At its famous (or ill-famed) sitting on 12 December 2018, the Hungarian Parliament adopted, among others, the draft act on the amendment of the land transaction acts. According to the National Chamber of Agriculture (Nemzeti Agrárgazdasági Kamara in Hungarian-hereinafter referred to as NAK), Act CXXXVI of 2018 on the amendment of certain acts related to agricultural and forestry land trade "reinforces the roles of local farmers; contributes to a more competitive agriculture and the fight against abusive practices; and plays an important role in keeping agricultural land in Hungarian hands[1]". The NAK emphasised that "the transfer of land ownership for unrealistically high prices and the subsequent use of land for non-agricultural purposes" cease to be a possibility. "The local land committee must check the income-generating potential of the areas in question in the local context and must evaluate the purchase price accordingly[2]". The draft act adopted in December 2018 changes the Hungarian land-transaction regulations significantly and substantially. So, we should review the most important elements, reasons, potential consequences of the amendment as well as the potential problems in terms of constitutionality and EU law.
Paragraph (6) of Section 68 of Act CXXII of 2013 on Transaction in Agricultural and Forestry Land (hereinafter referred to as Land Transaction Act) requires that the municipal clerk convoke the general meeting of the local farmers' community to elect the members of the local land committee, according to the decree implementing the Act. No such implementing decree has, however, been adopted; local land committees have, therefore, not been set up. The regional NAK bodies exercise the powers of the local land committees. The amendment makes the transitional situation permanent, primarily because the amending act superseded the Land Transaction Act's Chapter on local land committees, but also because it re-codified the procedure of the regional NAK bodies, now acting as local land committees. According to Section 7 of the amending act, the Land Transaction Act is supplemented with Section 23/A stating that in the approval procedure of sale-and-purchase agreements, the regional NAK body affected by the agreement shall adopt a position as local land committee whether the sale-and-purchase agreement meets the general agricultural and land-ownership policy interests in terms ofownership and possession transparency, the prevention of speculative land acquisitions, the setting up and preservation of viable, competitive and single lands, the assertation of the interests of the local farmers' community, the supporting of farmers habitually living and farming locally, and the facilitation of intergenerational succession in agriculture. Paragraph (1) of Section 23/A of the Land Transaction Act enumerates the aspects specified in the superseded Paragraph (3) of Section 68, supplemented with the supporting of farmers habitually living and farming locally and the facilitation of intergenerational succession in agriculture.
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Paragraph (4) of Section 23/A, enacted by Paragraph (7) of the amending Act, clearly states that the local land committee has client status in the agricultural administration body's procedure, regulated by this Act, to approve or deny a sale-and-purchase agreement or an exchange agreement as well as the right to bring an action in the judicial review of the agricultural administration body's decision approving or denying a sales-and-purchase agreement or an exchange agreement.
To understand the underlying reason for this provision, we must review the history of the client status and the legal standing of the chamber body exercising local land committee powers.
The chamber body exercising local land committee powers was, in my view, not a client when the land transaction regulations were adopted. Paragraph (2) of Section 27 of Act CCXII of 2013 on certain provisions and transitional rules concerning Act CXXII of 2013 on Transactions in Agricultural and Forestry Land (hereinafter referred to as Interpreting Act for the Land Trade Act) provides an exhaustive (and still effective) list of the persons and organisations that may be clients in the official approval procedure of agreements requiring the approval of the agricultural administration body and aimed at the acquisition of the ownership of agricultural land or its acquisition in a way not constituting the transfer of ownership, not including the acquisition of the ownership of agricultural land in an auction conduced according to Section 35 of the Land Transaction Act. According to the list, in the procedure, a client shall be the natural person, economic entity party to the legal transaction; the organisation exercising the ownership rights of the state in legal transactions aiming at the changing of the right of ownership of the state, or the asset manager, if asset management rights apply; the person having right of first refusal for the piece of land subject to the legal transaction; any other right holder in the real estate register, whose right to the piece of land is affected by the procedure, including the right holder and obligor who have not been registered in the real estate register but are subjects of the application for the registration of an index attached to the title deed; close rel-ative(s) defined by the Interpreting Act of the Land Transaction Act, whose status was considered when the legal transaction was made the validity of which is subject to the existence of a close relative relationship. any other right holder whose right to the piece of land in question is affected by the legal transaction. None of the elements of this list includes the chamber body acting as local land committee, so, in my view, courts had to dismiss (should have rejected) this body's claims without hearing, according to point (g) of Paragraph (1) of Section 130 of Act III of 1952 (former Civil procedure Act). Because Paragraph (1) of Section 327 of the former Civil Procedure Act clearly specifies the scope of persons who may launch administrative proceedings: the client involved in the administrative proceedings and any other participant of the procedure, for the provision specifically pertaining to such participant. Regarding the approval procedure of the authority, Paragraph (1) of Section 27 of the Interpreting Act to the Land Transaction Act requires the application of the Administrative Procedures Act only if the acts on land transaction do not provide for otherwise. Paragraph (2) of Section 27 of the Interpreting Act to the Land Transaction lists the persons, organisations qualifying as clients; in my opinion, therefore, the provisions of the Administrative Procedures Act are not applicable. Other participants of the procedure are listed by Point e) of Section 172 of the Administrative Procedures Act: the witness, the official witness, the expert, the interpreter, the holder of the inspected object, the representative of the client and the mediator of the authority. Pursuant to the above legislative provisions, the chamber body acting within the powers of the local land committee may, therefore, not be regarded as either client or any other participant of the procedure. The courts had different positions regarding the foregoing. There were orders dismissing the claims without hearing and there were rulings establishing the absence of legal standing. The Curia stated in several cases that "the case must consider the doctrinal meaning of decision No. 2/2004. for the unified interpretation of admin-
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istrative law must be considered. Though this decision for the unified interpretation of the law pertains to the right of local governments to file for lawsuits; Point 2 of its operative part may however governing in this case as well. Accordingly, determination if the entitlement to enforce claims (legal standing, right of action) applies is an issue for the substantive part of the legal dispute; the lawsuit may be dismissed with a ruling in the absence of a legal standing[3]". In its decisions, the Curia referred to Ruling no. 12.K.27.292/2015. of the Szolnok Administrative and Labour Court, published as Decision of Principle No. EBD2016.K.21, in which the court of first instance has concluded that "the plaintiff did not verify its legal standing in the lawsuit, it failed to specify a direct legal interest that would support that it might enforce its claim against the defendant. It did not present a specific injury that it would suffer from the fact that it approved the sale and purchase agreement between the defendant interveners and the sellers[4]".
Government Decree 175/2016. (VII. 1.) on the Client Status of Local Land Committees, consisting merely of two sections, was adopted with respect to the uncertainty of the client status. According to Section 1, the local land committee - or the Hungarian Chamber of Agriculture, Food Industry and Rural Development fulfilling the responsibilities of the local land committee based on the Interpreting Act for the Land Trade Act-shall exercise the rights of client in administrative proceedings concerning this scope of responsibility. Section 2 requires that the provisions of the Government Decree be applied in procedures either in process at the time of its entry into force or repeated after that.
The above Government Decree clearly declared the body acting within the powers of the local land committee client; therefore, courts could not apply Point (g) of Paragraph (1) of Section 130 of the Civil Procedure Act and dismiss complaints without hearing any more. After the entry into force of that piece of legislation, the courts examined the legal standing of the body acting within the powers of the local land committee, and the courts of first instance made rulings that rejected the petitions due to the absence of legal standing. Several
Curia decisions dealt with the legal standing in connection with claims submitted by regional NAK bodies as clients. The supreme judicial body stated that "legal standing, the right to enforce claims may be given rise by the direct interest of the party. General arguments, protection of public interests and other similar argumentation shall not provide a ground for the right to enforce claims"[5]. In the case before the Curia, "in its complaint, the plaintiff could not justify the fact that it would have undoubted, direct and obvious interest in the refusal of the approval of sale and purchase agreements, issue a negative position, because it is not even exercising authority powers"[6]. Referring to the specific status of private law interested party described in Decision No. 17/2015. (VI. 5.) of the Constitutional Court, the Curia made it clear "that this qualification of the Constitutional Court may not be considered so that the Chamber (land committee) has legal standing in this case of public administration. The land committee is considered as a particular private law interested party. Pursuant to Paragraph (1) of Section 327 of the Civil Procedure Act, the plaintiff does not have the right to bring about an action regarding and due to its own position, the decision of the defendant does not affect its right or obligation"[7].
Subsequently, Act XLI of 2017 on the amendment of Act CXXVI of 2012 on the Hungarian Chamber of Agriculture enacted the following Paragraphs (1)-(2) of Section 13/A in Act CXXVI of 2012 on the Hungarian Chamber of Agriculture (hereinafter referred to as the NAK Act) with effective date of 18 May 2017: The Chamber of Agriculture shall have a client status in the administrative cases and the related procedures of legal remedy in which it fulfils responsibilities specified by the law in a non-authoritative capacity. According to Section 103 of the Interpreting Act for the Land Trade Act, the Chamber of Agriculture fulfilling the responsibilities of the local land committee is entitled the status of client in the procedure aiming at the judgment of the objection submitted against the position of the local land committee, including the appeal proceedings as well, and the right to bring an action for the judicial review of the decision on the judgment of the objection. According to the reasoning of
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the above amendment, the body acting within the powers of the local land committee has dealt with more than one hundred thousand cases so far, the rate of refusals is about 2 percent of the cases. The reasoning of the minister referred to the practice of the Curia regarding the legal standing (right to bring an action) of the local land committee, then it came to the conclusion that "the procedure of the land committee is an important element of the regulation of land transactions, it is to ensure that the priorities of land policy defined in general by the law are effective in individual cases as well; together with the option of legal remedy. Since the judicial practice has separated the client-status and the legal standing (right to bring an action) of the Chamber, one of the most important provisions of the act is, with a view to clearly enforce the original intention of the legislator, the settlement of the client status and the legal standing (right to bring an action) of the chamber on the level of an act of Parliament"[8]. The reasoning of the amendment made it clear that the legislator regards the right to bring an action and the legal standing as synonymous concepts. Subsequently, some courts did not change their practice and dismissed claims owing to the lack of legal standing; some other courts investigated plaintiff claims substantially. Agreeing with the legal position expressed in Order No. 1.Kf.20.274/2017/3. of the Zalaegerszeg Regional Court, the status of indirect private law involvement described in Decree No. 17/2015. (VI. 5.) of the Constitutional Court and the fact that it is not subject to any rights or obligations arising from the sale-and-purchase agreement concerned by the position do not exclude legal standing based on indirect involvement. Direct involvement related to the subject-matter of the case should be judged based on the legal status, responsibility of the local land committee. The court determined that "in the legal transaction, the plaintiff acts in the name of the community of land owners not having its own subjective right according to the criteria in Paragraph (2) of Section 24 of the Land Transaction Act in order to protect the interest of the public; this legal status was created by a piece of legislation; accordingly, only another piece of legislation may confer client rights upon it. If it submits a claim to enforce interests falling within the scope of this legal status, responsibility, thenin the view of the court of second instance-its legal standing may not be disputed if it acts in the same role. Its indirect involvement in the revision of the local council decision changing its own decision adopted during the enforcement of interests falling within the scope of its responsibilities is obvious"[9]. Order No. Kfv. III.37.733/2017/4. of the Curia also confirmed the position above. In it, the supreme judicial body emphasised that "direct interest in the subject-matter of the case shall be considered on the basis of the legal status and the statutory responsibilities of the plaintiff. In the legal transaction, the plaintiff acts in the name of the community of land owners not having its own subjective right according to the criteria in Paragraph (2) of Section 24 of the Land Transaction Act in order to protect the interest of the public; this legal status was created by a piece of legislation. If it submits a claim to enforce interests falling within the scope of this legal status, responsibility, then its legal standing may not be disputed if it acts in the same role. Its direct involvement in the revision of the local council decision changing its position adopted in the course of the assertation of interests falling within the scope of its responsibilities is, consequently, obvious[10]". The NAK's direct involvement was not established by the relation to the agreement but the statutory responsibilities and the legislative will.
Therefore, the legislative provision enacted by Section 7 of the amending act is substantially the repetition of Paragraphs (1)-(2) of Section 13/A. of the Chamber Act in the Land Transaction Act, while Section 13/A of the Chamber Act remains unchanged.
According to the amending act, the chamber body acting as local land committee shall provide its position within 30 days from the receipt of the inquiry of the agricultural administration body, instead of the previously applicable 15 days. Previous regulations required the local land committee to assess sale-and-purchase agreements based on publicly
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known facts and its best knowledge, according to the following criteria, in particular: is the sale-and-purchase agreement capable of circumventing ownership-acquisition restrictions; is it to be established that the parties agreed on the transfer of ownership already before the entry into force of the act but they would make the sale-and-purchase agreement effective within the context of this procedure only with a statement of either of them or a declaration with legal effect of a third person; subject to the approval of the sale-and-purchase agreement, is the buyer in the sale-and-purchase agreement and/or the first option holder - or if there are more than one first option holders, then all first option holders - according to the list capable of performing the sale-and-purchase agreement and the commitments specified in Sections 13 and 15, does he or she get a legal status that lets him or her exercise his or her right of first refusal abusively or does he or she get the land ownership without any reasonable economic necessity, for the purposes of accumulation; is the consideration proportionate to the market value of the land, and if not, then did the buyer keep away an option holder from exercising his or her right of first refusal. Within the meaning of the amendment, the local land committee assesses the sale-and-purchase agreement and the acceptances based on publicly known facts, the best of its knowledge and the information obtained pursuant to Paragraph (3) of Section 24, in a manner specified in the Government Decree, and in terms of compliance with the criteria specified in Paragraph (1) of Section 23/A. and supports or does not support them. According to Paragraph (3) of Section 24, the following must be taken into account in assessing the compliance of the sale-and-purchase agreement with the criteria specified in Paragraph (1) of Section 23/A: what is the quantity and size of the lands owned, used by the buyer or the option holder in the list and their close relatives in the municipality the land belongs to or within the twenty-kilometre radius from its administrative border, and what are their forms of cultivation and gold-crown value, and where are these lands; what is the size and gold-crown value of the land used by the agricultural production cooperative the buyer, the option holder in the list or their close relatives have ownership interest in within the municipality the land belongs to or within a twenty-kilometre radius from its administrative border; has the buyer or the option holder in the list had a legal transaction concerning the land in question with their close relative(s) in the three years before the sale-and-purchase agreement, and by whom is the land used; did the buyer or the option holder in the list issue an acceptance as an option holder regarding a piece of land in the municipality the piece of land belongs to or within a twenty-kilometre radius from its administrative border in the five years before the sale-and-purchase agreement, but the legal translation did not get fulfilled owing to his or her breach of contract; to what extent does the sale-and-purchase of the piece of land serve the transfer of ownership of a young farmer or career-starter farmer in connection with the transfer of his or her farm; does the option holder issue acceptances regularly concerning a piece of land regarding which he or she has a right of first refusal without its acquisition being justified by the size of his or her farm; the total sizes of the lands owned by the buyer in the sale-and-purchase agreement and by the option holders in the list are different in magnitude, and the average sizes of the municipality's farms are different in magnitude; the transactional consideration of the piece of land should exceed its income-generating potential calculated for a farming period of 20 years, as calculated with indexation, for non-forest lands, or the income-generating potential over a farming period of 50 years for lands classified as forests, under the condition that the value of the forest soil and the stand should be determined as combined-in which the forest soil value should be calculated from the present value derived from the perpetual annuity of the forest and the stand value should be calculated from the present value derived from the potential final use, and the values of plantations or structures on the piece of land shall be determined by value estimation based on replacement cost. According to the reasoning to the above provision, "judicial practice of the past years clearly shows that no uniform interpretation of the law has been developed for the pre-
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vious provisions or it was fundamentally inconsistent with the original intention of the legislator, which was, as it is confirmed with the new provisions of the act, that the local land committee develops its position on the sale-and-purchase agreement by considering all circumstances of the case in its procedure. When the legislator provided that the local land committee develop its position "based on publicly known facts and to the best of its knowledge", it wanted to indicate that no expert evidence, like in an administrative or civil legal dispute, is necessary. As it is, the local land committee exercises social control over the land market. The disorder of the resulting legal situation is further intensified by the fact that, although the Constitutional Court regarded the local land committee as an indirect party governed by private law, the municipal council included the objections to the local land committee's position into a resolution governed by administrative rules. In the lawsuits launched in such cases, however, courts adopted the position that the local land committee's position must meet the requirements for administrative decisions[11]". Clarifications and supplementations of the above reasoning might be necessary to avoid misunderstandings. The main problem with Decision No. 17/2015. (VI. 5.) of the Constitutional Court as well as the judicial practice itself was not that the Constitutional Court and the courts would have expected the body exercising the powers of the local land committee to conduct the extensive evidentiary procedure of court proceedings in their procedures assessing sale-and-purchase agreements. The above decision of the Constitutional Court provided a constitutional requirement regarding the reasonings of the land committees' positions, namely that "the fundamental right to legal remedy, ensured in Paragraph (7) of Article XXVIII of the Fundamental Law, shall be operative only if the position of land committees contains the assessment required by the law in such a detailed fashion so that its causality can be meaningfully assessed in the administrative procedure; the factual substantiation and lawfulness of the decision of the authority can be overruled during the judicial review, both formally and substantially[12]". According to the reasoning of the decision of the Constitutional Court, "the land committee shall make the statutory assessment [Paragraph (2) of Section 24] to a level of detail allowing it to be the basis of the Authority's decision and to develop a conviction regarding the reality of the facts and the causality of the position in clarifying the facts of the case[13]". "In order to let the municipal council make its review, the position shall clearly identify the examined criteria and assessment results, in, the position must have a detailed reasoning[14]". Because in the period before the Decision of the Constitutional Court, positions of the chamber bodies acting as local land committees referred, as a reasoning, only to a Point of Paragraph (2) of Section 24 of the Land Transaction Act and did not provide any reasoning to their positions. According to the Constitutional Court, however, the above procedure does not ensure the functioning of the fundamental right to legal remedy, the party the position is detrimental to cannot learn the reason for non-supporting; its right to legal remedy is, therefore, limited. I do not know of any decision of the Curia that would have required that the local land committee's position meet the requirements for administrative decisions in the judicial review of a municipal council resolution regarding an objection to the chamber position. Moreover, the Curia has recently adopted a decision contrary to this. Some of its decisions stated that "the court procedure reviews the municipal council resolution according to Section 103/D of the Interpreting Act for the Land Trade Act. Decision No. 17/2015. (VI. 5.) of the Constitutional Court provides guidance regarding the local land committee's role, legal status, and the requirements for the content of the position, among other things. According to the Decision of the Constitutional Court, the chamber acting in the name of the local land committee is an indirect interested party governed by private law. Against this background, it is undisputable that the local land committee does not act as an authority in issuing its position, so the strict formal and substantive requirements specified in Paragraph (1) of Section 72 of the Administrative Procedures Act may not be expected from it[15]". The Decisions of the Constitutional Court and the courts, therefore, expect
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the chamber body exercising the powers of the local land committee only to include the reasons for supporting or non-supporting in sufficient detail in their positions, not according to the content requirements specified in the Administrative Procedures Act, but to the extent necessary for substantial review.
The amendment's reasoning to this Section also includes "the jeopardising, disturbing, rendering impossible, excluding, or restricting of a contractual clause must always be assessed for the municipality and the specific agreement. The substantiated position of the local land committee in such cases might necessitate supplementary information which it could obtain if it requests them separately. Paragraph (3) of Section 24 specifies this separately obtainable information. The provisions of the act support the land committee in obtaining additional information which it might not know ex officio or could obtain only with disproportionate difficulties before developing its position. The additional information specified in this act also allow the substantiated exclusion of legal transactions that are inconsistent with the land policy objectives laid down in the act[16]". It is by all means a positive solution from the legislator that the chamber body exercising the powers of the local land committee acquires relevant information before issuing its position. The amending act also provides more suitable criteria for the reviewing court than the previous regulations, because it can assess the disputed sale-and-purchase agreement and/or acceptance based on the goals, interests specified in Paragraph (1) of Section 23/A and the data, information specified in Paragraph (3) of Section 24. We could also say that the intention of the legislator has become more exact-with the additional remark that the task of the judicial practice will remain considerable regarding the new regulations as well. The Government Decree the Government is authorised to adopt under Section 19 of the amending act and which will deal with the requirements concerning the assessment of the criteria to be considered in developing the position of the local land committee will foreseeably support judicial practice.
The Curia had just started to shape judicial practice in terms of the criteria specified in Paragraph (2) of Section 24 of the Land Transaction Act when the amendment introduced different criteria. Certain conceptual findings of the Curia may, however, remain applicable, with some adjustments. Regarding Point (d) of Paragraph (2) of Section 24 of the Land Transaction Act, the Curia stated that "the determination of the market value of a property is a technical matter; the determination of disproportionality is, therefore, also a technical matter. The court should have appointed an expert to clarify the issue reassuringly[17]". According to the Curia, if there is an actual disproportionality, "then the assessment of the next condition comes into question, namely 'the buyer used the disproportionality to keep away an option holder from exercising his or her right of first refusal'." If it is to be proved that the buyer used the disproportionality to keep away an option holder, then the condition specified in Point (d) of Paragraph (2) of Section 24 of the Land Transaction Act shall apply, and non-supporting of the sale-and-purchase agreement shall be lawful[18]". In the specific case, the Curia changed the final ruling and rescinded the resolution of the defendant and obliged it to conduct a new procedure. It provided guidance for the repeated procedure: "as for the consideration and the disproportionality of the market value of the piece of land in question, the effect of the nominees of the plaintiff on the purchase price must be taken into account, and if the disproportionality still applies, then it must be further investigated whether there are any option holders whom the purchase price held back from exercising their right of first refusal. The potential judicial review of the so-adopted municipal council resolution must appoint an expert to determine the property value (hence the disproportionality)[19]". The Curia sustained the above reasoning in its Ruling No. Kfv. IV.37.172/2017/5. as well, based on which the court of first instance obtained a forensic expert report and opinion establishing the disproportionality. In my view, the above procedural method-more specifically, appointing a forensic expert in administrative lawsuits-is applicable for Point (h) of Paragraph (3) of the amended Section 24 of the Land Transaction Act, if the plaintiff is challenging the findings of the chamber. The reasoning to the amend-
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ment is not inconsistent with this either: "the parties' bargaining process determining the price of land must be ensured. Nevertheless, the unacceptability of considerations resulting in an uneconomically long payback period must be also taken into account to protect the acquiring parties from irrational investments that could cause irreparable problems to its own farming business as well as the farming community through the excessive increase of land prices and, consequently, the generation of a land market bubble. Because land is a limited resource that makes profit for its farmer, and the profit so realised over a reasonable period of time must be an upper limit for its value[20]". I would say that the worries reported in the press regarding the introduction of an officially fixed price are somewhat unsubstantiated, because the chamber body exercising the powers of the local land committee could determine the excessive and disproportionate consideration based on precisely defined criteria but also because the court can use the opinion of the expert appointed in the court proceedings to review, also based on exact criteria, the decision of the agricultural administration body reflected in the position of the chamber.
Section 9 of the amendment clearly lays down that the agricultural administration body takes the position of the local land committee into account as a client statement in its procedure, according to Margin Number 74 of Decision 17/2015. (VI. 5.) of the Constitutional Court[21].
By re-regulating Sections 101-103 of the Interpreting Act for the Land Trade Act, the legislator specified provisions concerning the procedure and the content of the position of the local land committee. According to the new rules, the buyer and the option holder in the list are obliged to provide data in writing within a 15-day time limit at the call of the local land committee to do so, and the 30-day procedural time-limit does not include this period.
The buyer and the issuer of the acceptance may attend the meeting of the local land committee. The Chamber discloses a notice about the agreements to be discussed at the meeting on its website and the bulletin board of the competent regional Chamber organisation and indicates the relevant property parcel numbers, the meeting location, date, and time in it. The local land committee hears the party if necessary and must hear him or her, if he or she so requests.
The local land committee's position contains the name of the acting organisation; the personal identification data of the individual concerned; identification data of the involved pieces of land; a statement whether it supports or does not support the agreement regarding the party concerned; the reasoning contains the established facts of the case, the data provided by the client regarding Paragraph (3) of Section 24 of the Land Transaction Act or the lack of data, the criteria considered in developing the position and supporting the position, the result of the assessment of the above criteria as required in the Government Decree; the date of issue of the position and the issuer's signature.
In my view, the provision allowing the in-person hearing of the party concerned serves the development of a substantiated position by the land committee. Such hearing was not an option before the amendment. Specification of the content elements of the reasoning of the position also serves a sound decision, because the local land committee must determine the authoritative facts of the case, specify the criteria it considered and must report on the result of its assessment. The era where the local land committee reasonings was nothing more than a reference to a legislative provision or a longer sentence with general statements is now over. This way, the amendment fulfils the constitutionality requirements specified by the Constitutional Court: the position of land committees must contain the assessment required by the law in such a detailed fashion so that its causality can be meaningfully assessed in the administrative procedure; overruling of the factual substantiation and lawfulness of the decision of the authority must be possible during the judicial review, both formally and substantially.
As the legislator removed the objection procedure wedged in the official approval procedure, ie, the municipal councils' procedures
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to review the land committees' positions, the level of detail and substantiation of the positions must allow agricultural administration bodies to make substantial decisions regarding the approval of sale-and-purchase agreements. Although the legislator does not provide for it explicitly, I think that the agricultural administration body may call the local land committee to provide any information missing from its incomplete position, because, according to Paragraph (4) of Section 27 of the Land Transaction Act, it must consider the position as a client statement under the General Public Administration Procedures Act, meaning that its clarification or supplementation might be necessary for the establishment of the facts of the case. If this is not an option, the agricultural administration body must establish the facts of the case even with an incomplete acceptance and acquire and evaluate all potential evidence under the General Public Administration Procedures Act.
Section 10 of the amending act changed Paragraph (5) of Section 30 of the Land Transaction Act by stating that the court may not alter the decision of the agricultural administration body in the administrative lawsuit.
As the amendment repealed Sections 103/A-103/D of the Interpreting Act for the Land Trade Act, the position of the body exercising the powers of the local land committee may not be challenged with objections. This means that municipal councils have not got objection-related powers anymore. This is a positive legislative decision at least because the municipal councils were not able to investigate the positions substantially, as they did not have the appropriate means for that. This means that, after the amendment, only the decision of the agricultural administration body may be challenged before the courts, and the courts will not have any reformatory powers. This legislative solution runs, however, counter to the objectives of Act I of 2017 on the Code of Administrative Court Procedures, being that the court, as a general rule, changes unlawful administrative acts if the case allows that, the facts of the case are clarified enough, and the data available allow the final settlement of the legal dispute. In land transaction cases, however, the court can only "enforce" its will on the agricultural administration body or the chamber body acting as land committee through annulment and obliging to conduct a new procedure. This might mean a considerable elongation of the procedure.
The court ruling may still be appealed, except for the first instance ruling adopted in an administrative lawsuit launched against the official certificate of the agricultural administration body.
In its ruling adopted in the joined cases C-52/16 and C-113/16, the Court of Justice of the European Union established that Paragraph (1) of Section 108 of the Interpreting Act for the Land Trade Act is inconsistent with EU law by declaring that "Article 63 TFEU must be interpreted as precluding national legislation, such as that at issue in the main proceedings, under which rights of usufruct which have previously been created over agricultural land and the holders of which do not have the status of close relation of the owner of that land are extinguished by operation of law and are, consequently, deleted from the property registers[22]".
The legislator reacted to the above decision of the Court of Justice of the European Union in the amending act and added the new Paragraphs (4) and (5) to Section 108 of the Interpreting Act for the Land Trade Act. According to Paragraph (4), if the restoration of a right terminated on the basis of Paragraph (1) is necessary based on a court decision, but this right could not have been registered under the laws in force at the time of its original registration owing to formal or substantial defect(s), then the property authority shall notify the prosecutor and suspend the procedure until the end of the prosecutor's investigation and the lawsuit launched on the basis thereof. According to Paragraph (5), a defect under Paragraph (4) shall exist if the holder of a usage right is an
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entity; if the usufructuary right or usage right was registered in the land registry in favour of a legal entity or a non-Hungarian citizen after 31 December 2001; a certificate or permit issued by another authority was required by the then applicable legislation at the time the application for registration of the usufructuary right or usage right was submitted, and the client did not submit this document.
According to the reasoning to the amendment "it is still justified to ensure the option to act regarding the fraudulent obtainment of usufructuary rights, and a case-by-case procedure is required to be set up in this regard. If, during the re-registration procedure, the property registration authority discovers that the establishment of a usufructuary right was irregular owing to some circumstance, then it must notify the prosecutor, who may launch a lawsuit to establish the nullity of the agreement. Such circumstances apply if a legal entity obtains the usage right, because the Civil Code ensures this right for natural persons only; or, if the usufructuary right has been registered in the property registry in favour of a legal entity or a non-Hungarian citizen after the entry into force of the expressed statutory prohibition on 1 January 2002 (because the right is created at the time of registration and not the contract date); or, if the contract has not complied with the law in force at the time of registration (eg, an official permit necessary at the time was not submitted). The property registration authority shall suspend the re-registration procedure for the duration of the lawsuit launched by the prosecutor[23]".
As for the joint cases dealt with by the Court of Justice of the European Union, we can say that the amendment does not apply to the individual involved in Case C-113/16, because his usufructuary right was registered on 2 November 1999. The usufructuary right of the business association involved in Case C-52/16 was created before 1 January 2002, but it was registered on 8 January 2002. Having regard to this latter circumstance as well, the questions whether the Hungarian legislator performed the ruling of the Court of Justice of the European Union, and what consequences the application of the amendment's provision might have, is turning to the Court of Justice of the European Union still not excluded are still valid.
To answer these questions, we should first review the ruling the Court of Justice of the European Union adopted in the joint cases above. In its ruling, the Court of Justice of the European Union established that "by virtue of its very subject matter, legislation such as that at issue in the main proceedings, which provides for the extinction of rights of usufruct acquired by contract over agricultural land, including those held as a result of exercise of the right to free movement of capital, restricts that freedom on account of that fact alone[24]". The Hungarian regulations apply a criterion apparently independent from the citizenship of the usufructuary and the origin of the capital (existence of a close family relationship); therefore, it does not constitute direct discrimination. The application of this legal prerequisite is, however, hardly probable in terms of non-Hungarian citizens of EU Member States-given the previous Hungarian legislative environment.
In its ruling, the Court of Justice of the European Union touched upon the verification of the restriction of the free movement of capital. Regarding the verification of the general interest objective associated with the use of agricultural land, the Court accepted that national regulations may limit the free movement of capital with a view to objectives such as the continued utilisation of agricultural land through direct use and the habitation and cultivation of agricultural lands mostly by their owners and regional development: preserving a permanent rural population and preferring a reasonable use of available area in fighting against the pressure of the property market. These objectives are also in line with the objectives of the common agricultural policy. The same applies for the distribution of lands ensuring viable holdings and a harmonised preservation of the countryside and the landscape. The disputed legislation does, however, not appear capable to accomplish, or to have any connection with, the goals mentioned by the Hungarian Government. "The fact that the required family tie exists does not guarantee that the usufructuary farms the land concerned himself and that he has not acquired the right of usufruct at issue for purely speculative purposes. Similarly, it
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cannot be assumed that a person outside the owner's family who has purchased a usufruct over such land would not be in a position to farm that land himself and that the purchase would necessarily have been made for purely speculative purposes, without any intention to cultivate the land[25]". The available documents do not demonstrate either that the close family relationship required by the national regulations would contribute to a viable and competitive agriculture, by avoiding subdivision, or the prevention of migration from the countryside. The Court of Justice of the European Union is of the opinion that the Hungarian legislator could have adopted other measures that would have limited the free movement of capital to a lesser extent in order to accomplish the general interest objectives. It would have been possible to require "the usufructuary to preserve the agricultural use of the land concerned, as the case may be by actually farming it himself, under conditions ensuring the viability of farming it[26]".
Regarding the verification of the infringement of the national exchange control legislation, the Court established in its ruling that "other measures with less far-reaching effects than the cancellation of the rights in rem concerned could have been adopted for the purpose of penalising from the outset any infringements of the applicable exchange control legislation, such as, for example, administrative fines[27]". In the light of the information in the case file before the Court, "it is not apparent that the legislation relating to exchange controls actually resulted in acquisitions of a usufruct by non-residents being subject to grant of an exchange authorisation, failing which the acquisition would be invalid, or that adoption of the legislation at issue in the main proceedings was driven by the desire to penalise infringements of such legislation[28]". It was apparent from the observations of the Hungarian Government that "no authorisation of that type was ever sought for the purpose of acquiring a usufruct over productive land and that, notwithstanding that fact, a very large number of rights of usufruct acquired by non-residents, without such an authorisation, gave rise to entries in the property registers[29]".
Regarding the verification based on the fight against the practice to circumvent the national law and to protect the public order, the Court's ruling pointed out that the usufructs at issue in the main proceedings were created before 1 January 2002, that is to say, at a time when the creation of such usufructs was not prohibited by the national legislation in force. Nor is it in dispute that those usufructs were entered in the property registers by the competent public authorities. The Hungarian Government said, however, that this acquisition of the usufructs was inconsistent with the law, and the Hungarian legislature, instead of "having recourse to the most classical approach, consisting in declaring, following a judicial examination on a case-by-case basis, that the contracts at issue were void, decided to remedy by force of law the deficiencies of the legal rule previously laid down or, indeed, the absence of any relevant rule of law. The Hungarian Government adds that approach was favoured, in particular for budgetary reasons and reasons relating to the economising of judicial resources, in the light both of the large number of cases that potentially were to give rise to such an examination and of the need to amend the legislation relating to the acquisition of agricultural land before 1 May 2014, the date on which the transitional regime resulting from the 2003 Act of Accession was to expire[30]". The Ruling found that a national measure restricting any of the fundamental freedoms was still justifiable if it combats artificial arrangements to circumvent legislations; the Court's case-law, however, excludes any general assumption of misappropriations. "In order to comply with the principle of proportionality, a measure pursuing such a specific objective of combating wholly artificial arrangements should, on the contrary, enable the national court to carry out a case-by-case examination, having regard to the particular features of each case and taking objective elements as a basis, in order to assess the abusive or fraudulent conduct of the persons concerned[31]". Referring to, among others, Decision No. 25/2015. (VII. 21.) of the Constitutional Court, the Court set out that the purpose of Hungarian land transaction regulations is to ensure that agricultural land is owned exclusively by the persons farming them and not
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to fight against the above-mentioned artificial arrangements. The Court reminded that "such legislation seeks, generally, to cancel by operation of law all rights of usufruct held by legal persons, or by natural persons in so far as they cannot demonstrate a close family tie with the owner of the agricultural land, without in any way linking those cancellations to the reasons which led the persons concerned to make such acquisitions[32]". The Hungarian legislator could have adopted other measures that would have implied less restrictions on the free movement of capital to accomplish this goal, such as sanctions, or annulment proceedings before the national courts. The argument based on budgetary considerations and considerations relating to the economising of judicial resources cannot be accepted, because grounds of a purely economic nature cannot constitute overriding reasons in the public interest justifying a restriction of the free movement of capital.
Here we should also refer to Decision No. 25/2015. (VII. 21.) of the Constitutional Court, which established that "inconsistency with the Fundamental Law applies due to the fact that the legislator did not create exceptional rules that though cannot be applied in the settlement of the accounts of the contracting parties but enable compensation for pecuniary injuries related to valid contracts in relation to the terminated usufructuary and usage rights based on Section 108 of Act CCXII of 2013 on certain provisions and transitional rules concerning Act CXXII of 2013 on Transactions in Agricultural and Forestry Land[33]". The Constitutional Court called the legislator to eliminate the nonaction inconsistent with the Fundamental Law by 1 December 2015. In the reasoning to its decision, the Constitutional Court established, however, that the Interpreting Act for the Land Trade Act does not provide for the compensation to be enforced in the settlement of accounts between the contracting parties for pecuniary losses caused by the termination of the legal relationships. Any amendment or dissolution of contract by law must consider the equitable interests of all parties, they must strive for a balance of interests, as legislative intervention implies responsibilities and may not cause injuries not justified by its goals. The Interpreting Act for the Land Trade Act does, however, not create a proper balance between the limitation in the interest of the public and the full functioning of the protected rights of the persons involved.
The legislator has not adopted the legislative provisions regarding the above financial compensation ever since. According to the Court of Justice of the European Union, however, the disputed Hungarian regulation restricts the free movement of capital, regardless of the adoption of compensation rules. The Court of Justice of the European Union has already established the legal basis for the liability for damages of the Hungarian State owing to the non-adoption of the regulations the Constitutional Court raised objections to and stated that "in the event of damage caused by nonaction, the nonaction, as damaging behaviour, occurs in the moment following the preceding moment when the damager could still have fulfilled its action obligation without any legal consequence. In the case of the lawsuit, the damaging nonaction of Defendant 1 was that it failed to adopt the compensation rules in relation to the usufructuary and usage rights discontinued under Section 108 of the Interpreting Act for the Land Trade Act. Since the act's provisions discontinued the usufructuary rights covered by the Interpreting Act for the Land Trade Act on 1 May 2014, the legislator should have adopted the act settling the compensation of usufructuaries up to this date[34]". The plaintiff of the lawsuit based its claim for compensation on the fact that "Defendant 1 failed to adopt an act to regulate compensations in connection with the discontinuation of the usufructuary right. Should the legislator do that and adopt the compensation act, then the plaintiff would have been compensated under the conditions set out in this act with regard to its ex lege discontinued usufructuary right. In the absence of a compensation act, however, it did not get the compensation it would have been entitled to in the absence of the legislator's unlawful nonaction[35]".
Having reviewed the foregoing, what we should first lay down about Paragraphs (4) and (5) of Section 108 of the Interpreting Act for the Land Trade Act, inserted by the amendment, is that Paragraph (1) of Section 108, qualified as an unjustified restriction of the free movement
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of capital by the Court of Justice of the European Union, still applies (just like Paragraphs (1), (3) and (5) of Section 94 of Act CXLI of 1997 on the Property Register). My view is that Paragraph (1) of Section 108 of the Interpreting Act for the Land Trade Act is incompatible with the Hungarian legal system because it is inconsistent with EU law. So, the legislator should repeal it (Keeping it effective is also pointless because this Section has already done its job: the property registration authorities have already completed their procedures in this regard).
We can now discuss if the amendment of Section 108 of the Interpreting Act for the Land Trade Act has fulfilled the ruling of the Court of Justice of the European Union. The Hungarian Government tried to verify the restriction of the free movement of capital with various arguments. The Court of Justice of the European Union examined these one by one and provided its position on them. Regarding the reference to the general interest objective to use agricultural land, the Court of Justice of the European Union proposed, as a less strict measure, that the agricultural purpose of the land concerned should be kept. Regarding the infringement of exchange control legislation, it proposed administrative fines as appropriate sanctions. Regarding the fight against the circumvention of national law, it stressed that the legislator should enable the national courts to investigate each case based on objective evidence regarding the abusive and fraudulent behaviours of the persons concerned. For these cases, the Court of Justice of the European Union proposed sanctions and the specific annulment procedures before the national courts as less restrictive measures.
From the "recommendations" of the Court of Justice of the European Union, the legislator chose the specific annulment procedure in Paragraph (4) of Section 108 of the Interpreting Act for the Land Trade Act. On account of this procedure, we must refer to the provisions of Act VII of 2014 on Exposure and Prevention of Legal Transactions Aiming at Evasion of Laws Limiting Acquisition of Ownership or Usage of Arable Land (hereinafter referred to as Fraudulent Contracts Act), the scope of which covers "null and void contracts, contract clauses aiming at the evasion of legal provisions limiting the acquisition of ownership or usage of arable land, other related legal transactions and the relevant procedures[36]". The act applies to legal transactions made before its entry into force as well if the unlawfulness of these legal transactions is not ended by lawfully setting their legal relationships within 30 days after the entry into force of the act. The procedure regulated by the Fraudulent Contracts Act is conducted by the prosecutor upon notification, which comes from the property authority under Paragraph (4) of Section 108 of the Interpreting Act for the Land Trade Act. If the prosecutor finds that the notification is founded, then "moves, in the lawsuit to establish the nullity of the legal transaction, that the court establishes the ownership of the agricultural land subject to the legal transaction in favour of the state, if it is to be established that the aim of the legal transaction was to evade legislative provisions limiting the acquisition of ownership of the agricultural land in question, the owner of the agricultural land delivered the agricultural land into the possession of the party wishing to acquire the ownership without reserving the right of disposal, and the owner has waived the exercising of property rights permanently in favour of the party wishing to acquire the ownership for the consideration received[37]". As legal consequence, "the prosecutor may move that the entry or note in the property registry or land-use registry (forestry registry in case of forests) based on the legal transaction be erased or changed, and/or that the situation in the property registry and the land-use registry (forestry registry in case of forests) before the unlawful legal transaction be restored[38]". The amendment of the Interpreting Act for the Land Trade Act appears to fulfil the condition the Court of Justice of the European Union specified for artificial arrangements: the court reviews whether the entry was unlawful on a case-by-case basis.
The legislator, however, wanted to be sure, because Paragraph (5) of Section 108 of the Interpreting Act for the Land Trade Act precisely defines, exhaustively enumerates, the defects regarding which the property authority should notify the prosecutor. According to the rules of the former Civil Code applicable based on Paragraph (1) of Section 11 of Act LV of 1994
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on Agricultural Land (Agricultural Land Act), applicable before 1 January 2002, the holder of the usage right could not be a legal person, and, according to the regulations in force since 1 January 2002, legal entities (neither foreign, nor Hungarian ones) could not acquire usage rights of agricultural land.
Having regard to the prohibition of the Agricultural Land Act, usufructuary rights, usage rights of legal entities may not be entered in the property register after 31 December 2001. The registration of usufructuary rights, usage rights in favour of non-Hungarian citizens is, however, somewhat different from that. Foreign individuals (such as EU citizens) were not allowed to acquire usufructuary rights, usage rights over Hungarian agricultural land between 1 January 2002 and 30 April 2004. The text of the Agricultural Land Act changed on 1 May 2004. More specifically, Paragraph (2) of Section 7 provides for that rules governing Hungarian individual shall apply to other Member State citizens who wish to settle down in Hungary as sole agricultural producers and have been residing continuously and lawfully in Hungary and pursuing agricultural activities for at least three years. If a Member State citizen met the conditions specified in Sections 8/A and 8/B of the Agricultural Land Act, then he or she could acquire usufructuary, usage rights over agricultural land lawfully. My opinion is, therefore, that usufructuary, usage rights registered for non-Hungarian citizens after 1 May 2004 do not constitute the formal or substantive defects specified in Paragraph (4) of Section 108 of the Interpreting Act for the Land Trade Act in themselves only.
The third defect type concerns the lack of certificates and permits required by the laws in force at the time when the application for registration was submitted. Although the reasoning of the amendment refers to the necessary official permits in general only, presumably the official certificates and permits under Paragraph (2) of Section 8/A of the Agricultural Land Act, in force since 1 May 2004, and the exchange authorisation referred to in the procedure of the Court of Justice of the European Union. Government Decree No. 171/1991. (XII. 27.) requiring exchange authorisations was in force until 25 January 1996. Act XCV of 1995 on foreign currency required, however, the acquisition of an exchange authorisation for contracts involving the transfer of money until 31 December 2001. Requiring such an authorisation for registration is another question.
The case-by-case investigation of the nullity of legal transactions underlying individual entries in the property registry is by all means a positive solution from the legislator; it is, however, still a question to what extent do procedures with a retroactive effect for even 20-25 years meet the requirement of legal certainty and the prohibition of retroactive legislation. The assessment of this is, in my view, outside the competence of the Court of Justice of the European Union but would induce the procedure of the Constitutional Court-having regard to the fact that the new Paragraphs (4) and (5) of Section 108 of the Interpreting Act for the Land Trade Act could lead to the establishment of unlawfulness of rights registered as a result of non-appealable authority decisions. ■
NOTES
* This paper has been made within the framework of the programmes initiated by the Hungarian Ministry of Justice to raise the standard of legal education.
[3] Order No. Kfv.IV.37.805/2016/4. of the Curia
[4] Point 22 of Decision of Principle No. EBD2016.K.21.
[5] Ruling No. Kfv.III.37.698/2016/5. of the Curia
[6] Ruling No. Kfv.III.37.698/2016/5. of the Curia
[7] Ruling No. Kfv.III.37.698/2016/5. of the Curia
[8] Reasoning to Section 9 of Act XLI of 2017
[9] Order No. 1.Kf.20.274/2017/3. of the Zalaegerszeg Regional Court
[10] Margin No. 27 of Order No. Kfv.III.37.733/2017/4. of the Curia
[11] Reasoning to Section 8 of Act CXXXVI of 2018
[12] Point 2 of the operative part of Decision No. 17/2015. (VI. 5.) of the Constitutional Court
[13] Margin Number 75 of Decision No. 17/2015. (VI. 5.) of the Constitutional Court
[14] Margin Number 64 of Decision No. 17/2015. (VI. 5.) of the Constitutional Court
[15] Margin Number 31 of Order No. Kfv.IV.37.341/2018/13. of the Curia
[16] Reasoning to Section 8 of Act CXXXVI of 2018
[17] Margin Number 27 of Ruling No. Kfv.IV.37.784/2016/5. of the Curia
[18] Margin Number 28 of Ruling No. Kfv.IV.37.784/2016/5. of the Curia
[19] Margin Number 31 of Ruling No. Kfv.IV.37.784/2016/5. of the Curia
[20] Reasoning to Section 8 of Act CXXXVI of 2018
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[21] The assessment-based position of the local land committee, as indirect right holder governed by private law, is considered as a client statement in terms of the Authority's procedure.
[22] Point 129 of the Ruling of the Court of Justice of the European Union, adopted in the joint cases C-52/16 and C-113/16
[23] Reasoning to Section 33 of Act CXXXVI of 2018
[24] Point 62 of the Ruling of the Court of Justice of the European Union, adopted in the joint cases C-52/16 and C-113/16
[25] Point 87 of the Ruling of the Court of Justice of the European Union, adopted in the joint cases C-52/16 and C-113/16
[26] Point 93 of the Ruling of the Court of Justice of the European Union, adopted in the joint cases C-52/16 and C-113/16
[27] Point 106 of the Ruling of the Court of Justice of the European Union, adopted in the joint cases C-52/16 and C-113/16
[28] Point 102 of the Ruling of the Court of Justice of the European Union, adopted in the joint cases C-52/16 and C-113/16
[29] Point 103 of the Ruling of the Court of Justice of the European Union, adopted in the joint cases C-52/16 and C-113/16
[30] Point 112 of the Ruling of the Court of Justice of the European Union, adopted in the joint cases C-52/16 and C-113/16
[31] Point 117 of the Ruling of the Court of Justice of the European Union, adopted in the joint cases C-52/16 and C-113/16
[32] Point 120 of the Ruling of the Court of Justice of the European Union, adopted in the joint cases C-52/16 and C-113/16
[33] Point 1 of the operative part of Decision No. 25/2015. (VII. 21.) of the Constitutional Court
[34] Margin Number 23 of Ruling No. Pf.II.20.329/2017/11. of the Szeged Court of Appeal (issued under No. BDT 2018.3816.)
[35] Margin Number 30 of Ruling No. Pf.II.20.329/2017/11. of the Szeged Court of Appeal (issued under No. BDT 2018.3816.)
[36] Paragraph (1) of Section 1 of Act VII of 2014
Lábjegyzetek:
[1] The Author is doctoral student, Doctoral School of the Faculty of Law at the University of Pécs administrative and labour judge at the Győr Administrative and Labour Court
Visszaugrás
