Commercial Arbitration

Last verified on Wednesday 29th March 2023

Commercial Arbitration: Hungary

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1. Is your state a party to the New York Convention? Are there any noteworthy declarations or reservations?

Hungary

The answer is yes to both questions. Hungary incorporated the New York Convention into its domestic law by Law Decree No. 25 of 1962, which is effective as of 3 June 1962.

In accordance with article I(3) of the New York Convention, Hungary made the reservation that it only applies the New York Convention to the recognition and enforcement of awards made in another Contracting State and related to disputes qualified as commercial disputes under Hungarian law. Hungarian courts used to interpret the term ‘commercial’ in line with section 7(2) of the old Civil Code, which presupposed that one of the parties be a business professional. Since the 2017 arbitration law regime, the term has gained a wider sense, basically any legal relationship relating to commerce or business – whether contractual or not – falls under the scope in line with the UNCITRAL Model Law on International Commercial Arbitration as amended on 7 July 2006 (2006 Model Law).   

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2. Is your state a party to any other bilateral or multilateral treaties regarding the recognition and enforcement of arbitral awards?

Hungary

Yes, Hungary has also ratified the European Convention on International Commercial Arbitration (European Convention) by Law Decree No. 8 of 1964 effective as of 26 March 1964. In article IX, the European Convention regulates the setting aside of an arbitral award. It provides that in relations between Contracting States that are also parties to the New York Convention, article IX(1) of the European Convention limits the application of article V (1)(e) of the New York Convention solely to the cases of setting aside set out under in article IX(1) of the European Convention. In all other aspects, the European Convention complements the New York Convention and does not deal with the phase of recognition and enforcement of arbitral awards.

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3. Is there an arbitration act or equivalent and, if so, is it based on the UNCITRAL Model Law? Does it apply to all arbitral proceedings with their seat in your jurisdiction?

Hungary

Yes, effective since 1 January 2018, Act LX of 2017 on arbitration (new Arbitration Act) governs all arbitrations seated in Hungary. The new Arbitration Act incorporates the text of the 2006 Model Law and refers to its explanatory notes for interpretation under section 3(3) and extends its application to both domestic and international arbitrations.

Complementing the terms of the 2006 Model Law, Chapter IX of the new Arbitration Act also provides for an option of retrial to be initiated within one year of the receipt of the arbitral award by a party relying upon a fact or evidence that was not submitted in the arbitration proceedings due to no fault of its own and that could have resulted in a decision more favourable to the party applying for retrial. The retrial under the new Arbitration Act is frequently excluded in arbitration agreements to ensure efficient arbitration and to avoid uncertainty as regards the finality of the award under the New York Convention.

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4. What arbitration bodies relevant to international arbitration are based within your jurisdiction? Do such bodies also act as appointing authorities?

Hungary

Established in 1949, the Permanent Court of Arbitration attached to the Hungarian Chamber of Commerce and Industry (HCCI Arbitration Court) is the only commercial arbitral institution in Hungary. As such, the new Arbitration Act recognises it as ‘the Commercial Court of Arbitration’ and determines its institutional structure.

Besides the HCCI Arbitration Court, three additional arbitration courts have been constituted by sectoral laws, namely the Court of Arbitration for Sports, the Arbitration Court attached to the Agricultural Chamber and the Permanent Arbitration Court for Concession. The statute of the Permanent Arbitration Court for Concession is effective as of 1 October 2022, yet the court is not operational to this date.

Generally, the Metropolitan Court of Budapest acts as the appointing authority as per section 12(3) a)-b) of the new Arbitration Act (equivalent to article 11(3) b) of the 2006 Model Law). However, it is the board of the HCCI Arbitration Court which appoints the missing arbitrator from the published list of arbitrators if it has competence over the case at hand.   

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5. Can foreign arbitral providers operate in your jurisdiction?

Hungary

Yes, there is no rule prohibiting foreign arbitral providers operating in Hungary.

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6. Is there a specialist arbitration court? Is the judiciary in your jurisdiction generally familiar with, and supportive of, the law and practice of international arbitration?

Hungary

Since the entry into force of the new Arbitration Act, the Metropolitan Court of is designated as the competent court to act in matters of arbitration for the purposes specified in article 11(3) b) of the 2006 Model Law. The Metropolitan Court of Appeal acts at second instance while judicial review is also available in certain cases as special remedy that is decided by the Curia (the Hungarian supreme court since 2012).

Whilst the Hungarian arbitration scene generally witnessed a solid development of a pro-arbitration approach in the past decade, State court practice showed a mixed attitude towards arbitration in cases where a respondent went insolvent. It is also a noteworthy development that in result of an amendment of the new Arbitration Act effective as of 8 August 2018, the Metropolitan Court of Budapest has exclusive competence over arbitration cases.

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Agreement to arbitrate

7. What, if any, requirements must be met if an arbitration agreement is to be valid and enforceable under the law of your jurisdiction? Can an arbitration agreement cover future disputes?

Hungary

To be enforceable, the arbitration agreement shall be in writing. In this regard the new Arbitration Act reflects the concept of 2006 Model Law except that it does not recognise an arbitration agreement made orally or by conduct even if recorded (cf. article 7 in 2006 Model Law).

The arbitration agreement is deemed to be in writing if it was made via electronic communication if: (i) the information contained therein is accessible to the other party, and (ii) is usable for subsequent reference. As such, an arbitration agreement is also considered to be in writing if made via email, telegram, telex or fax. Furthermore, an arbitration agreement is in writing if it is contained in an exchange of statement of claim and defence in which the existence of an agreement is alleged by one party and not denied by the other. Also, the reference in a contract to any document containing an arbitration clause constitutes an arbitration agreement in writing, provided that the reference is such as to make that clause part of the contract.

The arbitration agreement may cover future disputes if the parties agree so, which is usually the case.

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8. Are any types of dispute non-arbitrable? If so, which?

Hungary

Under section 1(3), the new Arbitration Act categorically excludes (i) disputes arising out of consumer contracts and (ii) disputes that would fall under special proceedings according to the Code of Civil Procedure (ie, disputes arising out of employment contracts, personal right infringement, and enforcement proceedings) or under the scope of administrative litigation as per the Code of Administrative Litigation. Apart from the previous specific exceptions, disputes not recognised as commercial are excluded by definition.

Note that if liquidation proceedings were initiated against a party of the arbitration agreement under Hungarian law, any pecuniary claim regarding the assets subject to liquidation can be enforced under that liquidation proceedings pursuant to section 55 of the new Arbitration Act. In such cases, the arbitration agreement is deemed to be unenforceable.

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9. Can a third party be bound by an arbitration clause and, if so, in what circumstances? Can third parties participate in the arbitration process through joinder or a third-party notice?

Hungary

It is generally considered a foreign idea to arbitration that third parties would be bound by an arbitration agreement. However, the new Arbitration Act introduced an exception under section 35 based on international practice. It provides that in cases where the arbitrated dispute can only be decided uniformly with another arbitrable dispute, a third party may become a party to the arbitral proceedings upon its written submission to the proceedings. As to the question whether a claim can only be decided uniformly, the arbitration panel shall decide this issue on a case-by-case basis, by taking into account the substantive legal connection of the claims.  

Another novum of the new Arbitration Act is the opportunity for intervention of a third party who has a legal interest in the outcome of the arbitration proceedings, at a party’s request. To facilitate the success of a party with identical interest, the intervener may submit evidence, take part in the hearing and be present at inspection. The intervener rather plays a supporting role in the proceedings and therefore only enjoys some of the party’s procedural rights. Its actions do not necessarily lead to an award binding the intervener. The new statutory rules have not yet been tested in court practice.

According to section 56 of the new Arbitration Act, in the case of succession and assignment in the contract, the effect of the arbitration agreement concluded by the predecessor or assignor shall extend to the successor or assignee.

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10. Would an arbitral tribunal with its seat in your jurisdiction be able to consolidate separate arbitral proceedings under one or more contracts and, if so, in what circumstances?

Hungary

There are no provisions either in favour of or against the consolidation of separate arbitral proceedings in the new Arbitration Act. This is unless one interprets section 35 of the new Arbitration Act as an opportunity for consolidation provided that the cases can only be decided uniformly and that the parties involved give their consent to such consolidation. The HCCI Rules empowers the HCCI Arbitration Court to consolidate arbitral proceedings pending before it subject to the consent of the parties involved. 

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11. Is the "group of companies doctrine" recognised in your jurisdiction?

Hungary

Group of companies is not an established concept under Hungarian law. The piercing of the corporate veil doctrine does not extend to arbitration agreements inasmuch as parent companies are not bound by those under Hungarian law.

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12. Are arbitration clauses considered separable from the main contract?

Hungary

Yes, they are. The new Arbitration Act is in full conformity with the 2006 Model Law with respect to the doctrine of separability.

The court practice is also consistent with the common understanding of separability. For reference, see a recent finding of the Curia in this regard:

‘[i]n practice, in many cases, the underlying legal relationship and the arbitration agreement are indeed created at the same time, when the deed recording those is signed. However, the creation and validity of the arbitration agreement is to be examined in itself (doctrice of separability) […]. It is therefore of no legal significance whether the contract establishing the legal relationship of the parties and the arbitration agreement are contained in the same instrument or whether they are separated, the arbitration agreement (clause) is legally equivalent and independent of the commercial contract, even if it formally appears as one clause thereof.’

(Curia Judgment No. Gfv. 30.044/2022/6.)

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13. Is the principle of competence-competence recognised in your jurisdiction? Can a party to an arbitration ask the courts to determine an issue relating to the tribunal's jurisdiction and competence?

Hungary

The answer is yes to both questions. The new Arbitration Act is in full conformity with the 2006 Model Law with respect to the principle of competence-competence and allows the arbitral tribunal to rule on its own jurisdiction. Section 17 of the new Arbitration Act provides that if an arbitral tribunal rules on its competence as a preliminary issue, any party may, within 30 days, request the Metropolitan Court of Budapest to finally rule on that issue.

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14. Are there particular issues to note when drafting an arbitration clause where your jurisdiction will be the seat of arbitration or the place where enforcement of an award will be sought?

Hungary

If Hungary is the choice of the parties for the place of arbitration, due consideration should be given to the option for retrial introduced by Chapter IX of the new Arbitration Act, which is considered foreign to international arbitration practice. Given its questionable effect on the recognition and enforcement of final arbitration awards, it is generally recommended to opt out of Chapter IX.

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15. Is institutional international arbitration more or less common than ad hoc international arbitration? Are the UNCITRAL Rules commonly used in ad hoc international arbitrations in your jurisdiction?

Hungary

According to the experience of our law firm, parties tend to refer their disputes to institutional arbitration rather than to ad hoc arbitration. Although accurate data is not available regarding ad hoc arbitration given its nature. The most common institutions of choice are the HCCI Arbitration Court, VIAC Arbitration Court and ICC Court of Arbitration.

As regards ad hoc arbitration, parties may choose to have their disputes adjudicated based on the Model Rules recommended and published by the Budapest Bar Association. One case under the latter rules made it to the judicial review proceedings of the Curia. Although the UNCITRAL Rules is commonly referred to in investment arbitration, we have no data as to its use in commercial arbitration.

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16. What, if any, are the particular points to note when drafting a multi-party arbitration agreement with your jurisdiction in mind? In relation to, for example, the appointment of arbitrators.

Hungary

There are no specific provisions or restrictions in the new Arbitration Act relating to multi-party agreements. Due consideration is recommended to be given to the procedural complications that a multi-party arbitration may entail when drafting the agreement. For instance, if the claimants or the respondents reach a deadlock as to whom to appoint as arbitrator, they risk that either the HCCI Arbitration Court or the State court would appoint an arbitrator instead to their case.

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Commencing the arbitration

17. How are arbitral proceedings commenced in your jurisdiction? Are there any key provisions under the arbitration laws of your jurisdiction relating to limitation periods of which the parties should be aware?

Hungary

Arbitral proceedings are commenced in accordance with the relevant procedural rules chosen by the parties. For example, under the HCCI Arbitration Rules, an arbitration is deemed to commence on the date on which the statement of claim is received by the HCCI Arbitration Court. The new Arbitration Act provides a subsidiary rule in line with the 2006 Model Law that unless otherwise agreed by the parties, the arbitral proceedings commence on the date on which a request for the dispute to be referred to arbitration is received by the respondent.

In Hungary, limitation periods are considered a matter of substantive law and the relevant limitation periods will be those under the law chosen by the parties. Under Hungarian law, the general limitation period for contractual claims is five years starting from the due date. Claims of warranty lapse within one year.   

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Choice of law

18. How is the substantive law of the dispute determined? Where the substantive law is unclear, how will a tribunal determine what it should be?

Hungary

The new Arbitration Act sets out a procedure for determining the applicable law in line with the 2006   Model Law. Accordingly, arbitral tribunals shall determine the applicable law based on the parties’ agreement. Unless otherwise agreed by the parties, a choice of law clause only refers to the substantive law of the state not including the international private law of the same state. Where parties do not designate the law applicable to their dispute, the arbitral tribunal has the power to determine the substantive law according to the conflict of laws it considers applicable to the dispute. When determining the applicable law, the arbitral tribunal shall observe the parties’ agreement and the commercial customs applicable.

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Appointing the tribunal

19. Does the law of your jurisdiction place any limitations in respect of a party's choice of arbitrator?

Hungary

Yes, under section 12, the new Arbitration Act provides six grounds for exclusion to act as an arbitrator. A person may not act as arbitrator who:

  • is under the age of 24;
  • has been deprived of political rights by a final court ruling;
  • has been sentenced to prison by final ruling until exempted by law;
  • is under guardianship or supported decision-making affecting capacity to proceed under the law;
  • is prohibited from practising a profession made subject to having a university law degree; and
  • is on probation based on a final court ruling.

Apart from these limitations, the parties are free to designate any person to arbitrate their dispute.

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20. Can non-nationals act as arbitrators where the seat is in your jurisdiction or hearings are held there? Is this subject to any immigration or other requirements?

Hungary

There are no limitations with regard to the nationality of arbitrators under Hungarian law. However, parties are not prevented from setting such limitations. The new Arbitration Act observes the 2006 Model Law in this respect.

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21. How are arbitrators appointed where no nomination is made by a party or parties or the selection mechanism fails for any reason? Do the courts have any role to play?

Hungary

The procedure of default appointment of arbitrators is typically provided by the arbitration rules. In the case of the HCCI Arbitration Court, if a party fails to nominate an arbitrator within 30 days of the receipt of the call for nomination by the HCCI, it is the board that appoints the missing arbitrator from the published list of arbitrators. In the case of ad hoc arbitration, the Metropolitan Court of Budapest acts as the appointing authority.

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22. Are arbitrators afforded immunity from suit under the law of your jurisdiction and, if so, in what terms?

Hungary

Arbitrators do not enjoy immunity from suit in Hungary. No specific provision is included in the new Arbitration Act in this regard. Section 50 of the HCCI Arbitration Rules contain a disclaimer excluding any liability for damages or other legal consequences, or for compensation under any title whatsoever of the arbitral tribunal and its members for any act or omission in connection with the arbitral proceedings, except for liability for damages cause due to intentional breach of duty or gross negligence. The scope and validity of such disclaimer have not been tested yet though.

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23. Can arbitrators secure payment of their fees in your jurisdiction? Are there fundholding services provided by relevant institutions?

Hungary

Security for payment of arbitration fees is not provided by the new Arbitration Act. It does, however, include an obligation for the board of the HCCI Arbitration Court to create an earmarked reserved fund to cover fees and costs not be reimbursed by the parties. Such costs may emerge in the event of exclusion or termination of mandate of an arbitrator.

In addition, the HCCI Arbitration Rules provides that the parties shall deposit an advance for costs of the arbitration including the fees of the arbitrators. If the claimant does not pay the advance for costs in time, the HCCI Arbitration Court terminates the proceedings.        

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Challenges to arbitrators

24. On what grounds may a party challenge an arbitrator? How are challenges dealt with in the courts or (as applicable) the main arbitration institutions in your jurisdiction? Will the IBA Guidelines on Conflicts of Interest in International Arbitration generally be taken into account?

Hungary

In line with article 12(2) of the 2006 Model Law, the new Arbitrator Act provides that an arbitrator may only be challenged if circumstances exist that give rise to justifiable doubts as to their impartiality or independence, or if they do not possess qualifications agreed to by the parties. The arbitrator in question shall disclose any circumstances likely to give rise to justifiable doubts as to his or her impartiality or independence.

The challenge procedure is also regulated in line with international practice. Parties are free to agree on the procedure for the arbitral tribunal to follow except for the procedure established for cases if a challenge is unsuccessful. In such an event, the challenging party may request, within 30 days of having received notice of the decision rejecting the challenge, the competent court to decide on the challenge which decision shall be subject to no appeal. While such a request is pending, the arbitral tribunal, including the challenged arbitrator, may continue the arbitral proceedings and make an award.

The HCCI Arbitration Rules provides for a more detailed challenge procedure. In the event that the challenge request is unsuccessful before the arbitral tribunal, the requesting party may request the HCCI Arbitration Court to decide on the request.

The IBA Guidelines on Conflicts of Interest are often referred to for guidance in case of arbitrator challenges, although these guidelines are not strictly binding, they are also used and accepted in assessing challenges by state courts. (see, eg, Curia Judgment No. 2013.100).

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Interim relief

25. What main types of interim relief are available in respect of international arbitration and from whom (the tribunal or the courts)? Are anti-suit injunctions available where proceedings are brought elsewhere in breach of an arbitration agreement?

Hungary

Interim reliefs are regulated under the new Arbitral Act in line with the 2006 Model Law. Accordingly, interim measure is available under identical conditions as set out in article 17A of the 2006 Model Law Additionally preliminary order may be applied for under identical conditions as set out in article 17B of the 2006 Model Law. While a preliminary order may only be issued by the arbitral tribunal, an application for interim measure may be satisfied by either the arbitral tribunal or directly by the state court.

Furthermore, state courts also have the power to grant interim reliefs provided by Hungarian procedural law in relation to arbitral proceedings. These include:

  • the preliminary taking of evidence;
  • interim measures;
  • security measures;
  • provision of an enforcement clause affixed to a deed; and
  • the possibility to oblige the party to provide security in a separate action in accordance with the rules of litigation proceedings.

Anti-suit injunction as such is not a recognised means under Hungarian law. 

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26. Does the law of your jurisdiction allow a court or tribunal to order a party to provide security for costs?

Hungary

Security for arbitration costs is generally not provided for, although not even specifically excluded.

As regards security for interim measures, both an arbitral tribunal and a state court may require the party requesting an interim measure to provide appropriate security in connection with the measure as per section 23 of the new Arbitration Act and section 107 of the Act CXXX of 2016 on the Code of Civil Procedure (CCP).

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Procedure

27. Are there any mandatory rules in your jurisdiction that govern the conduct of the arbitration (eg, general duties of the tribunal and/or the parties)?

Hungary

Yes, yet not many. Section 29 of the new Arbitration Act (in line with the 2006 Model Law) provides that the parties shall be treated with equality and each party shall be given a full opportunity of presenting his or her case. The right to be heard appears in various ways in the Hungarian court practice. In Judgment No. BH2014.21, the Curia held that arbitration courts may not decide on a relief with regard to which the parties were not heard. Besides, other aspects of the right to a fair trial are to be observed in Hungary-based arbitrations too.

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28. What is the applicable law (and prevailing practice) where a respondent fails to participate in an arbitration?

Hungary

In line with the 2006 Model Law, section 38 (b) of the new Arbitration Act provides that if the respondent fails to communicate its statement of defence, the arbitral tribunal shall continue the proceedings without treating such failure as an admission of the claimant's allegations. Section 38(c) of the new Arbitration Act allows the arbitral tribunal to continue the proceedings and make an award on the evidence before it even if a party fails to appear at a hearing or submit documentary evidence. The HCCI Arbitration Rules provides for the same.

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29. What types of evidence are usually admitted, and how is evidence usually taken? Will the IBA Rules on the Taking of Evidence in International Arbitration generally be taken into account?

Hungary

Under section 30 of the new Arbitration Act (equivalent to article 19 of the 2006 Model Law), arbitral tribunals have the power to determine the admissibility, relevance, materiality and weight of the evidence, subject to the rules agreed by the parties. Also, in line with the 2006 Model Law, section 31 of the new Arbitration Act provides a set of rules for the involvement of experts in an arbitration applicable unless otherwise agreed by the parties.

In practice, evidence is often given in the form of deeds and witness statements, which are subsequently orally verified at the evidentiary hearing, followed by cross-examination and re-examination of the witness. Particularly in technical disputes, experts are frequently involved too. In rare cases, site inspection may take place.

The IBA Rules are frequently referred to as guidance in Central and Eastern European arbitrations.

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30. Will the courts in your jurisdiction play any role in the obtaining of evidence?

Hungary

Yes, the arbitral tribunal – on its own motion or upon a party’s request – may seek assistance in the taking of evidence from a competent court, which may execute the request according to its own rules on the taking of evidence. In doing so, the rules of court proceeds on preliminary evidence (Chapter XXIV of the CCP) shall apply as regards territorial competence, form of the request, the order of the court, the evidentiary procedure and costs, except that the parties need not be heard on the order for the taking of evidence.

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31. What is the relevant law and prevailing practice relating to document production in international arbitration in your jurisdiction?

Hungary

Although arbitral tribunals have broad evidentiary powers under the new Arbitration Act as well as the HCCI Arbitration Rules, document production is not widely used domestically. In international disputes, arbitral tribunals tend to adapt the proceedings more to international trends and conduct document production in accordance with the IBA Rules.

In cases of non-compliance, it is, however, hard to tell, whether state courts could provide assistance given that document production is not an existing evidentiary method under the CCP. There is no court practice available in this regard.

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32. Is it mandatory to have a final hearing on the merits?

Hungary

Under section 36 of the new Arbitration Act, in line with article 24 of the 2006 Model Law, subject to any contrary agreement by the parties, the arbitral tribunal may decide not to hold hearings and proceed on a document-only basis.

Under the HCCI Arbitration Rules, the arbitral tribunal shall hold a hearing in person or – in justified cases – by means of telecommunication.

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33. If your jurisdiction is selected as the seat of arbitration, may hearings and procedural meetings be conducted elsewhere?

Hungary

Yes, according to section 31(1) of the new Arbitration Act (equivalent to article 20(1) of the 2006 Model Law Art), the parties are free to agree on the place of arbitration. Failing such agreement, the place of arbitration shall be determined by the arbitral tribunal. In principle, the arbitral tribunal may also assemble at a different place for the purposes of consultations between the arbitrators, hearing the parties, witnesses or experts and inspection of documents.

If the HCCI Arbitration Court is designated by the parties, the place of arbitration shall by default be Hungary. This does not prevent the arbitral tribunal from occasionally proceeding elsewhere, under the HCCI Arbitration Rules.

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Award

34. Can the tribunal decide by majority?

Hungary

Section 42 of the new Arbitration Act states that in arbitral proceedings with more than one arbitrator, any decision of the arbitral tribunal shall be made by a majority of all its members, unless otherwise agreed by the parties. If there is no majority opinion, the president of the arbitral tribunal shall decide the issue at stake. Also, questions of procedure may be decided by a presiding arbitrator, if authorised by the parties or all members of the arbitral tribunal. The 2022 HCCI Arbitration Rules apply the same rules.

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35. Are there any particular types of remedies or relief that an arbitral tribunal may not grant?

Hungary

There are no specific limitations on the types of remedies or relief that can be awarded by an arbitral tribunal.

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36. Are dissenting opinions permitted under the law of your jurisdiction? If so, are they common in practice?

Hungary

There is no specific provision on dissenting opinions in the new Arbitration Act. At the same time, the Explanatory Note of the 2006 Model Law states that dissenting opinions are permitted.

Also, the HCCI Arbitration Rules allow dissenting opinions to be attached to an award. Under the latest rules applicable from 31 December 2022, a dissenting opinion is to be placed in a closed envelope among the case file to which only the President of the HCCI Arbitration Court may allow access. The 2022 Arbitration Rules also prohibit sharing information on the internal deliberations among the arbitrators in dissenting opinions. According to the HCCI, such prohibition became necessary due to the ‘unacceptable practice’ of dissenting arbitrators revealing secrets of deliberations. 

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37. What, if any, are the legal and formal requirements for a valid and enforceable award?

Hungary

The arbitration award, according to section 44 of the new Arbitration Act, shall be made in writing and shall be signed by the arbitrator or arbitrators. In arbitral proceedings with more than one arbitrator, the signatures of the majority of the members of the arbitral tribunal shall suffice, provided that the reason for any omitted signature is stated. The award is also required to state its date and the place of arbitration. Unless the parties have agreed otherwise, the award shall state the reasons upon which it is based. The parties may agree on further formal requirements of the award. The HCCI Arbitration Rules also set some additional formal requirements regarding arbitral awards under article 44 (such as case number, names of the parties, subject of the case, reliefs sought).

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38. What time limits, if any, should parties be aware of in respect of an award? In particular, do any time limits govern the interpretation and correction of an award?

Hungary

Under section 46 of the new Arbitration Act, parties have 30 days from receipt of the award to request any corrections to or interpretations of the award by the arbitral tribunal. An application for setting aside may not be made until after 60 days from the date on which the party making that application had received the award or, where appropriate, the corrected award.

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Costs and interest

39. Are parties able to recover fees paid and costs incurred? Does the "loser pays" rule generally apply in your jurisdiction?

Hungary

Pursuant to section 44 of the new Arbitration Act, the arbitral tribunal shall rule on the amount and bearing of costs of the proceedings in the award, if one of the parties so requests. Under section 11(3) of the HCCI Arbitration Rules, the arbitral tribunal is obliged to rule on the costs in the final award except where a party is ordered to pay all or part of the costs of the proceedings regardless of the outcome of the proceedings.

Section 11 of the HCCI Arbitration Rules is based on the ‘losers pay’ principle. However, it allows the arbitral tribunal to derogate from this principle, having regard in particular to the parties’ conduct during the proceeding and the justification, appropriateness and necessity of the procedural steps taken by the parties and their representatives.

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40. Can interest be included on the principal claim and costs? Is there any mandatory or customary rate?

Hungary

Interests on a claimed amount is a matter of substantive law. Although there are no provisions prohibiting the inclusion of interest of a principle claim or costs, the practice would suggest that it may be only included if a party enforced claims for interest.

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Challenging awards

41. Are there any grounds on which an award may be appealed before the courts of your jurisdiction?

Hungary

No appeal against an arbitral award is available in the strict sense of the word. However, section 47(2) of the new Arbitration Act entirely adopts the grounds for recourse against the award as set out under the 2006 Model Law. State courts may only set aside arbitral awards on the following grounds:

  • incapacity of a party or invalidity of the arbitration agreement;
  • proper notice of the appointment of an arbitrator or of the arbitral proceedings was not given, or the party was otherwise unable to present its case;
  • the dispute falls outside the arbitration agreement;
  • the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties;
  • the subject matter of the dispute is not capable of settlement by arbitration; and
  • the award is in conflict with public policy.

An award will conflict with the public policy of Hungary if it does not duly apply the requirements of res iudicata (see Curia Judgment No. 2015.14.). In Judgment No. 2015.167, the Curia held that where the tribunal’s ruling and its statement of reasons on the partial adjudication of the reliefs sought are inconsistent with each other, the scope of res iudicata cannot be established. Clear limits of res iudicata is a fundamental aspect of legal certainty in arbitral awards.

State courts refrain from setting aside awards on grounds that the arbitral tribunal misinterprets or misapplies the law under the ground that the arbitral proceedings was not in accordance with the agreement of the parties, unless a manifest error of law was committed (see, eg, Court of Appeal Debrecen Judgment No. BDT2017. 3650., Curia Judgment No. BH2017. 411.). It also has been established that it does not conflict public policy if an arbitral award was made under ex aequo et bono where it is not recognised by the applicable law (Curia Judgment No. Gfv. 30.241/2022/5.)

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42. Are there any other bases on which an award may be challenged, and if so what?

Hungary

In addition, the new Arbitration Act has introduced an option for retrial under Chapter IX. In retrial proceedings, a party may, within one year of the receipt of the arbitral award, rely on facts or evidence that it did not adduce in the main proceedings through no fault of its own, provided that, if adjudicated, those could have resulted in a decision more favourable to the party. The arbitral tribunal that issued the contested award shall rule on the admissibility of the application for retrial by way of an order. Such order is non-appealable.

If the arbitral tribunal has decided to grant a retrial and the application is likely to succeed, the arbitral tribunal may stay the enforcement of the award. The retrial proceedings shall be conducted within the limits of the request and, depending on the outcome, the arbitral tribunal shall uphold the challenged award or render a new award repealing the original award in whole or in part.

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43. Is it open to the parties to exclude by agreement any right of appeal or other recourse that the law of your jurisdiction may provide?

Hungary

Parties may opt out of the retrial of proceedings in the arbitration agreement. This is widely accepted since it may impede the recognition and enforcement of final awards. There is no practice of the exclusion of the option to set aside an award. 

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Enforcement in your jurisdiction

44. Will an award that has been set aside by the courts in the seat of arbitration be enforced in your jurisdiction?

Hungary

Pursuant to article V(1)(e) of the New York Convention (which is incorporated in Law Decree No. 25 of 1962), setting aside of an award at the seat of arbitration is one of the potential reasons for non-enforcement of the award in Hungary. There is no court practice available yet on the conditions Hungarian courts would assess upon deciding whether still to enforce an award already set aside at the seat of arbitration.

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45. What trends, if any, are suggested by recent enforcement decisions? What is the prevailing approach of the courts in this regard?

Hungary

Court rulings regarding enforcement of arbitral awards follow the EU trends in terms of conflict with public policy. Accordingly, the conflict with public policy may be established in exceptional cases where a foreign judgment (or award):

 ‘is likely to have consequences which are contrary to fundamental rights or to social values and which go beyond the legal relationship of the parties and are likely to be prejudicial to public policy. The recognition of a foreign judgment cannot be refused by the court of the requested State on the ground that there is a difference between the law applied by the court of the State of origin and the law which would have been applied by the court or authority of the requested State if the dispute or proceedings had been brought before it.’ (see Curia Judgment No. BH2018.174.)

In this sense, no conflict of public policy may be established where the arbitral tribunal applied punitive damages, which is not recognised under Hungarian law (Kúria Pfv.I.21.109/2016/18.). In case No. Pkf.25.166/2022/4, the Court of Appeal of Győr held that if the expedited arbitration affords the parties due time to make their submissions, such proceedings do not violate public policy, not even at times of a pandemic.

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46. To what extent might a state or state entity successfully raise a defence of state or sovereign immunity at the enforcement stage?

Hungary

In Hungary, state immunity is regulated under Act XXVIII of 2017 on Private International Law (PIL Act), which was designed based on the United Nations Convention on Jurisdictional Immunities of States and Their Property, New York, 2 December 2004. Section 85 of the PIL Act, provides for immunity from jurisdiction unless certain statutory exceptions apply including if the subject matter of the proceeding is a right or obligation of the state arising out of a contract under civil law. At the enforcement stage, immunity would not be successfully invoked where state assets serve purposes of commercial activities.

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Further considerations

47. To what extent are arbitral proceedings in your jurisdiction confidential?

Hungary

Unless the parties agree otherwise, the proceedings of the arbitral tribunal shall be confidential pursuant to section 36(7) of the new Arbitration Act. However, in some cases, confidentiality conflicts with the requirement of transparency (eg, in the case of involvement of government or EU subsidies). In practice, such conflicts are usually resolved in a way that the party subject to reporting obligation must disclose the fact of proceedings and the final award to the necessary extent. It is becoming a widespread view in Hungary that confidentiality should also not hinder the development of jurisprudence. To this end, the President of the HCCI shall ensure the anonymisation and communication of arbitral awards and termination orders on its website within six months of the issuing. 

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48. What is the position relating to evidence produced and pleadings filed in the arbitration? Are these confidential? Is there any way that they might be relied on in other proceedings (whether arbitral or court proceedings)?

Hungary

Evidence and pleadings enjoy the confidentiality of the proceedings. There are no exceptions defined under Hungarian law to this rule, even though the boundaries of the rule have not been tested yet.

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49. What ethical codes and other professional standards, if any, apply to counsel and arbitrators conducting proceedings in your jurisdiction?

Hungary

Attorneys qualified in Hungary are bound by Act 78 of 2017 on Legal Practice and Hungarian Bar Association Rules No. 6/2018 (26.III.) ‘Ethical Rules of the Hungarian Bar Association), which cover all legal practices, including arbitral proceedings.

In respect of arbitrators, section 13 of the new Arbitration Act requires an arbitrator to ‘disclose any circumstances likely to give rise to justifiable doubts as to his [or her] impartiality or independence"’, both when approached in connection with possible appointment as an arbitrator and ‘from the time of his [or her] appointment and throughout the arbitral proceedings’.

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50. Are there any particular procedural expectations or assumptions of which counsel or arbitrators participating in an international arbitration with its seat in your jurisdiction should be aware?

Hungary

No, the new Arbitration Act, which adopts the 2006 Model Law, governs all arbitrations seated in Hungary. Under section 30 of the new Arbitration Act (which corresponds to article 19 of the 2006 Model Law), parties are free to adopt any rules they wish to govern their proceedings, failing which, the tribunal may conduct the arbitration in such manner as it considers appropriate.

In terms of practice, international arbitration in Hungary follows the major trends of civil law jurisdictions.

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51. Is third-party funding permitted in your jurisdiction? If so, are there any rules governing its use?

Hungary

In Hungary, third-party funding is not prohibited; however, its practice is still at its early stages. Some insurance companies have announced their presence in the Central and Eastern Europe region, while leading law firms in arbitration have extended their legal services to advise clients on litigation funding.

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