Chinese or American investments and the right of pre-emption of the state, what is worth knowing about FDI regulations?

Chinese or American investments and the right of pre-emption of the state, what is worth knowing about FDI regulations?

What is FDI?
In recent years, Hungary, like other European countries, has significantly tightened its regulations on foreign direct investment (FDI). The aim was to protect the country's strategically important sectors and national security interests, especially in times like the COVID pandemic or the Russian-Ukrainian war.

Therefore, it is not a new rule that if a foreign investor intends to acquire a certain percentage of shares in a Hungarian company operating in sectors of strategic importance to the national economy, they are required to report this to the Ministry of Economic Development.

The precise rules governing this reporting obligation are currently laid down in two sets of regulations.

The general system was established in 2019 and primarily applies to investments in sectors that are important from a national security perspective, such as the arms industry, the energy industry, transport, and telecommunications. The special system was introduced later, at the outbreak of the COVID pandemic, and extended the scope of FDI rules to much more ordinary sectors, such as trade or construction. Another difference between the two systems is that while the former mainly affects investments by non-EU investors that exceed a higher threshold, the scope of the latter is much stricter, with even a 5% stake potentially subject to notification if the investor is from a non-EU member state.

State pre-emption rights as the latest and most powerful tool in FDI regulation

State pre-emption rights first appeared in FDI regulation in 2024, but at that time, this option was only available for investments related to solar panels.

However, in June 2025, the rule was extended to all other sectors. In June 2025, however, the rule was extended to all other sectors. In practice, this meant that if an investment or acquisition of interest falling under the scope of the regulation was announced but the transaction was rejected by the competent ministry, the state itself could "step in" in place of the investor and purchase the company or shareholding in question on the same terms, regardless of the sector concerned.

The controversial regulation appears to be easing again in August 2025, with the provisions of Act L of 2025, which came into force on August 19, 2025, once again limiting the right of pre-emption to solar panel investments. However, the rapid, consecutive amendments to the regulations clearly demonstrate the dynamic changes in this area, points out Dr. Ivett Bognár, attorney at act legal Hungary.

What exactly does an FDI transaction look like today?

If an investor, primarily from outside the EU – for example, from Asia or the US – intends to purchase a Hungarian company or acquire a stake in it, the transaction must be reported to the competent minister, who will examine the report within 30 working days, although this deadline may be extended up to three times. The minister may approve or prohibit the transaction. If prohibited, in the case of a strategic company operating in the solar power sector, the state may even take over the company or purchase the stake itself, through the Hungarian National Asset Management Inc. or another designated organization, within 90 days of the delivery of the decision. It is particularly important to note that this rule applies not only to notifications made after its entry into force, but also to cases already in progress.




I am a foreign investor, why is this important to me?

In addition to the fact that Hungarian FDI legislation is among the strictest in the EU, the regulations are constantly changing on a daily basis. Therefore, if someone from a third country wants to buy a company or acquire a stake in Hungary, it is not an easy task, even if it is a minority ownership. Practice shows that the current regulations have not only extended the state's control powers, but in certain cases have also created a tool that allows the Hungarian state to intervene by granting preemptive rights, emphasized Dr. Ivett Bognár, expert at act legal Hungary.

In view of the above and the expected future changes in regulations, it is not advisable to enter into an FDI transaction without an effective and qualified legal advisor who is well aware of the pitfalls of such a procedure.