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ARBITRATION IN HUNGARY

18 September 2015

The undisputable advantages of arbitration, such as the relatively shorter duration and the parties’ control over the appointment of the arbitrators have resulted that arbitration has a growing importance in Hungary. In this article we share some useful information about arbitration in Hungary, especially about the proceeding of the Court of Arbitration of the Hungarian Chamber of Commerce and Industry.

arbitration, Hungary, dispute resolutionWhat kind of disputes may be resolved through arbitration?

In Hungary arbitration may only take place if the following 3 conditions are met:

  • at least one of the parties is a natural or legal person professionally engaged in business activities, and the legal dispute is related to such activity,
  • the parties have free disposal over the subject matter of the dispute and
  • the parties entered into an arbitration agreement.

The above restrictions result that mostly commercial disputes arising between business companies are typically referred to arbitration.

There are a number of disputes that cannot be submitted to arbitration such as disputes arising from marriage, personal or family status or disputes arising from employment relationship.

In addition, according to the New Civil Code entered into force in March 2014 arbitration clauses in general terms and conditions of consumer contracts shall be considered as unfair terms.

Main arbitration centers

Although the Arbitration Act allows referring legal disputes to ad-hoc arbitration, the institutional arbitration is predominant in Hungary, because of practical reasons, such as the smooth organisation of the proceedings, or the appointment of arbitrators in case of non-cooperative parties, etc.

The most important institutional arbitration centres are the Court of Arbitration attached to the Hungarian Chamber of Commerce and Industry, the Energy Arbitration Court and the Money and Capital Market Court of Arbitration. Commercial disputes are most commonly referred to the Court of Arbitration of the Hungarian Chamber of Commerce.

The Court of Arbitration attached to the Agricultural Chamber was founded in 2013 with an “exclusive” competence in cases concerning the ownership and use of arable lands, and agricultural activity.

Arbitration Court attached to the Hungarian Chamber of Commerce and Industry

The language of the proceeding and the number of the arbitrators is agreed by the parties. The number of the arbitrators shall be an odd number, in the general practice each party appoints one arbitrator and the party-appointed arbitrators elect the chairman.

The Rules of Procedure of the Arbitration Court sets forth that proceeding should be finished within six months, however general experience shows that proceedings are usually closed within a year, some complex cases may last even longer.

The arbitration proceeding is a so celled one-instance procedure, that means that the arbitration award may be not be appealed by the parties, it is final and enforceable.

The only remedy is the challenge of the award before state court on few grounds specifically listed in the Arbitration Act (e.g. the arbitration agreement has been null and void, the constitution of the arbitral tribunal or the arbitral procedure was not in accordance with the arbitration agreement).

The effect of an unchallenged arbitration award is the same as that of a final and binding non-appealable court judgement and is smoothly enforced by the state courts.

The elements of the cost of the arbitration are the registration fee, the fees of the arbitrators, the administrative expenses. While the registration fee is uniformly HUF 25.000 (ca. EUR 84), the rate of the arbitrators’ fees and the administrative expenses depends on the amount in dispute.

Generally we can state that the minimum cost of arbitration in case of a 3-arbitral tribunal is around HUF 220.000 (ca. EUR 730).

Other costs of the arbitration may be the attorney’s fees, and the cost of the evidentiary procedure (witnesses, experts, etc.).

As a general rule the cost of arbitration shall be advanced by the plaintiff, or in case of evidentiary procedure by both parties jointly, and at the end will be borne by the losing party.