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VOL. 21. NUMBER 10

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DOMESTIC EXPANSION €6.1 billion OTP’s liquid capital

Photo: Tibor Illyés/MTI

OTP Bank concluded yet another profitable quarter and is now looking to acquire two of its peers in Hungary, who have apparently had enough. OTP boss Sándor Csányi, who remains Hungary’s wealthiest man, says OTP is open to buying even more banks. 07

NEWS

Trafik license scandal still smoldering Public interest is still very much focused on the scandal surrounding the awarding of tobacco trade licenses, with further evidence coming out, raising uncomfortable questions for the government. 03

SPECIAL REPORT

May I take a look? In a surprisingly fast move, Parliament accepted an amendment to limit the scope of data accessible to the public just one day after it was proposed. All public information requests could be refused by public entities. President János Áder sent it back to Parliament for reconsideration. 23

TRENDS

Farm money gap

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THE EDITOR SAYS

CHANGE BETWEEN THE CUSHIONS Economy Minister Mihály Varga was forced to announce yet another set of austerity measures to ensure Hungary has a chance of being able to exit its ongoing European Union excessive deficit procedure. Considering the government’s track record with its eco− nomic policies and its continuing inability to convince Brussels it can keep the budget gap under reins, the HUF 266 billion package, which is a few tenths short of 1% of gross domestic product, is hardly surprising. Varga assured the public that the government is confi− dent the entirety of the cuts won’t have to be implemented, so they will only be introduced gradually, if the situation doesn’t improve. The first phase of the package, a HUF 92.2 bln spend− ing−freeze in the public sector this year is bound to bring fierce number−crunching at ministries and various aligned institutions, as the measure follows similar cuts last year and a wave of layoffs after the second Orbán government came to power. The Human Resources Ministry has the worst of it, hav− ing to find a way to cut HUF 17.25 bln, but the Agricul− ture Ministry isn’t happy either with a required reduction of HUF 11.88 bln in costs. The announced package fits in perfectly with a tried and tested Fidesz policy: go where the money is, take it with−

out even considering structural changes that go beyond the introduction of new taxes. Because if that’s not enough, the second step of the pro− gram will involve the suspension of state−funded invest− ments in 2014, such as football stadiums and other ven− tures. When asked how these would then be financed, Varga enigmatically pointed to “other sources”, like the sale of state property. Lastly, and this prospect has surely caused business leaders to cringe, increasing the taxes on financial trans− actions and energy costs. It’s abundantly clear that even though Brussels is keeping the pressure on Hungary, whether for economic or political reasons – or a combination of the two – the Orbán government is sticking to its core principle that it won’t introduce any steps that could be interpreted as austerity affecting the general public – even though all of its measures do. There will always be a few more forints to take some− where to meet the numbers, with little regard to what these steps could entail. If the economic well being of a mem− ber state is a consideration, maybe the EU is better letting Hungary off the hook with the EDP, since the government’s policy responses are actually worse for the country than a wider gap in the budget.

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CONSOLIDATING THE MONEY Once Viktor Orbán’s government started to brutally tax a banking sector that was still reeling from the lingering effects of the Lehman Brothers crisis, it became a widely held notion that the country’s banking landscape would undergo changes and that consolidation would be inevitable. Thus far, this hasn’t been the case, but suddenly all that is changing. In the past few years, there has been relatively little activ− ity in the financial sector in terms of changes in ownership. Russia’s Sberbank bought Volksbank, but that wasn’t a Hun− gary−specific arrange− ment, as the Austrian company sold its entire central European busi− ness. The latest deal, the sale of Banco Popo− lare to MagNet involves only a very small share of the market. Now, however, the government’s plan of ensuring that at least 50% of the coun− try’s banking system should be in Hungar− ian hands looks set to take off, because after these small deals, big ones are now well in the making. OTP Bank says it is up to four months away from the acqui− sition of two banks in Hungary and has plenty of liquid cap− ital for further takeovers. The obvious (though undisclosed) candidates are MKB and CIB, which each control nearly 10% of the Hungarian market. Adding up the percentages, the deal would boost OTP’s market share to around 45%. If OTP is up for it, the government is doing its best to encourage the

appearance of further acquisition targets. Unfortunately, it’s doing so in the worst way possible. The administration has made it clear that it doesn’t deem the banking sector’s profitability a priority when it comes to economic growth. Rather, it operates on the notion that the banks had it good for years, so now it’s time to pay up. Banks are where the money is, and the Economy Ministry remains confident that there is more where that came from. First, there was a tempo− rary tax on the industry, next the government back− tracked on its earlier prom− ise that the tax would be short−lived, then, it actu− ally increased the levy. Prime Minister Orbán has already announced that if necessary, further increases are entirely pos− sible, something Economy Minister Mihály Varga recently confirmed. If it wasn’t obvious before – which is difficult to imagine – it is highly obvious now that foreign− owned banks won’t be enjoying a good time in Hungary any− time soon, which, as OTP boss Sándor Csányi indicated, has already led to the preparation of several exit strategies. The goal of a 50% Hungarian share in the Hungar− ian banking market is therefore close, after the newly announced deals, OTP alone will be an arm’s reach away. To ponder whether a listed company that has a family of Russian oligarchs as its biggest shareholder is really Hun− garian would only be nitpicking.

THE GOAL OF A 50% HUNGARIAN SHARE IN THE HUNGARIAN BANKING MARKETCOULD BE CLOSE

BBJ

1 News

NEWS IN BRIEF

Hungary April CPI slows to 1.7%

NEWS

Balabit IT searches smart investor

macroscope

TRAFIK LICENSE SCANDAL STILL SMOLDERING Shrugging off the criticism isn’t working and government officials continue to face questions about the suspicious circumstances surrounding the award of the tobacco trade licenses. With very little subtlety, the government escalated tensions by trying to increase the profit margin for those who won licenses while even further concealing the selection process itself.

STORY HIGHLIGHTS ■

Government continues to face charges of foul play over tobacco licenses ■ Weight of the scandal raises internal differences in governing party

on his Facebook page. Even higher up the government ranks, concerns have come to the foreground. “I am no fan of people getting busi− nesses for relatives or abusing a position which helps relatives to business,” Justice Minister Tibor Navracsics told Hír TV. In certain repots, his words were interpreted as an encouragement those who feel wronged in the “trafik” affair to file crim− inal charges. He later attempted to tone these comments down. Bencsik added, “The key to success is hard work, resourcefulness, willingness to develop and create value to benefit others and not acquiring wealth created by oth− ers, selfish abuse of other people’s efforts through ties in the family, in business, or even politics.”

the otherwise highly disciplined Fidesz party. A local representative in Szek− szárd, Ákos Hadházy, gave hvg.hu an interview in which he admits that the win− ners were pre−selected based on the town management’s preferences. When later approached by other media he declined to

Governing party officials continue to receive uncomfortable questions as the unwavering public interest leads to new details coming to light about the award of the now more lucrative tobacco sale licenses. The government has already been targeted because it refuses to pub− lish the details of the selection process, but the media’s digging revealed a grow− ing number of people close to local or nationally known Fidesz figures who received one or more licenses. A request from civil liberties groups and media to release the records was turned down, so the group, lead by TASz, is plan− ning to take the matter to court. In the meantime, the hvg.hu news por− tal has published an audio recording, which appears to show that local politi− cal management was directly involved in the award process, and a mayor mandated that licenses should be awarded based on political loyalty. “The point is they [the winners] must be committed right wing supporters,” Ist− ván Horváth, Fidesz MP and mayor of Sze− kszárd, is heard saying on the recording. Government officials continued to deny anything is wrong, and Prime Minister Viktor Orbán said the reports circulating are purely rumors. State secretary János Lázár blamed tobacco products maker Philip Morris for the scandal, which he alleged was artifi− cially manufactured. “They [Philip Morris] clearly informed us that they would do everything in their power to prevent the July 1 introduction of the new system,” Lázár told political weekly Heti Válasz.

A DESIGNATED TOBACCO SHOP IN BUDAPEST.

Photo: Balázs Mohai/MTI

GERGŐ RÁCZ

GROWING BUSINESS In the meantime, the license holders have become the targets of appealing offers, pre− senting them with venues for their outlets. Besides the signs popping up everywhere declaring, “a national tobacco store will open here shortly,” the other main trend is the lengths others will go to be able to stay involved in tobacco sale.

THE KEY TO SUCCESS IS HARD WORK [...] NOT ACQUIRING WEALTH CREATED BY OTHERS, SELFISH ABUSE OF OTHER PEOPLE’S EFFORTS THROUGH TIES IN THE FAMILY, IN BUSINESS, OR EVEN POLITICS DEVELOPING RIFTS Then, it turned out that the government is planning to change regulations to ensure a 10% profitability margin for applicants who have already won. Retailers surveyed in the media complained of being cheated, since the low profit margin that was included in the original tender was the main reason they didn’t apply in many cases, since they couldn’t have viably operated their outlets. The questionable procedure led to cracks appearing among the ranks of

comment, while his fellow party members have distanced themselves from him. Former state secretary János Bencsik also expressed his disapproval and refused to vote in favor of additional changes to the law, which would have once more expanded the range of products sold in the shops to include ice cream. “It’s rather strange when we are look− ing to make children healthier by taking ice cream sales inside retail units where they’re not allowed entry,” Bencsik wrote

Apparently, many license winners have been approached with offers to sell. Even major players of the economy like energy group MOL launched a campaign to bring license holders to its fueling stations. OTP Bank launched a loan construct aimed specifically at small business own− ers who may have won the license but still need financing to create the infrastructure. The tailored policy is lenient in evaluating the normally strict demands for collateral to make access for startup trafiks easier.

04 News

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NEWS FOR THESE PAGES IS TAKEN FROM THE BUDAPEST BUSINESS JOURNAL’S DAILY BRIEFING, HUNGARY A.M.

NEWS

IN BRIEF

Budapest Business Journal | May 17 – May 30

The goal was to make gypsies face what awaits them if they commit a crime...Our aim is to prevent participants from becoming criminals Cserd mayor László Bogdán on his controversial “scared straight” program that is bluntly named “Köcsögmentesítési Napok,” (≈fag elimination days). It involves taking locals on prison tours to show them what happens in incarceration.

VARGA ANNOUNCES FURTHER AUSTERITY MEASURES

ECONOMY FOUR-MONTH GEN GOV’T DEFICIT 60% OF FULL-YEAR TARGET

Hungary posted a cash flow−based general government deficit, exclud− ing local councils, of HUF 528.6 bln in the first four months of 2013, or 60% of the HUF 841.8 bln full−year target, the National Economy Ministry said in a first reading. In April alone, the general government, excluding local councils (that is, the central govern− ment), had a deficit of HUF 35 bln. Last April, the central government had a HUF 287.8 bln surplus. And it recorded a deficit of HUF 228.2 bln in the first four months of 2012, post− ing 37.6% of the preliminary full−year deficit. The ministry warned, howev− er, that the two years are not directly comparable as a result of tax and organizational changes, such as the takeover of municipal institutions as of May 1, 2012 and January 1, 2013. HUNGARY APRIL CPI SLOWS TO 1.7%

Consumer prices in Hungary rose 1.7% in April from the same month a year earlier, slowing from a 2.2% increase in March, the Central Sta− tistics Office (KSH) said. Analysts polled by business daily Napi Gaz− daság had put the April CPI at 1.7%. April consumer prices were up 0.3% month−on−month, as they were in March. Monthly inﬂation was also in line with analysts’ expectations. The fall in the headline 12−month CPI to a new all−time low was helped by an 8.4% drop in household energy prices, in turn supported by a gov− ernment mandated 10% reduction in gas, electricity and district heating prices from the start of the year. Food

prices rose 3.4% in 12 months, includ− ing a 14.8% rise in seasonal foodstuff prices. Food prices rose a steep 0.7% from March, and rose 0.2% excluding the 4.3% rise in seasonal food prices. INDUSTRIAL OUTPUT FALLS 2.9% IN MARCH

New automotive sector capacity slowed the decline of Hungary’s in− dustrial output in March, detailed data published by the Central Sta− tistics Office (KSH) shows. The data shows output of the motor vehicle segment rose 6% year−on−year in March, probably lifted by added ca− pacity at German carmakers Daimler and Opel. At the same time, output of the computer, electronics and op− tical segment dropped 8.1%, and out− put of the pharmaceuticals segment plunged 20%. Output of the rubber and plastics segment fell 5.6%, out− put of the chemicals segment edged down 0.6% and food sector output declined 3.9%. Output of the energy segment was down 1.1%. EBRD KNOCKS DOWN HUNGARY GDP PROJECTION

The European Bank for Reconstruc− tion and Development (EBRD) said it expects Hungary’s economy to contract by 0.8% this year in a regular assessment at the beginning of May, compared to a forecast for a 0.1% drop in a forecast published in Janu− ary. Hungary’s government recently lowered its own projection for GDP growth this year to 0.7% from 0.9%. The fresh EBRD projection shows Hungary’s economy growing 0.9% in 2014. The forecasts take into ef− fect the National Bank of Hungary’s recently announced Funding For Growth Scheme, which aims to sup− port lending to SMEs. But the EBRD

Photo: Lajos Soós/MTI

Economy Minister Mihály Varga (l) announced another set of austerity measures, which involve spending cuts in the public sector, suspending state investments and raising taxes on banks and utility firms. The three chapters of the plan will only gradually take effect and only if the European Commission can’t be convinced that Hungary can keep its budget deficit below the 3% of gross domestic product threshold this year and next, Varga said. If the European Commission accepts that the newly announced measures will sustainably keep the budget gap below the required threshold, Hungary is set to exit an ongoing excessive deficit procedure, which carries the threat of losing development funds, government spokesman András Giró−Szász (r) added.

Numbers in the news

HUF

65 BLN

the amount of uncovered VAT fraud in 2012, Hungary’s National Tax and Customs Authority says

HUF

38.8 BLN

the amount of financial transactions duty generated in Jan−April – the annual target is HUF 300 bln

said the scheme was “unlikely to re− verse investment trends unless busi− ness confidence and the investment environment improve”. The EBRD said steps the government has taken to rein in the fiscal deficit would de− press domestic demand in the short− term, but “may enhance confidence”. The EBRD said Hungary’s 2013 bud− get was “likely to miss” EU targets, referring to the 3% of GDP European Union general government deficit threshold. A continuation of the Euro− pean Commission’s excessive deficit procedure against the country would “significantly constrain the scope for expenditure policies ahead of the 2014 elections”, it added.

DOMESTIC EUROPEAN COURT OF HUMAN RIGHTS RULES AGAINST HUNGARY IN SEVERANCE PAY CASE

The European Court of Human Rights has delivered a ruling in a case brought by a Hungarian na− tional against the state of Hungary for taxing her severance pay at a rate of 98%. The court ruled for the appli− cant, a civil servant identiﬁed by her initials only, who complained that the 98% tax on the upper bracket of her severance pay was an unjustiﬁed de− privation of property, under Article 1 of Protocol No. 1. The 98% tax is applied to the severance pay of civil servants exceeding HUF 3.5 mln. In the applicant’s case, it was applied to HUF 2.4 mln. The court awarded the applicant €11,000 (HUF 3.3 mln) in pecuniary and non−pecuniary dam− ages and €6,000 to cover costs. The National Economy Ministry said that it was studying the court’s ruling. “The basic goal of the extraordinary

tax is to end the practice of unrealisti− cally high severance payments made from public money,” it added. Hun− gary has three months to appeal the court’s decision. GOV’T PREPARES REVIEW OF PENAL CODE

The government has found the codi− ﬁcation committee that will oversee the creation of the country’s new penal code, Justice Minister Tibor Navracsics told HírTV. Among oth− ers, the changes would allow block− ing illegal online content that is available in Hungary but cannot be removed because the servers are reg− istered in other countries, he said. He stressed that the measure isn’t mainly aimed at radical political contents, but rather to thwart sexual attempts against minors.

POLITICS GOV’T EXPANDS “FREE BUSINESS ZONES”

Hungary’s government decided last week to expand “free business zones”, areas in which higher job creating sub− sidies are available, state secretary for employment Sándor Czomba said at a press conference. The government decided to add 177 communities to the zones, up from 903 at present, Czomba said. Businesses that make investments in the zones are eligible for subsidies of up to HUF 3.7 mln for each job created, well over the HUF 3 mln in subsidies available elsewhere in the country. The ministry received HUF 22 bln worth of applications for the HUF 10 bln available in job−cre− ation subsidies, and HUF 7.8 bln of the applications came from free business zones, Czomba said.

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News 05

Budapest Business Journal | May 17 – May 30

COMPANY NEWS

The state−owned sports betting site is set to launch, almost a year later than planned. Tippmixpro, operated by SZERENCSEJÁTÉK ZRT, is to replace existing sports betting options.

Hungarian oil and gas company MOL’s ﬁrst−quarter net income plunged 56% to HUF 32.3 bln from the same period a year earlier as revenue fell, margins narrowed and tax payments rose, the company’s consolidated IFRS report shows. Revenue fell 5% to HUF 1,297.7 bln.

Electricity distributor Elmű will appeal the HUF 8 mln fine it received for allegedly failing to properly inform clients in bills about savings made as a result of government reductions in household utilities prices, a spokesman for the company, cited by daily Népszabadság, said. The spokesman conceded that Elmű’s bills did not meet all of the criteria stipulated in new regulations, but argued that the tight, twoweek deadline made full compliance impossible, in spite of the company’s every effort. The government mandated a 10% reduction in household electricity, gas and district heating prices from the start of this year. Service providers are required by law to clearly show clients the resulting savings in bills. Consumer protection authorities have also fined GDF Suez for a similar offence, daily Magyar Nemzet wrote.

The shares of web shop Shopline will continue to trade on the Budapest Stock Exchange (BSE) following the company’s merger with book retailer Libri Könyvkereskedelmi. Shopline is a B−category issuer at the Buda− pest Stock Exchange. FHB Mortgage Bank and Hungarian postal company Magyar Posta have signed a declaration of intent on long−term cooperation with billing and fee−collection company Díjbeszedő Holding and a change of ownership at the company. Hungary’s Business Telecom and its shareholders have decided to form a professional partnership with Swiss infocommunications company Elast− office, which injected €1 mln into Business Telecom earlier in May, Busi− ness Telecom said. The cooperation agreement will give Business Telecom clients access to Elastoffice’s eoSERVER cloud−based documentation and enterprise management solutions. Dozens of fuel stations will be shut down in response to a significant drop in demand, daily Népszabadság wrote. Shell had already announced it was closing 34 stations, a number that will now be raised to 45−50. Some 12 Agip units are for sale, with the brand’s owner ENI basically looking to keep only one, its busiest station. Many companies have adapted to the situation by scrapping nighttime opening hours. Troubled energy services company E−Star, which is under bankruptcy protection, initiated the termination of his contract, the company’s CEO, Csaba Soós said. E−Star reached an agreement with its creditors at the end of April. The company said it had secured undisputed creditors’ claims of almost HUF 492 mln, and unsecured undisputed creditors’ claims of HUF 17.9 bln. Hungarian bus manufacturer NABI will suspend production at the com− pany’s plant in Kaposvár after fi lling an order for 150 buses from the city of Los Angeles, the website Sonline.hu reported, citing NABI communica− tions consultant János Kovács−Gajdács. NABI restarted production at the plant in the fi rst half of 2012 in order to fi ll the order. Hungary’s National Infocommunications Service Company (NISz) has called a tender for an estimated HUF 5.1 bln of optical cable for a railway communications network in the European Union’s Tenders Electronic Daily (TED). It is expected a contract for the project, with an estimated cost of around HUF 22.6 bln, will be signed by the end of June.

Photo: Mondelēz

ELMŰ TO APPEAL FINE OVER BILLING COMPLIANCE

Hungarian petrochemicals company TVK has booked a slight HUF 21 mln net proﬁt in Q1, compared to a HUF 3 bln loss in the base period, because of improved margins. Revenue fell 5% to HUF 97.9 bln.

Iryna Shandarivska, managing director in charge of the South and Central European region at Mondelēz International, with Székesfehérvár mayor András Cser-Palkovics

MONDELEZ DEBUTS WITH A $19 MLN INVESTMENT IN SZÉKESFEHÉRVÁR Snack maker Mondelez International, formerly known as Kraft Foods, is investing $19 million at its base in Székesfehérvár (northwest Hungary) to install capacity for Milka brand chocolate biscuit sandwiches, Mondelez Hungaria managing director Iryna Shandaryvska said at a press conference in Budapest. The investment will boost capacity at the biscuit plant in Székesfehérvár by 30%, Shandaryvska said. Construction has already begun and it is expected the production lines will be installed in December. The investment will create 200 jobs by the end of the year. Mondelez International has invested almost HUF 3 bln at the base, owned by unit Győri Keksz, in recent years.

Hungarian low−fare airline Wizz Air is adding another Airbus 320 to its fleet based in Bucharest, sales director György Ábrán said. The A320 will lift passenger numbers on Romanian flights by an annual 300,000 to 3.3 million. Property company Appeninn Holding has acquired a 3,000sqm office and residential complex high on Budapest’s exclusive Gellért Hill. Appeninn Holding acquired the complex, which lies on more than half a hectare, as part of a loan conversion agreement with Erste Bank. It will continue to operate the complex. Germany’s Hochtief has agreed to sell its airport unit, which holds a stake in Liszt Ferenc International Airport operator Budapest Airport, to the Public Sector Pension Investment Board of Canada. The transaction, af− fecting assets worth about €1.5 bln, including minority stakes, is expected to be closed in the first half of 2013 but would have retroactive effect from January 1, 2013. Citi Hungary was named the Best Foreign Bank in Hungary for the second consecutive year, as well as the Best Investment Bank in Hungary for the fifth year in a row by EMEA Finance Magazine in its annual fi nancial insti− tution ranking, the Europe Banking Awards 2012. Hungary’s competition office (GVH) has fined Hold Financial, which orga− nizes group purchase schemes, HUF 10 mln for unfair business practices. Hold Financial failed to make sufficiently clear in advertisements that it only organized group purchase schemes and did not offer credit, GHV said.

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06 News

Budapest Business Journal | May 17 – May 30

STOCK MARKET FORECAST FOR USA RALLY COMES AMID MIXED SIGNALS FROM THE US ECONOMY

EXPERT OPINION

Pé Péter SOMOGYI S

CITIBANK CIT CE CENTRAL EUROPEAN CLUSTER, IN INVESTMENT HEAD

FIXED INCOME

EQUITIES

Citigroup US Board Investment Grade Bond Index 1 600,00

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Fed may begin to taper pace of asset purchase in 2H13

iti analysts continue to expect economic growth of 2.1 % this year and picking up further in 2014 to 2.8%. Support for expansion has improved with widespread hiring, more effective monetary accommodation as reflected in buoyant financial markets, and the rippling effects of reviving housing. But fiscal drag may likely check upside momentum now that the full budget sequester is going into effect. Slow implementation is expected to further delay the larger fiscal drag, while the recovery’s underlying momentum may also be buffering the impact of deficit reduction. The Federal Reserve’s (Fed) aggressive forward guidance and open-ended bondbuying have yielded the longest stretch of accommodative financial conditions since the late-1990s. The drag from fiscal restraint and policymakers’ high bar for satisfactory job growth will likely sustain QE at an elevated pace through 1H13 but may begin to taper the pace in 2H13. High unemployment and low inflation suggest no start to exit strategies through 2014. From an equity perspective, new highs for the Dow Jones and the S&P 500 are met with deep concerns about the sustainability of the advance and questions regarding any opportunity for more appreciation. According to Citi’s latest client survey, U.S. investors seem most focused on 4 issues: 1) Corporate margins sitting near previous highs; 2) Valuation continues to come up as being relatively high; 3) Potential Fed policy reversal as many believe that all of the gains in stock prices have been “liquidity” driven; and 4) Allegedly frothy investor sentiment. Citi analysts continue to believe that 2H13 may prove more challenging as political drama in the form of another debt ceiling fight or elections in Germany could be problematic. In the interim, the S&P 500 could exceed our year-end 2013 target of 1,615 before slipping in the second half.

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Source: Bloomberg

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NOTE: ALL ARTICLES MARKED E XPERT OPINIONS ARE PAID PROMOTIONAL CONTENT FOR WHICH THE BUDAPEST BUSINESS JOURNAL DOES NOT TAKE RESPONSIBILIT Y

U.S.

Treasuries rates may remain rangebound as sluggish growth prospects, political uncertainties, and the U.S. fiscal debate weigh heavily on the yield curve. As uncertainties dissipate, rates will likely seek higher ground later this year to reflect lower tail risks and improving growth prospects. While credits are still poised to outperform within fixed income universe this year, Citi analysts believe that the credit cycling is likely turning, with increasing signs that corporate are re-levering across regions and sectors. Furthermore, valuations are less compelling now as yields trade near historic lows and spreads hover around post-crisis tights. U.S. High yield returns have been more resilient than investment grade securities due to better carry and resumed fund inflows as a result of improved risk appetites. Actually the high yield fund outflows that occurred from late January through February received much attention. However, the outflows were driven primarily by ETFs, which tend to attract more fast money and more shorting interest than the broader market. In addition, those outflows have partially reversed since then. Thus Citi analysts believe that credit spreads may tighten only modestly from here and expect low single digit returns from investment grade bonds below historical average and project 7% and 5% returns for high yield and leveraged loans this year, respectively

Source: Bloomberg

Important Disclosure Citi analysts” refers to investment professionals within Citi Investment Research and Analysis, Citigroup Global Markets and voting members of the Global Investment Committee and Global Portfolio Committee of Citi Private Bank. This document is based on information provided by Citigroup Investment Research and Analysis, Citigroup Global Markets, Citi Private Bank and Citigroup Alternative Investments. It is provided for your information only. It is not intended as an offer or solicitation for the purchase or sale of any security. Information in this document has been prepared without taking account of the objectives, financial situation or needs of any particular investor. Accordingly, investors should, before acting on the information, consider its appropriateness, having regard to their objectives, financial situation and needs. Any decision to purchase securities mentioned herein should be made based on a review of your particular circumstances with your financial adviser. Investments referred to in this document are not recommendations of Citibank or its affiliates. Although information has been obtained from and is based upon sources that Citibank believes to be reliable, we do not guarantee its accuracy and it may be incomplete and condensed. All opinions, projections and estimates constitute the judgment of the author as of the date of publication and are subject to change without notice. Prices and availability of financial instruments also are subject to change without notice. Past performance is no guarantee of future results. Subject to the nature and contents of the document, the investments described herein are subject to fluctuations in price and/or value and investors may get back less than originally invested. Certain high-volatility investments can be subject to sudden and large falls in value that could equal the amount invested. Certain investments contained in the document may have tax implications for private customers whereby levels and basis of taxation may be subject to change. Citibank does not provide tax advice and investors should seek advice from a tax adviser. Investment products: (i) are not insured by the Federal Deposit Insurance Corporation; (ii) are not deposits or other obligations of any insured depository institution (including Citibank); and (iii) are subject to investment risks, including the possible loss of the principal amount invested.

U.S. stock market indices have climbed to record highs amid optimism that central banks will continue to use stimuli to boost economic growth. However, recent rallies on the financial markets will not be sustained unless key risks and vulnerabilities are addressed. GABRIELLA LOVAS

The S&P 500 Index surged to well over 1,600 points in May, while the Dow Jones Indus− trial Average climbed above 15,000. As the money pumped into the markets by central banks drives interest rates to record lows, investors are piling into the stock market in search of higher returns. Beside the three rounds of bond purchases by the Federal Reserve, the Bank of Japan announced on April 4 that it would double monthly bond buying to 7.5 trillion yen and lengthened the average maturity of the purchases by twofold to about seven years. On May 2, the Euro− pean Central Bank cut rates to 0.5%. Other, smaller central banks followed suit. With a GDP increase at a 2.5% annual rate in the first quarter, the United States’ econ− omy has expanded for the 15th consecu− tive quarter. Morgan Stanley analysts see the potential for GDP to increase by 2.5% per annum through 2017. The recently published macroeconomic indicators point to a gradual recovery, accord− ing to Péter Kovács, head of Buda−Cash’s international division. Labor Department figures show that applications for unem− ployment insurance payments decreased by 4,000 to 323,000 in the week ended May 4. The April employment report showed that the economy added 165,000 total nonfarm jobs in April, and the unemployment rate dipped to 7.5%, a four−year low. The Fed has pledged to maintain its current policy as long as U.S. unemployment remains above 6.5% and the outlook for inflation doesn’t exceed 2.5%. Con− sumer spending picked up and the housing market strengthened, too. However, old dangers and new risks lurk in the shadows, Kovács stressed. Easing monetary policies may create side effects, including asset bubbles and excessive risk taking. The U.S. recovery remains tied to economic conditions in other parts of the world. The International Monetary Fund cut its forecast for global growth in April to 3.3% this year and 4% in 2014. The euro− zone’s troubles are far from being over, while China’s growth is losing momentum. STOCKS TO WATCH In its spring stock portfolio recommenda− tion, Buda−Cash says investors should over− weight U.S. stocks as corporate fundamen−

tals are strong and profit growth is more dynamic and stable than in the European Union. However, the old practice of selecting promising sectors no longer applies, pointed out Buda−Cash analyst Bálint Török; now stocks have to be “hand−picked” and portfo− lios need to be adjusted constantly to reflect changing market conditions. Török recommends decreasing holdings in the U.S. construction sector as the indus− try outlook has somewhat deteriorated. Hav− ing risen around 15−20% since the end of last year, stock price levels in the sector are not as attractive as they used to be. Profit realization is also recommended in the U.S. health sec− tor, which has far outperformed the S&P 500. Prices of previously selected stocks, such as Lifepoint, CVS and Vanguard, rose sharply, by a respective 30%, 28% and 25%. While prices are still at attractive lev− els for buying in the U.S. technology sec−

tor, there are huge differences among the outlooks of the individual firms. Hold rec− ommendations have been given for Google due to the further improving margins and a 15−20% profit growth forecast, as well as for Oracle, while Buda−Cash has given the stocks of EMC, the world’s biggest maker of storage computers, and of Qualcomm, the largest seller of semiconductors for mobile phones, a buy recommendation. In the financial sector, bankcard issuers and specialized financial service providers are the broker’s favorites due to an increase in consumer spending and in the proportion of payments by bankcards. Buda−Cash’s picks are MasterCard and student lend− ers Sallie Mae and Discover Financial. The top two defensive sectors are currently the power sector and the paper industry. These are unaffected by business cycles and their exposure to the consequences of the budget cuts may be moderate. Although these are less dynamic sectors, companies like power giant AES or the world’s largest maker of office paper International Paper have signifi− cant growth potential.

WWW.BBJ.HU

News 07

Budapest Business Journal | May 17 – May 30

OTP SEEKS TO GROW EVEN BIGGER

BALABIT IT SEARCHES SMART INVESTOR

Hungary’s biggest lender OTP isn’t deterred by a drop in its first quarter business results, so much so that it is close to acquiring two of its peers on the Hungarian market from foreign owners seeking to leave.

KRISZTIÁN KUMMER

OTP Bank has made an offer to acquire one domestic competitor and is in “very serious negotiations” on buying another, the company’s chairman−CEO Sán− dor Csányi told commercial broadcaster InfoRádio in an interview. The immediate speculation on the market is that the two targets for the buyout are CIB and MKB. The former’s owner has publicly expressed disappointment with business con− ditions in Hungary, while the latter is openly for sale. Csányi declined to reveal the answer, but only said OTP had made a non−binding, written offer for one of the banks and was in the “last phase of negotiations” on the pur− chase of the other. OTP’s latest business report for the first quarter showed after−tax profits of HUF 11.23 billion, down 12% year−on−year, but still beating analyst expectations. OTP noted that the effects of the financial sec− tor tax are always added to the books in the first quarter of the year, which weighs heav− ily on the overall result. Thanks to continued profitability, OTP has €6.1 bln in free liquidity, which will be used to finance the latest acquisitions. “Our case is made difficult by the fact that we were always a very conservative bank and, fittingly, we proceeded with the pricing in a pretty conservative man− ner too. We took into account all possible risks, thus it could be that our offer price ADVERTISEMENT

OTP EXECUTIVES AT THE BANK’S LATEST ANNUAL ASSEMBLY

will not be enough,” Csányi said regard− ing the outlooks After other deals in the past years, the market is likely to see further consolidation. Several banks – “not just small ones, either” – want to pull out of Hungary, Csányi said, as the special taxes eating into the sector’s profits paired with low lending is making the market less appealing. “The big question is whether these will be bought by another foreign bank that wants to stay in Hungary, or by OTP, or by, let’s say, the Hungarian Development Bank (MFB),” he added. He noted that the government’s strategic goal of increasing domestic ownership to 50% within the country’s banking sector could eas− ily become a reality in the coming years. OTP’s deputy CEO László Bencsik hinted that the bank’s liquidity might be used to make even further acquisitions, not only in Hungary but abroad, although without going into specifics. He promised the bank would adhere to its established conservative approach in evaluating its options.

The continuation of OTP’s international expansion is hardly surprising given some of the successes it has had. Even when the domestic situation is adverse to the bank− ing industry, OTP could remain profitable, hoisted by its foreign units. In the first quar− ter of 2013, OTP’s foreign subsidiaries gen− erated 45% of total after−tax profit, adjusted for one−off effects. OTP’s newly announced acquisitions could be concluded in three to four months’ time. The deal will also require permission from the competition office GVH, since the deals will further increase OTP’s already dominant role on the Hungarian market. OTP Bank has total assets of HUF 10,520 bln, according to latest data, more than several of its foreign rivals’ local assets put together. Late 2012 fig− ures show Austria’s Erste had total assets of HUF 2,788 bln, German−owned MKB Bank had total assets of HUF 2,579 bln, Italian−owned CIB Bank had total assets of HUF 2,119 bln and Austrian−owned Raif− feisen had total assets of HUF 2,096 bln.

Photo: Noémi Bruzák/MTI

GERGÔ RÁCZ

BalaBit IT Security, the most renowned Hungarian IT security software company is maintaining dynamic development: its consoli− dated revenue grew by more than 30% to HUF 2.62 billion in 2012. The constantly expanding share of foreign sales in its revenue reached 82% last year, with its main markets being the United States, Western Europe and Russia. The company, which has made it on to the Deloitte Technology Fast 50 list for the third time, has partner− ships with Facebook, Leibniz Super− computing Center and Czech nuclear power plant C.E.Z., among others. “We have reached a point where we have to grow even faster than our dynamic growth pace in the last 12 years in order to keep our competitiveness,” managing direc− tor Zoltán Györkő said at a press conference. “We see the biggest growth potential in the United States, therefore our negotiations with smart investors are moving in that direction. The first successful steps are already made,” he added. To expand at a faster−than−ever pace, the company has started a program to promote innovation, increase the quality of professional education and to teach younger gen− erations. The Hungarian−owned company aims towards three prod− uct categories: monitoring high− profile users, log acquisition and storage, and firewall solutions based on proxy technologies.

WWW.BBJ.HU

08 News

Budapest Business Journal | May 17 – May 30

EXPERT OPINION

NABUCCO AND SOUTH STREAM: BELIEVING THE HYPE? István ZSOLDOS

Péter Simon VARGHA

Diána SZŐKE

NABUCCO TRULY IN THE PIPELINE After years of delays and genuine doubts about whether it would ever become a reality, the Nabucco international natural gas pipeline project appears be to getting its act together. Following extensive revisions to the overall plan, the controlling consortium is now selling capacity.

NOTE: ALL ARTICLES MARKED E XPERT OPINIONS ARE PAID PROMOTIONAL CONTENT FOR WHICH THE BUDAPEST BUSINESS JOURNAL DOES NOT TAKE RESPONSIBILIT Y

GERGŐ RÁCZ

riginally conceived in 2002, the Nabucco pipeline seemed to be a great idea for all stakeholders. At a time when European gas consumption was on the rise, it was meant to provide a cheaper source of gas, while diversifying away from Russian imports and thus easing Russia’s political influence. However, the world has changed a lot since then. First, the global financial crisis increased the political and economic risks for any project, especially those with a long payback period and immovable assets. Second, the energy landscape has also transformed dramatically: European gas demand is unlikely to grow much if at all, squeezed out by renewables and coal. There were also some game-changing developments on the supply side, with substantial unconventional gas production in the United States, as well as huge natural gas finds in frontier regions (East Africa, the Mediterranean). Furthermore, Europe has also built up a tremendous amount of LNG import and gas storage capacity. (Just to give you an idea of its size: if we count facilities currently under construction, EU countries have an LNG import capacity that amounts to 2/3 of their total imports – around seven times the originally planned maximum capacity of Nabucco.) LNG is a less vulnerable form of gas transportation than relying on pipelines through countries with significant political risk. So a lot of things have changed to make Nabucco a less attractive proposition. Yet the project continues, with sporadic PR blitzes trying to drum up trust. But these do not make it any more likely to be built. Another case in point: South Stream, Gazprom’s rival project to Nabucco, which has several times managed to give the impression that it was a done deal, with a final investment decision. This project is meant to transport Russian gas through the Black Sea to Bulgaria, Greece, Italy and Austria. There have been, and remain, many questions about the economic viability of South Stream. Its political aims are more apparent, namely to circumvent Ukraine as a transit country, as well as to undermine Nabucco (and other alternative pipeline projects). But Gazprom’s plans could backfire, both economically and politically. On the one hand, its costs are stellar; Gazprom itself has said the project would require around $40 bln. On the other hand, Gazprom could “shoot itself in the foot”, from a regulatory point of view: Gazprom is unlikely to be granted the special exemption from the EU to limit third-party access to its pipeline or to block reverse flows. And if Gazprom’s effective monopoly cannot be upheld over parts of the pipeline (i.e. between Hungary and Italy), even transporting LNG from Italian terminals to Hungary could become feasible. Therefore, South Stream may lead to Gazprom unwillingly supporting the development of a more integrated European natural gas market. This is particularly ironic since it has the most to lose with such a turn of events, as it would mean an end to price discrimination, when Western European countries, though further away, achieve lower Russian import gas prices. It’s obvious that based purely on economic considerations, the odds are stacked against both Nabucco and South Stream – perhaps that is why no comprehensive final investment decisions have been made. But the projects continue, the hype lives on, and no one knows whether either one of the two will finally be built as originally planned…

The company behind the venture, Nabucco Gas Pipeline Inter− national GmbH, has announced “open season,” which allows potential partners to book capacities. Once they signal their interests, they can then go on to sign non−binding agreements for natural gas capacities in the 1,330−kilometer pipeline “Once constructed, the Nabucco pipeline will offer produc− ers and shippers access to the growing markets of South East− ern and Central Europe, as well as augmenting their access to

Another participant, Hungary’s MOL, also raised strong criticism of the investment when it announced in 2012 that it would no longer contribute financially to Nabucco until the entirety of the effort was revised and added that at that point, it was ready to sell its stake in the consortium. RADICAL MAKEOVER The circumstances led to substantial revisions in the plans for Nabucco. Redubbed “Nabucco West,” the pipe− line is now planned to run on a shorter trajectory from the Turkish border to its original termination point, pass− ing through Bulgaria, Romania and Hungary in the pro− cess before reaching Austria. This new version is considered a far more feasible alterna− tive plan, one that is safer to build, with an added benefit in the ensuing reduction in costs. While RWE went ahead with its announced intent to exit Nabucco, MOL has apparently reconsidered and remains on board with the investment. The Hungarian state, the biggest shareholder in MOL, also affirmed its support for the project after the “open season” announcement at the start of May. Foreign Minister János

THE GAS DISTRIBUTION NODE IN BAUMGARTEN, NABUCCO’S PLANNED DESTINATION

the Central European Gas Hub at Baumgarten,” chief execu− tive Reinhard Mitschek said. After years of strife concerning the future of the venture, the coordinating firm now boasts tangible progress. NO SMOOTH SAILING During the more than 10 years since preparations for the pipeline started, so much has changed that there are still lingering doubts about whether the pipeline will ever become a reality. Originally, Nabucco was to deliver natural gas to central Europe from Iraq, with potential additional sources from Turkmenistan, Azerbaijan and Egypt. How− ever, political issues and security risks in the Middle East essentially severed any sources of natural gas supplies that could have fed into the pipeline. With the relative standstill in the venture that ensued, compounded by increasing international enthusiasm for the Russian backed South Stream natural gas pipeline, partici− pants in the implementing consortium started voicing con− cerns about whether they would continue their involvement in the project. This culminated in Germany’s RWE selling its 16.67% interest in the project to fellow consortium mem− ber Austrian OMV in April.

Martonyi, along with his colleagues from the other nations involved, addressed a letter to European Union leaders, urg− ing them to throw their weight behind Nabucco. FAR FROM A DONE DEAL Despite the latest optimism, Nabucco could still use all the help it can get, since perhaps the most important aspect, namely where the gas will come from, still hasn’t been decided. Natural gas supplies from the Caspian region have been reduced to a single feasible source, the Shah Deniz II field in Azerbaijan. Unsurprisingly, Nabucco isn’t the only suitor to the consortium overseeing the area and the decision is anything but certain. The Shah Deniz consortium comprises Azerbaijan’s SOCAR, BP, Norway’s Statoil and Total. It is scheduled to reach a final decision on its partner in June, picking between Nabucco and the Trans Adriatic Pipeline (TAP), a rival backed by Statoil, Germany’s E.ON Ruhrgas and Swiss firm Axpo Holding. TAP would run through Greece and the Balkans, and terminate in Italy. Azeri Industry and Energy Minister Natik Aliyev said at the end of April that the final decision would be made based on which offer holds the most commercial viability.

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2Business insight

Interview with Laurent Demortier, head of Crompton Greaves

BUDAPEST ANDRÁSSY AVENUE 3. WWW.ST-DUPONT.HU

Farming short of funding

CRISIS? WHAT CRISIS? Hungary’s top 100 richest people have assets of more than HUF 2,000 billion – enough to build five projects with a cost tag similar to Metro 4. Although the ranking shows several changes from last year, being rich seems pretty much crisis−proof: the aggregated assets of the country’s most wealthy individuals are up 6% on a year−on−year basis. PATRICIA FISCHER

Food industry magnate Sándor Csányi, who is also head of Hungary’s largest commercial bank OTP, once again tops Napi Gazdaság’s 2013 list of the richest Hungarians. His esti− mated assets were unchanged from last year at HUF 135 billion. An interesting fact: Csányi had estimated assets of HUF 15 bln in 2002, when the first such list was first pub− lished (by Magyar Hírlap back then), which was enough for him to make it to ninth place. The majority of his assets come from his stake in OTP – he has a 1% direct share with a cur− rent value of HUF 12 bln. He also has a signif− icant investment portfolio in agriculture: his Bonafarm group is present in every segment from arable farming to the food industry. Lászó Bige, who has an estimated for− tune of HUF 130 bln, closely follows Csányi at the top. Bige made HUF 20 bln more last year than the year previously, which ensured him second place, up from the third in 2012. Bige owns chemical companies and fertilizer producers. Bige Holding, according to the Top 100 Richest Hungarians publication, is one of the few large companies in Hungary that was able to finance its developments, to the tune of several billions of forints, from its own resources. The group’s profit was HUF 25 bln in 2012 – more than three times more than in 2010 (HUF 7 bln). Ranked third, György Gattyán also increased his assets by some HUF 20 bln, to HUF 118 bln. Gattyán is the owner of Docler, a company group that supplies adult content to websites, and was first included in the top 100 in 2011 with HUF 33 bln (which made him 15th). Gábor Várszegi, who is now based in Lux− emburg and whose flagship company Fotex is listed on the Luxemburg stock exchange,

TOP 10 RICHEST HUNGARIANS IN 2012

ASSETS IN 2013 (HUF BLN)

ASSETS IN 2012 (HUF BLN)

CHANGE

Sándor Csányi

135

László Bige

130

110

+20

György Gattyán

118

+20

Gábor Várszegi

110

125

-15

Sándor Demján

105

-15

Tibor Veres

83.5

79.5

Gábor Széles

Tamás Leisztinger

-4

Tamás Rákosi

NEW

György Wáberer

HUF

2,228 BLN

it straight into the top ten with assets of HUF 75 bln. He is mainly active in the media business: he sold his share in commercial TV channel RTL Klub. He still owns IKO Production Kft, and has shares (direct and indirect) in RAKO Kft, Dentalcoop−DC Kft, Zugligeti Klinika Kft and Videovox Kft. Another newcomer to the list is Róbert Szűcs, whose wealth of HUF 9.2 bln drove him to 65th place. Szűcs has been in the wine business since 2000, but started out in trading medical equipment. His firm, Novomed Kft, had HUF 1.5 bln in turnover in 2012, and his two wine cellars produce about one million bottles of wine a year. Right in his wake is a family with esti− mated assets of HUF 9 bln. The Németh family owns CHS Hungary−Kventa, a company group active in the IT sector. The group was founded by the late Imre Németh, and since his death in 2009, his wife and two sons have carried on the business, which had a turnover of HUF 34 bln in 2011. The list includes 11 family busi− nesses, among them the Zwack fam− ily (ranked 74th), and the Barabás fam− ily (producer of the Hell energy drink, ranked 86th). After the owners of brokerage com− pany’s Brokernet parted ways last

THE NET WORTH OF ASSETS OF THE 100 RICHEST INDIVIDUALS IN 2013, UP 6% FROM LAST YEAR

Source: Napi Gazdaság

moved back two places – to fourth from last year’s second. His assets shrank by HUF 15 bln compared to last year. Construction industry magnate Sándor Demján has been towards the top of the list since it was first published, and took first place from 2007 until 2010. Since then, though, he has gradually fallen back (to sec−

ond place in 2011, fourth in 2012 and fifth this year). According to Napi Gazdaság’s calculations, he’s worth HUF 15 bln less in 2013 than a year ago. WHO’S NEW There are nine newcomers on this year’s list. One of them, Tamás Rákosi, made

year, one of them, Erika Kósa founded Consequit. As a result of the split, she now takes 50th place on the list, falling back from 15th last year (with assets of HUF 12.2 bln and HUF 34 bln, respectively). She is, by the way, the only woman among Hungary’s wealthiest individuals.

WWW.BBJ.HU

2 Business

Budapest Business Journal | May 17 – May 30

‘HUNGARY IS STILL A GOOD TARGET’ While the former Ganz Művek and its history as a renowned stronghold of high− voltage industrial products is relatively well known among Hungarians, the fact that it is owned by an Indian company is a novelty for many. KRISZTIÁN KUMMER

The company now trades as CG Electric Systems Hungary Zrt, deriving its name from that of its owner: Crompton Greaves Ltd. We talked with Laurent Demort− ier, the CEO and managing director of Crompton Greaves about the expansion of the Hungarian company, the difficul− ties of platform−migration and his plans to conquer the world.

Did you arrive in Hungary for a special reason or do you just hap− pen to be visiting our country?

STORY HIGHLIGHTS ■

Ganz Művek was acquired by Crompton Greaves in 2006 ■ Hungary is still a good target to invest in, according to the CEO

to monitor the factory, to see if these are working in the ways we expect.

It’s good news that there are still companies that have the cour− age to invest in Hungary. A: We also had the courage to invest in Western Europe, which is in very bad shape right now, so to invest in Hungary is not as courageous as it may seem. In terms of cost effectiveness, Hungary is still a good target. Making an invest− ment in Hungary is not very risky from an industrial point of view, compared to other countries. When we moved our platform from Bel− gium to Hungary, the challenge was not economic, but quite unique: we had to con− vince our customers that our motors and

East Asia and 20% in the Americas. We have acquired many companies since 2005 with two main goals: on one hand to increase our market share and on the other to buy new technologies. Now in the case of Ganz, we bought a company that was in a very difficult situa− tion. But we were able to use most of Ganz’s technology in India and, at the same time, we’ve put a lot of innovation into new prod− ucts made here. It was a great opportunity for us to enter the segment of large motors, where we haven’t been present before.

If it’s not a business secret, could you be more specific about how much you have invested in Hungary? A: We invested €3−5 million in the Hun− garian plant and we plan to invest a further €7 million this year, both in the motor and the transformer branch of the factory. In the latter we had 7,500 MVA capacity and, by December, we plan to increase it to 15,000 MVA, practically doubling the capacity. We have increased the number of employees by more than 25%, hiring more than 200 new

CURRICULUM VITAE Frenchman Laurent Demortier was appointed CEO and Managing Director of CG on June 2, 2011. He graduated from The Wharton School of the University of Pennsylvania, and also has a Masters engineering degree in physics from the Ecole centrale de Marseille, France. Prior to joining CG, he was Senior Vice-President of Alstom Power, in-charge of the power automation and control business unit. He joined Alstom in the year 2000 and has led several business units both in transmission and distribution and power sectors.

A: The CG executive committee regu− larly reviews the region, focusing on Cen− tral Europe and Russia. We meet here with politicians, customers etc., and we visit the Ganz factory as well. In 2006 we acquired the Ganz works and at the end of last year we made an impor− tant decision to transfer our industrial plat− form from Western Europe to Hungary. We invested a lot in Hungary and have con− centrated a lot of tasks here that we used to have in Belgium. Now, we monitor the performance of the Hungarian platform on a weekly basis. The specific purpose of our visit is that this tran− sition is very important to us: we have new employees, new customers, etc. So we came

transformers from Hungary are not infe− rior to those made in Belgium or else− where in Western Europe in terms of qual− ity. Sometimes they sent full delegations to Hungary to see the platform and the whole process of manufacturing, but they were all absolutely convinced. Why did you think that Hunga− ry’s Ganz Művek would fit into the company’s portfolio? A: We used to be a very strong company both in motors and power generation, but only in India. Eight years ago, we decided to spread our business around the globe. In 2005, all our businesses were situated in India, now only 40% of them are there. Thirty percent is in Europe, 10% in South−

people. We plan to hire more than 150 more employees by the end of the year, increas− ing the total head count to more than 1,000. We produce parts for our offshore wind farms here in Hungary. The problem was how to double capacity, which seemed painful at the time, but the team adopted new technologies very fast, so all in all it was a great show of the local team’s per− formance. The partners and we were very pleased with the results.

For the past several years the European Union has been very loud about the paradigm− shift in Europe’s energy scheme, from nuclear to renewables. How do you compete in this market? A: In Europe, we’re competing against giants who are much bigger than us, so we have to find our niche markets. The niche in which we are operating in Europe is renew− ables. We are number one in offshore wind connections. E.g.: we have a 200 MW wind farm with a number of wind−turbines and

transformers in the middle of the sea, we connect these wind turbines and plug them to the shore through an AC connection. Wind energy also has great potential in Central Europe, in countries like Romania and Hungary, so we want to introduce our already tried and proven onshore technolo− gies in this region. We are also very strong in hydro energy and have a major program in revamping systems everywhere from Ukraine to Western Europe. One of our key competencies is energy efficiency. We come from a very poor coun− try, India, where energy efficiency issues are often more important than in other regions of the world. We are working very hard to develop energy efficient products – motors, transformers and the like.

What are your advantages over your competition? A: I think we have four key elements that make us more appealing than the competitors. The first element is that we have some products that –

WWW.BBJ.HU

2 Business

Budapest Business Journal | May 17 – May 30

through unique patterns and designs – are very cost effective. The second part is that, being a rela− tively small company on the market, we are more flexible. Basically we are engineer− driven and all our motors are made based on actual orders, specially designed accord− ing to the clients’ demand. Third, the low cost level. All customers appreciated that we migrated our platform from Belgium to Hungary. If you take a look at our competitors, they all have large fac− tories in high cost countries. We have a lot of very cost−effective factories in India, our homeland, and around the world. And also good manpower is a key issue. To find a good electromechanical techni−

cian in Belgium at a reasonable price is very difficult. In Hungary, good and affordable experts were easily available. I think in the long−term you can only sur− vive if you have good products and good technologies on a very cost−effective basis.

You mentioned several times that the company decided to go global in 2005. What are your “world conquering plans” for this year? A: To successfully build up a busi− ness, you have to know where you are and where the business is. For exam− ple, Indonesia is definitely a growing market that we focus on. Its electrical infrastructure is the biggest in South−

east Asia. We have been in the coun− try for many years now, but we have to increase our presence there. I could also mention Malaysia, Vietnam, Australia and New Zealand. And of course India, the home country of CG. A few months ago we opened a new fac− tory in Saudi Arabia. The Middle East is also an interesting market, as Western companies used to have huge businesses there. Now, that’s changing a little bit, as Middle Eastern countries tend to prefer local companies in the power business; that’s why we think that a factory in Saudi Arabia has huge potential Europe is still a key target for us, espe− cially in the field of motors, as we manu−

facture the whole range of high efficiency motors, LT and HT motors. We bought a company last year in the drive business to monitor the energy efficiency of our motors. We see very good opportunities in Africa, so we will open a new office in Dubai in a few weeks to cover the conti− nent. We already have very good connec− tions with Maghreb. Last year, we started to invest in Bra− zil, but the country is not our top priority right now, as it is a very complex market, that you can’t penetrate in small and simple way. We have a little bit eased our pressure on the United States, because the market is lagging, but we have remained very active on smart grid projects.

I THINK IN THE LONG-TERM YOU CAN ONLY SURVIVE IF YOU HAVE GOOD PRODUCTS AND GOOD TECHNOLOGIES ON A VERY COST-EFFECTIVE BASIS ADVERTISEMENT

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2 Business

Budapest Business Journal | May 17 – May 30

Just a job, please

Farming short of funding

A job is more important than a salary

Lack of financing to further diminish competitiveness

19%

FEEL LONGTERM JOB SECURITY IS MOST IMPORTANT

It is not so much a high salary, but a stable job for the long−term that is most important to potential employees, a new global survey from Randstad shows. Although the proportion of those indicating a competitive salary as the most important factor increased from 2012, most respondents still keep job security in mind while seeking a job, and it is especially important for people over 40 and with lower qualification levels. Besides a secure job and a good salary, a pleasant working atmosphere also featured in the list of most important aspects in job offer assessments; this factor is especially important for women: a company that offers flexible working hours and is easy to reach is more attractive to female employees, the survey shows. Men are mainly impressed by career development opportunities and good corporate governance skills when considering a new job. Younger and highly skilled workers are also motivated by the chance for progress, more so than the average – even at international level. According to the survey, four main components guarantee a good working atmosphere: the management recognizes good work; colleagues feel part of a team; employees respect each other; and communication is open and sincere. Independent working is also important to a third of respondents. Also, a generation gap could clearly be observed: recognition, task sharing and teamwork motivate older employees, while younger people feel better when they find new friends. Employees are less likely to look for a new job when companies provide stable employment. Parallel to that, the majority (55%) of respondents leave when they aren’t paid on time, or only partially so. KK

MOST IMPORTANT FACTORS IN JOB SEEKING (%)

Long term job safety Source: MRSz

Competitive salary

1,065

HUF

BLN NEEDED IN BREEDING LIVESTOCK

The government has highlighted the farming sector as a key niche of the economy, but it will be necessary to introduce extensive measures boosting competitiveness if Hungary is to reach the level of its European peers, a study from OTP Bank’s agricultural division said. In particular, raising livestock needs much additional funding, which OTP puts at HUF 1,065 billion over the next seven years to reach a production level and quality seen elsewhere in Europe. The biggest problems are in the pork segment, where outdated technologies and the resulting deficit in competitiveness necessitate big changes. There are currently 2.9 million pigs being raised in Hungarian farms, but the number is dropping and the local meat industry is relying more on imports. Hungarian farmers have difficulties meeting strict sanitary regulations and the high cost of animal feed is also a deterrent. OTP estimates the pork segment alone requires HUF 450 bln in capital in the coming years. The situation is better for poultry and dairy, where the level of applied technologies is relatively modern. Still, there are plenty of investment opportunities to improve energy efficiency as well as sanitary conditions. OTP points out that Hungary has HUF 1,300 bln in available European Union funds for the seven−year budgetary term starting in 2014, some HUF 350 bln of which could go to developing livestock industries, complemented with state support. To reach the projected investment requirement, Hungary must accordingly raise another HUF 715 bln. Given that the farming sector is typically short of disposable capital, the largest part, around HUF 500 bln, will come from loans, OTP said. GR

FUNDING NEEDS IN AGRICULTURE (HUF BLN)

Financial Good stability work atmosphere

Entrepreneurs for life

Flexibility gains importance

85%

Once an entrepreneur, always an entrepreneur; even though they might have encountered huge challenges in starting and growing their businesses, or even fallen into business ownership through redundancy, the vast majority of entrepreneurs would do it all over again, a recent global study of Regus shows. Although 55% of entrepreneurs report that current economic conditions are a deterrent, fully 85% would start again. This in spite of the fact that a quarter of entrepreneurs today say they were forced into this decision when they lost their previous employment or were made redundant. SMEs accounted for 99.8% of non−financial enterprises, equating to 20.7 million businesses. The overwhelming majority (92.2%) were micro−enterprises, defined as those with fewer than 10 employees. In spite of this overwhelming evidence of the importance of SMEs as “the engines of growth” in economies throughout the world, entrepreneurs see many deterrents to their activities. Half of them cite the state of the economy and market domination by large corporations as serious hindrances. But the biggest deterrents to setting up business today as reported by existing entrepreneurs are the lack of access to credit (76%), red tape (74%) and lack of government support (61%). Given the above, entrepreneurs will be turning even more to more flexible working practices such as flexible workspaces that allow them to upscale or downscale operations rapidly and invest all their capital into growth strategies rather than lengthy leases. Already 58% of entrepreneurs use flexible working locations for more than half the working week, compared with only 39% non−business owners. KK

MAIN DETERRENTS TO ENTREPRENEURSHIP (%)

Lack of access to credit Source: OTP Bank

OF FAILED ENTREPRENEURS WOULD START OVER AGAIN

Source: Randstad

Red tape

Lack of government support

BBJ

3Special Report Data leakage: It's all about rights 14

Smoke and mirrors: TASz fights for access 16

Constitutional jurors review embattled fourth amendment 18-19

LAW TRANSPARENCY AND CORRUPTION

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Budapest Business Journal | May 17 – May 30

DATA LEAKAGE: ITS ALL ABOUT RIGHTS Leaking confidential data no longer requires a micro camera or safecracking equipment; it can be retrieved, saved or forwarded by a single click.

access rights should be reviewed at reg− ular intervals. The current Labor Code provides the right and possibility for employers to verify employees’ activi− ties by technical means. Although the employee’s consent is not required for on−line monitoring according to Gide Loyrette Nouel, to ensure the protec− tion of privacy, the employer must provide a detailed and well−reasoned warning prior to the application of the monitoring system.

KRISZTIÁN KUMMER

We talk about data leakage when high− value, electronically stored information is released from a safe corporate environ− ment. Aside from external attacks by hack− ers, data leakage is most frequently caused by employees (intentionally or otherwise), making prevention key. Vulnerability issues must be dealt with in every organization – from small businesses right through to government institutes and multinational companies – where commu− nication between internal and external col− leagues is conducted via Internet. In addition to more traditional chan− nels such as email, social media sites and applications also give new security issue to IT−experts. BUSINESS SECRET FIRST In the development of any company’s inter− nal security strategy, legal and IT protec− tion is equally important. The first impor− tant task in developing a defense against data leakage is to carry out a security risk analysis, which involves identifying all data to be protected and classifying it according to different security levels. First and foremost, business secrets must be protected: information, solu− tions or data that are related to the com− pany’s business activities, and the pub− lic disclosure, theft or use of which by unauthorized persons might compromise or harm the owner’s financial, economic and/or market interests. Defining what are your business secrets is of upmost importance, as employees are legally bound to keep business secret even after a job contract is terminated. ADVERTISEMENT

BASIC RULES Basic rules of conduct to protect confiden− tial data must be determined in an inter− nal data protection regulation. Regular training on data protection can increase the sense of personal responsibility and conscious behavior of workers and also lower the risk of data leakage due negli− gence or carelessness. “It’s important to lay down rules, such as whether employees are entitled to install software on corporate computers,” Dr. Máté

Bende, head of communications and busi− ness development at law firm Gide Loyrette Nouel said. “If an employee installs soft− ware on a corporate computer without prior permission from his or her employer, the entire civil and criminal liability – including possible copyright infringement – is borne exclusively by that employee,” he added. It is highly possible that employees have access to more information than is actually required for them to perform their tasks. To reduce security risks,

MONITORING EMPLOYEES “Our company uses a specially designed software for monitoring por− table devices connected to comput− ers,” said Dr. László Takács, manag− ing director of storage and information management services provider Iron Mountain Magyarország. “The access rights are managed centrally based on Information Technology Infrastruc− ture Library (ITIL) recommendations. This tool helps to keep both USB− devices and CD/DVD writers under surveillance. By default, users have no automatic right to write, and can get read or writing rights only after indi− vidual authorization,” he added. When it comes to paper−based classified information, Iron Moun− tain uses the company’s own device, a destructing container called CD2. These sealed containers are later destroyed in a confidential way. If no technological surveillance sys− tem can prevent data leakage, employees responsible for the loss are still bound by the law. Employees must reimburse the damage caused by any breach of the obliga− tion of confidentiality and business secrecy to the employer. The compensation depends on the conduct of the employee. Usually, in the case of negligent conduct, the fine is up to four month’s salary, although in the case of gross negligence or willful misconduct, the penalty might reach to full compensa− tion for any damage made.

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Budapest Business Journal | May 17 – May 30

EXPERT OPINION

A less predictable business environment and the highly accelerated pace of lawmaking are currently the two defining tendencies of Hungary’s legal market, says Zsolt Okányi, who was recently appointed partner at CMS Cameron McKenna’s Budapest Office. According to the litigation partner, the decrease in the number of acquisitions and the drop in the volume of investments are being met with an increasing number of legal disputes that need to be resolved as swiftly, efficiently and adeptly as possible. BBJ: What are the typical problems attorneys currently face in Hungary? Zsolt Okányi: Advising clients in the law is becoming ever more difficult these days in Hungary. We are witnessing vibrant, accelerated and frequently unpredictable legislative tendencies. Laws and regulations, throughout the entire Hungarian legal system, are being amended at such a speed that it is often an extreme challenge to follow the changes. In order to provide clients with accurate and up to date advice on the law, we at CMS devote considerable efforts to continuously monitoring the ongoing legislative activity so that we are able to proactively advise clients. Needless to say, even with a dedicated team of lawyers who go through all the bills on the agenda of the Hungarian Parliament daily, new laws may still create dilemmas, particularly if they enter into force without a reasonable grace period or even with a retroactive effect. All this necessarily impacts every player on the market. BBJ: What do these tendencies mean in your everyday practice as a newly appointed partner at CMS?

Zs. O.: I am heading the Dispute Resolution Practice Group at CMS’s Budapest office, where we mainly deal with highprofile arbitration and litigation cases. We see that while procedural rules are normally expected to be a set of stable, clear and coherent provisions, the trends I mentioned earlier gravely affect even this particular field of law. Over the last few years we have witnessed two conflicting tendencies arising. First, market players appear to be growing less confident in the state-run court system, particularly if the adverse party is a state or municipal entity. This results in clients naturally seeking out alternative dispute resolution techniques such as arbitration or mediation. On the other hand, over the course of the last one-and-ahalf years, the legislator introduced fundamental restrictions and limitations to narrow the potential scope of arbitration proceedings, mostly with the aim of preserving state and municipal assets. As a result, many high-profile legal disputes that for decades were arbitrable are now subject to the exclusive jurisdiction of the Hungarian state courts. BBJ: Do you see a change in the types of assignments you get from your clients? Zs. O.: The economic crisis inevitably caused changes in the nature of M&A and other transactional works. The trends triggered by the worsening business conditions were topped by the legal environment becoming more insecure, and it all led to new types of assignments, like high-value commercial mediation or compliance audits, at least in our office. BBJ: Do state courts adapt well to handling business disputes of large magnitudes? Zs. O.: In 2011 the legislator introduced a separate regime for “priority lawsuits”, meaning that civil and commercial disputes with a claim value exceeding HUF 400 million are subject to special procedural rules and stricter deadlines, in order to make the claim enforcement proceedings quicker and more efficient. While the underlying legislative purpose is absolutely valid and warmly welcome, in practice the new rules raise a vast number of difficulties. The Civil Procedure Code governing the entire proceedings is amended often and unpredictably. The newly introduced rules frequently lack a visible rationale and do not fit into the established framework of civil procedure rules. For instance, while the threshold for priority lawsuits is HUF 400 mln, other important requirements are linked to a HUF 200 mln limit. BBJ: What are the perspectives for dispute resolution in Hungary? Zs. O.: The recent years have seen state court procedures becoming more

Dr. Zsolt Okányi, partner, Head of Dispute Resolution

AS ATTORNEYS IT IS OUR TASK TO SERVE THE CLIENT’S BEST INTEREST – IN MANY CASES A FAVORABLE SETTLEMENT IS FAR MORE BENEFICIAL, THAN A LONG-LASTING LITIGATION PROCEDURE expensive. The maximum amount of first instance court duties were increased 66%, while the increase in appeal proceedings was 177%, and 40% in Supreme Court proceedings. Although the costs of state court litigation in Hungary are still substantially lower than Western European standards, the increase of court duties and the constant change in the laws will probably direct clients to arbitration and mediation. It is our task as attorneys to serve the client’s best interest – and in many cases a favorable settlement is far more beneficial, than a long-lasting litigation procedure. While alternative dispute resolution schemes have the necessary legal framework, apparently the Hungarian business and legal culture is not yet ripe for taking the real benefits offered by such opportunities. BBJ: Do you see any change in your clientele as a result of the above tendencies?

Zs.O: Not much. Obviously the type of assignments might be changing to some extent, adapting to the current business environment, but our clientele remained largely unchanged, and I firmly believe that high standards and quality legal services always have their own market. It is essential for us to form lasting partnerships with our customers, based on mutual loyalty and trust, and we are confident that regardless of the actual business trends, this is what our clients most value.

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CONFLICTING TENDENCIES IN LEGAL DISPUTES

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Budapest Business Journal | May 17 – May 30

SMOKE AND MIRRORS: TASz FIGHTS FOR ACCESS Apart from the obvious political implications of the tobacco license affair, the government has also been the target of criticism for legislation that limits access to public information on grounds that it violates basic rights. The TASz civil liberties group is set to file a court case over the matter in association with peer groups and media organizations. The Budapest Business Journal asked Fanny Hidvégi, TASz’s head of data protection and freedom of information program, about the details.

STORY HIGHLIGHTS ■ TASz

argues planned changes to information access law violates basic rights

■ The

liberties union leads a group of organizations in a lawsuit to make tobacco license data public disillusioned voters

still considerably faster than other cases that often take several years.

What is your opinion about the amendments proposed to the information access law after the tobacco license scandal broke out?

BACKGROUND

GERGŐ RÁCZ

What are the main objections TASz has about the award of the tobacco licenses? A: We think this matter isn’t necessarily about the tobacco stores themselves, but instead a violation of the fundamental right of access to public information. If you look at the timeline of events, the licenses were announced on a Friday and after we applied for access to the details of the process as essential public information, the law was modified as soon as Sunday.

The new data protection law limits public access to certain information citing abuses in how data is applied for by individuals or the press. Do you see this as an issue? A: There is already a major disparity between the state and the citizens in this respect, and there’s hardly any need to give the state even more protection. Access to publicly essential data is a fun− damental right since it allows citizens to make informed decisions. As such TASz believes that “abusing the processes” that allow access to data is completely nonex− istent, since we’re dealing with a basic right. The justification behind it, namely that institutions are already dealing with heavy workloads, prescribes that the data holder will have the jurisdiction in weigh− ing certain cases, which introduces an arbitrary aspect to the system.

What options are you considering at this point? A: We lodged a request to access public records along with other liberties groups and media organizations. This request was rejected, so TASz will shortly file a civil court case for the release of the records and will also conduct the group’s legal representation.

What are your expectations, what will happen with the law now? A: Based on the government’s comments, we’re expecting some “cosmet− ics” will be applied and the law will then be passed without actually addressing our core concern that it violates a basic right.

IT DOESN’T CONTAIN A SINGLE PARAGRAPH WE COULD AGREE WITH

What result are you hoping for and what other fora can you approach? A: In such cases a civil suit is filed and if the court rules in favor of the plaintiff, the holder of the data that is of public signifi− cance is obliged to release it. There may be appeals, and when all other domestic options are exhausted, there is the European Court of Human Rights in Strasbourg.

Is TASz ready to take this matter as far is it will go? A: We are. In information access cases there is special expedition, based on the obvious logic that infor− mation is most valuable when it’s fresh. If the case should reach Strasbourg it could still take a year or two but that is

A: Basically, it doesn’t contain a single para− graph that we could agree with, although to varying degrees. In general, it narrows the scope of judicial oversight and, thanks to the suggested limitations of access, it provides state institutions with an arbi− trary jurisdiction over the data that can be accessed by the public.

You appealed to President János Áder to veto the bill, which he did. A: Yes, but he only exercised a political veto and sent the bill back to Parliament for review. This means he didn’t find any issues related to fundamental rights as we are arguing now. If that were the case he would have sent it for evaluation to the Constitutional Court.

The government’s controversial management of the licenses for the monopolized trade in tobacco products sparked widespread interest since it led to some well-connected people winning, while excluding established businesses. In addition, the tender process was so confidential that there is still no way of knowing exactly what the main criteria were, or how many points individual applicants received in the evaluation. As a consequence, the Hungarian Civil Liberties Union (better known as TASz ), Átlátszó, Transparency International Magyarország, K-Monitor and media outlets, Index, Origo, and hvg.hu filed a claim to access the details saying they are public records. The application was not only rejected but, shortly afterwards, the law regulating access to public information was amended to give legal grounds for authorities to limit external oversight.

Besides the courtroom, does TASz have any other avenues in this matter? A: As a result of the tobacco scandal, we have ended our participation in the Jus− tice Ministry’s anti−corruption work− group operating under the Open Govern− ment Partnership. This is an international effort launched by U.S. President Barack Obama aimed at combating corruption through advocating transparency in gov− ernance. Membership is voluntary and participants are invited to make various commitments. We have had several con− cerns before, but the tobacco licenses were the last straw, which is why we ended our membership. Naturally, we made our observations known to the other members of the organization.

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Budapest Business Journal | May 17 – May 30

EXPERT OPINION

REAL ESTATE INVESTMENTS IN SOUTHEAST EUROPE GAIN IN LEGAL SECURITY The Adriatic coast and Serbia offer great real estate investment opportunities to foreign investors. The dynamic Southeast Europe (SEE) region is covered by Gide Loyrette Nouel’s SEE Group, which operates from the firm’s Budapest office and accompanies investors in their projects throughout the region. The SEE Group works alongside highly qualified local law firms to offer the best level of service, combining the know-how of these local experts with Gide’s international experience. Thanks to its overall intervention capacity, the SEE Group acts as sole client contact in cross-border transactions, centralizing the legal information relevant to all countries involved. The diversity of real estate registry systems in the countries along the Adriatic coast and in Serbia offers a good example of areas in which the SEE Group is capable of offering a clear overview as well as tailored legal insight.

Ioana Knoll-Tudor

François d’Ornano

Senior Associate

ike any business operation, investing in foreign real estate markets involves taking risks. Legal risks can however be minimized by accessing reliable information on the targeted real assets. Important data in this regard mainly includes the precise geographic localization and delimitation of plots and of any buildings situated on these plots as well as any related ownership and lease rights. It is also important to verify whether any possible impediments to the success of the investment exist, such as ongoing court or arbitration proceedings concerning the real assets, encumbrances or land-use restrictions. All this data can be found in real estate registries, which generally provide factual information in a cadastral registry mapping the territory, while legal data is usually kept in a so-called land registry. The countries in the Adriatic coastal region – Slovenia, Croatia, Bosnia and Herzegovina, and Albania – as well as Serbia are showing significant effort in improving their real estate registry systems. In Slovenia, Croatia, Serbia and Montenegro, and the cadastral and land registries have been modernized and digitalized over recent years. The Croatian cadastral website provides real property descriptions covering 90% of the territory, while No digital data

information on registered owners and encumbrances is available through the online land registry database. The Slovenian registration system has been digitalized in a similar manner and provides information online through two websites, one for cadastral and one for land right data. In Serbia and in Montenegro, a single online database covering the entire respective territories provides both cadastral and land right information, and Serbia has even set up a digitalized registry of mortgages. Albania is following the same path with the adoption, in 2012, of legal reforms aimed at simplifying the registration system through the creation of an online register in which all cadastral data and land rights will be available. The system in Bosnia and Herzegovina is still quite complex and unpractical, due to the decentralized organization of the territory (Republic of Srbska and Federation of Bosnia and Herzegovina) and to the fact that the digitalization process is only at an early stage. This overview shows the recent regional trend to digitalize real estate registry systems. The main goal is of course to enable an easier and more rapid access to all relevant data in the scope of a real estate investment, by providing online data to the public, free of charge. But this is not the only advantage. The process of digitalizing the data found in the real estate registries also leads

Adoption of reforms allowing digitalisation

Digital data available (different % in each State)

LEGAL SECURITY Bosnia and Herzegovina

Albania

Slovenia Croatia Serbia Montenegro

the competent authorities to review and control the content of the data, and to correct any incoherencies. The information thus not only gains in accessibility – its accuracy is also improved. The digitalization of real estate registry systems is strongly encouraged by international institutions such as the World Bank, which supported the project in Serbia and in Albania, and is currently participating in the funding of similar projects in Bosnia and Herzegovina and Montenegro. The higher level of transparency of real estate data reached through the recent and ongoing digitalization processes has spurred foreign investors to venture into the Adriatic

coastal region. For example, the SEE Group recently advised an international hotel chain on the opening of a new hotel in Albania, following its successful establishment in Macedonia and other countries of the region.

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Partner

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Budapest Business Journal | May 17 – May 30

CONSTITUTIONAL JU REVIEW EMBATTLED F AMENDMENT The Constitutional Court is the remaining institution in Hungary’s administrative system, which hasn’t been rearranged to fully comply with the government’s aims. As such, many look at it as a final vestige of checks and balances that could block controversialchanges to the basic document. GERGŐ RÁCZ

The Constitutional Court (AB) has speed− ily taken to evaluating a submission from the ombudsman regarding the latest and highly controversial modification of the country’s basic document. This fourth amendment of the constitution passed by Viktor Orbán’s Fidesz government has already sparked widespread criticism of Hungary internationally, as well as among political opponents. Hungary is under scrutiny by the Euro− pean Commission for the changes, which include limitations to next year’s election campaigns, the allocation of legal cases and compelling the AB to ignore its own rulings from previous decades as legal precedent. Other controversial measures that featured prominently in domestic discourse included binding the achievement of tertiary degrees to working in Hungary for a mandatory period of time. Ombudsman Máté Szabó

STORY HIGHLIGHTS ■

Constitutional Court currently evaluating controversial amendments to basic document

■ Government

has legal means to circumvent any ruling

determined after his own review that the measures are in violation of basic rights. The constitutional amendment sparked protests and calls for President János Áder – who as head of state has to validate all laws passed by Parliament – to opt for a veto and refrain from ratification by send− ing it to the AB for review. Feeling the pres− sure, Áder delivered a television address to justify his choice and then went ahead and signed the amendment, but passed it back to Parliament for them to look at again. By doing so, he effectively removed himself from the process, as he will not be called upon to review it again. “For a political power with the means to draft a constitution there is always great temptation to give a routine response to Constitutional Court decisions it dislikes, to remove certain issues from the Constitu− tional Court’s scope, and place them under constitutional protection, as happened in Hungary in the past two years,” chairman of the AB Péter Paczolay said in January. THE COUNTERWEIGHT The Constitutional Court exists as the ultimate balancing factor against any government majority legislating against the country’s basic document. In this aspect, it has reached controversial deci− sions over the years in issues like same−

sex unions or drug use, but its rulings have also led to the reconsideration of already passed economic measures. However, the institution’s broad scope of jurisdiction was seriously curbed once Fidesz came to power. As one of the first measures affecting the AB, the government withdrew its power to evaluate tax matters for as long as the country’s public debt is above 50% of gross domestic product. See− ing that the current level is around 80% and unlikely to drop seriously anytime soon, this move is in effect a near−permanent withdrawal of jurisdiction. DOWN TO THE CORE Orbán hasn’t shied away from making exten− sive changes to the country’s administrative structure, ones that largely suit Fidesz’s poli−

cies. The state audit office (ÁSz) has a former Fidesz MP as chairman, the judicial system is overseen by the wife of a prominent Fidesz member and after the long−awaited (at least from the government’s side) expiration of András Simor’s term, the central bank too is now fully compliant to central directive. Without questioning the professional qualifications behind these appointments or numerous others that could be added to the list, it is quite clear that the prime minis− ter is looking for people who agree with his own political creed and will consequently support his government. As such, the appointment of carefully selected new jurors has been eased through with government support in the pertinent committees, as well as in the House. Based on the governing party’s earlier choices,

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Budapest Business Journal | May 17 – May 30

JURORS D FOURTH Photo: András Péter Németh

FOR A POLITICAL POWER WITH THE MEANS TO DRAFT A CONSTITUTION THERE IS ALWAYS GREAT TEMPTATION TO GIVE A ROUTINE RESPONSE TO CONSTITUTIONAL COURT DECISIONS IT DISLIKES

PÉTER PACZOLAY, CHAIRMAN OF THE CONSTITUTIONAL COURT

having appointed MPs and a former Fidesz minister to the panel, any new candidate will surely be someone close to Fidesz. There has been speculation that former chancellery minister and current constitu− tional juror István Stumpf only goes against certain laws passed by the government out of a personal political grudge against his party leader and one−time boss. JUDICIAL CHALLENGES The government has been anything but subtle whenever the AB struck down a law, whether it was through limiting jurisdic− tion, or simply saying that a ruling that a law was unconstitutional is a technicality. This was easily rectified by the govern− ment majority incorporating the criticized elements into the document itself, because

something that is in the constitution, by definition, can’t be unconstitutional. The multitude of changes have led legal expert to point out that the basic document that Orbán famously said was “firm as bed− rock” often contradicts itself because of the changes and how they were rushed. The prime minister’s priorities and expec− tations from the judicial branch are also clear. When a court ruled in favor of providers chal− lenging the mandatory 10% reduction of util− ity fees, Orbán told parliament that the deci− sion was “outrageous”. He stated that the court ruled against the Hungarian people’s interests under influence from foreign agents, apparently not considering that the steps may have shaky legal footing. The courts, unsurprisingly, rejected that notion that they are not independent.

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Budapest Business Journal | May 17 – May 30

THE BEST OF THE BEST BELOW IS THE LIST OF INTERNATIONAL LAW FIRMS OPERATING IN HUNGARY THAT HAS BEEN RECOMMENDED IN THE MOST AREAS OF LEGAL ACTIVITIES IN 2013 (IN TOP CATEGORIES OF VARIOUS RANKING BODIES, E.G. BAND 1 WITH CHAMBERS EUROPE AND CHAMBERS GLOBAL, AND TIER 1 WITH LEGAL 500). CHAMBERS EUROPE 2013 BAND 1

CHAMBERS GLOBAL 2013 BAND 1

LEGAL 500 2013 TIER 1

TOTAL NUMBER OF RECOMMENDATIONS

CMS Cameron McKenna LLP

Réczicza White & Case LLP Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie

Weil, Gotshal & Manges LLP

Andrékó Kinstellar Ügyvédi Iroda DLA Piper Horváth & Partners Law Firm

Oppenheim

Szecskay Attorneys at Law

Faludi Wolf Theiss

Lakatos, Köves & Partners

Nagy és Trócsányi

CHAMBERS GLOBAL 2 013 LEGAL ACTIVITIES

BAND 1

BAND 2

BAND 3

Banking & finance

CMS Cameron McKenna LLP Weil, Gotshal & Manges LLP

Allen & Overy Andrékó Kinstellar Ügyvédi Iroda DLA Piper Horváth & Partners Law Firm Lakatos, Köves and Partners Réczicza White & Case LLP

Corporate / M&A

CMS Cameron McKenna LLP DLA Piper Horváth & Partners Law Firm Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie Réczicza White & Case LLP Weil, Gotshal & Manges LLP

Andrékó Kinstellar Ügyvédi Iroda Lakatos, Köves and Partners Szabó Kelemen & Partners Attorney Szecskay Attorneys at Law Faludi Wolf Theiss

Allen & Overy Nagy és Trócsányi Oppenheim

Dispute resolution

Nagy és Trócsányi Oppenheim Szecskay Attorneys at Law

Burai-Kovács & Partners Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie

CMS Cameron McKenna LLP Lakatos, Köves and Partners Réczicza White & Case LLP Sándor Szegedi Szent-Ivány Komáromi Eversheds Weil, Gotshal & Manges LLP

CMS Cameron McKenna LLP Weil, Gotshal & Manges LLP

Andrékó Kinstellar Ügyvédi Iroda DLA Piper Horváth & Partners Law Firm Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie Lakatos, Köves and Partners Réczicza White & Case LLP

Restructuring / Insolvency

Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie Faludi Wolf Theiss

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“A subjective overview based on systematic research,” goes the summary written by the editors in the intro− duction of the 2011 copy of the Legal 500, a guide rank− ing law firms from all over the world. The publication, along with peers such as Chambers and Partners and IFLR1000, gathers informa− tion from clients and rival lawyers to rank law firms. These sturdy books (and their online versions) come with sections equivalent to major practice fields like M&A, competition or IT. Firms are placed according to the num−

Budapest Business Journal | May 17 – May 30

ber and value of deals done, the efficiency and speed of handling assignments and the quality of service pro− vided. Editors makes inter− views, review court records, watch deal news and trawl through press reports. The research results in descrip− tions such as “a go−to firm for tax advice”, or quotes from clients like “aggressive, cli− ent−oriented and driven by success”. The guides also mention significant new hires, new client relationships, and areas of key expertise. It is not always clear how companies on a lookout for

legal representation interpret a description like a “strong, big and capable firm” or a Tier 2 position. According to series IFLR1000 EMEA editor Sam Duke, it is up to them. “I think it’s fair to say that no−one would make a mandate deci−

helping clients orientate themselves in jurisdictions they are unfamiliar with. “The Legal 500 surveyed cli− ents to find out how they use our rankings,” said Mike Nash, the guide’s EMEA edi− tor. “From 1,600 corporate/

opinions of others.” Though not common, ranking as a criterion may appear in a call for a tender, but rele− vant experience in the field and referrals probably weigh more. Guides can be helpful to see if the counsel the com− pany used previously is still performing in the market. For firms, the significance of rankings depends on how competitive the market sion based solely on a ranking, legal decision−maker respon− is. “In certain jurisdictions but it gives good guidance dents, 68% said they used the where competition is fierce as to the group of firms they Legal 500 for initial research and the market is growing, a might wish to employ.” (e.g. to get ideas about which ranking gains more impor− Indeed, rankings are used law firms to approach), and tance,” Duke noted. It also more as a starting point, 32% used it to validate the varies by location. In neigh−

boring Austria, law firms and attorneys in general tend to take it more seriously. There, the career path toward part− nership is better defined so it counts more how lawyers and their firms place. “Large international firms are happy to participate in the research, they tend to be more enthu− siastic in the emerging mar− kets where they are still forg− ing reputations.” No matter how thorough they claim they are with research, ranking guides’ results often disappoint law firms who believe they should be better placed. ZsV

CHAMBERS EUROPE 2 013 LEGAL ACTIVITIES

BAND 1

BAND 2

Banking & Finance

CMS Cameron McKenna LLP Weil, Gotshal & Manges LLP

Allen & Overy Andrékó Kinstellar Ügyvédi Iroda DLA Piper Horváth & Partners Law Firm Lakatos, Köves and Partners Réczicza White & Case LLP

Capital markets

Allen & Overy Weil, Gotshal & Manges LLP

Andrékó Kinstellar Ügyvédi Iroda DLA Piper Horváth & Partners Law Firm Réczicza White & Case LLP

Competition/Antitrust

Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie Oppenheim Réczicza White & Case LLP

Andrékó Kinstellar Ügyvédi Iroda CMS Cameron McKenna LLP

Corporate/ M&A

CMS Cameron McKenna LLP DLA Piper Horváth & Partners Law Firm Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie Réczicza White & Case LLP Weil, Gotshal & Manges LLP

Andrékó Kinstellar Ügyvédi Iroda Lakatos, Köves and Partners Szabó Kelemen & Partners Attorneys Szecskay Attorneys at Law Faludi Wolf Theiss

Dispute resolution

Nagy és Trócsányi Oppenheim Szecskay Attorneys at Law

Burai-Kovács & Partners CMS Cameron McKenna LLP

Employment

CMS Cameron McKenna LLP Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie

DLA Piper Horváth & Partners Law Firm Réczicza White & Case LLP Szecskay Attorneys at Law

Intellectual property

Danubia Patent and Trademark Attorneys SBGK Patent and Law Offices Szecskay Attorneys at Law

CMS Cameron McKenna LLP Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie Sár & Partners Attorneys at Law

Life sciences

Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie Réczicza White & Case LLP

CMS Cameron McKenna LLP Forgó, Damjanovic & Partners Law Firm Szecskay Attorneys at Law

Private equity

Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie Réczicza White & Case LLP Weil, Gotshal & Manges LLP

CMS Cameron McKenna LLP DLA Piper Horváth & Partners Law Firm Lakatos, Köves and Partners VJT & Partners

Projects and energy

Andrékó Kinstellar Ügyvédi Iroda CMS Cameron McKenna LLP Faludi Wolf Theiss

DLA Piper Horváth & Partners Law Firm Lakatos, Köves and Partners Oppenheim Réczicza White & Case LLP Weil, Gotshal & Manges LLP

Real estate

CMS Cameron McKenna LLP Kővári Tercsák Salans FMC SNR Denton Europe Attorneys

Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie Lakatos, Köves and Partners Réczicza White & Case LLP

Restructuring/Insolvency

CMS Cameron McKenna LLP Weil, Gotshal & Manges LLP

Andrékó Kinstellar Ügyvédi Iroda DLA Piper Horváth & Partners Law Firm Lakatos, Köves and Partners Réczicza White & Case LLP

Tax

CMS Cameron McKenna LLP DLA Piper Horváth & Partners Law Firm Jalsovszky Law Firm

Andrékó Kinstellar Ügyvédi Iroda Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie Lakatos, Köves and Partnerss Réczicza White & Case LLP Faludi Wolf Theiss

Technology, Media, Telecommunications

CMS Cameron McKenna LLP Réczicza White & Case LLP

Bán, S. Szabó & Partners Lakatos, Köves and Partners Weil, Gotshal & Manges LLP

TMT / Film

DLA Piper Horváth & Partners Law Firm

Kővári Tercsák Salans FMC SNR Denton Europe Attorneys

WWW.BBJ.HU

Budapest Business Journal | May 17 – May 30

LEGAL 500 LEGAL ACTIVITIES

2 013

TIER 1

TIER 2

Banking & Finance

Andrékó Kinstellar Ügyvédi Iroda CMS Cameron McKenna LLP Lakatos, Köves and Partners Réczicza White & Case LLP

Allen & Overy DLA Piper Horváth & Partners Law Firm Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie Oppenheim Weil, Gotshal & Manges LLP

Capital markets

Allen & Overy Andrékó Kinstellar Ügyvédi Iroda DLA Piper Horváth & Partners Law Firm Weil, Gotshal & Manges LLP

CMS Cameron McKenna LLP Gárdos, Füredi, Mosonyi, Tomori, Law Office of Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie Lakatos, Köves and Partners Oppenheim Réczicza White & Case LLP

Andrékó Kinstellar Ügyvédi Iroda Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie Oppenheim Réczicza White & Case LLP

Allen & Overy CMS Cameron McKenna LLP Faludi Wolf Theiss Lakatos, Köves and Partners Schönherr Hetényi Law Firm Weil, Gotshal & Manges LLP Szecskay Attorneys at Law

Corporate & M&A

CMS Cameron McKenna LLP DLA Piper Horváth & Partners Law Firm Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie Oppenheim Réczicza White & Case LLP Weil, Gotshal & Manges LLP

Allen & Overy Andrékó Kinstellar Ügyvédi Iroda Kővári Tercsák Salans FMC SNR Denton Europe Attorneys Eördögh Bird & Bird Erös Üqyvédi Iroda / Squire Sanders (US) LLP Faludi Wolf Theiss Forgó, Damjanovic & Partners Law Firm Lakatos, Köves and Partners Nagy és Trócsányi Ügyvédi Iroda Réti, Antall & Partners PwC Legal Szecskay Attorneys at Law

Dispute resolution

Nagy és Trócsányi Ügyvédi Iroda Oppenheim Szecskay Attorneys at Law

CMS Cameron McKenna LLP Faludi Wolf Theiss Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie Lakatos, Köves and Partners Réczicza White & Case LLP Weil, Gotshal & Manges LLP

Employment

Andrékó Kinstellar Ügyvédi Iroda Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie Réczicza White & Case LLP VJT & Partners

bnt Attorneys-at-law Forgó, Damjanovic & Partners Law Firm Gide Loyrette Nouel DLA Piper Horváth & Partners Law Firm PRK Partners Szecskay Attorneys at Law

Energy

Andrékó Kinstellar Ügyvédi Iroda CMS Cameron McKenna LLP Faludi Wolf Theiss

DLA Piper Horváth & Partners Law Firm Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie Oppenheim Réczicza White & Case LLP Weil, Gotshal & Manges LLP

Intellectual property

Danubia SBGK Patent and Law Offices

CMS Cameron McKenna LLP Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie Oppenheim Szecskay Attorneys at Law

Project finance

Andrékó Kinstellar Ügyvédi Iroda CMS Cameron McKenna LLP Faludi Wolf Theiss DLA Piper Horváth & Partners Law Firm Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie Lakatos, Köves and Partners Réczicza White & Case LLP Weil, Gotshal & Manges LLP

Allen & Overy CHSH Dezsö Gide Loyrette Nouel Oppenheim Partos & Noblet

Real

CMS Cameron McKenna LLP Kővári Tercsák Salans FMC SNR Denton Europe Attorneys Réczicza White & Case LLP

DLA Piper Horváth & Partners Law Firm Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie Lakatos, Köves and Partners Weil, Gotshal & Manges LLP

Technology, Media, Telecommunications

CMS Cameron McKenna LLP DLA Piper Horváth & Partners Law Firm Réczicza White & Case LLP

Eördögh Bird & Bird Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie Lakatos, Köves and Partners Oppenheim Weil, Gotshal & Manges LLP VJT & Partners

Tax

Andrékó Kinstellar Ügyvédi Iroda CMS Cameron McKenna LLP Jalsovszky Law Firm Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie Lakatos, Köves and Partners Réczicza White & Case LLP

Faludi Wolf Theiss Gide Loyrette Nouel DLA Piper Horváth & Partners Law Firm Nagy és Trócsányi Ügyvédi Iroda

Competition

estate & construction

WWW.BBJ.HU

Budapest Business Journal | May 17 – May 30

MAY I TAKE A LOOK? In a surprisingly fast move, Parliament accepted an amendment to limit the scope of data accessible to the public just one day after it was proposed by two MPs of governing party Fidesz. According to the new law, all public information requests could be refused by public entities, however, János Áder, President of Hungary has sent it back to Parliament for reconsideration.

In an extraordinary process, the Hungarian Parliament adopted an amendment to Act CXII of 2011 on the Right of Informational Self−Determination and Freedom of Informa− tion just 24 hours after its proposal. The Free− dom of Information Act (FoIA) is vital to the work of Hungarian journalists, as it obliges rather secretive government agencies to make certain information available to public. PRESIDENT JÁNOS ÁDER SENT THE DATA ACCESS LAW BACK FOR REVIEW

WE’RE EXPECTING SOME ‘COSMETICS’ WILL BE APPLIED AND THE LAW WILL THEN BE PASSED The new law states that “abusive” data requests that would impede “data control− lers’ operations for a significantly long time” will not to be fulfilled. Opposition parties and civilian groups protested, with some of the most prominent of the latter resigning in protest from the anti−corruption working group organized by the government itself. “Transparency International Hungary (TI), K−Monitor watchdog for public funds, Hungarian Civil Liberties Union (TASz) and atlatszo.hu investigative portal are con− vinced that the amendment of the law on freedom of information discredits all previ− ous stances of the government to stop cor− ruption. Therefore we have decided to quit the anti−corruption working group coordi− nated by the Ministry of Justice and Pub− lic Administration. We are still devoted to making Hungary a better society free of corruption, but we will not lend our reputa− tion to the jiggery−pokery our government is doing in the anti−corruption arena,” TI said in a statement. Despite the haste with which the law was passed, its application was delayed by Pres−

ident János Áder, who vetoed it. While some might feel relieved for at least a while, NGOs protest that Áder only exercised a political veto and didn’t find it contrary to fundamental rights or send it for review by the Constitutional Court. “Based on the government’s comments, we’re expecting that some ‘cosmetics’ will be applied and the law will then be passed without actually addressing our core concern that it violates a basic right,” Fanny Hidvégi, TASz’s head of data protection and freedom of informa− tion program told the Budapest Business Journal in an interview. The new amendment comes in the wake of the distribution of tobacco sales licenses under the new state monopoly rules, which many have found suspicious. NGOs and news sites called for transparency about the tenders, arguing that the list of licensees proved that most winners have close ties with the governing party Fidesz. But even if the plan was to cover up all the alleged nepotistic ties between new license owners and Fidesz, the Hungarian National Authority for Data Protection and Freedom

Photo: Péter Komka/MTI

KRISZTIÁN KUMMER

of Information (NAIH) states that the need to make data regarding concession winners public could be easily defended. “The authority must interpret the law in force in accordance with the broader pos− sible realization of the freedom of infor− mation. Even if the returned bill was com− ing into force, which would have left too many possibilities for public bodies to discard data requests, the authority would still be in a position to make institutions performing public functions disclose the information required in certain cases. As the authority has already made clear in its response to watchdog K−Monitor regard− ing tobacco sales’ licenses, applications can clearly be known, based on the law on concessions as well,” Dr. Attila Péterfalvi, president of the NAIH wrote in a state− ment sent to BBJ. The ball is now back on Parliament’s side of the net. But even if MPs vote in favor of the proposal again, civil rights NGOs still hope to build barriers in the its path to save what ex−ombudsman László Majtényi called the last basic right still untouched. Ombudsman Máté Szabó could still refer it to the Constitutional Court for review. And after all, NAIH might make public institutions disclose the information required one by one.

WWW.BBJ.HU

Budapest Business Journal | May 17 – May 30

DOUBLE IMPACT The Hungarian legal market has irreversibly changed due to the double whammy effect of the economic crisis and the forced, accelerated pace of lawmaking, professionals the Budapest Business Journal talked to agree. Although there are tendencies that point toward a market purification, the competition is becoming more cutthroat right across the industry. ZSOLT BALLA

“The market for legal services has fundamen− tally changed, and the practice of law will never return to how they used to be before 2008,” says Dr. Eszter Kamocsay−Berta, local partner at Gide Loyrette Nouel Buda− pest. “The first and most important change is the shift from a seller’s market that tradi− tionally dominated the legal industry to a buyer’s market that will likely remain the pre− vailing model for the foreseeable future. This shift calls for clear thinking, strategic focus and flexibility in addressing rapidly changing realities,” she adds. The global economic crisis in Hungary was aggravated by domestic political decisions that were unfavorable for the vast majority of multinational companies. “Market players in every business sector adopted a very careful and prudent approach, which obviously impacted the legal market as well, including mergers, acquisitions, prop− erty deals and other areas,” says Zsolt Okányi, partner at CMS Cameron McKenna Buda− pest Office. “A few areas, however, witness really busy times: our litigation, liquidation and white collar crime investigation teams have been dealing with more cases recently than ever before,” he continues. “Relationship between economic difficulties and liquidation is obvious. However, the augment of other types of contentious work might likely be attributed to that the sources that made it pos− ADVERTISEMENT

decided to leave Hungary for good. But while the names have disappeared, the teams working in the offices remain basi− cally unchanged, only without the brand name of the parent company they used to work for. And although this change allows these firms to work at more competitive prices, due to the lack of a global profes− sional infrastructure, they are expected to fall out from the league of premium cate− gory law firms in the long run.

sible to re−gain the losses of minor disputes have now drained, and consequently the com− panies stiffen their positions in business argu− ments, and the arguments reach a legal phase more often than in previous years.” Despite the growing number of disputes, the traditional over−supply of legal firms and lawyers is generally worsened by a radically decreased number of assignments, which together have created to a dramatic increase in competition. In the best case, the result is a new pricing and service structure, but in the not−so−good scenarios, there is a plunge in service quality as well. ADAPTING TO THE NEW SITUATION Legal firms have various choices to adapt to this new situation. Firstly, they can actively take on the competition, striving to get a big− ger share of the decreasing market to keep their revenues up, as much as possible. This strategy, however, is likely be harmful both for the service providers and for the clients, as ‘rationalizing’ service usually leads to junior professionals working on more complex cases to meet the budget limitations of their clients. While this inevitably results in lower quality standards, the pricing strategy is unwelcome from the legal offices’ perspective as well. It also has an aspect of irreversibility, as it is difficult – if not impossible – to see how the prices can be hiked again, once the economic climate gets better. Another potential strategy is to provide unique, premium services, that may differ− entiate law firms from their competitors. “We have to find new ways to deliver the high quality and responsive legal services that our clients want by observing both financial objectives and professional values,” explains Kamocsay−Berta. “Our special expertise is paired with an improved work process, thus, we are not selling ‘one size fits all’ solutions to our clients, but rather we work and think together with them, in order to find ways that serve their interests and suit their businesses the best,” she adds. Service quality aside, alternative pricing techniques do exist, so the times when prices were fixed based on the seniority of lawyers, and invoices were prepared based purely on

work−hours, are long gone. There are various models around, most involving some kind of success−related bonus, and calculated based on the potential gains of the client as well as the possible risks involved. All in all, the busi− ness models used by legal firms have become more diverse and sophisticated, following the necessary cost cutting and adapting to the increased flexibility demanded by the market. “The nature of our work itself has changed,” says Dr. Ákos Kovách, head of competition & regulatory at Gide Loyrette Nouel. “The consulting part of our work has grown more important compared to previous practice, where the task of a law− yer was chiefly to take care of incoming requests, no questions asked. The impor− tance of cooperation between the lawyer and his clients has significantly increased, and the communication has become closer and more intense as well,” he adds. As a result of the increasing compe− tition, a few multinational law firms

CHANGING ENVIRONMENT On top of the market dynamics resulted by the worsening economic conditions, other important changes were triggered by the rap− idly changing legal environment, especially since the Fidesz government introduced its accelerated practice of lawmaking in 2010. The legal environment as well as the legis− lative procedures themselves have become more insecure, unpredictable, and less transparent. While this has led to a further decrease in the number of M&A and other investment−related transactions, as investors often find other, more attractive destinations within the region, it also poses law firms with new, unforeseen challenges. One of the evident results of the swiftly changing legal system is a sudden boost in compliance−type regulatory assign− ments. Business players need to allocate more resources to continuously monitor that their operations are fully in line with the actual legal regulations. But the changes in the legislation also gen− erate issues. “In fields where the legislator is very active, it might be a real challenge to provide clients with fully up−to−date advice, and is even more difficult to build long term strategies,” confirms CMS’ Okányi. “Advis− ing clients in the law now includes not only an interpretation of the law in force, but at least as much also that of the bills and other new filings on the agenda of the Parliament,” he adds with a hint of sarcasm in his voice. All in all the legal business reflects the gen− eral state of the Hungarian economy pretty well: a high−risk and largely unfavorable envi− ronment, where the most characteristic, solid point that remains is uncertainty itself.

WWW.BBJ.HU

Budapest Business Journal | May 17 – May 30

LAW FIRMS WITH INTERNATIONAL AFFILIATIONS NAME OF ASSOCIATE NON-HUNGARIAN LAW FIRM OR COOPERATION NETWORK WORLD HQ OF ASSOCIATE LAW FIRM OR COOPERATION NETWORK YEAR OF ESTABLISHMENT OF ASSOCIATE LAW FIRM OR COOPERATION NETWORK

NO. OF OFFICES WORLDWIDE YEAR HUNGARIAN OFFICE ESTABLISHED

OTHER

BUSINESS LAW

SECURITIES

ARBITRATION

PRIVATIZATION

M&A

ENVIRONMENT PROTECTION

MEDIA

EMPLOYMENT

COMPETITION

ENERGY

BANKING AND FINANCE

TAX

REAL ESTATE

COMMERCIAL

LEGAL SPECIALITY AREAS NO. OF PARTNERS OF HUNGARIAN OFFICE ON MAY 1, 2013

NO. OF TRAINEES IN HUNGARY ON MAY 1, 2013

COMPANY WEBSITE

NO. OF ATTORNEYS (WITH LICENSE TO PRACTICE) IN HUNGARY ON MAY 1, 2013

RANK

Ranked by no. of attorneys (with license to practice) in Hungary on May 1, 2013

CMS CAMERON MCKENNA LLP HUNGARIAN OFFICE 46

CMS Cameron McKenna LLP London 1779

DLA Piper UK LLP London 2006

–

)UHVKÀ HOGV %UXFNKDXV Deringer LLP London 1743

White & Case LLP New York 1901

54 1989

DLA PIPER HORVÁTH & PARTNERS LAW FIRM 35

77 1988

1124 Budapest, Csörsz utca 49–51. (1) 510-1100 (1) 510-1101 budapest@dlapiper.com

Ulrike Rein

OPPENHEIM LAW FIRM www.oppenheim.hu 35

1053 Budapest, Károlyi utca 12. (1) 483-4800 (1) 483-4801 budapest@cms-cmck.com

András Posztl

www.dlapiper.com/hungary 2

ADDRESS PHONE FAX EMAIL

Gabriella Ormai

www.cms-cmck.com 1

TOP LOCAL EXECUTIVE

–

27 2007

1053 Budapest, Károlyi utca 12. (1) 486-2200 (1) 486-2201 RIÀ FH#RSSHQKHLP KX

István Réczicza 3

RÉCZICZA WHITE & CASE LLP www.whitecase.com/budapest

KAJTÁR TAKÁCS HEGYMEGI-BARAKONYI BAKER & MCKENZIE LAW FIRM 4

www.bakermckenzie.com

1061 Budapest, Andrássy út 11. (1) 488-5200 (1) 488-5299 –

Pál P. Takács

Baker & McKenzie LLP Chicago 1949

Dorda Brugger Jordis – Best Friends, World Service Group, Biolegis – –

SZECSKAY ATTORNEYS AT LAW www.szecskay.com 5

39 1991

–

72 1987

1051 Budapest, Dorottya utca 6. (1) 302-3330 (1) 302-3331 budapest.reception@ bakermckenzie.com

András Szecskay

1992

1055 Budapest, Kossuth Lajos tér 16–17. (1) 472-3000 (1) 472-3001 info@szecskay.com

NAME OF ASSOCIATE NON-HUNGARIAN LAW FIRM OR COOPERATION NETWORK WORLD HQ OF ASSOCIATE LAW FIRM OR COOPERATION NETWORK YEAR OF ESTABLISHMENT OF ASSOCIATE LAW FIRM OR COOPERATION NETWORK

NO. OF OFFICES WORLDWIDE YEAR HUNGARIAN OFFICE ESTABLISHED

OTHER

BUSINESS LAW

SECURITIES

ARBITRATION

PRIVATIZATION

M&A

ENVIRONMENT PROTECTION

MEDIA

EMPLOYMENT

COMPETITION

ENERGY

BANKING AND FINANCE

TAX

REAL ESTATE

COMMERCIAL

&+6+ '(=6Ĺ&#x201A; e6 7Ă&#x2030;56$, Ă&#x153;GYVĂ&#x2030;DI IRODA

LEGAL SPECIALITY AREAS NO. OF PARTNERS OF HUNGARIAN OFFICE ON MAY 1, 2013

RĂ&#x2030;TI, ANTALL Ă&#x2030;S TĂ RSAI Ă&#x153;GYVĂ&#x2030;DI IRODA

NO. OF TRAINEES IN HUNGARY ON MAY 1, 2013

COMPANY WEBSITE

Budapest Business Journal | May 17 â&#x20AC;&#x201C; May 30

NO. OF ATTORNEYS (WITH LICENSE TO PRACTICE) IN HUNGARY ON MAY 1, 2013

RANK

WWW.BBJ.HU

TOP LOCAL EXECUTIVE ADDRESS PHONE FAX EMAIL

LĂĄszlĂł RĂŠti

PRICEWATERHOUSECOOPERS LEGAL www.retiantallpartners.hu

â&#x20AC;&#x201C;

PricewaterhouseCoopers Legal LLP London 1999

â&#x20AC;&#x201C;

CHSH Wien 1921

100 (cca.) 2000

1077 Budapest, WesselĂŠnyi utca 16/A (1) 461-9888 (1) 461-9898 rap.central@hu.pwclegal.com $WWLOD 'H]VĹ&#x192;

www.chsh.hu

â&#x20AC;&#x201C;

8 2004

1011 Budapest, )Ĺ&#x192; XWFD Â˛ (1) 457-8040 (1) 457-8041 RIĂ&#x20AC;FH#FKVK KX Csilla AndrĂŠkĂł

ANDRĂ&#x2030;KĂ&#x201C; KINSTELLAR Ă&#x153;GYVĂ&#x2030;DI IRODA

www.kinstellar.com

â&#x20AC;&#x201C;

Kinstellar â&#x20AC;&#x201C; 2008

6 2008

LAKATOS, KĂ&#x2013;VES AND PARTNERS Ă&#x153;GYVĂ&#x2030;DI IRODA

PĂŠter Lakatos

www.lakatoskoves.hu 21

1054 Budapest, SzĂŠchenyi rakpart 3. (1) 428-4400 (1) 428-4444 budapest.reception@ kinstellar.com

Clifford Chance London 1987

â&#x20AC;&#x201C;

Lex Mundi Houston, USA 1989

Weil, Gotshal & Manges LLP New York 1931

International Alliance of Law Firms London 1990

â&#x20AC;&#x201C;

bnt-attorneys-at-law â&#x20AC;&#x201C; â&#x20AC;&#x201C;

WolfTheiss RechtsanwĂ¤lte GmbH Wien 1957

DENTONS / Salans FMC SNR Denton Europe LLP â&#x20AC;&#x201C; 2013 / 1978

Squire Sanders (US) LLP Cleveland, USA 1890

35 1991

1075 Budapest, MadĂĄch Imre Ăşt 14. (1) 429-1300 (1) 429-1390 mail@lakatoskoves.hu

PĂŠter Berethalmi

NAGY & TRĂ&#x201C;CSĂ NYI Ă&#x153;GYVĂ&#x2030;DI IRODA www.nt.hu 21

â&#x20AC;&#x201C;

600 1991

David Dederick

WEIL, GOTSHAL & MANGES LLP www.weil.com 20

1126 Budapest, Ugocsa utca 4/B (1) 487-8700 (1) 487-8701 EXGDSHVWBRIĂ&#x20AC;FH#QW KX

21 1991

1054 Budapest, SzabadsĂĄg tĂŠr 7. (1) 301-8900 (1) 301-8901 david.dederick@weil.com

TamĂĄs SzabĂł

SZABĂ&#x201C;, KELEMEN Ă&#x2030;S TĂ RSAI 10 Ă&#x153;GYVĂ&#x2030;DI IRODA

www.sz-k-t.hu

â&#x20AC;&#x201C;

62 1996

BNT SZABĂ&#x201C; TOM BURMEISTER LAW FIRM

Antal Levente SzabĂł

www.bnt.eu 16

1132 Budapest, VĂĄci Ăşt 20. (1) 288-8200 (1) 288-8299 tamas.szabo@sz-k-t.hu

â&#x20AC;&#x201C;

11 2000

1143 Budapest, StefĂĄnia Ăşt 101â&#x20AC;&#x201C;103. (1) 413-3400 (1) 413-3413 info@bnt.hu

ZoltĂĄn Faludi

FALUDI WOLF THEISS Ă&#x153;GYVĂ&#x2030;DI IRODA www.wolftheiss.com 16

â&#x20AC;&#x201C;

.Ĺ&#x201A;9Ă&#x2030;5, 7(5&6Ă&#x2030;. SALANS FMC SNR DENTON EUROPE ATTORNEYS 11

www.dentons.com

14 2007

-XGLW .Ĺ&#x192;YiUL TamĂĄs TercsĂĄk 79 2006

(5Ĺ&#x201A;6 h*<9e', ,52'$ SQUIRE SANDERS (US) LLP

1062 Budapest, VĂĄci Ăşt 1â&#x20AC;&#x201C;3. (1) 880-6100 (1) 880-6199 budapest@dentons.com

Ă&#x2030;NRV (UĹ&#x192;V

www.squiresanders.com 12

1085 Budapest, KĂĄlvin tĂŠr 12â&#x20AC;&#x201C;13. (1) 484-8800 (1) 484-8825 budapest@wolftheiss.com

â&#x20AC;&#x201C;

39 1991

1051 Budapest, SzĂŠchenyi IstvĂĄn tĂŠr 7â&#x20AC;&#x201C;8. (1) 428-7111 (1) 428-7100 budapest@squiresanders.com

WWW.BBJ.HU

NAME OF ASSOCIATE NON-HUNGARIAN LAW FIRM OR COOPERATION NETWORK WORLD HQ OF ASSOCIATE LAW FIRM OR COOPERATION NETWORK YEAR OF ESTABLISHMENT OF ASSOCIATE LAW FIRM OR COOPERATION NETWORK

NO. OF OFFICES WORLDWIDE YEAR HUNGARIAN OFFICE ESTABLISHED

OTHER

BUSINESS LAW

SECURITIES

ARBITRATION

PRIVATIZATION

M&A

ENVIRONMENT PROTECTION

MEDIA

EMPLOYMENT

COMPETITION

ENERGY

BANKING AND FINANCE

TAX

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COMMERCIAL

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NO. OF TRAINEES IN HUNGARY ON MAY 1, 2013

NO. OF ATTORNEYS (WITH LICENSE TO PRACTICE) IN HUNGARY ON MAY 1, 2013

RANK

COMPANY WEBSITE

Budapest Business Journal | May 17 โ May 30

TOP LOCAL EXECUTIVE ADDRESS PHONE FAX EMAIL

GIDE LOYRETTE NOUEL BUDAPEST Eszter Kamocsay-Berta ร kos Kovรกch

www.gide.com

โ

Gide Loyrette Nouel A. A. R. P. I. Paris 1920

19 1993

1051 Budapest, Szรฉchenyi Istvรกn tรฉr 7โ 8. (1) 411-7400 (1) 411-7440 gln.budapest@gide.com

Istvรกn Gรกrdos

Gร RDOS, Fร REDI, MOSONYI, TOMORI 13 ร GYVร DI IRODA www.gfmt.hu

โ

KNP LAW NAGY KOPPANY VARGA AND PARTNERS 13 www.knplaw.com

Advoc, ELA โ

ยป

1992

1056 Budapest, Vรกci utca 81. (1) 327-7560 (1) 327-7561 postmaster@gfmt.hu

Kornรฉlia Nagy-Koppรกny Istvรกn Varga 13

โ

Conference Bleue โ 2006

ยป

2007

1051 Budapest, Vigadรณ utca 2. (1) 302-9050 (1) 302-9060 knplaw@knplaw.com

Zoltรกn Lengyel 13

MORLEY ALLEN & OVERY LAW FIRM www.allenovery.com

Allen & Overy LLP London 1930

42 1993

1075 Budapest, Madรกch Imre รบt 13โ 14. (1) 483-2200 (1) 268-1515 budapest@allenovery.com Jรถrg Menzer Zoltรกn Nรกdasdy

NOERR & Tร RSAI IRODA www.noerr.com

โ

Noer LLP Mรผnchen 1950

โ

Eversheds LLP London 1988

Schรถnherr Rechtsanwรคlte GmbH Wien 1950

Sร NDOR SZEGEDI SZENT-IVร NY KOMร ROMI EVERSHEDS LAW FIRM 13

www.eversheds.hu

15 1990

ร gnes Szent-Ivรกny 13

43 1987/1999

1026 Budapest, Pasarรฉti รบt 59. (1) 394-3121 (1) 392-4949 RIร FH#HYHUVKHGV KX

Kinga Hetรฉnyi

SCHร NHERR HETร NYI LAW FIRM www.schoenherr.eu 12

1011 Budapest, )ล XWFD ยฒ (1) 224-0900 (1) 224-0495 recepcio@noerr.com

14 2010

1024 Budapest, Buday Lรกszlรณ utca 12. (1) 345-8778 (1) 345-8777 RIร FH KXQJDU\#VFKRHQKHUU HX

Chrysta Bรกn Pรฉter S. Szabรณ 15

Bร N, S. SZABร & PARTNERS LAW FIRM www.bansszabo.hu

โ

Gleiss Lutz Rechtsanwรคlte Stuttgart 1949

7 1997

1051 Budapest, Jรณzsef nรกdor tรฉr 5โ 6. (1) 266-3522 (1) 266-3523 RIร FH#EDQVV]DER KX

Alice Dessewffy

DESSEWFFY ร S Dร VID 15 VALAMINT Tร RSAIK ร GYVร DI IRODA www.dessewffy.com

โ

MSI Global Alliance London 1990

โ

Mackrell International Voking, UK 1987

125 1992

MOLDOVร N & CO. ATTORNEYS

1061 Budapest, Andrรกssy รบt 43. (1) 413-3340 (1) 413-3341 RIร FH#GHVVHZII\ FRP

Andrรกs Moldovรกn

www.moldovan.hu 15

โ

160 1990

1051 Budapest, Dorottya utca 1. (1) 328-6010 (1) 328-6011 info@moldovan.hu

NAME OF ASSOCIATE NON-HUNGARIAN LAW FIRM OR COOPERATION NETWORK WORLD HQ OF ASSOCIATE LAW FIRM OR COOPERATION NETWORK YEAR OF ESTABLISHMENT OF ASSOCIATE LAW FIRM OR COOPERATION NETWORK

NO. OF OFFICES WORLDWIDE YEAR HUNGARIAN OFFICE ESTABLISHED

OTHER

BUSINESS LAW

SECURITIES

ARBITRATION

PRIVATIZATION

M&A

ENVIRONMENT PROTECTION

MEDIA

EMPLOYMENT

COMPETITION

ENERGY

BANKING AND FINANCE

TAX

REAL ESTATE

COMMERCIAL

LEGAL SPECIALITY AREAS NO. OF PARTNERS OF HUNGARIAN OFFICE ON MAY 1, 2013

NO. OF TRAINEES IN HUNGARY ON MAY 1, 2013

COMPANY WEBSITE

Budapest Business Journal | May 17 – May 30

NO. OF ATTORNEYS (WITH LICENSE TO PRACTICE) IN HUNGARY ON MAY 1, 2013

RANK

WWW.BBJ.HU

TOP LOCAL EXECUTIVE ADDRESS PHONE FAX EMAIL

Jnr. László Partos

PARTOS & NOBLET IN COOPERATION WITH HOGAN 15 LOVELLS INTERNATIONAL LLP

–

www.hoganlovells.com

Hogan Lovells International LLP London, Washington 1899 / 1904

43 2006

1051 Budapest, Vörösmarty tér 7–8. (1) 505-4480 (1) 505-4485 RIÀ FH#KRJDQORYHOOV FR KX Arne Gobert

BWSP GOBERT AND PARTNERS www.gobertpartners.com

SÁRKÖZY RÖDL & PARTNER ÜGYVÉDI IRODA RÖDL & PARTNER ÜGYVÉDI TÁRSULÁS

17 www.roedl.com

–

BWSP / Globalaw – 2012 / 1994

Rödl & Partner GbR Wirtschaftsprüfer Steuerberater, Rechtsanwälte Nürnberg, Deutschland 1977

–

PRK Partners s.r.o. advokátni kancelár Prague 1993

PRK PARTNERS BUDAPEST / FÁBRY ÉS TÁRSAI ÜGYVÉDI IRODA

1061 Budapest, Andrássy út 10. (1) 270-9900 (1) 270-9990 DUQH JREHUW#JISOHJDO FRP Sándor Sárközy Stefan Sieferer

1062 Budapest, Andrássy út 121. (1) 814-9880 (1) 814-9898 EXGDSHVW#URHGO KX

Ágnes Fábry

www.prkpartners.com 8

5/100+ 2002

–

2010

1024 Budapest, Fény utca 16. (1) 336-0443 (1) 336-0444 EXGDSHVW#SUNSDUWQHUV FRP

Tibor Bihary

BIHARY BALASSA ÉS TÁRSAI 19 ÜGYVÉDI IRODA www.biharybalassa.hu

–

TELFA London 1989

30 2002

Andrea Jádi Németh

BPV JÁDI NÉMETH ATTORNEYS AT LAW www.bpv-jadi.com 7

1026 Budapest, Pasaréti út 83. (1) 391-4491 (1) 200-8047 RIÀ FH#ELKDU\EDODVVD KX

–

bpv LEGAL – 2006

–

Ius Laboris Global Human Resources Lawyers, Multilaw Bruxelles, London 2001/1990

8 2000

1051 Budapest, Vörösmarty tér 4. (1) 429-4000 (1) 429-4001 EXGDSHVW#ESY MDGL FRP Marianna Csabai

CLV PARTNERS CSABAI, LINDNER ÉS VARGA 19 ÜGYVÉDI IRODA

–

www.clvpartners.com

141 / 76 2003

1126 Budapest, Tartsay Vilmos utca 3. (1) 488-7008 (1) 488-7009 LQIR#FOYSDUWQHUV FRP Zoltán Forgó Gábor Damjanovic

FORGÓ, DAMJANOVIC 19 AND PARTNERS ÜGYVÉDI IRODA www.fdlaw.hu

–

Alfa International Chicago 1980

145 2000

1123 Budapest, Alkotás utca 17–19. (1) 214-0080 (1) 214-0078 RIÀ FH#IGODZ KX Rupert Várnai Zsolt Zamostny

YINGKE VÁRNAI ZAMOSTNY 19 ÜGYVÉDI IRODA www.yingke.com

Yingke Law Firm Beijing 2001

36 2010

1037 Budapest, Montevideo utca 10. (1) 887-8288 (1) 887-8381 RIÀ FH#YDUQDL HX Richárd Eördögh

EÖRDÖGH BIRD & BIRD 20 ÜGYVÉDI IRODA www.twobirds.com

–

Bird & Bird LLP London 1846

Norton Rose LLP London 1794

Luther Rechtsanwaltsgesellschaft mbH Cologne 1992

25 2008

1013 Budapest, Pauler utca 6. (1) 799-2000 (1) 799-2088 EXGDSHVW#WZRELUGV FRP Károly Varga

VARGA KÁROLY 20 ÉS TÁRSA ÜGYVÉDI IRODA

–

WALDE, FEST ÉS TÁRSAI 20 ÜGYVÉDI IRODA www.waldefest.hu

30 1998

1065 Budapest, Bajcsy-Zsilinszky út 53. (1) 302-9090 (1) 302-9092 KDOFVL#W RQOLQH KX Attila Fest Zsolt Walde

18 1999

1055 Budapest, Kossuth Lajos tér 13–15. (1) 381-0000 (1) 381-0001 RIÀ FH#ZDOGHIHVW KX

WWW.BBJ.HU

BÁNKI AND PARTNERS LAW FIRM IN COOPERATION WITH TAYLORWESSING E߃N߃W߃C NATLACEN WALDERDORFF CANCOLA 21 RECHTSANWÄLTE GMBH www.taylorwessing.com

–

NAME OF ASSOCIATE NON-HUNGARIAN LAW FIRM OR COOPERATION NETWORK WORLD HQ OF ASSOCIATE LAW FIRM OR COOPERATION NETWORK YEAR OF ESTABLISHMENT OF ASSOCIATE LAW FIRM OR COOPERATION NETWORK

–

TaylorWessing e߃n߃w߃c Natlacen Walderdorff Cancola Rechtsanwälte GmbH Wien 1986

–

Studio legale de Capoa e Associati Bologna, Italy 1986

Warwick Legal International Network London 2001

NO. OF OFFICES WORLDWIDE YEAR HUNGARIAN OFFICE ESTABLISHED

OTHER

BUSINESS LAW

SECURITIES

ARBITRATION

PRIVATIZATION

M&A

ENVIRONMENT PROTECTION

MEDIA

EMPLOYMENT

COMPETITION

ENERGY

BANKING AND FINANCE

TAX

REAL ESTATE

COMMERCIAL

LEGAL SPECIALITY AREAS NO. OF PARTNERS OF HUNGARIAN OFFICE ON MAY 1, 2013

NO. OF TRAINEES IN HUNGARY ON MAY 1, 2013

NO. OF ATTORNEYS (WITH LICENSE TO PRACTICE) IN HUNGARY ON MAY 1, 2013

RANK

COMPANY WEBSITE

Budapest Business Journal | May 17 – May 30

TOP LOCAL EXECUTIVE ADDRESS PHONE FAX EMAIL

Orsolya Bánki 22 1995

1051 Budapest, Dorottya utca 1. (1) 327-0407 (1) 327-0410 budapest@taylorwessing.com

Krisztina Salló 22

SALLÓ LAW FIRM

www.decapoa.com

–

6 2000

1055 Budapest, Honvéd utca 38. (1) 312-1683 (1) 269-2999 sallo-decapoa@mail.datanet.hu

Thomas A. Squarra 22

SQUARRA & PARTNERS ÜGYVÉDI IRODA

www.squarra.hu

»= would not disclose, NR NA = not applicable

= not ranked,

–

57 1997

1016 Budapest, Avar utca 8. (1) 474-2080 (1) 474-2081 info@squarra.hu

This list was compiled from responses to questionnaires received by May 6, 2013 and publicly available data. To the best of the Budapest Business Journal’s knowledge, the information is accurate as of press time. While every effort is made to ensure accuracy and thoroughness, omissions and typographical errors may occur. Additions or corrections to the list should be sent on letterhead to the research department, Budapest Business Journal, 1075 Budapest, Madách Imre út 13–14., or faxed to (1) 398-0345. The research department can be contacted at research@bbj.hu

EXPERT OPINION

BUDAPEST OR BUCHAREST: THE ENGLISH TRANSLATION OF “KFT” MIKLÓS BÁN ceo espell translation and localization

he English translation of Hungarian company types (like bt or kft) is a longstanding problem and a source of age-old debate among Hungarian legal practitioners. There is clearly a demand for translating the names of Hungarian company types, as evidenced, for example, by it being possible to have foreign language versions of company names, including the company type, registered in the Company Register (Cégjegyzék), a database that is authentic by law. Avoiding misleading translations of the names of company types is therefore a highly responsible – and challenging – task. WRONG ON SO MANY LEVELS For instance, there are a number of workable solutions for the English translation of korlátolt felelősségű társaság or kft, a common company type in Hungary: frequently used English versions include “limited company”, “limited liability company”, and “private company limited by shares”, not to mention the acronyms (both Ltd and LLC are regularly used

in the sense of kft in documents translated into English). These are all reasonable solutions based on existing English and American legal entity types whose features are comparable to the Hungarian kft. However, this comparisonbased method fails on a system level, i.e. when other Hungarian company types appear in the same context. The term “private company limited by shares”, for instance, has a much broader meaning than kft, so it can also be used to cover zártkörűen működő részvénytársaság (zrt). Although kft and zrt are not very dissimilar under Hungarian law, the key difference lies in a zrt’s ability to issue shares in the form of securities, while in British law no such division is made. In other words, while the transformation of a Hungarian kft into a zrt is a complex procedure, the English translation of the company type would not change. Kft could also be referred to as a limited liability company, but that is an American term, and the translation of zrt as a private company limited by shares would still be too broad, not to mention the inelegance of mixing British and American expressions. Countless similar issues exist: for instance, the British term “general partnership” appears to be a reasonable translation for közkereseti társaság (kkt), but it can also be used to cover polgári jogi társaság (pjt), which can be puzzling as, under Hungarian law, a kkt is a registered entity with legal personality while a pjt is unincorporated. Hence, it is

virtually impossible to find equivalence and translate company types from one language to another as differences are arbitrary and very specific, and legal systems have their unique distinctions. For instance, in the United States, “S corporation” and “C corporation” are subcategories used primarily for taxation purposes and have no equivalent in other legal systems, requiring the translator to be creative. NO TRANSLATION IS GOOD TRANSLATION It may be argued, therefore, that the translation of entity types is pointless. According to this approach, from a technical, i.e. linguistic and legal, point of view, the best English translation for kft is kft, and it is wisest to admit that any translation would be imprecise and therefore carry the risk of misleading the reader. The question of whether these terms should be translated depends on the context and occasionally the optimal solution is not to translate company types. The real lesson of recognizing the inherent impossibility of finding exact translations for company forms is that the translator must always look beyond bilingual dictionary entries and analyze the legal content of company types, focusing on the context of use and having recourse to additional translation devices (e.g. footnotes or comments) if need be. Saying that a kft is the same thing as an Ltd in the wrong context can be as risky as

claiming that Maradona and Pelé or Budapest and Bucharest are equivalents: there are similarities, but they are far outnumbered by the dissimilarities and readers can be misled by imprudent comparisons. A NEW HOPE The globalization of business brings company law systems and their terminology closer to one another and the European Union, with the introduction of the Societas Europaea, the European Private Company and the like, has taken the first tentative steps towards creating more harmonized company regulations within the member states. This process may bring about more integrated company law terminology. Until the long-awaited moment when this removes the need for painstaking legal terminology research (at least within the EU), Hungarian lawyers and language service providers will have to remain on their guard and remember that the similarities between the Hungarian legal system and those of Englishspeaking countries are fewer than we would expect or like. That requires legal language users to make an extra effort to find the right translation for company types, if of course they choose to translate them at all.

www.espell.com

4 Going Global

BBJ conference

WWW.BBJ.HU

Budapest Business Journal | May 17 – May 30

THEY MADE IT, SO COULD YOU Sometimes it takes just a little imagination to find a technology that everybody needs. Of course we are not talking about reinventing the wheel here, but Prezi, LogMeIn and Ustream provide very useful solutions for making presentations in a new way, being able to work on your office PC from home, and streaming your very own live camera on the web. GERGELY HERPAI

THE HUNGARIAN GUY FROM SWEDEN WITH A COOL IDEA More than 22 million people use Péter Árvai’s Prezi worldwide. When the 34 year old returned from Sweden five years ago, coming back from the air− port his uncle complained that it was so hard to live in Hungary, with no jobs and no chance to get by in life. Árvai, who besides Sweden have been in Japan, Sin− gapore and Ireland, wanted to prove oth− erwise and together with Ádám Somlai− Fischer and Péter Halácsy founded Prezi. “It’s fine that I have job to be able to pay the overheads, but when I get older and want to take a look at my life, I would like to be proud of it. Those who want the same have to think about how their activ− ity adds to the evolution of humanity,” Árvai said in an interview with 168ora. hu. He is a lot more optimistic about the

WHAT IS PREZI? Prezi is basically a non-linear presentation tool, or a virtual drawing board, where you can put and move the elements of your presentations freely from a webpage. One can change, display and download a presentation from everywhere, there’s no need for paper, a document page, or any other limitation. evolution of the world than many people today. It’s actually proven by research that the world is going in a better direc− tion: we live longer and healthier, and there is a fantastic evolution that’s going on, we just forget it sometimes,” he added.

The company was founded in 2009 and found almost instant success: it won the World Technology Award in the art cate− gory in the same year, and the European Seal of e−Excellence Platinum Award in 2010. It has also gained big popularity in the United States: it was chosen at Micro− soft’s startup conference from 30 other projects, and is widely used in other Eng− lish speaking countries as well. LOG IN FROM ANYWHERE LogMeIn has 20 million users world− wide and has been installed on more than 200 million devices. The company now has more than 600 employees and

WHAT IS LOGMEIN? LogMeIn provides remote connectivity, collaboration, and support solutions to businesses and consumers. It means that you can work from home on your office PC. a yearly income of $140 million in 2012, which produced about HUF 1.5 billion in taxes in Hungary, besides other countries according to insiderblog.hu. The Hungar− ian part of the business has HUF 1.3 bln of its own capital and had an income of HUF 4 bln according to Napi Gazdaság. Impressive numbers from the com− pany of Márton Anka, who started his professional career at a small IT com− pany in Hungary as a software devel− oper. After a few years he joined Michael Simon’s Uproar, a new com− pany that was developing online games – a novelty in 1995. While at the com− pany, he developed new server man− agement software: RemotelyAnywhere. This was so successful that he founded his own firm, which made $1 million a year, but Anka felt that controlling a whole company wasn’t exactly his cup of tea, so he invited his former boss, Michael Simon, to lead the company. Since Uproar was acquisitioned by Vivendi, many other ex−Uproar staff members have also joined Anka. In 2003, he wanted to increase the reach of the company’s potential user base, and wanted to reach home and office users. As he said in an interview on the website of the European Entre− preneurship Foundation last year, the company changed its business model as well: it combined the freemium model (still new at this time) with the SaaS sys− tem (Software as a Service, or cloud ser− vice). “Our peer−to−peer technology made it possible to offer a high−perfor− mance service at a very low cost. Thus, a

new remote access application was born: LogMeIn,” Anka told insiderblog.hu. LogMeIn’s headquarters are located just outside Boston, Massachusetts, with European headquarters in Dublin, Ire− land, Asia Pacific headquarters in Syd− ney, Australia, and development centers in Budapest and Szeged in Hungary. I AM NOT THE LAW! How do you study something inten− sively, even acquiring a Ph.D, then become successful in something else entirely? Well, Gyula Fehér can show you, since he got his doctorate in law, but has not practiced the profession for a single day. He was always a computer geek with a strong penchant for the Internet. When he was just 23 and still a student, he started his own firm: a company that delivered translation ser− vices, Fehér said in an interview with europreneurs.org. He befriended two US soldiers, who were also his customers. Those friends had to answer the call of duty in the Iraqi war, but after they came back the basic idea of toying with video technol−

ogy was born. Ustream was founded in 2006 and the trio registered the com− pany in Delaware. Today it provides video streaming services to more than 80 million view− ers and broadcasters. It is based in San Francisco and has more than 220 employees in offices there, in Los Ange− les, and in Budapest.

WHAT IS USTREAM? With Ustream you can broadcast your own video in real time by streaming it using a camera or a smartphone. After registering to a webpage, a restricted user base of your choice, or every user on the system, can see your video streamed online.

BBJ conference

WWW.BBJ.HU

Budapest Business Journal | May 17 – May 30

4 Going Global

MIND THE GAP! EVEN IF IT’S IN YOUR MIND Good ideas, hard work and a bit of luck are all you need to be successful and well known, says Veronika Pistyur, CEO of Bridge Budapest. The non− profit organization established by three successful startup companies with Hungarian origins (Prezi, LogMeIn and Ustream) has recently started its first fellowship program. The Budapest Business Journal talked to the CEO about the launch. ZSOLT BALLA

How old is the story of Bridge Budapest? A: We officially launched Bridge Budapest on April 11, which was also the beginning of the application period of our first internship programs. But the idea behind Bridge Budapest, to launch a non−profit orga− nization in order to initiate a change in peo− ple’s attitude towards success, has been pres− ent for months if not years.

What is the message of Bridge Budapest, and what are the tools you can utilize to deliver it? A: Our primary mission is to inspire a change in attitude as much as possible, with the spe− cific message that you can be successful start− ing from Hungary, and that reaching global success should not take decades, but it can be done in a few years even in the current busi− ness environment. We would like more people to get rid of their fatalistic views, of finding excuses rather than solutions. Hard work and a bit of luck is more than enough to be successful, and the three founder companies of Bridge Budapest – Ustream, LogMeIn and Prezi – are the living proof of that. The first initiative we launched to deliver this message is an open internship, that provides applicants with the opportunity to see some of today’s most innovative and cutting edge companies, including Facebook, Twitter, SoundCloud or any of our three par− ent companies, from the inside, in the frame− work of a three−month fellowship program.

Are the names and the stories of your founding companies particularly important? A: I think they do have an added value. These three companies are the most renowned suc− cess stories of the Hungarian startup cul− ture, and for one reason or another, the list of the names has not seemed to expand very quickly for a while. It might as well be an atti− tude thing: someone in his 20s, however tal− ented or ambitious does not necessarily con− sider the startup world as an option. Yet these

young guys should be the very ones follow− ing their dreams, well before they have mort− gages on their homes or kids they have to take care of. They should have the ideas that can provide innovative solutions, and are capa− ble of conquering the world. I think the basic problem is whether they have these dreams or not. Whether they dare to dream at all. Bridge Budapest doesn’t consider itself a startup organization. We position ourselves to be at the very beginning of this whole pro− cess, inspiring a broader segment of society to at least consider a different mentality towards shaping and building its own future.

Success seems to play a critical part in Budapest Bridge’s communication. A: It does, indeed. Our main goal is to spread the word about successes and, even more importantly, about the potential of success that can be found in every single one of us. We find that the way people look at success, at their own success stories, highly deter− mines their abilities to live a complete and ful− filled life. The lack of successes, or the lack of the ability to realize our own successes is, in my opinion, the most widespread reason for unhappiness, and while this phenomenon is true on a personal level, it can also be seen on a broader scale, referring to the entire society. If we don’t know – or fail to acknowledge – our own success stories, it is rather unlikely that too many people will launch new businesses to try their own luck. All we want to say is that “it can be done”. If our founders could do it from a tiny rented apartment on Margit körút, everyone can do it.

Although there are EU grants, and more funding will become available to help innovative new businesses in the framework of the JEREMIE program, as far as I know none of the three founding companies drew in state subsidies to build their own success. Is this an important factor? A: We often highlight that there was no state money, nor subsidies, nor state orders involved in the building of our parent com− panies. While I think that it is a good point, we definitely do not advise against using EU or state funds that are avail− able for startups. We find, however, that there is a huge difference in the education and attitude of companies that were built using these funds as opposed to those who funded their growth purely from the mar− ket. In the latter case, you are left with the single option of taking your idea, and pouring a vast amount of work into it, hop− ing that sooner or later, when the prod− uct comes to life on its own, and your user base grows from five hundred to a million, money will also find its way. Just as hap− pened with Prezi, for example. Of course this scheme is not applicable to every case: there are cases when the development or hardware costs are exor− bitant right from the beginning, and you can not even make your first steps with−

CURRICULUM VITAE Veronika Pistyur graduated from Budapest’s University of Theater and Film Arts in 2001. After working for various commercial TV channels as reporter, editor and presenter, she went on to edit her own program on body- and healthawareness, 2testŐr. From 2010 she was marketing consultant at Dimenzió Insurance company, and in 2011 she co-founded Shine Budapest communication and marketing agency. She joined the newly launched Bridge Budapest non-profit organization as CEO in January 2013.

out appropriate funding. But more often than not, success can be achieved with− out state or EU funding.

On top of the recently launched fellowship program, what other plans do you have to popularize the idea and the attitude of startups? A: I would say that our basic tool in our quest to spread the word is storytelling. Our fellowship program is also designed with storytelling in mind: the participants are given smartphones, and will have to prepare a 10−minute video to share their experiences during their time at the com− panies. The whole concept is built on this principle: from the applications until the follow−up phase a couple of months after the end of their fellowships they are requested to share as much as pos− sible. The fellowship program aside, we also started to prepare research, firstly on young people’s attitude towards suc− cess, entrepreneurship and startups, and secondly we measured awareness of our founding companies. Politely put, we see room for improvement in both cases. Our upcoming plans are, evidently, highly dependant on the success of this year’s fellowship program, and we aim to repeat our research as well on a yearly basis, to see the tendencies for change. Ultimately, we want at least every second Hungar− ian to be aware of one Hungarian success story as soon as possible.

32 4 Going Global

BBJ conference

WWW.BBJ.HU

Budapest Business Journal | May 17 – May 30

IN SEARCH OF GROWTH ABROAD With the Hungarian market so small, and now shrinking even further, growing businesses will sooner or later need to cross the borders in search of growth opportunities abroad. GABRIELLA LOVAS

According to a report by the National Econ− omy Ministry, Hungary is among the lead− ing countries in the CEE region with the highest outward FDI stock as a percentage of GDP, at 27% as of the end of 2012. Out− ward FDI stock reached €26.3 billion at the end of last year, while outward FDI flow without one−off high−value transactions is expected to be around €1 bln in 2013 and could reach an annual €1.5 bln on average in the medium−term. Hungarian companies investing abroad employ a wide range of strategies from simply making a “mini copy” of their Hungarian businesses in other countries through making acquisitions, setting up joint ventures or franchise companies, to greenfield investments, György Bőgel, a professor at the CEU Business School, told the Budapest Business Journal. “I would be very happy to see a ‘Hungar− ian Nokia’, a real global, not just regional, brand within the foreseeable future,” he noted. He says he could imagine this hap− pening in knowledge intensive industries such as IT, biotechnology, medical diag− nostics or the pharmaceutical industry. MOTIVES AND CHALLENGES Although company specific data on FDI out− flow is not readily available, the biggest com− panies investing abroad are considered to be MOL, OTP Bank, Magyar Telekom, MKB Bank and Richter. The BBJ asked some of these about the motives and challenges of foreign expansion.

PHARMACEUTICAL PRODUCER RICHTER Richter made two significant crossborder acquisitions in 2010: its main task now is their consolidation. One of these was the purchase of the oral contraceptive portfolio of German peer Grünenthal for a cash purchase price of €236.5 million. The other was the acquisition of Preglem, a private specialty biopharmaceutical company based in Switzerland. The primary motive for investing abroad is to carry out product and portfolio acquisitions to continuously renew the company’s product range with pharmaceuticals that either offer a good fit to the existing portfolio or where synergies can be achieved, such as, for instance, in the field of gynecological therapy. However, further acquisitions are not among Richter’s strategic goals in the short- and medium-term.

OIL AND GAS COMPANY MOL MOL, now present in 40 countries in Europe, the Middle East, Africa and the CIS, started expanding abroad in the 1990s as the Hungarian market failed to provide sufficient growth opportunities. MOL’s most important target countries are Croatia, Iraq, Kazakstan, Oman, Pakistan, Romania, Russia, and Slovakia. The main challenge the company faces is to ensure effective operations in several regions from a central European base. It is very important not to give unfair advantage to the CEE region over the projects and recommendations of other countries. A recently launched reorganizational program called GLOCAL aims to support the internationalization of the company. As there are huge differences among the work cultures of the MOL employees present in more than 40 countries, the company first outlines its objectives in each new country and tries to find the right way to reach them together with local experts and stakeholders rather than bring “only one solution”.

CONTRACT ELECTRONICS MANUFACTURER VIDEOTON Videoton has been able to meet the quickly changing demands of the Customer Experience Management (CEM) market only by setting up production bases and service providers abroad. The company’s main targets are those countries, where production costs are lower than in Hungary. Videoton privatized Bulgaria’s biggest electronics firm DZU in 1999, which provides a real alternative within the EU for its customers to the Far East. Labor costs in Bulgaria are only 50-60% of those in Hungary, the labor market is flexible, country risks are low and the macroeconomic environment is transparent and stable. Videoton says it is yet to find another EU member with similar qualities at lower cost level. Videoton established a new business in Ukraine in 2009, where labor costs are a further 20-30% lower, making it an excellent intensive-production site very close to the Hungarian border. Although the country risks are higher than in Bulgaria and cross border cooperation with a non-EU country takes some serious effort, the language barriers are insignificant. Exploring opportunities abroad is getting easier every year, as the economies of the region are becoming more open. However, finding the right people for the key positions, people who are able to manage cooperation between group members with different economic and cultural characteristics, is still a challenge.

FROZEN PASTRY FRANCHISE FORNETTI For the past 15 years, the expansion strategy of the Fornetti franchise has been determined by the provision of comprehensive modular solutions to both strategic and financial investors. Initially, Fornetti started expanding in the CEE region because of its expertise in the local economic and business environment as well as obvious advantages in logistics. Today, the main target countries are Russia and the CIS, but mid-term expansion plans include Far Eastern countries like Laos, Vietnam, Cambodia and Thailand. The primary motive of investing abroad has been to expand the company’s product range of more than 250 different goods, with new products based on local tastes and preferences in the target countries. Some of these may be introduced across the 27 countries where the company is already present. The main challenges of foreign expansion include finding and choosing the right franchise partners: financially stable entrepreneurs, with proven expertise in the target country’s financial, economic and business environment. Partners must also be willing to accept that the franchisor will manage and in certain cases determine how to run the business. The key of a successful foreign expansion is to provide a secure and predictable business for the partners. The products and services they receive need to ensure competitiveness through continuous research and development. It is also important to recognize both existing and latent consumer demand.

WWW.BBJ.HU

Budapest Business Journal | May 17 – May 30

BBJ conference

4 Going Global

FIXED SPOT IN THE SUPPLY CHAIN Hungary’s drive to turn the county into a hub of European automotive production is benefit− ting from not only the major firms that set up their bases here, but also the local firms that become component suppliers and expand their business.

In early May, the U.S.−based automotive parts supplier Eagle Ottawa commenced the enlargement of its plant in Szolnok, which will expand capacity by 55%. The company is looking to reach a headcount of 1,000, supplying car interiors to major international brands, such as Daimler that is prominently present in Hungary’s industrial landscape. This, as well as the increasing participation of Daimler’s Mercedes factory and the Audi plant in Győr, not mention the Bridgestone hub in central Hungary, shows that there is genuine potential for the country’s automotive industry, even as other sectors of the economy are struggling.

CAR PRODUCTION AT THE AUDI FACTORY

This is a phenomenon that has provided smaller Hungarian businesses with the opportunity to not only ensure a secure line of orders, but also to get accustomed to the stan− dards and practices that major international producers demand.

Photo: Audi

GERGŐ RÁCZ

BITS AND PIECES For car owners, or even those who have had an opportunity to visit a car manu− facturing plant, it is difficult to conceive that the parts that comprise a vehicle come from a multitude of specialist firms, mostly local, that typically cluster around the manufacturer, as well as others that now have the capacity to extend their reach on international markets. Tatabányai Rugógyártó Kft, which manufactures springs used in auto mak− ing, boasts of being the market leader in Hungary and is now eyeing Germany as a potential export market. SMR Automo− tive Mirror Technology Bt was picked to supply mirrors to Porsche in February. This year, Auto−Szoft Automatizálási és Gépgyártó Kft started the construction of a HUF 109 million plant, having grown from supplying Audi. The list goes on. The international auto manufactur− ers, themselves part of the government’s strategic cooperation initiative campaign with major firms, are also looking to expand the scope. Both Audi and Daim− ler are inviting potential new vendors to apply, whether it is for the production of components, performing outsourced pro− duction jobs or supplementary services.

EXPANSION PERSPECTIVE The major automotive factories are also offering education programs, both to the workers and to the firms that are look− ing to become suppliers. While this natu− rally serves the interests of the maker, it is something that is also a key factor for the government, which is consequently ready to provide financial support to such endeavors. “Regional competitiveness is increased by the fact that Hungary produces iden− tical quality as in Western Europe but at lower costs, while the reliability of the services is better and is closer to the tar− get markets than in the case of oriental producers,” National Economy Minister Mihály Varga said when inaugurating a new facility constructed by tire maker and car industry supplier Continental in April. These programs not only allow the com− panies involved to choose between an improved selection of vendors, but also enables the firms to familiarize themselves with international standards and apply for further, even more lucrative commissions. Many businesses will surely be eyeing the new stimulus package to be launched by the central bank and aimed at increasing lend− ing for smaller domestic firms.

EXTERNAL MARKETS: SUICIDE OR SURVIVAL? Ever more Hungarian small− and medium−sized enterprises are interested in expanding towards external markets, however, without proper plans and funding, the move could prove suicidal. And funds are not easy to get nowadays KRISZTIÁN KUMMER

Hungarian small− and medium−sized enterprises are very interested in mov− ing into foreign markets, last year’s non− representative survey by Export Cooper− ation shows. While in 2011 only 20% of the responding SME−leaders were inter− ested in external markets, by 2012 50% were thinking about exporting goods or services, or had already done so. MORE POSSIBILITIES ABROAD Ever more Hungarian entrepreneurs are try− ing to expand beyond the country’s borders, for two main reasons. On one hand, more

professional and government actors have embraced the idea of expansion beyond the borders: the government’s Foreign Trade Strategy has been completed, the activity of the Hungarian Investment and Trade Agency (HITA) has notably increased in the last year in terms of event organiza− tion and supporting SMEs. Also, in August 2012, tender GOP−3.3.3 was published, which aimed to help SMEs access foreign markets. However, due to the greater than expected interest, funding for the tender was quickly exhausted. Hopefully, more will come this year. On the other hand, gloomy domestic economic trends are also pushing Hun− garian SMEs towards foreign markets. Demand on the crisis−hit Hungarian mar− ket has fallen sharply, deeply affecting the SME sector; to reach sufficient growth, therefore, enterprises must turn towards external markets in the short− and mid− term. While those who can grasp the opportunities have a good chance to pros− per from the situation, however, failure is always a possibility. The latest reductions in the base inter− est rate might get banks more involved in

start−up or SME−financing projects, but this probably won’t affect the great masses of entrepreneurs as such investments carry much higher risk for banks. Unfortunately, the current financing system of banks does not benefit early−stage companies, the lend− ers being much more comfortable when there is some collateral taken into or reve− nue that can be factored into the risk assess− ment. Even if a small company succeeds in obtaining funding, it still has to provide 10−20% of own contribution. PLANS AND PATIENCE While there are plenty of possibilities on foreign markets, entering and gain− ing a foothold is not as easy as it might seem. “It’s not recommended to enter new markets without proper funds,” Iván Gyurácz Németh, a marketing expert for M27 Absolvo, told a recent conference. “A huge project like this could bring down the whole enterprise if something goes wrong,” he warned. “The cultural gap is usually huge between Hungary and partner countries, that frightens Hungarians away from making business abroad. Also, little Hun−

garian tricks like tax evasion don’t work elsewhere. The business culture of tar− get countries must be understood, and that rarely works without local help, but requires funds and patience,” said Krisz− tián Orbán, managing partner at Oriens. “Export activity usually doesn’t provide any measurable result in the first year,” added Róbert Bödőcs, a department head at HITA. While many entrepreneurs dream the export−dream, European possibili− ties seems to be limited, as the financial problems of many member states prevent Hungary’s largest economic partners, like Germany, from achieving more dynamic growth. (Last year €20 billion of total exports of €80 bln went to Europe’s larg− est economy, Germany, while less than €9.5 bln went to markets beyond Europe.) Besides the limited growth potential in Europe, the Hungarian investments level is currently under the level of amortiza− tion, meaning factories and machinery are slowly aging, and that will have a neg− ative effect on product quality, warned András Szántó, head of retail services at Equilor.

BBJ conference

Too big for a small pond? GOING GLOBAL CONFERENCE – STARTUP AND INNOVATION IN HUNGARY How can someone build an international company in Hungary? What does it take to become successful on the global market? PROGRAM 8:30 9:00 9:15 9:35 9:55 10:15 10:35 10:55 11:15

Registration Welcome speech (BBJ) Gyula Fehér, co-founder, CTO, Ustream Ákos Berzi, CFO, Organica Water Imre Hild, CEO, iCatapult Coffee break Péter Nagy, Colabs, Co-founder, CEO Zoltán Varga, president-CEO, Central-Fund Venture Capital Fund Manager Miklós Fekete, partner, PwC Hungary

11:35 12:00

12:15

13:00

Coffee break Hungarian winners of the innovation competition of the Singularity University in 2012 and 2013: Priszcilla Várnagy, CEO, Be-novative Inc., and Márton Juhász Roundtable discussion with Sándor Kürti, CEO, Kürt Zrt, Gábor Bojár president, Graphisoft, Sándor Zettwitz, CEO, 77 Elektronika Kft, Moderator: Ernő Simon Lunch

Venue: Hotel President (1054 Budapest, Hold u. 3.), Date and time: May 28, 2013, 9 am - 2 pm (Language: Hungarian, with simultaneous English interpretation) PARTICIPATION FEE: HUF 35,000+VAT/person DISCOUNTS − BBJ subscribers: 15%, 2−4 registrations: 15%, 5 or more registrations: 20%

FOR MORE INFORMATION, UPDATES AND REGISTRATION: WWW.BBJ.HU. E-MAIL: EVENT@BBJ.HU PHONE: +(36) 1 398 0344

EVENT SPONSORS

THE PROGRAM MAY BE SUBJECT TO CHANGE

BBJ

5 Socialite UPCOMING EVENTS

AmCham’s Seminar & Cocktail: Data protection 39

PEOPLE ON THE MOVE

DOMINIC KÖFNER Corporate communications vice president, MOL Group

JAPANESE DINING Restaurant review: Fuji

➜ READ ON

ANDREEA ANCA

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36 5 Socialite

Budapest Business Journal | May 17 – May 30

PROMOTIONAL FEATURE

OTP KLUB GOURMET FESTIVAL – HAVE A BITE OF HUNGARY!

ungary’s most prestigious and diverse gastro event, the OTP Klub Gourmet Festival, will again await visitors in the Millenáris Park between May 30 and June 2. It is a must-see event for all those who love Hungarian gastronomy. The festival represents the essence of Hungarian culinary events with more than 100 exhibitors bringing the best flavors from each corner of the country. This is where the most outstanding restaurants – from inside the capital and out –converge, along with the most notable wine makers. As a noteworthy novelty, this year’s Gourmet puts goulash, the bestknown Hungarian dish, firmly in focus. Gourmet Festival is an exciting gastronomical reflection of Hungary. Exhibitors from all around the country will participate to make culinary pleasures available in one place, so no need for a travel plan to travel through Hungary. Gourmet Festival is not just about gastronomy, visitors can also enjoy cultural delights at the event. To match its slogan of “Taste Hungary”, this year even more restaurants from right across the country will participate. The event endeavors to provide a comprehen-

sive view of high-end Hungarian gastronomy by introducing the best restaurants, wineries, gourmet shops and confectioneries. “It delivers a translucent snapshot of the current state of gourmet catering. It’s also unique for being the single event in which the big guns of the Hungarian gastro scene are gathered together almost in their entirety, from both Budapest and out-

side,” explained Károly Gerendai, director of the Gourmet Festival. “In 2013, nearly all of the top 50 Hungarian restaurants will be represented. Furthermore, for many of them this is the only event they will move out of their kitchens for. We are spurred by the aim of presenting a gastronomic scale model of the country within the grounds of Millenáris. We offer visitors the opportunity

to taste countless exciting and delectable delicacies at an affordable price (between HUF 500 and HUF 1,000 per portion). Alongside the foods, visitors will receive wine offerings compiled by experts so that they can taste the wines on the spot as well. Visitors can get almost everything in one place that they would otherwise only be able to discover by going on long journeys and at considerable expense,” the festival director added. On top of the unprecedented food and drink offerings, gastro and music programs will also provide entertainment for visitors. On the Gourmet gastro stage, the audience can watch Hungary’s Michelinstar chef Tamás Széll (Onyx) who will hold separate shows. After their success last year, Lajos Bíró and Viktor Segal will enter into a gourmet duel over the subject of this year: the eggplant. So see you again on the last weekend of May at the Gourmet Festival at Millenáris with goulash variations and endless delicacies. More information on the program and tickets can be found on www.gourmetfesztival.hu

RESTAURANT REVIEW

JAPANESE DINING - CULTURE AND TRADITIONS It is surprising how popular Japanese cuisine has become in Budapest. One would have thought that eating raw fish and other strange ingredients are quite far from the usual Hungarian dietary tastes. But on the contrary: sushi, fusion restaurants, and ramen bars have become quite the fashion. There are, however, only a few ‘traditional’ Japanese restaurants in Budapest. The best among them is probably Fuji. In the building of former Mágnáskert on top of Rose Hill in the second district, there is quite a modest looking restaurant, Fuji. It has been open for 20 years (although for− merly it was located on the Pest side, across from the Erkel Theater), and from the begin− ning has enjoyed the reputation of being the best traditional Japanese restaurant in town. We decided to check this out one weekday lunchtime. The place was a bit empty, though we thought that the recently introduced three− course lunch menu would encourage custom− ers from the neighborhood for a visit. In spite of the quietness, the restaurant seemed wel− coming, as the waiter showed us to our table. (As we followed him, we noticed that accord−

Then we got the best, fresh miso soup that I have ever tasted: it was fabulous, creamy and rich, and perfectly salted. For me, this was one of the real highlights of the menu. For a main course we had a boat filled with stir−fried vegetables, grilled organic chicken on skewers, salad with Japanese dressing, rice, pickles, deep−fried chicken with oroshi ponzu sauce, assorted vegetables roasted on lava stone, Japanese omelet, fried fishcake, shallow fried prawn and vegetables, and boiled beef and vegetables. For dessert we had green tea and sweet bean ice cream: a perfect end to our feast. The menu was delicious and varied; it really was a great treat. Fuji is a great place for spiritually leaving the town for a few hours, and it offers the lux− ury of delicate dining. The restaurant has a designated area for smaller groups and pri− vate rooms for business or private dining. RATATOUILLE

ing to Japanese tradition he was wearing slip− pers instead of shoes.) It is not easy to choose from the almost 200 dishes Fuji offers, so we opted to play safe and ordered a demonstration meal for two, called a Washoku Ajimi Funamori Set, for HUF 11,500, and completed it with a few dishes we did not want to miss. As a starter we got three kinds of cold appetizers, seaweed salad, car− rots, green beans with sesame paste, and we also ordered edamame and nimame beans. The taste of the fresh vegetables was perfect,

and it was great fun to discover the secret of these little plates. Then we got a plate full of beautiful sushi of all kinds. The sushi was a revelation! The differences that separate quality sushi from cheaper versions can be found in two key ele− ments: the quality of the fish, and the quality of the rice. (Extra bonus: the quality of the soy sauce.) Even those who are not sushi experts are easily able to tell the difference by the richness of taste, the consistency of the rise, and the visual presentation of the plate.

FUJI

1025 Budapest, Csatárka utca 54. Tel: 325-7111, www.fujirestaurant.hu

Degustation Price range Reservation menu

Private dining

Business menu

Speed of service

Terrace

Sommelier

Credit cards accepted

Parking spots

Wifi

WWW.BBJ.HU

5 Socialite

Budapest Business Journal | May 17 – May 30

WHO'S NEWS

Name ZOLTÁN BENEDEK Current company/position MAZARS / HEAD OF TRANSACTION SERVICES

Name VIKTOR SPISSÁK Current company/ position VIACOM INTERNATIONAL MEDIA NETWORKS / VICE PRESIDENT, FINANCE AND OPERATIONS

As of May 1, Benedek heads transaction services at Mazars, succeeding Zsuzsa Fekete, who retires, but remains with the company as a consultant. Benedek joined Mazars in 2004 and has been a senior manager in the company’s transaction services business and head of its IFRS group since 2010. He is a chartered accountant and member of the Chamber of Hungarian Accountants and ACCA.

In April, Spissák was promoted to vice president in charge of finance and operations from the position of director of finance and operations at Viacom. Based in Budapest, he is responsible for the Central and Eastern Europe & Israel region. He has been with Viacom since 2009. Earlier, he was senior consultant with Ernst & Young, and worked for KPMG as an audit assistant.

Do you know someone on the move? Send information to research@bbj.hu

Name ÉVA DRIENYOVSZKI Current company/ position AEGONDIREKT.HU / MARKETING AND OPERATIVE DIRECTOR

Name DOMINIC KÖFNER Current company/ position MOL GROUP / CORPORATE COMMUNICATIONS VICE PRESIDENT

Drienyovszki joined AGEONdirekt. hu in March 2011 as head of the marketing department, and was promoted to marketing and operative director of the egoMedia division of AEGONdirekt.hu at the beginning of May. Previously, she worked for Arcus Interactive Group and with communications agency Mito. She graduated from the Corvinus University of Budapest.

Before joining MOL Group, Köfner held various key positions in corporate communications. From 2010 to 2012 he was responsible for corporate communications and was a spokesperson for Hypo Alpe Adria Group. Earlier, he was head of corporate communications and investor relations for MAGNAT Real Estate AG. During his professional career Köfner spent seven years at Brunswick Group LLP as a consultant for international communications.

Name CSONGOR NÉMETH Current company/position SBERBANK EUROPE AG / HEAD OF SME BUSINESS

Name IRÉN MÁRTA Current company/ position HOLCIM / COMMUNICATION COORDINATOR OF HOLCIM ONEUROPE

Before taking his new post, Németh was managing director responsible for the SME division of CIB Bank in Budapest. At Sberbank Europe, he will expand Sberbank’s SME product and service offering across CEE. After completing his studies in business administration in Edinburgh and London, Németh worked at Deloitte & Touche in Budapest from 1999 to 2002. In 2002 he moved on to Budapest Bank (GE Money Bank) where he worked in various managerial positions until 2009, when he joined CIB Bank.

Márta, who is the director of corporate relations and communications of Holcim Hungária, will be the communication coordinator of Holcim ONEurope, a regional organization recently created within the company group. Márta has been with Holcim since 2005, and worked in industrial areas and in the publishing business previously. She has been the regional coordinator for the European Association of Communications Directors since 2012.

PROMOTIONAL FEATURE

INTERNATIONAL MUSIC SUMMIT he Ibiza International Music Summit (IMS) presented by dance music legend Pete Tong, is now revered as one of the world’s most important music industry gatherings in the world IMS signals the beginning of the Ibiza season. It is a high level music industry conference attended by the global industry leaders in the dance music scene.

While the IMS focuses on shaping the future of electronic music, this year, the IMS is thrilled to announce that Jean Michel Jarre, one of the earliest pioneers of synthesised music, will be giving a keynote interview where he will discuss his career, past, present and future. Themed IMS: Beyond The Boom Boom!, the event, hosted by BBC Radio 1 DJ Pete Tong, will take a deep look into the international expansion of electronic music and how

It is a platform for labels, agents, managers and brands to debate, announce and explain new initiatives and strategies to the industry, and a forum for music technology collaboration and creation where the biggest minds in music come together to create new dance music apps, exclusive remixes, and music technology trials. In six short years, the summit dubbed “the TED of music conferences” has firmly established itself as one of the leading global events for its sector.

the business is spilling out of the confines of the dance floor and into mainstream culture. IMS 2013 will lead the discussions about sustainability after the goldrush settles down.

internationalmusicsummit.com

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38 5 Socialite

Budapest Business Journal | May 17 – May 30

PROMOTIONAL FEATURE

NOTE: ALL ARTICLES MARKED PROMOTIONAL FE ATURES ARE PAID PROMOTIONAL CONTENT FOR WHICH THE BUDAPEST BUSINESS JOURNAL DOES NOT TAKE RESPONSIBILIT Y

CHEAP CAN BE TRICKY With the summer approaching, you should prepare for the surprises a vacation might hold. It is not only the tour operator and the hotel that should be chosen carefully but also your car rental company – otherwise several unexpected factors might influence your trip and you could end up paying more for a “cheaper” service, not to mention all the annoyances. ccording to Sixt managing director Gábor Dévai, companies with an international background and several decades of history are less likely to surprise customers negatively. But even if they do, you can be sure that you’ll see simple, quick and efficient complaint management, not to mention possible compensation. “This is based on my experience, because as the sole franchise partner of Sixt AG in Hungary, we assist our clients travelling abroad utilizing our entire network.” One of the advantages of an international network is that there is no language barrier at the Hungarian customer service office. It is important to look into the past, background and experience of the service provider. You can surely expect a higher level of service from an international car rental company. The quality of the car fleet and the selection you can chose from will also be better than those of a smaller firm. Before reserving your chosen vehicle, you should get information on insurance conditions. In many cases, basic insurance policies do not cover tire and glass damage, therefore you should take out a supplementary policy on these. If you’d like to prevent all post-hire compensation, you can choose to reduce your excess liabilities – or, in some cases, you can waive them entirely. There are also cases where the service provider forbids taking the car into a certain country. It is better to ask about this at the customer service desk, as

IF YOU RENT LONGTERM, YOU SHOULD PAY ATTENTION TO THE POSSIBILITIES OF USING THE VEHICLE IN THE WINTER, OTHERWISE YOU ARE LIKELY TO FACE AN INCREASE IN PRICE IN OCTOBER – SOMETHING YOU DIDN’T COUNT ON.

pass, I was informed that I couldn’t travel to Romania with that car. But they were quick to offer a supplementary insurance that made it possible to cross the border. I didn’t hesitate because the amount was worth it to discover Transylvania. I was very pleased that they did not reject me at the first place but offered an alternative,” said Mihály Szabó, director of Napfényfürdő Aquapolis in Szeged. If you rent long-term, you should pay attention to the possibilities of using the vehicle in the winter, otherwise you are likely to face an increase in price in October – something you didn’t count on. Nikoletta Magyar, sales and marketing director at Sixt Magyarország talks about other aspects of car rental abroad. Like other international car rental companies, Sixt also has a global network from which you can take advantage while traveling abroad. Sixt offers its services in more than 100 countries worldwide, and its network is in constant development and expansion. Sixt also has various partner programs that are worth mentioning: it has international contracts with several airlines and hotels and if you’re a Sixt client, you can benefit from these. For example you can gather bonuses during air travel and car rental, and Sixt also offers a loyalty card program. If you’re a regular client and collect points for your card, in time you’ll be entitled for a higher category Express card, which means an immediate discount. In addition, the rental process is quicker if you have a Sixt card. You can apply for your Sixt Express card for free on the company’s website. We should also mention the Sixt car fleet: the cars are always in excellent condition, with low mileage and are as good as new. The company pays close attention to the procurement of new car fleets every year. It conducts surveys and gauges its customers’ satisfaction on a regular basis. Clients can always try new models when renting from Sixt. Regular revisions at a professional service station provide perfect technical conditions for the cars. The 24-hour assistance and replacement car service will provide help in the case of an emergency. You won’t even need to interrupt your journey, as Sixt will tow away the damaged vehicle and give you another one immediately. Get thorough information before you take to the road!

You can enjoy our discounted rates in Hungary if you book your car at www.sixt.hu/AbsolutMedia

there may be special policies to insure you for entering these countries. “At Sixt Magyarország, one can buy a supplementary policy for tire and glass damage, and can also reduce the excess to be paid. In addition, there are supplementary policies designed for young drivers and also for cases when one wants to

travel to a country that is excluded in the basic insurance. Our customer service is happy to inform all our clients on these different insurance options,” Dévai explained. “My family and I planned a weekend gateway to Transylvania. I used a medium-category car by Sixt, and when I checked in at the customer service to get my border-crossing

Sixt rent a car – Wallis Autókölcsönző Kft Customer service: +36 1 451-4227; sixt@sixt.hu, www.sixt.hu www.facebook.com/sixt.hu

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5 Socialite

Budapest Business Journal | May 17 – May 30

UPCOMING EVENTS

MAY 22

MAY 23

MAY 27

MAY 28

FINANCE CONFERENCE: CHALLENGES AND DIRECTIONS FOR HUNGARIAN ENTERPRISES LOCATION Courtyard by Marriott Budapest City Center,

NOMINEES’ NIGHT LOCATION Hotel Mercure Korona,

SPEED BUSINESS MEETING LOCATION Sofitel Budapest Chain Bridge, 1051 Budapest,

1053 Budapest, Kecskeméti u. 14. REGISTRATION 5:30-6 PM TIME 6-9 PM ORGANIZER British Chamber of Commerce in Hungary FEE BCCH members free of charge; non-members HUF 3,000 + VAT CONTACT www.bcch.com

Széchenyi tér 2. REGISTRATION 5:30-6 PM TIME 6-9 PM ORGANIZER British Chamber of Commerce in Hungary FEE BCCH members HUF 5,000 + VAT CONTACT www.bcch.com

SEMINAR & COCKTAIL: DATA PROTECTION - WHERE ARE WE HEADING? LOCATION InterContinental Budapest,

MAY 30

JUNE 03

JUNE 04

JUNE 05

ANNUAL GENERAL MEETING LOCATION Kempinski Hotel Corvinus Budapest, 1051 Budapest,

SECOND INDUSTRIAL STRATEGY AND INNOVATION SUMMIT – IN FOCUS: AUTOMOTIVE AND ELECTRONICS MANUFACTURING LOCATION Hilton Budapest, 1014 Budapest, Hess András tér 1-3. REGISTRATION 8:30-9 AM TIME 9 AM-2 PM ORGANIZER American Chamber of Commerce in Hungary FEE AmCham members in good standing HUF 20,000/person;

SAVINGS OPPORTUNITIES ON BUSINESS TRIPS LOCATION Német-Magyar Gazdaság Háza,

IT-CLUB: HYBRID CLOUD BASED SOLUTIONS WITH M. BALÁZS KRESZ, S&T CONSULTING HUNGARY LOCATION Novotel Centrum, Salon Palace,

1088 Budapest, József körút 5. REGISTRATION 8:30-9 AM TIME 9 AM-noon ORGANIZER British Chamber of Commerce in Hungary FEE BCCH members HUF 6,700 + VAT; HABA members HUF 8,700 + VAT; non-members HUF 10,630 + VAT CONTACT www.bcch.com

Erzsébet tér 7. REGISTRATION 4:30-5 PM TIME 5-9 PM ORGANIZER British Chamber of Commerce in Hungary FEE BCCH members free of charge; non-members HUF 5,500 + VAT (reception only) CONTACT www.bcch.com

non-members HUF 35,000/person CONTACT www.amcham.hu

1024 Budapest, Lövőház utca 30. REGISTRATION 4:30-5 PM TIME 5-7 PM ORGANIZER German-Hungarian Chamber of Industry and Commerce FEE Members free of charge; non-members HUF 10,000 + VAT CONTACT www.ahkungarn.hu

1052 Budapest, Apáczai Csere J. u. 12-14. REGISTRATION 4:30-5 PM TIME 5-7:30 PM ORGANIZER American Chamber of Commerce in Hungary FEE Members free of charge; non-members HUF 19.050/person CONTACT www.amcham.hu

1088 Budapest, Rákóczi út 43-45. TIME 2-4 PM ORGANIZER French-Hungarian Chamber of Industry and Commerce FEE Members HUF 7,900 + VAT; non-members HUF 10,300 + VAT CONTACT www.ccifh.hu