CJEU: Hungary law ending usufruct contracts with foreigners violates EU principle

The Court of Justice of the European Union (CJEU) on Tuesday ruled that the Hungarian legislation terminating usufructuary contracts with foreign beneficiaries violates the European Union principle of the free movement of capital.

A 2013 law terminated certain usufruct or “pocket” contracts conferring rights to use and profit from Hungarian farmland to EU citizens, saying that such contracts were only allowed between close family members.

The contracts were terminated abruptly, although earlier it was announced that holders of the contracts would enjoy a transitional period of 20 years.

The judgment was taken in joined cases on requests for a preliminary ruling from a court in Szombathely (W Hungary). One case involved an Austrian national residing in Austria whose usufruct rights over parcels of farmland in Hungary acquired in 1999 were terminated in 2015. The other case involved a company based in Hungary but with members from other EU member states and resident in Germany. The company, SEGRO, acquired usufruct rights over parcels of farmland in Hungary in 2002, but these were terminated in 2014.