Growing protests against priority investments in Hungary

In Hungary, the regulatory and institutional foundations of environmental protection and public participation rights were largely developed in the years following the regime change around 1990. Fortunately, this process combined political commitment with expertise. This effect was further strengthened by the definite intention to join the European Community, and accession was also conditional on the adoption of an environmental standards system. By the mid-1990s, a high level of environmental legislation and a well-maintained institutional system had developed domestically, even in international comparison. Within this framework, public participation was present alongside relatively effective standards.

However, in the early 2000s, a turnaround began. Many new investments were launched, often without taking into account their environmental effects and the interests of the residents concerned. This process gained speed especially after Hungary’s accession to the EU in 2004. Imre Kovách, scientific advisor and former director of the Hungarian Academy of Sciences’ Institute of Sociology, introducing a study by the Institute on this topic in 2013, gave the following explanation: “The main reason the business elite started to be involved in politics, and to side with political parties and figures, is the fact that Hungary joined the EU, from where thousands of billions of Forints started to flow to us. It was worth it to influence the allocation of this money, and it became possible to get substantial financial resources by applying for grants and winning them.” Free money has irresistibly attracted all those looking to get rich (or much richer) in a short time by illegal or semi-legal means.

The number of conflicts around these processes increased, and in many cases they led to protests by residents and even protracted litigation. Policymakers did not respond to this phenomenon by ensuring more thorough planning, more transparency, strict anti-corruption measures, full enforcement of environmental legislation, and timely coordination of interests, but instead began to blame the environmental and public participation rules. They started to gradually dismantle the high-quality legal regime and institutional system and to restrict public participation rights. Accelerating procedures and cutting was red tape was the administrations’ stated reason. On 1 January 2004, the Act on Public Interest and Development of the Expressway Network entered into force, which aimed to simplify the licensing procedures for road infrastructure investments, in part by cutting back the rules for public participation. At the initiative of the environmental NGO Clean Air Action Group, the Compliance Committee of the Aarhus Convention expressed concerns about this setback; however, the genie had already escaped the bottle, and regression in legal requirements has become continuous even as procedures have become increasingly formal: the first such legislation was followed by a series of laws and decrees weakening the existing rules. An outstanding element was the “Act on the acceleration and simplification of the implementation of priority investments significant for the national economy”, which entered into force in April 2006.

The stated aim of the law was to “implement projects financed by the European Union through a faster, simpler and more uniform procedure”, but the original legislation has already shown that it is much more than that, and since then, due to a series of amendments, it has become more and more easy to gain “priority investment” status. Today it is sufficient if the value of the project is at least HUF 90 million (EUR 243,000), creates at least 15 jobs, or meets other similarly easy conditions. According to the law, the Government can prioritise virtually any investment and put it in a much better position for winning financing compared to other, “normal” investments. The Government’s decisions in this regard are completely opaque, and the reasons are usually vague. In the first years after the law came into force, such decisions were exceptional and this “fast track” was ensured only for a few major investments: while from 2006 to 2010 there were only 24 such cases, since 2010 until today more than 3 000 investments were granted the status of “priority investments” by over 500 Government decrees. As practice has shown, even smaller office buildings, residential buildings, castle renovations or the relocation of a public authority could also easily become priority investments if the Government decides so.

Priority investments are basically subject to procedural benefits under the law. The licensing authority has to examine such applications ahead of non-priority investments and the administrative deadline has been shortened to a single, non-extendable 42 days, which in a more complex case means the authority is unable to completely examine the merits of the investment and the threats it poses. Moreover, the Government may even reduce this deadline through individual decrees adopted specially for a certain project. In contrast to the general procedures, clients such as NGOs or residents do not have to be notified about the official decision in a separate letter - it is enough to post it on the notice board in the municipality hall for five days. Needless to say, in practice this makes it nearly impossible for the public concerned to be informed about investments in the area. The “smooth running” of priority investments is coordinated by a designated Government commissioner who can, of course, give practically any instructions to the office staff.

The law contains further simplifications, among others, regarding land redevelopment procedures, investments in transport infrastructure, and court proceedings related to issued permits. These simplifications also reduce the level of public participation, make substantive work by the authorities almost impossible, and give an undue competitive advantage to arbitrarily-selected investments and investors. However, the biggest problems arise from the fact that the law empowers the Government to make further simplifications through decrees. It has become a common practice, for example, for Government decrees to be adopted for certain investments to prescribe building regulations that are more permissive than municipal building rules, or to circumvent monument protection regulations. While in 2006 only three such decrees were adopted, in 2017 there were already 72 decrees containing such specific rules.

Already in a 2011 report, the Ombudsman and the Deputy Ombudsman for Future Generations drew attention to concerns about priority investments, stressing that “simplification and acceleration must not be at the expense of careful consideration”. In 2012, in 2013 and in 2015, the Ombudsman’s Office issued reports with similar content and raising constitutional concerns, but in spite of this, the rules on priority investments and related Government practice deteriorated further. The problems related to priority investments have been also aggravated by the fact that environmental authorities have been regularly weakened during the last 20 years, and substantive work has now become almost impossible due to their lack of expertise and resources, as well as their lack of professional independence.

The two concrete cases presented below give some idea of how priority investment projects work in practice.

In 2014, the Government announced that the Buda Castle District, which has been a cultural and residential area so far, will be transformed into a governmental district. This decision has been severely criticized by many urban planners, architects and civil society organisations. According to a representative opinion poll, 77 percent of Budapest residents opposed the plan and only 16 percent agreed with it. Nevertheless, the implementation of the plan soon started. By now, Prime Minister Viktor Orbán has already moved his office into an historical building in the district and several major reconstruction projects are underway to make room for various ministries there. A Government decree in 2016 classified the area concerned as a priority investment. A law adopted in 2018 transferred  many historical buildings and other properties in the area, which until then had belonged to the district municipality, into the ownership of the state, without providing any compensation . Not much later, another Government decree put the area concerned under the jurisdiction of a special governmental organization, practically depriving the Budapest Municipality and the district municipality of any legal means to influence the investments. One of the properties confiscated by the Government to construct a huge office building was on a piece of land covered with trees on Dísz Square, adjacent to a kindergarten, which the kindergarten used as a playground. After the confiscation, the kindergarten was not permitted to use it anymore. After the district municipality refused to grant permission to cut down the trees, an amendment to the law on priority investments and an amendment to the above-mentioned 2016 Government decree were adopted prescribing that in a case of priority investment, the Government has the right to give permission for cutting down trees. When the district municipality refused to grant a permit for the occupation of the public space for the project because to do so would have made another nearby playground inaccessible from the kindergarten, an amendment to the  “Act on the development and protection of the built environment” dictated that occupying any affected public space by a priority investor’s project would be  free of charge and without time limits. When it was discovered that the planned new building would block the windows of the kindergarten, the 2016 Government decree has been – again – amended to require the owner of any building obstructing a priority project’s implementation to convert the property.

Although there has been no EU funding involved in the construction of the new Government buildings in the Castle District, the spending of hundreds of billions of forints in public money on unnecessary projects damaging the environment means the Government is making a farce of all EU funding for the environment.

Local residents and local governments, helped by the Clean Air Action Group, have also been protesting against new gravel quarries opening just southeast of Budapest. Due to the incommensurate excavation of gravel, this area has already experienced a vast disappearance of arable land and important natural sites, as well as a substantial drop in the ground water level. In the face of the protests, in July 2021 a Government decree designated 438 hectares covered by forests and agricultural land as a priority investment for gravel mining. The right to exploit the gravel was given to a business partner of Orbán’s son-in-law. Although there is no EU money involved, a large part of the gravel is used for environmentally harmful projects funded with public money, including also EU funds.

Many Hungarian priority investments are even directly financed with EU money. Just in 2021, more than a dozen Government decrees have been issued classifying various EU-funded projects as priority investments, including, among others, tourist development projects, railway line reconstructions and new motorway constructions.

Recently civil society organisations from various parts of Hungary have formed a coalition demanding the abolition of all priority investment classifications.