains, indicate a shift toward Asian and Eastern investors and we may expect M&A activity from traditional western investors to slow down a bit compared to the past," Gera concludes.
