5 KEY DIFFERENCES BETWEEN ARBITRATION AND LITIGATION IN HUNGARY

29 September 2023

If you intend to pursue a claim against a Hungarian debtor, based on the contract on which a dispute is based, you may need to bring a case before an ordinary Hungarian court or to initiate Hungarian arbitration proceedings. In this short article we summarise the 5 key differences between the two procedures.

1. LENGTH

The first to be mentioned is that in a normal Hungarian civil procedure, the decision can be appealed. Moreover, in some cases a so-called judicial review procedure can be also initiated against the final decision.

In contrast, in Hungarian arbitration cases, an appeal is not possible against the decision, the party can only start setting aside procedure against the arbitration award.

On the basis of the above, arbitration usually provides a quicker procedure, allowing you to obtain an enforceable decision sooner.

2. COSTS

In a normal Hungarian civil procedure, in general, the rate of the duty is 6% of the value of the subject-matter of the proceedings, but not less than HUF 15.000 and not more than HUF 1.500.000.

In an arbitration, in contrast to the above, there are more types of fees to be paid e.g., registration fee, administrative fee, arbitrator's fee, public charges.

Based on the above, especially in lower-value cases, you may have to pay a higher amount at the beginning of an arbitration proceedings in contrast to normal state court litigation. However, the higher initial cost is compensated by the shorter procedure, i.e., you do not have to pay an appeal fee, etc.

3. CONFIDENTIALITY

As a general rule, civil proceedings in state courts are open to the public, and restrictions on publicity can only arise in special cases.

Contrary to the above, the arbitration procedure is not public, which may be important for business players.

4. FLEXIBILITY

The new Hungarian Code of Civil Procedure, which entered into force a few years ago, sets out relatively strict procedural rules for the parties. Consequently, you often have to deal with detailed procedural issues in civil proceedings.

In arbitration, the parties have much more freedom, so they can shape the procedural rules.

5. EXPERTISE

It is also an important difference between the litigation and arbitration that while you cannot choose the judge in ordinary litigation, in arbitration the parties can freely choose the judge(s).

6. ENFORCEMENT

If you wish to enforce the Hungarian decision outside Hungary, it is important to note that, as a general rule, judgments of ordinary Hungarian courts can only be recognised and enforced in other EU countries or in countries with which Hungary has concluded bilateral agreements.

Hungarian arbitration awards can be enforced outside Hungary much more widely under the New York Convention, which has more than 170 contracting states. In these countries, Hungarian arbitral awards are enforceable if they comply with the provisions of the Convention.