Opinion of the Advocate General — ECLI:EU:C:2023:267
Date: 2023-03-30
Language of the case: Hungarian
Subject matter: Dumping;External relations;Free movement of capital;Commercial policy
Procedure: Reference for a preliminary ruling
Origin: Hungary

Summary C-106/22 – 1 
Case C-106/22 
Summary of the request for a preliminary ruling made under Article 98(1) of 
the Rules of Procedure of the Court of Justice 
Date lodged: 
15 February 2022 
Referring court: 
Fővárosi Törvényszék (Budapest High Court, Hungary) 
Date of the decision to refer: 
1 February 2022 
Applicant: 
Xella Magyarország Építőanyagipari Kft. 
Competent authority to which the application was made: 
Innovációs és Technológiai Miniszter (Hungarian Minister for 
Innovation and Technology) 
  
Subject matter of the main proceedings 
Application for annulment of a ministerial resolution prohibiting a foreign 
investor from acquiring shares in a strategic company. 
Subject matter and legal basis of the request for a preliminary ruling 
Interpretation of Article 65(1)(b) TFEU. 
Legal basis: Article 267 TFEU. 
Questions referred 
(1) Having regard to recitals 4 and 6 of Regulation (EU) 2019/452 establishing a 
framework for the screening of foreign direct investments into the Union and to 
Article 4(2) TEU, must Article 65(1)(b) TFEU be interpreted as meaning that it 
permits the laying down of rules such as those in Paragraph 85 of veszélyhelyzet 
EN 
SUMMARY OF THE REQUEST FOR A PRELIMINARY RULING – CASE C-106/22 
 
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megszűnésével összefüggő átmeneti szabályokról és a járványügyi készültségről 
szóló 2020. évi LVIII. törvény (Law LVIII of 2020 on transitional provisions 
relating to the end of the state of emergency and to the pandemic crisis), and in 
particular those in Paragraph 276(1) and (2)(a) and Paragraph 283(1)(b) of that 
law? 
(2) If the answer to the first question is in the affirmative, does the mere fact 
that the Commission has conducted a merger control procedure, exercised its 
powers and authorised a concentration affecting the chain of ownership of a 
foreign indirect investor preclude the exercise of the decision-making power under 
the applicable law of the Member State? 
Provisions of EU law relied upon 
– Article 4(2) TEU. 
– Article 63(1) and Article 65(1)(b) TFEU. 
– Regulation (EU) 2019/452 of the European Parliament and of the Council of 
19 March 2019 establishing a framework for the screening of foreign direct 
investments into the Union (OJ 2019 L 79 I, p. 1), recitals 4 and 6 and 
Article 4(2). 
– Communication from the Commission entitled ‘Guidance to the Member States 
concerning foreign direct investment and free movement of capital from third 
countries, and the protection of Europe’s strategic assets, ahead of the 
application of Regulation (EU) 2019/452’ (OJ 2020 C 99 I, p. 1). 
Provisions of national law relied upon 
– Provisions of the veszélyhelyzet megszűnésével összefüggő átmeneti 
szabályokról és a járványügyi készültségről szóló 2020. évi LVIII. törvény 
(Law LVIII of 2020 on transitional provisions relating to the end of the state of 
emergency and to the pandemic crisis) (‘Law LVIII of 2020’) that were in force 
at the time of the facts in the main proceedings:  
‘Paragraph 276 
For the purposes of this section: 
1. “national interest” shall mean: the public interest, not governed by 
either EU or national sectoral regulations, in relation to the security 
and functioning of networks and installations and continuity of supply; 
2. “foreign investor” shall mean:  
XELLA MAGYARORSZÁG 
 
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a) any legal person or other entity registered in Hungary, another 
EU Member State of the European Union or a third country 
belonging to the European Economic Area or in the Swiss 
Confederation which acquires a specific holding or influence in a 
commercial company whose registered office is in Hungary and 
which carries on a specific activity in accordance with 
Paragraph 277(2), wherever the person having a decisive 
influence, in accordance with the Law approving the Hungarian 
Civil Code, over that legal person or other entity is either a 
natural person who is a national of a country that does not belong 
to the European Union or to the European Economic Area and is 
not the Swiss Confederation, or a legal person or other entity 
registered in a country that does not belong to the European 
Union or to the European Economic Area and is not the Swiss 
Confederation; 
b) any natural person who is a national of a country that does not 
belong to the European Union or to the European Economic Area 
and is not the Swiss Confederation, or any legal person or other 
entity registered in a country that does not belong to the 
European Union or to the European Economic Area and is not 
the Swiss Confederation; 
3. “strategic company” shall mean: any limited liability company 
(korlátolt felelősségű társaság), private company limited by shares not 
listed on a stock exchange (zártkörűen működő részvénytársaság) or 
public company limited by shares listed on a stock exchange 
(nyilvánosan működő részvénytársaság), whose registered office is in 
Hungary and whose principal activity or one of whose activities, as 
defined by government decree, belongs to the energy, transport or 
communications sector or to a strategically important sector – with the 
exception of financial infrastructure – for the purposes of 
Article 4(1)(a) to (e) of Regulation (EU) 2019/452 of the European 
Parliament and of the Council of 19 March 2019 establishing a 
framework for the screening of foreign direct investments into the 
Union. 
Paragraph 277 
1. In the case of strategic companies, where the conclusion of a contract 
or a unilateral declaration of intent or decision made by the company 
(collectively, “legal transaction”) has the effects defined in paragraphs 2 to 
4, it must be notified to the minister for the national economy (for the 
purposes of this section, “the Minister”), and acknowledgement of receipt of 
that notification must be obtained, by 31 December 2020 in respect of the 
following legal transactions: 
SUMMARY OF THE REQUEST FOR A PRELIMINARY RULING – CASE C-106/22 
 
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a) the transfer of some or all of the holdings in a strategic company by 
any form of transfer of ownership, including contributions, whether for 
valuable consideration or otherwise; 
… 
Paragraph 283 
1. Immediately after receiving the notification, the Minister shall 
examine 
… 
b) whether, where the person submitting the notification acquires 
ownership, a right of ownership over bonds, a right of usufruct or an 
operating right, the Hungarian national interest, public security or 
public policy are damaged or threatened or may be damaged or 
threatened, having regard in particular to the guarantee of the coverage 
of basic social needs in accordance with Article 36 and Articles 52(1) 
and 65(1) TFEU;  
… 
2. The Minister shall, within 30 days from receiving the notification – or, 
in the situation under paragraph 3, within the period indicated in that 
paragraph –, if the circumstances defined in subparagraphs 1(b) to (e) 
… 
b) are satisfied, prohibit acquisition of the ownership or of the right of 
ownership over bonds, right of usufruct or operating right (“the 
prohibition decision”).’ 
– The Magyarországi székhelyű gazdasági társaságok gazdasági célú védelméhez 
szükséges tevékenységi körök meghatározásáról szóló 289/2020. (VI. 17.) 
Korm. rendelet (Government decree 289/2020 of 17 June 2020 defining the 
areas of activity necessary for the economic protection of commercial 
companies whose registered office is in Hungary): 
‘Paragraph 1 
Annex 1 defines the areas of activity on the basis of which commercial 
companies whose registered office is in Hungary shall be considered to 
belong to a sector of strategic importance. 
… 
Annex 1 to Government decree 289/2020 of 17 June 2020 
XELLA MAGYARORSZÁG 
 
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… 
[heading] 22. – Critically important raw materials – [point] 8: other type of 
mining and quarrying’. 
Brief description of the facts and the main proceedings 
1 The main activity of the applicant in the main proceedings, Xella Magyarország 
Építőanyagipari Kft. (‘Xella’), is the production of concrete products for 
construction purposes. Xella is directly owned by the German company Xella 
Baustoffe GmbH. That German company is owned by a company whose 
registered office is in Luxembourg, Xella International S.A., which in turn is 
owned by LSFIO XL Investments Limited, a company registered in Bermuda. 
That ownership structure was created by the Xella group being sold to a 
subsidiary of Lone Star by the United States investment group Goldman Sachs in 
2016. In 2017 the European Commission decided not to oppose that merger (Case 
M.8604 – Xella International / Ursa). The founder and beneficial owner of Lone 
Star is a natural person with Irish nationality. 
2 The company ‘Janes és Társa’ Szállítmányozó, Kereskedelmi és Vendéglátó Kft. 
(‘Janes’) is engaged in the extraction of sand, gravel and clay and owns a mine in 
Hungary. Under Paragraph 276(3) of Law LVIII of 2020, in conjunction with 
Article 4(1)(c) of Regulation 2019/462 and Annex 1, heading 22, point 8 to 
Government decree 289/2020, Janes is considered to be a strategic company. The 
raw materials extracted by Janes represent 0.52% of national production. 
Approximately 90% of that production is acquired by Xella and the remaining 
10% by local building undertakings. 
3 With a view to acquiring a 100% holding in Janes, on 29 October 2020 Xella 
entered into a sale and purchase agreement and sent notification to the competent 
authority in the main proceedings, the Minister for Innovation and Technology 
(‘the Minister’), as required under Paragraph 277(1)(a) of Law LVIII of 2020, 
requesting acknowledgement of receipt of the notification of the legal transaction. 
4 By decision of 30 December 2020, the Minister prohibited implementation of the 
legal transaction. Xella appealed against that decision to the Fővárosi 
Törvényszék (Budapest High Court, Hungary), which found that the Minister had 
not complied with the procedural rules and had not complied with the duty to state 
reasons. The Fővárosi Törvényszék (Budapest High Court) therefore annulled the 
decision and ordered the Minister to commence a new procedure. 
5 By the decision made in the new procedure (‘the contested decision’), the Minister 
again prohibited implementation of the legal transaction at issue. Xella brought 
non-contentious administrative proceedings before the Fővárosi Törvényszék 
(Budapest High Court) in relation to that latter decision. That court has referred 
two questions to the Court of Justice for a preliminary ruling. 
SUMMARY OF THE REQUEST FOR A PRELIMINARY RULING – CASE C-106/22 
 
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Principal arguments of the parties in the main proceedings 
6 In the statement of reasons of the contested decision, the Minister notes that 
Xella’s ownership structure consists of direct ownership by a German company 
and indirect ownership by Luxembourg and Bermudan companies. According to 
the Minister, one of the problems affecting the construction sector in Hungary is 
the scarcity of sufficient quantities of building materials. In the field of the 
production of additives for construction, a significant market share is already held 
by Hungarian producers in foreign hands, primarily as a result of the botched 
privatisation in the 1990s and 2000s. If Janes were to fall into Bermudan hands, it 
would represent a long-term risk in terms of ensuring the supply of building 
materials. 
7 The Minister also highlights that it is strategically important that the extraction 
and supply of raw materials is secure and foreseeable. It has become very evident 
in the context of the Covid-19 pandemic that the operation of global supply 
networks can quickly suffer serious disruptions that are harmful to the national 
economy. Since Xella belongs to a Bermudan company, the acquisition of Janes 
enables a third-country, that is to say, foreign, undertaking to acquire influence. If 
Janes, a strategic company, were to pass into foreign hands, the proportion of 
undertakings belonging to Hungarian nationals would be reduced, which could 
damage the national interest in the broad sense. The intended legal transaction 
could also jeopardise the security of supply in the regions in which Janes has its 
registered office. Bearing in mind that the prices of building materials are also 
increasing, the acquisition of Janes by a foreign undertaking means that particular 
investments in Hungary may not be made at all or may be delayed. 
8 In response to the foregoing, Xella claims that the contested decision amounts to 
an administrative practice contrary to Article 65(3) TFEU amounting to arbitrary 
discrimination or a disguised restriction on the free movement of capital. Xella 
states in that respect that its beneficial owner is a natural person who is a national 
of an EU Member State and that the Minister has barred Xella from acquiring the 
ownership at issue solely because its ownership structure is not Hungarian. Lastly, 
Xella notes that the principle of the rule of law could be infringed because the 
concept of ‘national interest’ is unclear. 
Brief description of the grounds of the request for a preliminary ruling 
9 According to the referring court, in order to resolve the dispute in the main 
proceedings it is necessary to examine the relationship between the national rules 
under Law LVIII of 2020 and EU law. In particular, doubt arises as to how the 
provisions of national law used to justify prohibiting Xella’s intended legal 
transaction dovetail with Article 65(1)(b) TFEU and with the public policy 
exception in that article, having regard to recitals 4 and 6 of Regulation 2019/452 
and Article 4(2) TEU. 
XELLA MAGYARORSZÁG 
 
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10 The referring court refers to the statement of reasons annexed to the draft of Law 
LVIII of 2020 during the legislative process. Although under Hungarian law that 
statement of reasons is not binding, according to the Hungarian Constitution it 
must be taken into consideration when interpreting legislation on the basis of 
purpose. 
11 According to that statement of reasons, in order to mitigate the economic effects 
of the pandemic, economic operators in strategic sectors of the national economy 
must be protected. Against that background, there needs to be protection from 
acquisitions that have adverse effects on the national economy, sideline 
innovation and the development of the Hungarian economy, reduce national 
capacity and represent a threat to jobs. 
12 The Hungarian legislature later extended the temporary validity of the legislation 
approved on the aforementioned grounds for legal transactions taking place up to 
30 June 2021 and, subsequently, up to 31 December 2021. In view of the date of 
Xella’s intended legal transaction, the original restriction in force until 
31 December 2020 applies to the dispute in the main proceedings. 
13 As regards the relevant circumstances of general interest, the referring court 
emphasises that the products that Janes extracts qualify as essential raw materials 
and, therefore, are of critical importance for construction activities in the Member 
State. Any fluctuations in or interruptions of the supply of raw materials would 
adversely affect first of all small and medium-sized enterprises in the construction 
sector of the Member State. Those small and medium-sized enterprises – which 
according to data for 2018 employed nearly two thirds of the workers employed in 
businesses in Hungary – are increasingly exposed to the economic crisis caused by 
the measures adopted to combat the pandemic. The referring court mentions – as a 
lesson to be learned from history and a well-known fact – that in times of 
economic crisis the flow of capital is also driven by speculation consisting of the 
acquisition of sources of raw materials at low prices. The European Union has 
acknowledged the link between the economic crisis associated with the pandemic 
and speculative movements of capital (see the Communication from the 
Commission published in OJ 2020 C 99 I p. 1). 
14 It can be seen from the foregoing that legal transactions capable of jeopardising 
the security of supply in strategic sectors may be examined under Law LVIII of 
2020. That examination supplements the instruments available in EU law. First, an 
examination under Law LVIII of 2020 relates not only to direct foreign 
investment but also to indirect foreign investment. Secondly, where the specific 
case can be regarded as falling within the public policy exception under 
Article 65(1)(b) TFEU, Law LVIII of 2020 allows that exception to be extended 
to apply to the guarantee of supply for purposes other than purely economic 
protection. 
15 As regards ensuring supply, the referring court finds that, for the purposes of the 
analysis, it is necessary to consider who is affected by the potential adverse 
SUMMARY OF THE REQUEST FOR A PRELIMINARY RULING – CASE C-106/22 
 
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effects. If the small and medium-sized enterprises operating in the construction 
sector cannot obtain essential raw materials and, as a result of the pandemic-
related restrictions, the fact that the supply is substitutable likewise cannot remedy 
those adverse effects, the measures to counter the adverse effects at regional level 
can be found to have a legally justified purpose. Those regional level adverse 
effects may result in the paralysation of the small and medium-sized enterprises 
that use the raw materials concerned, a reduction in the regional employment rate, 
the bankruptcy of the owners of the small and medium-sized enterprises or the 
suspension of certain projects financed by national and/or EU funds. According to 
the referring court, those adverse effects justify applying the public policy 
exception, even though EU case-law does not yet contain any example of that 
exception being recognised. 
16 According to the referring court, when assessing the national provisions relating to 
examination of foreign direct investment, where the acquiring company is 
considered to be a foreign investor because at the end of the chain of ownership 
there is a legal person registered in a third country, it is necessary to determine 
whether the fact that the European Commission has decided not to oppose that 
chain of ownership in a merger control procedure in itself precludes the 
examination under the national provisions.