## Facts

- After Hungary shifted from a communist economy to a social market economy, the government faced serious budget and financial pressures.
- Parliament enacted the Economic Stabilization Act (often associated with the 1995 stabilization package) to reduce public spending, including spending on social-welfare and family-benefit programs.
- The Act changed multiple benefit schemes at once: some programs were reduced, some were eliminated, and many benefits became subject to means testing.
- Certain programs operated as social-insurance schemes, funded through earmarked, income-based contributions (similar in structure to U.S.-style contributory social security); others were funded on a noncontributory, solidarity basis.
- The Act applied many changes immediately, including to people already receiving benefits or who had already met (or were about to meet) the statutory conditions for entitlement.
- Concerned citizens petitioned the Hungarian Constitutional Court for constitutional review, arguing violations of:
  - Article 2 (Hungary as a democratic constitutional state; rule of law and legal certainty),
  - Article 13 (property protection and limits on state deprivation), and
  - Article 70/E (right to social security and specified categories of social benefits).
- The challenged measures included cuts and restructuring of maternity and child-related supports, such as fixed-duration benefits tied to pregnancy, childbirth, and early childrearing.

## Issues

1. Whether immediate statutory reductions or terminations of already-acquired (or imminently acquired) social benefits violate the rule-of-law requirement of legal certainty under Article 2.
2. Whether, and to what extent, contributory social-insurance entitlements receive property-like protection under Article 13 that limits legislative cutbacks.
3. Whether Parliament may restructure family and social-welfare benefits under Article 70/E, and what constitutional limits apply when reforms affect current beneficiaries.

## Decision

- The Constitutional Court held that parts of the Economic Stabilization Act were unconstitutional and annulled provisions that imposed abrupt and immediate cutbacks affecting persons with acquired (or near-acquired) entitlements, because those measures violated legal certainty as part of the rule of law.
- The Court treated legal certainty as closely connected to protection of acquired rights in the social-benefits context, especially where individuals reasonably relied on statutory conditions governing eligibility, duration, and amount.
- The Court distinguished between:
  - short-term, fixed-duration maternity and child-related benefits (which, once statutory conditions are met, receive stronger protection against immediate worsening), and
  - longer-term benefits (where the legislature has more room to redesign eligibility and structure, including for existing recipients).
- For short-term, fixed-duration maternity and child-related benefits, the Court rejected immediate worsening for children already born and for births occurring within a limited, specified period tied to the reform’s effective date, requiring that entitlement conditions and duration not be made less favorable for those groups.
- For longer-term benefits, particularly those without an insurance element, the Court accepted that Parliament may redesign the scheme even as to existing beneficiaries, but held that the rule of law requires a reasonable preparation period so affected families can reorganize household finances to meet the new conditions.
- The Court did not accept financial difficulty as a blanket reason to set aside constitutional limits; changes to social policy still had to meet rule-of-law requirements.
- To the extent implementing measures gave effect to the unconstitutional cutbacks, they fell with the invalidated statutory provisions.

## Legal Principles

- Legal certainty, as part of the rule of law (Article 2), limits abrupt legislative changes that disrupt settled legal positions in social-benefit schemes.
- Protection of acquired rights is especially strong where a benefit is short-term and fixed in duration and the beneficiary has already met the statutory conditions for payment.
- Contributory, social-insurance benefits may receive stronger constitutional protection, including property-like protection under Article 13, because they are financed through required contributions tied to entitlement.
- Article 70/E recognizes a constitutional commitment to social security, but it does not freeze benefit levels; Parliament may revise programs, subject to rule-of-law limits and (where applicable) property protection.
- When restructuring longer-term, noncontributory benefits for current recipients, the constitutionality of the reform depends in part on whether the legislature provides a reasonable transition period that allows affected households to prepare for the new rules.

## Conclusion

Decision 43/1995 held that Hungary could reform and reduce social-welfare spending, but the Constitution’s rule-of-law requirement of legal certainty barred immediate, abrupt cutbacks that worsened already-acquired (or imminently acquired) entitlements—particularly short-term, fixed-duration maternity and child-related benefits—while allowing broader redesign of longer-term benefits only with a reasonable transition period and, for contributory schemes, heightened protection akin to property.


Hungarian Benefits Case, Decision 43/1995 (1995)