a) Hungary / b) Constitutional Court / c) / d) 29-09-2006 / e) 35/2005 / f) / g) 2005/130 / h) .
Keywords of the Systematic Thesaurus:
General Principles - General interest.
Fundamental Rights - Civil and political rights - Rights in respect of taxation.
Keywords of the alphabetical index:
Law, adopted in different social context, unconstitutionality.
Article 13.2 of the Constitution, read in conjunction with Article 8.2 of the Constitution, obliges the state to exercise objective institutional protection to pass adequate legislation setting out the procedural and substantive rules of full, unconditional and immediate compensation in case of expropriation.
I. The petition initiated the ex post facto constitutional review of a provision of Act C of 2000 on Accounting (hereinafter referred to as "the Act"). Article 77.1 of the Act deals with other income, means and revenues not forming part of net sales revenues arising in the course of regular business activity and which are shown neither under "income from financial transactions" nor under "extraordinary income". Article 77.2.b of the Act stipulates that compensation is to be regarded as 'other income'. The petitioner argued that Article 13.2 of the Constitution requires full and unconditional compensation in case of expropriation. This requirement would not be met because compensation counted as other income is subject to corporate taxation.
II. On examining Article 77.2.b of the Act, the Constitutional Court stated that the rule in question is of an accounting and recording nature, which gives participants in the market access to objective information on the financial and earnings position of the undertakings. Consequently, it does not affect the constitutional requirement of compensation.
Because the laws relating to expropriation were passed before the democratic transition, the Constitutional Court ex officio reviewed the compatibility of the Law Decree with Article 13 of the Constitution.
The Court pointed out that the Law Decree was passed in a different social, economic and legal climate. Then, only the state carried out public interest tasks, and this was central to the regulatory system. The political transformation over the past fifteen years has resulted in natural persons or corporations carrying out most of these functions. The scope of assets and proprietors as subjects of expropriation has also changed. The Law Decree was amended several times but its underlying regulatory concept has not changed.
The legislator must guarantee that expropriation is only permitted where there is no other way of achieving a purpose that is indeed in the public interest. The fact that the Law Decree permits expropriation if it relates to a generally defined state function fulfilled either by the central or local government does not in itself mean that expropriation is in the public interest. Furthermore, Article 13.2 of the Constitution allows for full, unconditional and immediate compensation, a safeguard of the right to property as a fundamental right. The Constitution provides a guarantee for the proprietor in case his property is confiscated.
The Law Decree does not provide this type of guarantee and the Constitutional Court established an unconstitutional omission. Parliament will need to pass the requisite legislation by 30 June 2007.