The judicial war Magyar Vagon (or Ganz-MaVag) promised after the government’s veto of the Hungarian consortium’s public buyout offer for Talgo will be lengthy and its path narrow. That is the view of several legal sources consulted by ACTIVOS, the economic vertical of Prensa Ibérica. Following the Cabinet decision and the Foreign Investments Commission, the Hungarian company announced it would pursue all legal avenues in Spain and the European Union to defend the legitimacy of its offer, which, in its view, complies with all current laws.
“The actions Magyar Vagon may undertake, at both the national and European levels, are legitimate, but they face several obstacles. Nationally, government defense of the public interest in foreign investment decisions is typically a strong argument that courts tend to respect. At the European level, while the European Commission might take an interest in the case, the process is long and intricate and does not always guarantee a favorable outcome for the investor. In short, although legal routes exist for Magyar Vagon to challenge the veto, success is not guaranteed, and the process could drag on considerably,” summarize Antonio Benítez Ostos and Marcos Peña Molina, managing partner and founding partner, respectively, of Administrativando Abogados.
Other consulted legal sources explain that behind the denial of such a takeover must lie a proper motivation to avoid running afoul of the principle of free movement of capital recognized in the Treaty on the Functioning of the European Union. For now, the government has labeled the file classified, which blocks public access to the information, including reasons of “national security” and “public order” for vetoing the operation. “It is this motivation and the proportionality of the measure to serve the intended end, the protection of national security interest, that should be analyzed by the authorities and the supervisory bodies that, if applicable, proceed to the matter as a consequence of Magyar Vagon’s actions and what will determine the chances for success or failure,” they explain.
Legal actions in Spain
The first step Magyar Vagon could take to challenge the decision is to file a discretionary appeal with the Council of Ministers within one month of notification, which should be decided within a month. The next route would be a contentious-administrative appeal before the National Court, though other sources suggest this could also be filed with the Supreme Court.
“While this is a legitimate route, the investor’s room for maneuver is limited, since the court will mainly review whether the government decision complied with current law, rather than the merits or economic convenience. The course of these appeals can be lengthy, spanning one to three years, depending on case complexity and court backlog. The main issue is determining whether the “national interest” justifies a public veto action like the present one, requiring the government to provide reasoned justification for the national interest it seeks to protect,” explain Antonio Benítez Ostos and Marcos Peña Molina.
Legal actions in Europe
Outside Spain, Magyar Vagon has, as a European company, the option to file a complaint with the European Union alleging a breach of community law, particularly the rules on the free movement of capital. Within twelve months, the European Commission would study the case and decide whether to open a formal infringement procedure against the country in question, according to the previously cited legal sources.
“If the European Commission sees merit in the claim, it could initiate an infringement procedure against Spain. The process is complex and typically lasts several years. Yet even if the Commission issues a negative opinion against the Spanish government, that opinion would not be immediately binding. Spain could be brought before the Court of Justice of the European Union (CJEU), and only a ruling from that court would have binding force, obliging the Spanish government to comply,” conclude the managing partner and founding partner of Administrativando Abogados.