Communicated on 12 September 2014

SECOND SECTION

Application no. 5294/14 Józsefné ALBERT and others against Hungary lodged on 10 January 2014

STATEMENT OF FACTS

1. A list of the applicants is set out in the appendix.

A. The circumstances of the case

2. The facts of the case, as submitted by the applicants, may be summarised as follows.

1. Antecedents

3. In 1993, 235 savings cooperatives decided to create a voluntary and restricted integration in order to enhance their market position and financial security and – with the active support of the Hungarian S tate and the PHARE Program of the European Union – entered into an integration agreement. The key institutions of this integration were the National Association of Savings Cooperatives ( Országos Takarékszövetkezeti Szövet ség , “ OTSZ” ), the Savings Bank ( Takarékbank Zrt . ) , and the National Fund for the Institutional Protection of Savings Cooperatives ( Országos Takarékszövetkezeti Intézményvédelmi Alap , “OTIVA” ) which was creat ed as part of the integration. OTIVA, on the one hand, improved the security of deposits placed with the savings cooperatives by supplementing the National Deposit Insurance Fund ( Or szágos Betétbiztosítási Alap , “OBA” ), and , on the other hand , served the prevention of crisis situations and improv ed the stability of savings cooperatives.

4. The Savings Bank, by cooperating with OTIVA, harmonis ed and improved the effectiveness of the business operation of savings cooperatives. Until the changes introduced by the Integration Act (see below) , the share of the savings cooperatives and certain banks in the Savings Bank had exceeded 60%. In 2012 the Hungarian State appeared as indirect owner of the Savings Bank, when the Hungarian Development Bank Ltd. (Magyar Fejlesztési Bank Zrt ., “ MFB” ) purchased the stake of Deutsche Zentral-Genossenschaftsbank AG , representing 38. 5% of the shares.

5. According to Risk Report 2013/I of the Supervisory Authority of June 2013 , which provides a comprehensive analysis of the financial system ’ s stability and its potential risks, solely the sector of the cooperative credit institutions remained profitable among the sector of the financial institutions. T he Report found that the sector of coo perative credit institutions had remained profitable throughout the entire economic crisis, and, moreover, that in 2012 this sector could improve its results, which were higher than those of other players in money markets .

6. According to publicly available information , before the effective date of the Integration Act , the savings cooperatives were stable, had capital adequacy and their operation was profitable. The total earnings before tax of the cooperative credit institutions in the second quarter of 2013 was 3. 983 billion Hungarian forints (HUF) and their capital adequacy ratio was 16. 94% (this ratio for the credit institutions oper ating as share companies was 16. 55%).

7. The profitability and capital adequacy ratio of the institutions involved in the present case (see below) exceeded both those of the banking sector and those of the savings cooperatives. In 2012 Kinizsi Bank Zrt . (“ Kinizsi ”) realis ed a profit before tax amounting HUF 315 million, representing 8. 72% return on equity, and had a capital adequacy ratio of 17.73%. In the same year Mohácsi Takarék Bank Zrt . (“ Mohácsi ”) realis ed a profit before tax amounting H UF 613 million, representing 14. 6% return on equity, and had a capital adequacy ratio of 19.39%. Pátria Takarékszövetkezet (a savings cooperative) (“ Pátria ”) had similar results in 2012, by having profits before tax amounting HUF 372 million, representing 7. 3% return on equity, and a capital adequacy ratio of 17. 68%. ( Kinizsi , Mohácsi and Pátria : “the Institutions”) .

2. Integration

8. Act no. CXXXV of 2013 on the I ntegration of Cooperative C redit I nstitutions and the A mendment of Certain Laws Regarding Economic M atters ( the “2013 Integration Act” ) entered into force on 13 July 2013 , the day after its proclamation . The Act was then amended in several aspects by Act no. CXCVI of 2013 on the Amendment of Certain Laws Regarding the I ntegration of C ooperative Credit I nstitutions ( the “ Amendment”) with effect f rom 30 November 2013.

9. T he 2013 Integration Act concerned most savings cooperatives operating in the form of a cooperative, including Pátria , and certain banks operating in the form of a company limited by shares, such as Kinizsi and Mohácsi .

10. When introducing the application, the a pplicants held shares with the aggregate par value of HUF 2,043,342,000, representing 98. 28% in the total registered capital of Kinizsi , shares with the aggregate par value of HUF 1,833,300,000 representing 87. 65% in the total registered capital of Mohácsi , and shares with the aggregate par value of HUF 8,100,000 representing 5. 61% of the total share capital of Pátria .

11. The 2013 Integration Act abolished the integration of coo peratives which had been organis ed on a voluntary basis, with voluntary membership, and terminated OTIVA. Instead , it introduced a forced integration under close S tate control . In particular:

(a) the Integration Organis ation of Cooperative Credit Institutions ( Szövetkezeti Hitelintézetek Integrációs Szervezete ) was created, a body under indirect State control ( the “Integration Organis ation”);

(b) the Bank of Hungarian Savings Cooperatives ( Magyar Takarékszövetkezeti Bank Zrt . ), the central bank of the integration, over which the savings cooperatives had previously had a controlling majorit y, was effectively nationalis ed;

(c) the economic independence and autonomy of the savings coopera tives operating in the form of cooperative s and that of certain banks operating as companies limited by shares, was restricted, a measure targeting amongst others the Institutions; and

(d) the ownership rights o f the members and shareholders of the savings cooperatives and banks falling under the scope of the 2013 Integration Act were restricted.

3. Scope of the 2013 Integration Act

12. Until the effective date of the Amendment, Act no. CXII of 1996 on Credit Institutions and F inancial Enterprises ( the “ 1996 Banking Act”) contained certain regulations for banks operating as compan ies limited by shares, which were different from the ones regarding cooperative credit institutions with respect to their scope of business, capital requirements and other matters ( prior to the Amendment , only savings cooperatives operating as cooperatives and credit cooperatives belonged to the group of cooperative credit institutions).

13. H owever , t he 2013 Integration Act had, already before the Amendment and contrary to the 1996 Banking Act, qualified certain banks organis ed as compan ies limited by shares as cooperative credit institution s and extended its scope to them, on the basis of the fact that , as of 1 January 2013 , these ba nks were members of the OTIVA.

At the same time , the 2013 Integration Act did not qualify the following entities as cooperative credit institution s :

(a) all the other banks, including those which were member s of other insti tutional protection funds, and

(b) those savings cooperatives and credit cooperatives which applied to the supervisory authority for permission for their transformation from the cooperative form into a company limited by shares before the effective date of the 2013 Integration Act, and their request s were pending as of the effective date of the Act.

14. The scope of the 2013 Integration Act was extended to Kinizsi and Mohácsi as well as two additional banks, which – complying with capital requirements and other conditions and with the permission of the supervisory a uthority – had been transformed into bank s from being savings cooperative s and ha d been operating as such since then.

15. In sum, the 2013 Integration Act brought a heterogeneous circle of entities under uniform regulation s .

4. The new regulations

16. The 2013 Integration Act has abolished the voluntary n ature of cooperative organis ation and, by extending its scope to savings cooperatives, credit cooperatives and some banks (including the Institutions) by creating its own definition of cooperative credit institution, ordered a mandatory integration of these entities by introducing the following measures:

(a) i t terminated the integration agreement of 1993, which had been entered into voluntarily on a civil law basis, and abolished OTIVA;

(b) i t made almost all savings cooperatives and credit cooperatives, including the Institutions, ipso jure members of the Integration Organisation which was newly created as legal successor of OTIVA and other voluntary institutional protection funds ;

(c) i t prohibits cooperative credit institutions operating in the form of cooperative s from terminat ing their membe rship of the Integration Organis ation and , in the case of cooperative credit institutions operating in the form of a company limited by shares , it makes the same practically impossible ;

(d) t he independent operation of cooperative credit institutions falling in the scope of the 2013 Integration Act w as abolished and their owners were deprived of the essence of their ownership rights or the exercise of those rights w as substantially restricted ;

(e) t he mandatory membe rship in the Integration Organis ation and the fact that the sanction f o r breaching the rules created in order to enforce the governing powers of the Savings Bank and the Integration Organis ation is the mandatory withdrawal of the opera tional licence or the exclus ion from the Integration Organisation ( which in fact also has the effect of terminating the operational licen c e ) , would necessarily result in the termination of the entities concerned.

5. Legal provisions indirectly influencing the a pplicants ’ property rights

17. A fter the date of issu ing by the Savings Bank of mandatory risk management regulation s regarding the subjects of the new law, including the Institutions, they will bear direct, joint and several liability, with all their equity , for the debts of all other me mbers of the Integration Organis ation, the debts of the Savings Bank and of the Integration Organ is ation itself, result ing in full aboli tion of the economic and financial independence of the particular institution . This liability eliminates the separate equit ies, the availability of which is the core precondition for the existence of a legal entity, and in economic terms , it merges the members of the integration.

18. The Integration Organisation is authoris ed to issue mandatory regulation s for the subjects of the law covering essential issues regarding the operation of the I nstitutions, such as the accounting principles, internal control, and eligibility of their leading officials. The Savings Bank is authoris ed to issue mandatory regulation s covering essential issues regarding the operation of the I nstitutions, such as risk management, credit authoris ation, risk monitoring, receipt of deposits, cash flow management, investment policy, rating and depreciation, special equity ratio requirements, business policy, joint marketing and integrated IT system.

19. The Savings Bank supervises the operation of the I nstitutions and is authoris ed to issue instructions in order to ensure compliance with the law and the regulations i ssued by the Integration Organis ation and by the Savings Bank.

20. At the general meeting of the Savings Bank to be held on the 45th day following the effective date of the Integration Act , the I nstitutions were obliged to approve the new Charter of the Savings Bank – as drafted by the board of dire ctors of the Integration Organis ation – and also approve the increase of the Savings Banks ’ capital by HUF 654,986,000 to the amount of HUF 3,389,704, 000 from the previous amount of HUF 2,735,038, 000. Out of this capital increase, the Hungarian Post has subscribed for common shares with the aggregate par value of HUF 654,666, 000 and the i nstitutions to which the applicants belong took series “C” preference shares with the aggregate par value of HUF 320,000. The Hungarian Post was entitled to subscribe for the common shares at par value, which is considerably less than the reasonable value based on the Savings Bank ’ s equity situation.

21. Several savin gs cooperatives and some banks held series “B” preference shares in the Savings Bank ensuring that no decision on strategic matters may be made without the approval of holders of these shares. This approval could be given by the majority of votes of the shareholders. The I nstitutions were obliged to deposit their series “B” Savings Bank shares with the Savings Bank, and to sell those shares to the Hungarian Development Bank , an entity of 100% State ownership, by the date of the first general meeting of the Savings Bank following the effective date of the Integration Act, as well as to sign a written undertaking to take over one series “C” preference share s of the Savings Bank with par value of HUF 2,000 . No such preference is represented by the series “C” shares which had to be taken over. The Hungarian Development Bank is entitled to exercise the rights attached to the series “B” shares acquired by it.

22. The I nstitutions may not transfer their shares in the Savings Bank within 365 days from the effecti ve date of the Integration Act; these shares may not be pledged at all, may not be used as security for credits, may not be subject to a number of other transactions, and must be continuously kept with a depositary appointed by the board o f directors of the Savings Bank . There are a number of situations in which the I nstitutions are not entitled to exercise their shareholder rights over their shares in the Savings Bank.

23. The Integration Act created a call option for the Hungarian Development Bank with respect to the shares of the i nstitutions in the Savings Bank in case they vote d against the proposed resolutions in certain matters, abstain ed from voting or did not appear at the general meeting. In the applicants ’ view, t he provisions of the Integration Act introducing changes in ownership ratios, in shareholder rights and in the management over the Savings Bank resulted in essence in depriving all the previous shareholders other than the Hungarian Development Bank, but including the I nstitutions , of their property rights , and resulted in the nationalis ation of the Savings Bank.

24. Bank accounts and securities accounts of the I nstitutions may be solely kept at the Savings Bank; and they must keep their free financial assets solely in financial instrum ents traded by the Savings Bank; other organis ations keeping bank accounts of the I nstitutions were obliged to terminate such bank account agreements.

25. The Savings Bank has exclusive power to previously approve th e acquisition of any stake by the I nstitution s in any other business entity or sale of such property if its value or its purchase price exceeds 0. 1% of the solvency capital of the integration calculated on a consolidated basis. Thereby the Institutions must obtain a case-by- case approval of the Savings Bank for their investments.

26. The a pplicants and other owners may not pass a valid resolution at the general meetings of the I nstitutions if the latter do not simultaneously inform the Savings Bank about such general meeting s by submitting the invitation with all its annexes to the Savings Bank. The precondition for a valid resolution by the board of directors and supervisory board of the I nstitutions is that the invitation to the respective meeting of the board of directors or the supervisory board, together with all related material , is simultaneously sent to the Savings Bank. The rules of procedure of the board of directors and the supervisory board of the I nstitutions may not be in conflict with the Charter and relevant regulations established by the Savings Bank; and these rules of procedure must be amended within 15 days upon, and according to, a request of the Savings Bank. Minutes of the general meetings and the meetings of the board of directors of the I nstitutions must always be submitted to the Savings Bank, and the minutes of the supervisory board meetings must be sent to the Savings Bank in certain cases.

27. The I nstitutions must inform witho ut delay the Integration Organis ation, the Savings Bank and the Mutual Capital Coverage Fund of Cooperative Credit Institutions ( “ Szövetkezeti Hitelintézetek Tőkefedezeti Közös Alapja ” ) in case a lawsuit or any other legal proceeding s may be – or are – started against them. The Savings Bank is entitled to issue further regulations both to handle the above proceedings and regarding the obl igations to provide information .

28. In certain cases the transactions and undertakings of the I nstitutions are subject to a previous app roval by the Integration Organis ation on a case - by - case basis.

29. The I nstitutions were obliged to submit within 20 days from the effective date of the Integration Act a new application to the Supervisory Authority for a repeated issue of their operational licen c e; they were obliged to approve their new Charter within 45 days from the effective date of the Integration Act according to the text established by the board of dire ctors of the Integration Organis ation; moreover, within 75 days from the effective date of the Integration Act, they had to re- obtain their operational licen c e.

30. The Integration Organis ation may, as a sanction applied for a number of reasons, exclude one of the Institutions from among its members, which re sults in the withdrawal of the operational licence; moreover, the Integration Act includes several provisions directly stipulating that the Supervisory Authority may or shall withdraw the operational licen c e, which result s in liquidation . According to the Integration A ct it is the Integration Organis ation which is entitled to decide if the preconditions exist to apply a particular sanction.

31. No legal remedy is available for the Institutions regarding those restricting measures which had been taken before the Amendment, and there is no legal remedy against the regulations issued by the Savings Bank and the Integration Organis ation which are binding upon the Institutions . Furthermore, there is no remedy against the specific orders of these institutions based on other regulations of the integration.

6. Legal provisions directly affecting the property rights of the a pplicants

32. At the general meetings of the Institutions , the a pplicants, together with all other owners , were obliged to approve a new Charter in compliance with the sample provided by the Integration Organis ation. As a result, the Institutions were forced to approve measures violating the provisions of the 2006 Compan ies Act and the 2006 Cooperatives Act. The a pplicants are , from time to time , obliged to amend , within 60 days , the Charter of the Institutions according to the then actual sample Charter i ssued by the Integration Organis ation or the Savings Bank. In case the c ourt keeping the corporate r egistry refuses to register the Charter or its amendments as dr afted by the Integration Organisation, the a pplicants and other owners shall approve a new Charter according to a text establ ished by the Integration Organis ation, and the Institutions sha ll submit this new text to the c ourt within 30 days with full compliance with relevant regulations. In the applicants ’ view, t hese provisions of the Integration Act deprive them of their fundamental and statutory ownership rights to establish or amend the Charter .

33. A previous approval of the Savings Bank is required for a decision by the a pplicants and other owners over the election, revocation and remuneration of the members of the board of directors and supervisory board members of the Institutions. The board of directors of the Savings Bank is authoris ed to suspend or terminate the mandate of the managing officials of the Institutions; it may appoint a managing official for an interim period if the Institutions do not comply with the orders of the Savings Bank, their operations are not in compliance with law or regulations , or if they are in a so- called crisis situation.

34. The a pplicants ’ statutory shareholder s ’ and members ’ rights are restricted, in that the following measures regarding the Institutions are subject to the previous approval of the Savings Bank, and shall be taken solely according to such an approval: approval of A nnual R eport ; issuing of bonds, reduction or increase of its capital ; and r eduction of their subscribed capital or a ny payment that is made to the a pplicants under any legal title that is connected to their status as owners (e.g. dividend, reduction of capital).

35. The Integration Organis ation is entitled to suspend the a pplicants ’ voting rights for one year, if in its opinion they threaten the reliable, secure operation of the Institutions. It is authoris ed to define from time to time the level of the Institution s ’ solvency capital s on a case-by- case basis; if the capitals do not reach the level so defined, the Inte gration Organisation is authoris ed to increase the capital of the Institution s, even if the a pplicants and the other owners did not decide on such capital increase, or even contra ry to the resolution the owners .

COMPLAINTS

36. The applicants complain under Article 1 of Protocol No. 1 read alone and in conjunction with Article 14 of the Convention that the cumulative effect of the above rules amounts to an unjustified interference with their property rights, which is also discriminatory given the arbitrary inclusion / exclusion of various financial institutions within the scope of the new law.

37. In particular, in regard to the above-mentioned provisions of the Integration Act , the applicants assert that (a) the changes in ownership ratios, in shareholder rights and in the management over the Savings Bank resulted in essence in depriving all the previous shareholders other than the Hungarian Development Bank, but including the I nstitutions , of their property rights , and resulted in the nationalisation of the Savings Bank; and that (b) those provisions deprive them of their fundamental and statutory ownership rights to establish or amend the Charter; both elements representing prejudice to their property rights (see paragraphs 23 and 32 above).

Lastly, the applicants complain under Article 13 about the absence of a remedy against the new measures.

QUESTIONS TO THE PARTIES

1. Doe s the new legislation complained of, in its cumulative effects, give rise to an interference with the applicant s ’ right to peaceful enjoyment of possessions, within the meaning of Article 1 of Protocol No. 1? Does the new law have any significant repercussions on the value of the applicants ’ shares or the shareholders ’ rights attached thereto, or on the manner in which they can dispose of them?

2. If so, was that interference in the general interest? Did it impose an excessive individual burden on the applicants?

Appendix

List of applicants