New Hungarian Whistleblowing Legislation

The Hungarian Parliament has recently adopted the Act CLXV of 2013 on Complaints and Public Interest Disclosure which lays down comprehensive and detailed rules for the receipt, investigation and handling of whistleblowing reports in Hungary.

The main provisions of the Act can be summarized as follows:

·         The Act authorizes the employer (as well as it owner) to establish a whistleblowing system in order to investigate reports. Reported conducts may include violation of legal provisions as well as rules of conduct (code of conduct) issued by the employer, provided that such rules protect public interest or significant private interest. The Act intends to cover SOX matters as reportable conducts, too.  

·         Reporting persons may include employees, contractors as well as any other third person (including legal persons) pursuing a legitimate interest for making a report or to remedy the reported situation. The identity of the reporting person may not be disclosed without his / her consent.

·         The employer shall publicly disclose / make available on its corporate website in Hungarian language the rules of conduct the violation of which may be subject to reporting, as well as a detailed description of the reporting procedure.

·         The Act lays down that the investigation of the report is mandatory for the employer and the reporting person shall be informed on the outcome of the investigation, as well as on the measures taken.

·         The employer has 30 days to investigate the report which deadline may be extended, if necessary, however, the investigation may not exceed three months in total.

·         The Act also permits the receipt and investigation of anonymous reports. The investigation of anonymous reports is not mandatory for the employer, however, the deadline for the investigation (30 days) of such reports cannot be further extended.

·         The Act lays down strict confidentiality obligations for the investigators and rules / deadlines for the retention of reports.

·         The Act expressly prohibits the processing of special data within the reporting system.

·         The operator of the system shall ensure the fair process rights of the reported person, including the right to be heard. Upon start of the investigation, the reported person shall be informed on the accusation as well as his rights. Notification to the reported person may be delayed if such disclosure likely prevents the result of the investigation.The employer shall ensure that the investigation of the reported conduct is proportionate with the restriction of the rights of the reported person.

·         The Act permits data transfer abroad, provided that adequacy of data transfer is ensured and the foreign data controller and data processor make a contractual commitment to comply with the provisions of the Act.

·         The Act prohibits retaliation against the reporting person, unless the reporting person acted in bad faith.

·         The Act lays down that the whistleblowing system shall be registered with the DPA.

·         The Act permits the assignment of independent attorneys for the receipt and investigation of reports.

The Act is scheduled to enter into force by 1 January 2014 and the new legislation will replace the Act on the Fair Process.

In order to comply with the provisions of the Act, the operators of whistleblowing systems in the Hungarian jurisdiction shall:

·         publicly disclose and make available in their own website their codes of conduct as well as the rules of the whistleblowing procedure in Hungarian language;

·         ensure that the whistleblowing procedure, including the receipt of reports and internal deadlines for the investigation comply with the provisions of the Act;

·         ensure that vendors of the whistleblowing system make a contractual commitment to comply with the provisions of the Act;

·         ensure the adequacy of international data transfers relating to the system;

·         initiate the registration of the whistleblowing system or modification existing whistleblowing registrations before the Hungary DPA.