Hungarian legislation that deprives individuals of their right of usufruct if they do not have close family ties with the owner of agricultural land runs counter to EU law, the Court of Justice of the EU stated in a judgment returned on Tuesday 6 March (cases C-52/16 and C-113/16).
The Hungarian company SEGRO, which is owned by investors resident in Germany and an Austrian national, a Mr Horváth, held rights of usufruct over agricultural land in Hungary until the Hungarian authorities stripped them of these rights. The authorities relied on the new national legislation limiting rights of usufruct to close relatives of the owners of agricultural land, a law that has incidentally been challenged by the Commission itself (case C-235/17).
In its judgment, the Court states that the Hungarian legislation primarily affects nationals of other member states as for several years, they were able to invest only by acquiring rights of usufruct in agricultural land. The controversial legislation appears, therefore, to constitute discrimination on the basis of nationality, it finds.
The Court also aimed to establish whether the Hungarian legislation is a proportionate restriction of the free movement of capital. It considers that other measures could have been taken to prevent agricultural land from being bought up for the purposes of speculation. Moreover, the Hungarian legislation goes beyond what is necessary to tackle infringements of national rules on exchange controls and practices designed to circumvent, by means of covert contracts, the prohibition on foreign nationals and legal persons from other EU countries directly acquiring agricultural land.
Additionally, due to presuming that every individual who does not have close family ties with the owner is likely to act abusively when acquiring rights of usufruct, the Hungarian legislation has set out a general prohibition of abusive practices that is not proportionate to the objective of combating these practices, the Court finds.
Accordingly, the Hungarian national legislation is not compatible with the principle of free movement of capital and runs counter to EU law. (Original version in French by Mathieu Bion)