Commission refers Hungary to court over construction export block

The Hungarian government announced at the beginning of July 2021 that it would try to stop the immense rise in the price of construction materials through an export ban and a windfall tax it called 'extra profit tax'.

Under the Hungarian law, construction materials intended for exports have to undergo a prior notification procedure. Exports may be blocked if the Hungarian authorities consider that these exports would “significantly impede or render impossible the construction, operation, maintenance and development of critical infrastructures, thereby jeopardising public supply or pose a risk to the security of supply in the construction industry”.

The Commission considers that these measures are in breach of EU regulations, as they

restrict the free movement of goods and are not justified.

The EU executive highlighted that

• Hungary does not demonstrate in a satisfactory manner that the objective of the measure corresponds to a legitimate objective;
• there seems to be no actual risk to the security of supply of the products concerned in Hungary;
• the Hungarian measures do not provide objective and predefined criteria for the decision of whether exports could be blocked.

Therefore, the Hungarian authorities can freely determine when there is a risk to the security of supply in the construction industry, making the decision potentially arbitrary. The measures therefore cannot be considered as justified to attain the intended public interest.

The Hungarian measures not only affect intra-Union trade but also trade with third countries in violation of Article 2 and Article 3 of the Treaty on the Functioning of the European Union (TFEU).

Furthermore, the notification obligations under the Single Market Transparency Directive have been violated as the Hungarian authorities did not submit to the Commission the draft measure.

The Commission had initially sent a first letter of formal notice in September 2021, followed by a reasoned opinion in April 2022. As the Commission considers that Hungary is still in breach of EU rules, it has decided to refer the case to the Court of Justice of the European Union.

Background

National measures that are capable of hindering, directly or indirectly, actually or potentially intra-Community trade are measures having an equivalent effect to a quantitative restriction. The export notification system and the right to block exports stipulated in the Hungarian legislation amount to such measures.

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