Resources to Report Corruption
The Hungarian Ministry of Interior, the Prime Minister’s Cabinet Office, law enforcement agencies (Prosecution Office, police, Tax Office), and the Integrity Authority are responsible for combating corruption. Although a legal framework exists to support their efforts, critics have asserted the government has done little to combat grand corruption and rarely investigates cases involving politically connected individuals, even when recommended to do so by the European Antifraud Office (OLAF).
Hungary is a party to the UN Anticorruption Convention and the OECD Anti-Bribery Convention and has incorporated their provisions into the penal code, as well as subsequent OECD and EU requirements on the prevention of bribery. Parliament passed the Strasbourg Criminal Law Convention on Corruption of 2002 and the Strasbourg Civil Code Convention on Corruption of 2004. Hungary is a member of GRECO (Group of States against Corruption), an organization established by members of the Council of Europe to monitor the observance of their standards for combatting corruption. GRECO’s reports on evaluation and compliance are confidential unless the Member State authorizes the publication of its report. For several years, the Hungarian government kept GRECO’s compliance reports on corruption prevention with respect to members of parliament, judges, and prosecutors, and transparency of party financing confidential.
Following calls from the opposition, NGOs, and other GRECO Member States, and a March 2019 visit by senior GRECO officials to Budapest, the Hungarian government agreed to publish the reports in August 2019. The reports revealed Hungary failed to meet 13 out of 18 recommendations issued by GRECO in 2015; assessed that Hungary’s level of compliance with the recommendations was “globally unsatisfactory,” and concluded that the country would therefore remain subject to GRECO’s non-compliance procedure. The compliance report on transparency of party financing noted some progress but added that “the overall picture is disappointing.” A November 2020 GRECO report came to the same conclusion, adding that Hungary had made no progress since the prior year on implementing anticorruption recommendations for MPs, judges, and prosecutors. In its latest report published in September 2022 GRECO said only six of its 18 recommendations had been implemented satisfactorily by the government – including some improvements to the operation of the Prosecution Office, but the overall result is still “globally unsatisfactory.”
Following a letter of concern by transparency watchdogs to Open Government Partnership (OGP)’s Steering Committee in summer 2015, OGP launched an investigation into Hungary and issued a critical report. The OGP admonished the Hungarian government for harassment of NGOs and urged it to take steps to restore transparency and to ensure a positive operating environment for civil society. The Hungarian government, only the second Member State to be reprimanded by the organization, rejected the OGP report conclusions and withdrew from the organization in 2016.
The Hungarian government has amplified its attacks on NGOs including transparency watchdogs, accusing them of acting as foreign agents and criticizing them for allegedly working against Hungarian interests. Observers assess that anti-NGO rhetoric endangered the continued operation of anti-corruption NGOs crucial to promoting transparency and good governance in Hungary. In 2017 and 2018, Parliament passed legislations that many civil society activists criticized for placing undue restrictions on NGOs. In its June 2018 and November 2021 rulings, the European Court of Justice found both laws in conflict with EU law.
Transparency International (TI) is active in Hungary. TI’s 2022 Corruption Perceptions Index rated Hungary 77 out of 180 countries, the worst ranking among EU member states. TI attributed this ranking to the decade-long erosion of the rule of law, state capture, and increasing systemic corruption. TI and other watchdogs note that data on public spending remains difficult to access since the Hungarian government amended the Act on Freedom of Information in 2013 and 2015. Moreover, according to watchdogs and investigative journalists, the Hungarian government, state agencies, and SOEs are increasingly reluctant to answer questions related to public spending, requiring lengthy court procedures to receive answers. Even if the court orders the release of data, by the time it happens, the data has lost significance and has a weaker impact, watchdogs warn. In more cases, even when ordered by court to provide information, state agencies and SOEs fail to comply with the court ruling or release data in nearly unusable or undecipherable formats.
A 2019 European Commission study found that Hungary had the second-highest rate (40 percent) of single-bidder EU funded procurement contracts in the European Union. Each rule of law report of the European Commission since 2020 expressed concerns over the “systematic lack of determined action to investigate and prosecute corruption cases involving high-level officials or their immediate circle.” The 2022 report noted that “concerns remain regarding the lack of systematic checks and insufficient oversight of asset declarations as well as the lack of conflict-of-interest rules for the public interest trusts.”
The European Anti-Fraud Office (OLAF) has found high levels of fraud in EU-funded projects in Hungary and has levied fines and withheld development funds on several occasions. Indicating the inefficient use of funds, OLAF requested the Hungarian authorities to investigate 18 cases of misuse of EU funds between 2017 and 2021 and proposed the repayment of 0.7 percent of domestic funds, compared to the EU average of 0.3 percent.
TI and other anti-corruption watchdogs have highlighted EU-funded development projects as the largest source of corruption in Hungary. According to their criticism, public procurements in practice lack transparency and accountability and are characterized by uneven implementation of anti-corruption laws. Additionally, transparency NGOs calculate that government-allied firms have won a disproportionate percentage of public procurement awards.
A TI study found indications of corruption and overpricing in up to 90 percent of EU-funded projects. The Corruption Research Center (CRCB) analyzed more than 240,000 public procurement contracts from 2005-2020 and determined companies owned by individuals with links to senior government officials enjoyed preferential treatment in public tenders and faced less competition than other companies. The studies also revealed that the share of single-bidder public procurement contracts was over 40 percent in 2020, and that the corruption risk reached its highest level since 2005. In a March 2022 report CRCB found that 42 companies owned by 12 entrepreneurs closely affiliated with the government won more than 20 percent of the EU-funded public contracts in the 2011-2021 period. In 2020, a year which was particularly difficult for many businesses because of the COVID pandemic, this small group of entrepreneurs won almost one-third of the EU-funded public tenders.
The business community and foreign governments share many of these concerns. Multinational firms have complained that competing in public procurements presents unacceptable levels of corruption and compliance risk. In addition, observers have raised concerns about the appointments of Fidesz party loyalists to head quasi-independent institutions such as the Competition Authority, the Media Council, and the State Audit Office. Because it is generally understood that companies without political connections are unlikely to win public procurement contracts, many firms lacking such connections do not bid or compete against politically connected companies.
As a result of the unaddressed systemic “irregularities, deficiencies, and weaknesses” in EU-funded public procurement projects, in April 2022 the European Commission launched the budget conditionality mechanism against Hungary. In its letter sent to the government on April 27, the European Commission reportedly mentioned systemic irregularities in the government’s allocation of EU funds, including a €44 million ($47 million) public lighting project implemented by a firm co-owned by Prime Minister Orban’s son-in-law. In October and November 2022, Hungary passed a series of laws to address the European Commission concerns including setting up a new Integrity Authority, a new remedy process in corruption cases, and new rules for asset declarations. On November 30, the Commission assessed Hungary had not made sufficient progress in implementing the 17 remedial measures agreed during the negotiations, and it maintained its recommended suspension of €7.5 billion ($8 billion) of funding from the 2021-2027 EU budget. On December 12, the European Council approved the European Commission recommendation to withhold the funds, but reduced the amount withheld to €6.3 billion ($6.7 billion). Hungary agreed to implement a series of anti-corruption and rule of law reforms to unlock access to those funds and to €5.8 billion ($6.2 billion) in EU Recovery and Resilience funds.
Hungary has legislation to combat corruption, but the implementation of the laws is deficient. Giving or accepting a bribe is a criminal offense, as is an official’s failure to report such an incident. Penalties can include confiscation of assets, imprisonment, or both. Since Hungary’s entry into the EU, legal entities can also be prosecuted. Legislation prohibits members of parliament from serving as executives of state-owned enterprises. An extensive list of public officials and many of their family members are required to make annual declarations of assets, but there is no specified penalty for making an incomplete or inaccurate declaration. It is common for prominent politicians to be forced to amend declarations of assets following revelations in the press of omission of ownership or part-ownership of real estate and other assets in asset declarations. Politicians are not penalized for these omissions.
Transparency advocates claim that Hungarian law enforcement authorities are often reluctant to prosecute cases with links to high-level politicians. For example, they reported that, in November 2018, Hungarian authorities dropped the investigation into $50 million in EU-funded public lighting tenders won by a firm co-owned by a relative of the prime minister, despite concerns raised by OLAF about evidence of conflict of interest and irregularities involving the deal. According to media reports, OLAF concluded that several of the tenders were won due to what it considered organized criminal activity. In December 2021, the Prosecutor General’s Office charged a senior government politician for accepting bribes to influence cases at the request of the president of the Court Bailiff Chamber. The senior government official resigned from his positions but was left at large for the duration of the investigation.
The Public Procurement Act of 2015 initially included broad conflict of interest rules excluding family members of Hungarian government officials from participating in public tenders, but Parliament later amended the law to exclude only family members living in the same household. While considered in line with the overarching EU directive, the law leaves room for subjective evaluations of bid proposals and tender specifications tailored for favored companies.
The Hungarian government does not require private companies to establish internal codes of conduct.
Generally, larger private companies and multinationals operating in Hungary have internal codes of ethics, compliance programs, or other controls, but their efficacy is not uniform.
Resources to Report Corruption
Hungarian government Office Responsible for Combatting Corruption:
National Protective ServiceGeneral Director Szilvia Tomin
Phone: +36 1 433 9722
Fax: +36 1 433 9751
President Ferenc Biro
1051 Budapest, Szechenyi Istvan ter 7-8.
Transparency International Hungary
Falk Miksa utca 30. 4/2
Phone: +36 1 269 9534
Fax: +36 1 269 9535