Although Hungary’s approach to FDI screening has become significantly more restrictive in recent years, the process largely remains a bureaucratic challenge rather than a major barrier. For example, under the special (second) FDI regime introduced in 2020, approximately 590 notifications have been submitted by July 2025, with only 16 resulting in prohibitions – representing a blocking rate of less than 3%. ¹

In 2025, for a brief period, the Hungarian state held a general pre-emption right under the special (second) FDI regime: if the authority blocked a transaction, the state could step in and acquire the strategic company on identical terms. This broad right has since been repealed, though a narrower, sector-specific version still applies to solar power plant deals.

¹ Data received from the Ministry of National Economy in July 2025.

2. Which sectors do you see as most sensitive under Hungary’s FDI rules, and why?

Under Hungary’s FDI screening rules, transactions are assessed primarily on grounds of national security and the protection of Hungary’s vital interests. This includes preventing any violation or endangerment of state interests, public security or public order, with particular emphasis on ensuring the security of supply for essential social needs.

In this context, the most sensitive sectors include defense (such as activities related to arms, ammunition, and military equipment), dual-use technologies (civilian applications with potential military use), energy, and manufacturing. These sectors are critical for national security, economic stability, and public welfare. The government prioritizes maintaining domestic control and ensuring resilience against external shocks or geopolitical risks.

As a general note, Hungarian blocking decisions have generally been limited to cases involving key players in strategic sectors or where the transaction is deemed to pose a risk to Hungary’s supply chain.

3. How do these rules influence the way cross-border M&A deals are structured?

Hungary’s FDI screening rules have a significant impact on the structuring of cross-border M&A transactions, particularly as the special (second) FDI regime expressly renders any blocked deal null and void.

First, any acquisition involving a foreign investor in sensitive sectors requires prior approval from the relevant governmental authority, making such approval a standard condition precedent to closing. This is particularly challenging for transactions that would otherwise involve simultaneous signing and closing.

In special cases, the screening process can take more than two months, which affects deal timelines.

Sellers often impose enhanced information-sharing obligations on buyers.

Finally, parties often explore alternative structures, most notably the use of intermediate holding companies to reclassify the transaction as foreign-to-foreign and thereby exempt it from the applicable FDI regime. This is typically achieved through a pre-signing reorganization, which, however, usually requires its own FDI approval.

4. What practical challenges do foreign investors face under these screening regimes?

Compliance costs – such as expenses for translation and notarization – add to overall transaction costs.

A specific challenge is the short timeframe for submitting notifications, which often does not allow sufficient time to obtain the required official translations, creating logistical pressure early in the process.

In addition, investors must provide detailed ownership and control information, which can be burdensome for complex multinational structures.

In some cases, the review process exceeds the statutory deadline, further complicating deal timelines.

Finally, FDI approval is a mandatory condition precedent, making simultaneous signing and closing virtually impossible for transactions in sensitive sectors.

5. What strategies or approaches have you seen work well for companies navigating stricter FDI rules?

Early and detailed planning is essential. This includes assessing the applicability of FDI regimes, considering structural measures, and addressing administrative tasks such as collecting required documentation in time for official translations. Preparing the submission early and resolving potential questions upfront can significantly reduce delays.

In FDI submissions, it is highly beneficial for the buyer to provide a thorough explanation, supported by clear arguments, demonstrating why the proposed transaction does not compromise state interests or supply chain security.

Engaging experienced local advisors is highly recommended to navigate regulatory complexities and address concerns efficiently.