“First they attack justice, media freedom, and the NGOs. Now [Prime Minister Viktor] Orbán targets Internet users. When will this unbearable story end?” This is what outgoing European Commission Vice-President Viviane Reding tweeted on the Internet tax issue before the tax went away. In other words, she instantly set the tax story into a context that linked it with the critique of the Orbán administration dating from early 2011 when the media law took effect.

This train of thought popped up in other commentaries, too. To look at them, the Internet tax fits right in with the past four and a half years of disputes on the administration of justice, media regulation, and rule of law, as the latest attempt by an “autocratic” government to trim back civil liberties.

However, in the past few years the various European institutions and the Hungarian government not only opened up new battle-fronts, but also closed down some of them. No one says much about the latter though sometimes the international media still points at laws they say are disputed albeit the European Commission or the Council of Europe, the body responsible for safeguarding adherence to human rights, (and even the Venice Commission which is the constitutional law advisory body of the Council of Europe) have reached agreements with the government.

Under those compromise accords the Hungarian parliament has amended or deleted the disputed passages. In truth, there haven’t been all that many infringement proceedings launched against Hungary for breaches of obligations (when the European Commission initiates proceedings against a member state the dispute is ruled on by the European Court).

We also need to point out that Hungary isn’t the only country “disturbing the peace.” According to information obtained by the German news magazine Der Spiegel last Sunday for instance German Chancellor Angela Merkel would prefer to see the United Kingdom outside the European Union and will not accept the proposal made by British Prime Minister David Cameron to limit the free flow of labor within the EU.

In the meantime, the Euro-skeptic branch of his Conservative Party and the opposition UK Independence Party (UKIP) campaigning for Britain to leave the EU are also pressuring Cameron. Politicians in the UKIP merely asked for a coffee when they learned that Brussels was expecting London to pay an extra nearly two billion euros to cover added expenditure during the past cycle. Italy and France are also furious at having to cut back four billion euros worth of expenditure after Brussels voiced dissatisfaction with their efforts to get their deficits down to target.

Battles over and done with

“They amended the hotly criticized media and justice administration laws and we are satisfied with the amendments,” Council of Europe Secretary General Thorbjørn Jagland told a Council of Europe meeting in October of last year. Norway’s former prime minister knew what he was talking about since he was the chief negotiator for the “Hungarian issue” since the European Commission lacked authority on a number of disputed issues. His mediation was so successful that this past August he received a Hungarian award, the Order of Merit (civilian) – Commander Cross with Star. In other words a compromise was reached on the issues triggering the most heated debates of the last EU term of office. Now, let’s see what was involved.

(1) Media Act

When Viktor Orbán arrived at the European Parliament in January 2011, he was greeted by Members of the European Parliament’s Green coalition holding the blank title pages of Hungarian newspaper up for him to see. This was a reference to the censorship allegedly threatening freedom of the press here in Hungary. The charges printed in European papers were even more serious, some of which had visions of jailed journalists and editors harassed by the authorities through home searches.

But, the mountains labored and brought forth a mouse, since under the agreement with the Council of Europe in early 2013 the Hungarian parliament only had to amend two points in the law. One was that the President of the National Media and Telecom Authority was not to be appointed by the prime minister but by the president, on the proposal of the prime minister. (The prime minister was, however, required to consult with the professional organizations.) The other one stipulated that the president of the Media and Telecom Authority and the members of the Media Council could not be re-appointed on the expiration of their nine-year mandates.

(2) The jurisdictional transfer of court cases

The Venice Commission focused on the fourth amendment to the Hungarian constitution (basic law). This body, sometimes dubbed “the council of elders,” was concerned with a section in the constitution that gave the chief of the National Judicial Bureau the right to re-assign court cases from one court jurisdiction to another. Last December the Constitutional Court also found the clause to be unconstitutional, saying that it violated the principle of fairness in proceedings not to have offered defendants a chance to protest the jurisdictional transfer and seek legal remedy. The high court issued its decision following complaints by, among others, Miklós Hagyó a former Budapest Socialist politician whose criminal trial was transferred from Budapest to Kecskemét, about 85 kilometers away.

(3) Retirement for judges

Under a legislative amendment adopted in 2011, the mandatory retirement age for judges was reduced from 70 to 62, forcing some 300 judges to leave the bench before they had planned to. The Constitutional Court found the measure unconstitutional while the European Commission initiated its own proceedings which ended in the EU court finding Hungary in breach of EU regulations. The government was forced to back down, so in the spring of last year, parliament resulted to gradually reduce the age ceiling on allowing judges, prosecutors, and notaries public to work from 70 to 65 over a ten year timeframe. However, lawsuits initiated by judges who had been fired before the ruling was changed are still being heard at the Strasbourg Court of Human Rights.

Unorthodox, but effective

There have been cases that some observers cite as evidence of the “un-European” attitudes of the Hungarian government. In these cases not only has no one even given the cabinet a slap on the wrist but the European Commission has accepted what it called an “unorthodox” solution, and might even be suggesting that the government carry on along its chosen path.

(1) Private pension funds

Orbán’s nationalization of the private pension fund, which had supplemented the government run one, and eliminating it as a third pillar of pensioning financing, has been pointed to as the shining example of government plunder. This past February, however, one of the chief European Commission members responsible for pensions, stamped the much-disputed measure with the EU seal of approval.

Fritz von Nordheim, pension expert for European Commission’s Employment Directorate addressed a Budapest conference where he said he thought the Hungarian and Polish private pension financing models had been faulty, which is why Brussels had not objected to the changes.

He said that the two systems had not been supplementary and could not be considered savings opportunities either. The European Court of Human Rights in Strasbourg drew much the same conclusion when it rejected a Hungarian complaint regarding the private pension funds. The court found that the rights of the plaintiff to private property had not been violated since the plaintiff’s pension would continue to be accessible on the basis of employment and contributions made to the pension fund irrespectively of whether the contributions were made to a government or private fund.

(2) Cases related to value added tax

After the United States banned six (presently) unnamed Hungarian citizens from traveling to the USA for undisclosed reasons, general interest focused on fraud involving the value added tax (VAT) after rumors suggested that tax fraud had triggered the ban. One question being asked is what Brussels might have to say, since the EU has repeatedly pointed to the VAT abuses that have reached near epidemic proportions in Hungary (and elsewhere) because of the high [27 percent] VAT rate.

Although the European Commission did not comment on the concrete case, according to a position it took a year ago in recognition of the increasingly stringent monitoring and exposure of abuses, “Hungary has done well in starting to take the measures needed to successfully prevent cases of visible fraud in the sectors involved.... The Commission acknowledges the effort and encourages Hungary to continue with its measures, which the Commission deems satisfactory. “

Open issues and defeats

Alongside the laws that have survived with amendments that were really minor when compared to the battle noise and eventual European Union improvement, fighting is still underway in a number of areas. While it is too soon to predict the outcomes of the dozens of infringement proceedings ranging from the ban on building malls to regulations on pharmacy ownership and the system of mobile phone payments, the battles are definitely underway on multiple fronts.

(1) Fruit brandy (pálinka) liberalization

Although not one of the most important issues, the liberalization of home fruit brandy (pálinka) distillation rules illustrates how long it can take to decide on a comparatively simple matter. In June of 2010 Orbán announced that private individuals would be permitted to distill up to 200 liters of fruit brandy for their own use free of excise taxes. This regulation, dear to so many hearts, violated EU law.

At the time it joined the EU Hungary failed to ask for an exemption from taxing products subject to excise taxes (as, for instance, Austria had done), so the battle to “liberate fruit brandy” was doomed to defeat. The time span between the date the European Commission initiated its breach of obligation proceedings and the date of the European Court decision was nearly four years. This April the court found that the rule ran counter to European Union law and had to be changed. The tax bill currently before the Hungarian parliament shows signs that the government is in retreat on the brandy front. Starting next year the amount of fruit brandy that can be home-distilled will be cut from 200 liters to 50, and it will be subject to an excise tax.

(2) Land law

We do not know how long the land-law affair will drag on after the European Commission announced two weeks ago that it is initiating proceedings against Hungary for breach of obligation because of some clauses in the land law adopted last year.

Since land ownership in Hungary symbolizes more than an economic issue and has done so since the regime change, the law was an attempt to restrict purchases of land by foreigners to the greatest degree possible. According to the Commission, the law violated EU regulations on the free movement of capital and on the freedom to settle anywhere in the EU. The conflict is all-the-more heated in that the land law has been sharply criticized by Austria, defending the rights of Austrian farmers who have been making undercover, essentially illegal, purchases of land in western Hungary and would like to register those purchases now that the land purchase moratorium has expired.

(3) Regulation of Churches

The “democracy disputes” include the tug of war around the law governing Churches. In its effort to thwart abuses of religious-institution status and despite multiple attempts, Hungary failed to come up with a law that was constitutional and operated in accordance with EU law. In 2013 the Constitutional Court threw out a number of passages of the religious organization law adopted in 2011, including ones related to the procedure for gaining parliamentary recognition of the religious denominations.

The Constitutional Court declared that, while an organization could be mandated to apply for its status as a religious organization in a fair procedure, there also has to be opportunity for legal redress in case of rejection. The justices found that this requirement had not been met because the law gave parliament the right to approve or decline registration of a body a religious organization and the applicant had no appellate rights.

The fourth constitutional amendment adopted in March of 2013 reiterated parliament’s right to decide on which organizations to grant religious status. Then in June 2013 it again amended the law, which still failed to pass scrutiny. The European Court of Human Rights in Strasbourg, approached by small Churches denied their legal status as religions, found that allowing parliament to decide on religious status without the right to appeal was a violation of EU law.

Strasbourg also ordered that the Churches that had been excluded were entitled to compensation and ordered that agreement on this between the two sides be reached within six months. This is why Gergely Gulyás, deputy Speaker of Parliament for legislation, has recently announced that parliament would most likely be adopting a new law on religious orders in 2015.

(4) Meal vouchers

One of the items in the “package of violations” the European Commission announced in April 2014 was the state-issued subsidized meal and other benefit ticket, which, said the Commission, created a monopoly situation with meal tickets issued as of January 2012. From that date on, only government-issued Erzsébet certificates and Széchenyi recreational cards (SZÉP cards) enjoy a special low tax rate as payments in kind and the three French businesses that dominated the market until that point left the country.

The Hungarian government argues that EU law allows this type change when done as a social benefit. The Erzsébet certificate is nonprofit, and thanks to an inflow of HUF 120 billion (about USD 490 million) from purchase by employers and social welfare bodies and their distribution, hundreds of thousands of students, large families, retirees, and disadvantaged persons were able to take vacations. Most likely the courts will have the last word on this.

In themselves, the disputed issues do not justify the dramatic tone-of-voice surrounding Hungary at European Union headquarters. It is primarily the consequence of the cooling off of European–Russian and American–Russian ties because of Ukraine.

According to Brussels, with Hungary’s insistence on expanding its nuclear power plant [commissioning Russia to do the job], its commitment to the South Stream gas pipeline that will transport Russian gas, and its halting of gas deliveries to Ukraine, Hungary has abandoned its own allies and moved to the other side. This is why the EU has an eagle-eye on Hungary now to see who will get to buy the partly government owned Hungarian oil and gas company MOL’s share in the Croatian oil and gas company INA.

If the Russian government-owned Gazprom comes out the winner, Hungary will never be able to wash away the stain of supporting Moscow and retaliation is sure to follow. At the same time, Hungary is not responsible for the dispute between MOL and INA. The Croatians did everything in their power to kick MOL out of the country but given that their economic downturn has been prolonged, they do not have the money to buy out MOL’s share. If American mediation fails, if no Western business decides to try its hand, and if Zagreb is unwilling to pay the high price, almost half of INA (MOL owns over 49 percent) could easily be sold to the Russians.

Source: Heti Válasz

Translated by Budapest Telegraph