Hungary’s Investment Policy under the Magyar Government: Analysis and Practical Compliance Guide (Part II)

How Chinese companies in Hungary can prevent the risk of administrative sanctions today – Part II

Dr. Balázs Czudar, DHH Budapest Office (Czudar DHH Law Firm – Hungary); Cheng Tao 成焘, Shandong Deheng Law Firm (DHH Qingdao) · October 2026

SUMMARY

In July 2026 we published the first article of this series, analysing how the change of government in Hungary altered the business environment for Chinese investors and outlining an initial legal response. Five months into the new government’s term, the enforcement cases and materials published by the authorities allow a clear conclusion: every known sanction imposed by the Hungarian authorities rests on an established breach of law; enforcement targets violations in the battery industry and heavy industry, not the nationality of the investor; and the fines imposed so far remain within the statutory ranges set by the previous government between 2011 and 2025.

What has changed structurally is the transparency and firmness of enforcement. Administrative decisions that previously could only be obtained through freedom-of-information requests are now announced publicly by government ministers; suspension of operations has become a measure applied alongside – and sometimes ahead of – fines; and since 1 August 2026 a nationwide inspection programme covering the entire supply chain has been running.

A more fundamental change has already taken effect. Government Decree 280/2026 (X. 9.) entered into force on 25 October 2026. Under Section 26(4a) of Government Decree 314/2005 (XII. 25.) as now in force, for companies with an annual net turnover above HUF 100 million the fine for operating without a unified environmental permit or in deviation from it may range from HUF 500,000 up to 5% of the previous year’s net turnover, capped at HUF 5 billion (previously HUF 2 billion). Under Section 26(4b), the fine must be at least 0.5% of the previous year’s net turnover, and no less than HUF 5 million, if within the preceding five years the company was fined by final decision for environmental pollution at least twice, or if a final decision established that it had committed a breach causing environmental endangerment or damage – in the latter case a single earlier decision is enough. An earlier decision may be taken into account only once (Section 26(4c)), and the minimum fine may not exceed the cap (Section 26(4d)). Whether fines imposed before 25 October 2026 count towards the five-year period remains to be clarified by the authorities’ practice; as a precaution, companies should assess their risk on the assumption that they do.

Accordingly, the five measures proposed in our July article – a compliance self-review, realistic project planning, local integration, EU-level legal documentation kept ready, and a standing local legal partner – have not become less demanding. They have become more urgent, and they remain the most reliable way for Chinese companies to manage the legal risks of investing in Hungary.

I. ENFORCEMENT CASES UNDER THE NEW GOVERNMENT

Parts of the Chinese financial press have reported that the Magyar government is “cracking down” on Chinese plants brought to Hungary under the Orbán government. Whether the new government enforces the law in a discriminatory way against Chinese companies, and whether the investment climate has turned against them, is examined below on the basis of official authority announcements, government communications and cross-checked press reports.

1. Semcorp, Debrecen

In February 2026 a pipe ruptured at the plant. The water authority of the Hajdú-Bihar County Government Office found several metals and metalloids above the limit values in groundwater samples, and the company received fines totalling more than HUF 4 million. In July 2026 the fire authority imposed a further HUF 3 million fine for safety breaches and prohibited all activity on site. The plant has been at a standstill since 24 June 2026, for more than four months. The company has appealed the decisions and has brought an action before the Debrecen court concerning its remediation obligation; it disputes the authority’s sampling methodology (arguing that total rather than dissolved metal content was measured) and states that four subsequent tests showed no exceedance. These disputes are pending, and this article expresses no view on them.

2. CATL, Debrecen

On 5 May 2026 a metal-containing liquid escaped at the CATL site in Debrecen; the company’s pre-treatment permit for industrial wastewater was revoked and a HUF 1 million fine was imposed. On 24 August a further HUF 10 million fine was published for, among other things, hazardous-waste containers lacking Hungarian-language labels. A follow-up inspection on 9 July had confirmed that all deficiencies were remedied, and CATL paid the fine. On 25 August the first phase received its operating permit, limited to trial operation until the remaining deficiencies are cured; trial production of battery cells started on 22 September.

3. BYD, Szeged

On 16 June 2026 the Csongrád-Csanád County Government Office imposed an environmental fine of HUF 10 million because topsoil had been removed from the construction site without measurement or notification.

4. Temu (PDD Holdings)

The Hungarian Competition Authority (GVH), in proceedings opened before the election, fined Temu HUF 437 million on 28 April 2026 for misleading commercial practices and ordered consumer compensation of more than HUF 882 million.

Alongside the sanctions on Chinese companies, non-Chinese companies have been sanctioned under the new government on the same legal grounds and by the same standards: Korea’s SK On and EcoPro, Romania’s eMAG and Poland’s Allegro were fined for environmental, labour or competition breaches. SK On received the maximum HUF 100 million fine twice – in August (occupational safety) and on 29 September (environment: operation in deviation from its permit causing groundwater contamination); Samsung SDI was fined a further HUF 5 million on 9 October for deviating from its unified environmental permit; eMAG was fined HUF 225 million. The new government’s sanctions therefore show no discrimination by nationality.

II. STRICT ENFORCEMENT DID NOT BEGIN WITH THE MAGYAR GOVERNMENT

The record shows that strict regulation of the battery industry predates the current government. According to records of the Pest County Government Office, between 2018 and 2025 the authorities issued 61 sanctions against Samsung SDI’s battery plant in Göd, totalling HUF 405.3 million, covering construction, environmental protection, disaster management, occupational safety and labour inspection.

Maximum fines were also first applied under the Orbán government. The HUF 100 million cap for occupational-safety fines was introduced by Government Decree 25/2024, effective 1 March 2024, and was first applied to Samsung SDI in March 2025. Chinese companies were subject to the same level of scrutiny under the previous government: in March 2026 Semcorp received the maximum HUF 10 million fire-safety fine.

Judicial proceedings, including criminal ones, are not a new tool of the current government either. Since 2023 four criminal proceedings have been opened in connection with Samsung SDI, one of which has reached indictment. In a public-interest action brought by a civil organisation, the court granted interim protection in 2024 and annulled the environmental permit by judgment in 2025; however, the Kúria (Supreme Court) set that judgment aside on 3 February 2026 and remitted the case, and the permit remains in force.

In short, until September 2026 the change lay not in legislation, enforcement or the courts, but in the transparency of enforcement, the choice of measures and systematic, chain-wide inspections; since 25 October 2026, the fining regime itself has also changed substantively (see Section III, point 7).

1. Transparency: between 2018 and 2025 sanctioning decisions often had to be obtained through freedom-of-information requests or even litigation; in 2026 major sanctions are announced immediately by senior officials, making them far more visible.

2. Measures: suspension of operations and activity bans used to be exceptional, and fines rarely affected production; today suspension and bans are a preferred tool.

3. Systematic inspection: on 1 August 2026 the government launched a nationwide inspection programme, strictly based on existing law, which extends to upstream and downstream suppliers.

As of 26 August 2026, taking the battery industry as an example, the government had opened seven investigations and imposed four fines – not exceeding the previous intensity of about eight decisions per year at the Samsung SDI Göd plant alone, and within the legal framework adopted by the previous government.

III. THE NEW GOVERNMENT’S REGULATORY MEASURES

The government has begun to restructure the regulatory system. So far, the change mainly concerns the openness of enforcement, while the legal basis largely remains that of the previous government:

1. Government Resolution 1144/2026 (V. 14.): a comprehensive, accelerated review of “projects of national economic priority”; priority status is revoked where retaining it would pose significant social, infrastructural or environmental risk. On 20 July 2026 the Prime Minister announced a review of all previous government decisions, negotiations and state commitments (subsidies, tax incentives, accelerated permitting, infrastructure) relating to an individual Chinese-invested project. The first batch of priority statuses revoked by Government Decree 140/2026 (IX. 1.) did not include Chinese battery projects.

2. Government Decree 92/2026 (VI. 5.), in force since 6 June 2026: for new employment on the basis of a “guest worker” residence permit, no source country is designated any longer – in effect, new guest-worker permits are suspended; residence permits for employment purposes remain available; existing permits, extensions and pending applications enjoy transitional protection. The decree generally does not affect expatriates of Chinese or Korean parent companies, but the correct choice of permit category is subject to review by the immigration authority.

3. Government Resolutions 1181/2026 (VI. 5.), 1182/2026 and 1184/2026: preparation of a new, independent national environmental authority; a nationwide inspection of the entire battery value chain (anode, cathode, electrolyte, separator, cells, modules) with a deadline of 30 September 2026 (now passed; at the time of writing no consolidated results have been published); a proposal to strengthen environmental liability and sanctions by 1 October; abolition of the minister’s power to designate project sites; and technology-neutral rules for the battery industry.

4. Act XXXV of 2026: amending the Environmental Load Fee Act, the air-emission fee rates for sulphur dioxide, nitrogen oxides and non-toxic particulate matter doubled from 1 October 2026. The accompanying package announced the gradual phase-out of tax incentives for multinational companies and special rules for large water users.

5. National battery-industry inspection programme (from 1 August 2026): on-site comparison of permits with actual capacity, raw materials, solvent consumption, emissions, water use and hazardous-waste handling; inspections may extend to suppliers and related facilities, with environmental sampling; serious breaches may lead directly to enforcement measures.

6. Draft amendment to the Construction Act (submitted to Parliament): where an environmental breach is established at a priority project, no further permits may be issued for at least six months after the breach has ended.

7. Substantive reform of the fining regime (in force) and the National Living Environment Supervisory Authority (in preparation): Government Decree 280/2026 (X. 9.), amending Government Decrees 314/2005 and 156/2025, entered into force on 25 October 2026. For companies with annual net turnover above HUF 100 million, the fine for operating without or in deviation from a unified environmental permit may reach 5% of the previous year’s net turnover, capped at HUF 5 billion (previously HUF 2 billion); the fine is at least 0.5% of the previous year’s net turnover, and no less than HUF 5 million, where within five years the company was fined at least twice by final decision for environmental pollution, or a final decision established a breach causing environmental endangerment or damage (Government Decree 314/2005, Section 26(4a)–(4d)); the fixed HUF 500 million cap on waste-management fines for legal persons has been abolished, the amount now being determined by the statutory calculation rules. The ministry has stated that the aim is to prevent companies in high-impact industries such as battery manufacturing from treating fines as a predictable cost of doing business. The basis is the net turnover of the sanctioned company – i.e. the Hungarian subsidiary – not consolidated group figures; Chinese parent companies should factor this into the capital and settlement structure of their Hungarian subsidiaries. In parallel, public consultation on the draft government decree establishing the National Living Environment Supervisory Authority (Országos Élőkörnyezet-felügyeleti Főhatóság) closed on 30 September 2026. The authority is planned to operate from 1 January 2027, exercising permitting, inspection and sanctioning powers nationwide, with battery manufacturing as a priority area; under the draft, its decisions cannot be appealed administratively and can only be challenged in court.

IV. WHO SUPERVISES: THE HUNGARIAN AUTHORITIES

As in other countries, companies operating in Hungary are supervised in parallel by several independent authorities, each of which takes its own decisions and has its own sanctioning powers.

1. The government offices have separate, mutually independent departments for environmental protection, labour, occupational safety, fire protection and construction permitting.

2. The police conduct criminal investigations. Criminal offences relevant to industrial operations mainly concern damage to the environment, breaches of waste-management rules and negligent endangerment under the Criminal Code; legal entities can also be subject to criminal fines and restrictions on their activities. Chinese parent companies should prepare criminal-compliance and defence plans for their expatriate managers in advance.

3. Other bodies: the National Directorate-General for Aliens Policing reviews residence permits; the labour inspectorate checks working time and pay; the Competition Authority supervises market conduct; the National Tax and Customs Administration handles tax matters; and the Hungarian Investment Promotion Agency decides on subsidies and priority status.

V. PROCEDURAL RISKS IN HUNGARIAN ENFORCEMENT

Enforcement procedures are mainly governed by the Act on General Administrative Procedure and the Code of Administrative Litigation. Four procedural points carry particularly high risk for companies:

1. A suspension or prohibition decision is, as a rule, enforceable upon service. There is no administrative appeal against decisions of the county government offices; an action must be filed in court within 30 days of receipt. Filing does not suspend enforcement – the company must apply for interim legal protection at the same time to have any chance of suspending the measure.

2. Records of interviews taken during on-site inspections are admissible evidence in both administrative and criminal proceedings. What on-site staff say fixes the facts of the case; a lawyer should therefore be involved from the outset, or the consequences may be irreversible and costly.

3. In cases affecting an indeterminate number of interested parties, authorities also publish their decisions on their websites; the company’s deadline for legal remedy runs from actual receipt of the decision, not from the date of online publication.

4. Hungarian is the official language of all administrative proceedings. Authorities do not accept logs, reports or signage in other languages; interview records are kept in Hungarian, and translation is at the company’s cost and risk. Hungarian is a small language and the law is written in it; the application of Hungarian law should therefore be entrusted to Hungarian lawyers to protect Chinese investors’ interests effectively.

VI. THE MOST FREQUENT BREACHES IN THE HUNGARIAN BATTERY INDUSTRY

Recent enforcement cases show the following recurring compliance gaps in the battery industry:

1. Hazardous-waste management: containers without Hungarian labels, unmarked collection points, missing logs, unattended points, damaged or open containers (e.g. SK Battery, Samsung SDI).

2. Stormwater and industrial wastewater handled in deviation from the permit: operation contrary to the pre-treatment permit, test liquids or wash water discharged into the public sewer (e.g. HALMS Hungary / Huashuo Technology).

3. Procedural defects in soil and groundwater monitoring: even where no contamination is ultimately found, late sampling or late submission of monitoring reports is an independent breach and may be fined (e.g. Semcorp’s procedural fine).

4. Workplace exposure to hazardous substances: no air measurements, unreported nickel and cobalt exposure, inadequate protective equipment, missing occupational health examinations (e.g. SK On, Samsung SDI).

5. Construction-phase risks: earthworks, topsoil removal, waste transport, lifting safety, fatal accidents (e.g. the BYD site).

6. Third-country workers and the subcontracting chain: incomplete records of residence status, working time and pay; a subcontractor’s breach directly damages the investor’s reputation and may create liability.

7. Fire and industrial safety deviating from approved documents: operation inconsistent with the safety report, faulty extinguishing systems, defective pipe seals (e.g. EcoPro).

8. External communication and community relations: submitting documents in foreign languages, obstructing inspections, mishandling public hearings, poorly documented communication with local government.

VII. THREE PRACTICAL LESSONS FROM RECENT CASES

Lesson 1: Voluntary reporting must come with a complete remediation plan

A Chinese company lawfully reported elevated nickel levels among its employees – the report itself met its legal obligation. However, the on-site inspection found inadequate protective equipment, and the authority immediately prohibited work in the affected workshops.

Practical note: where a company must report a safety or environmental incident, it should not only disclose the problem but submit a complete set of remediation documents at the same time – a protective-equipment plan, medical follow-up of employees, process adjustments and supporting documentation. Without a remediation plan, the authority will replace the company’s own remediation with an administrative ban.

Lesson 2: A subcontractor’s fault does not relieve the permit holder of administrative liability

Although the wastewater in question was discharged by a subcontractor, the sanction was imposed on the Chinese company as the permit holder; and when a subcontractor receives a large fine, the media point to the investor. The nationwide inspection programme expressly covers suppliers. A Chinese company introduced a subcontractor compliance declaration in May 2026 – a minimum standard that cannot by itself ring-fence administrative risk. The permit holder always remains the party to the administrative proceedings; the owner can seek recourse against the subcontractor only afterwards, under the subcontract – so recourse and security arrangements must be agreed in advance.

Recommendation: subcontracts should build a complete compliance chain – onboarding review, reporting obligations, the right to inspect, special termination rights and indemnities – backed by bank guarantees and payment retentions, not merely a signed compliance declaration.

Lesson 3: The quality of permitting documents determines schedule and financing security

A Chinese company’s application for its second phase was rejected not for environmental reasons but because of errors in the site plan. Under the draft amendment to the Construction Act submitted to Parliament, no new permits will be issued for at least six months after an environmental breach at a priority project, and the government may revoke priority status. Permitting documents are no longer an administrative formality but a core risk to schedule and financing. Another example: on 18 October 2026 the second-instance environmental authority annulled the unified environmental permit of a Korean-owned electrolyte plant in Sóskút, because electrolyte production requires its own environmental impact assessment and could not be “bundled” into an amendment of a hazardous-waste permit. If the wrong permitting route is chosen, the project must re-apply and re-plan.

Recommendation: set up a dual review by the Chinese technical team and licensed Hungarian advisers, checking drawings and submissions item by item, with informal pre-consultation with the authority before filing. Control document versions strictly and update the environmental assessment whenever layout or process changes, with a full record. Split phased projects into separate filing units so that one defect does not hold up everything. Include provisions in financing agreements on disbursement and risk sharing if permits are delayed, and in service contracts on liability for defects and delay, linking final payments to permits obtained. Track new local rules, keep a list of errors encountered and turn it into an internal filing SOP to avoid six-month permitting freezes and loss of priority status.

VIII. TEN-POINT CHECKLIST FOR PREVENTING ADMINISTRATIVE SANCTIONS

In light of the current rules, the new fining regime in force since 25 October 2026 and the new authority planned for 2027, Chinese companies should take the following ten measures:

1. Conduct an enforcement-oriented compliance audit against the criteria of the national battery inspection programme, covering environment, water, hazardous waste, occupational and industrial safety, fire protection and the immigration and employment model.

2. Compare every permit, line by line, with actual operations: capacity, raw materials, solvent consumption, water use and emissions.

3. Complete the full set of Hungarian-language documentation: on-site signage, operating logs, safety reports and internal rules.

4. Keep a monitoring and reporting calendar with every deadline and the responsible person; note that late reporting is a breach in itself.

5. Implement a standard subcontractor compliance toolkit: compliance declaration, site-access approval, the owner’s inspection rights, special termination rights, indemnities and security.

6. Introduce end-to-end management of workplace exposure to hazardous substances: measurement plan, protective-equipment system, biomonitoring of employees and occupational health records.

7. Adopt an internal protocol for responding to inspections: who receives inspectors, who may speak, what documents may be handed over, how interview records are reviewed, and how a lawyer is brought on site.

8. Set up a procedure for voluntary reporting of incidents and hazards, requiring every report to the authorities to be accompanied by a complete remediation plan.

9. Plan legal remedies in advance: decide case by case between “accept the sanction, remediate and close” and “challenge in court”; upon receiving a suspension or prohibition, as a rule apply for interim legal protection at the same time.

10. Complete legal due diligence and a self-review before any review of subsidies or priority status begins; maintain continuous, documented communication with local government and the surrounding community. Note that subsidy agreements may become public: in October 2026, the subsidy agreement of a large battery manufacturer was disclosed following a freedom-of-information request – HUF 129 billion in non-repayable aid, an 11-year operating obligation, a state mortgage, and the right to suspend payments in case of environmental, occupational-safety or employment breaches.

IX. WHY LOCAL LEGAL SUPPORT IS INDISPENSABLE

An internal compliance team is necessary but not sufficient to manage Hungarian regulatory risk: proceedings are conducted in Hungarian under strict deadlines; interview records become evidence; suspension orders are enforceable at once; under the new fining regime in force since 25 October 2026, the number and nature of earlier final decisions matter as much as the size of the fine; and reviews of subsidies and priority status are in substance negotiations, in which leverage depends on the quality of written evidence.

The team of DHH Budapest Office (Czudar DHH Law Firm – Hungary) has long served Asian manufacturers in Hungary, with core lawyers practising for more than ten years, and offers the following defined legal services:

1. Enforcement-oriented compliance audit: legal due diligence of the site against the national inspection criteria, with a risk report and an actionable remediation plan.

2. Inspection response on call: a local lawyer on site upon notice of an inspection, handling interviews and statements of fact, working with DHH’s teams in China to keep the Chinese headquarters informed in Chinese in real time.

3. Disputes over sanctions and suspensions: administrative remedies and litigation with interim legal protection, negotiation of conditions for restarting operations; criminal defence in coordination where needed.

4. Permitting and subsidies: operating and environmental permits, priority-status reviews and review of subsidy agreements.

5. Subcontractor and employment compliance: contractual ring-fencing of subcontractor risk, immigration and labour-law due diligence, and optimisation of the workforce structure.

KEY DATES

1. 30 September 2026: deadline of the national battery-industry inspection programme (Government Resolution 1181/2026) – passed; consolidated results pending.

2. 1 October 2026: air-emission fee rates doubled; deadline for the proposal on stronger environmental liability (Government Resolution 1182/2026).

3. 25 October 2026: Government Decree 280/2026 (X. 9.) in force – fine cap of 5% of the previous year’s net turnover, up to HUF 5 billion; a minimum of 0.5% of turnover after repeated or serious earlier breaches established by final decision.

4. Autumn 2026: Parliament to debate the Construction Act amendment and legislation on the new environmental authority; results of priority-project reviews expected.

5. 1 January 2027: the National Living Environment Supervisory Authority is planned to start operating, concentrating environmental permitting, inspection and sanctioning powers.

CONCLUSION

Hungary has not closed its doors to Chinese capital. Both the Hungarian government and the Chinese Ambassador to Hungary have made clear that lawful operation is the precondition and non-discrimination the principle. The key to investment security today is compliance – verifiable, fully documented, in Hungarian, and supported by local lawyers from the very first moment of any proceeding. DHH remains committed to accompanying Chinese companies abroad, and stands ready to support them in operating compliantly and growing steadily in Hungary as they seize the opportunities of this new phase.

Sources

• Csongrád-Csanád County Government Office announcements
• Hajdú-Bihar County Government Office announcements
• kormany.hu
• Magyar Közlöny (Hungarian Official Gazette)
• Hungarian Competition Authority (GVH) decisions
• Telex, Portfolio and other leading media
• Átlátszó public records
• Daily News Hungary interview with the Chinese Ambassador
• Peking University research base for Chinese-foreign cultural exchange, research report
• Part I of this series (July 2026): “Chinese Investment in Hungary under the New Government: A Practical Legal Compliance Guide”
• Government Decree 280/2026 (X. 9.) (njt.hu); draft government decree on the National Living Environment Supervisory Authority (public consultation, September 2026)
• Portfolio, 29 September and 19 October 2026; Infostart, 25 October 2026; Economx and 444, 18 and 20 October 2026