EUR;CoE;EU;CECC;JCCJ;WCCJa) Hungary / b) Constitutional Court / c) / d) 19-11-2015 / e) 32/2015 / f) On compensation for victims of a collapsed brokerage house / g) Magyar Közlöny (Official Gazette), 2015/177 / h) .
Keywords of the systematic thesaurus:
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General Principles - Rule of law.
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Fundamental Rights - Equality.
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Fundamental Rights - Civil and political rights - Right to property.
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Keywords of the alphabetical index:
Compensation, eligibility, failed brokerage, victim / State regulation, increase threshold, unfair.
Headnotes:
The legislator is not entitled to put an undue, unpredictable burden on the investment companies financing the compensation of the Investor Protection Fund.
Summary:
I. On 14 April 2015 Parliament approved a bill in an expedited procedure to establish a top-up fund to compensate investors of the failed brokerage Quaestor up to €100,000 apiece. Under the existing laws, Quaestor investors were already eligible for compensation from the Investor Protection Fund of up to €20,000. However, lawmakers approved the new legislation that effectively raised the threshold to about €100,000.
The Investor Protection Fund is an autonomous organisation that provides limited property coverage funded primarily from the contributions paid by its members, if any of its members is not capable of performing its commitment to disburse clients’ assets. Because the Investor Protection Fund had already been largely depleted over the course of compensa-ting the victims of earlier scandals (BudaCash, Széchenyi Bank), the adopted law required financial brokerage firms and banks trading in securities to advance sufficient funds to cover most of the projected outlays.
The banks responded by filing a petition to the Constitutional Court. In addition to arguing that it was wrong to require them to compensate the victims of a former competitor that acted irresponsibly or even criminally, they also pointed out that it was unfair to compensate Quaestor victims up to five times more than BudaCash victims.
II. The Constitutional Court annulled the part of law providing for the compensation of victims holding between €20,000-€100,000. The Constitutional Court stated that the law was unconstitutional as it led to discrimination against some investors eligible for the compensation, placed disproportionate ownership restrictions on investment service providers involved in the compensation, and provided insufficient time for preparation. According to the decision of the Constitutional Court the legislation was not entitled to put an undue, unpredictable burden on the investment companies financing the compensation.
Supplementary information:
After the verdict of the Constitutional Court, the Government submitted a new bill to Parliament that provided for the compensation of the Quaestor victims. Parliament adopted the new rules in December 2015.
Hungarian.