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ECJ Rules Against Hungary In Case Of Loan Guarantees As Well As In Gas Traders Dispute

By Tamás Székely // 2015.03.20.

The European Court of Justice (ECJ) has ruled that guarantees by the state of Hungary of subsidised home loans qualify as illegal state aid. The case concerned guarantees on subsidised home loans to large and disadvantaged families introduced by the government in 2001, before Hungary joined the EU. The case was brought by OTP Bank, Hungary’s biggest commercial lender, against the state after it ceased to pay the guarantees, arguing that it was illegal state aid under EU rules.

The questions the case sought to resolve were if the guarantees were compatible with internal market rules and, if they were incompatible, what remedies were available for any damage to the interests of the banks concerned. The ECJ ruled that the illegal state aid gave lenders an unfair advantage over other economic players, but it said the task of deciding whether the banking sector was the only one to have benefitted from the support was up to the Hungarian courts to decide.The court said similar forms of state aid must first be reported to the EC, which may approve or reject them. Hungary failed to report the guarantees, thus they are illegal state aid and must be recovered from banks.

Meanwhile the European Court of Justice ruled that Hungarian regulations that prohibit legal recourse by gas traders against resolutions by the national regulatory authority affecting them go against European Union rules. In the case, the local unit of German utilities giant E.ON challenged a resolution by the Hungarian Energy and Utilities Regulatory Authority instructing transmission system operator FGSZ Földgázszállító to modify its rules of trade and operation to create a more level playing field on the deregulated gas market.

FGSZ had turned to the authority for guidance after E.ON made requests for a large volume of capacity, prompting a rethink of its mandate to ensure access to all market players free of discrimination. The Hungarian court ruled that E.ON could not challenge a resolution that was addressed to FGSZ, not itself. But the European Court said prohibiting E.ON from challenging the resolution went against the EU principle of effective judicial protection.

via hungarymatters.hu photo: public domain