Hungary: Changes to the FDI notification regime: certain exemptions introduced for financing

An amendment to Act L of 2025, which elevated to the statutory level the emergency FDI rules introduced in response to the armed conflict in Ukraine, entered into force on 17 December 2025. The amendment introduces an important exemption within the Hungarian foreign direct investment (FDI) notification regime.

Pursuant to Section 37(4) of the Act, the granting of security over infrastructure, equipment and assets indispensable for the operation of a strategic company no longer qualifies as a transaction subject to FDI notification, provided that such security is granted as collateral for financing provided by a credit institution.

This provision represents a notable relaxation compared with the previous regulatory framework.

Background of the Hungarian FDI screening regime

FDI screening refers to the governmental review of foreign investments – particularly those originating from third countries – in companies operating in strategic sectors. The objective of the regime is to protect national security, public order and public health by ensuring that control over strategically important companies is not acquired by investors that may pose potential risks.

In Hungary, FDI screening was introduced by Act LVII of 2018, establishing the first Hungarian FDI regime. This was supplemented during the COVID-19 period by the temporary rules set out in Act LVIII of 2020, also referred to as the "second", the "alternative" or the "emergency" FDI regime. These temporary rules have since been repeatedly extended. Subsequent legislation – in particular Act L of 2025 – elevated and consolidated a significant part of the emergency regime at the statutory level.

The second Hungarian FDI screening regime has been amended several times in recent years, partly in response to geopolitical developments and partly based on practical experience with its application. For further elaboration, please see: Amendments adopted in 2025 primarily strengthened the state's supervisory powers, for example by extending the state's pre-emption rights and modifying certain procedural deadlines.

The second regime primarily targets third-country investors, i.e. natural or legal persons established outside the EU, the EEA or Switzerland. However, the definition of a foreign investor also covers legal entities registered within the EU where a third-country person exercises majority control within the meaning of the Hungarian Civil Code. However, in certain cases, investors from the EU, the EEA or Switzerland are also covered.

Against this regulatory background, the December 2025 amendment introduces a targeted clarification: granting security interests in connection with bank financing should not, in itself, trigger an FDI notification obligation.

The previous practice in relation to financings

One of the principal obstacles encountered in the context of financings was that the involvement of a third-country credit institution as beneficiary in a financing could give rise to an FDI notification obligation. In particular, the granting of pledges, call options or certain receivables-based security arrangements in favour of such institutions carried the risk of triggering this obligation.

As a result, parties to financing transactions often assessed the potential applicability of the FDI notification requirement as a precaution. The submission of an FDI notification became an administrative burden, slowing down financing transactions.

Scope of the exemption: the definition of credit institution

The amendment introduces an exemption for granting security interests in connection with financing provided by credit institutions.

The concept of a credit institution is defined in Act CCXXXVII of 2013 on Credit Institutions and Financial Enterprises. Under this act, a third-country credit institution is an institution authorised under the laws of its home state to conduct credit institution activities and having its registered seat outside the European Union.

This clarification is significant because the rules of the Hungarian FDI notification rules regarding asset deals – and, by extension, the establishment of securities – primarily target third-country investors. Credit institutions established within the EU, EEA or Switzerland are generally not subject to these notification requirements.

As a result of the amendment, security granted in connection with financing provided by third-country credit institutions falls outside the scope of the FDI notification obligation. However, if the enforcement of such security ultimately results in the actual acquisition of ownership or control, the transaction may still trigger the application of the FDI rules on another legal basis.

Expected impact of the amendment

The amendment is expected to have several practical implications:

·         a reduction in the number of FDI procedures in financing transactions;

·         faster and more predictable lending transactions;

·         reduced legal uncertainty surrounding security structures; and

·         a potentially more favourable financing environment in Hungary for third-country banks.

At the same time, the possibility of state oversight remains if the enforcement of security results in the actual acquisition of ownership or control.