HOW TO SUE US RESIDENTS IN HUNGARIAN COURTS THROUGH ANCHOR-DEFENDANTS?

16 June 2022

Based on the basic principle of international civil litigation, a person can usually be sued only in the courts of their own country. However, this makes it very difficult for a claimant who wants to enforce their rights against several defendants living in different countries. Can the jurisdiction of the Hungarian courts that exists in respect of a domestic defendant (the so-called "anchor defendant") be extended to foreign defendants as well? This article analyses the practical application of the new rules enforced in 2018 based on a recent decision of the Hungarian Supreme Court.

1. Facts

Claimant one is a public figure and claimant two is a journalist for a public newspaper. The claimants, who reside in Hungary, filed a lawsuit against three defendants in a Hungarian court because photographs of the claimants were unlawfully published in a book without their consent.

Defendant one, who lives in the United States, is the author of a book containing the infringing photographs. Defendant two, a company incorporated in the United States, is the publisher of the book. Defendant three is a company incorporated in Hungary that was involved in the distribution of the book in Hungary.

The claimants sought the Court to both declare that the defendants had infringed upon their personality rights and to impose additional objective sanctions (eg, injunctions) against defendants one and two.

According to the claimants, under the new Private International Law Act (PIL)(1) effective as of 2018, the Hungarian courts had jurisdiction over defendants one and two who live in the United States. This is because the claims against the defendants were so closely connected that it was expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings.

The defendants disputed the jurisdiction of the Hungarian courts, arguing that the domicile of defendant three did not establish the jurisdiction and that defendant three had, in the meantime, ceased to distribute the books. Therefore, the defendants disputed the fact that the Court had jurisdiction as regards the US-based defendants one and two.

2. First- and second-instance courts

The court of first instance established its jurisdiction over all three defendants and ruled on the merits of the case. In its decision, the court dismissed the claimants' action as unfounded.

The second-instance court amended the judgment and held that defendants one and two had infringed upon the right of personality (likeness) of claimant one.

Defendants one and two were barred from further infringement and ordered to give moral reparation. The court of second instance also found Hungarian jurisdiction over all three defendants.

3. Supreme Court

Defendants one and two requested a judicial review of the final judgment. They sought the setting aside of the final judgment due to the lack of jurisdiction of the Hungarian courts. They argued that the claimants had sued defendant three solely in order to be able to initiate legal proceedings in Hungary against defendants one and two, both of whom are US residents. Given the fact that the claim against defendant three was unlawful, the claims should be rejected as regards all the defendants.

According to the judgment of the Hungarian Supreme Court,(2) the request for judicial review was unfounded.

According to the reasoning of the decision, the provisions of the PIL were applicable as regards the US domicile of defendants one and two and the Hungarian domicile of defendant three, given that, in the absence of a defendant domiciled in another EU member state, the Brussels Ia Regulation, a legal source which otherwise has priority over domestic rules, did not apply.

According to the Court, the violation of the right to privacy had been committed jointly by the defendants; defendant one as the author, defendant two as the publisher and defendant three as the distributor of the book in Hungary. The joint infringement resulted in a joint relationship between the defendants.

According to the Court, the adjudication of the infringement in separate lawsuits would be cumbersome and could lead to conflicting decisions. The Court therefore found that the court of first instance had been justified in concluding that, for reasons of expediency, it had jurisdiction over all the defendants based on the Hungarian domicile of defendant three.

4. Comment

The basic principle of international civil procedural law is the so-called "actor sequitur forum rei", under which a defendant may, as a rule, be sued only in the courts of the country in which they are domiciled.

However, there are complex cross-border cases in which it is appropriate to allow the claimant to pursue their claims against several defendants in front of one court, to ensure that the case is dealt with in a unified manner, avoiding potential conflicting judgments rendered in separate proceedings.

Joint procedure against several defendants – development of domestic law
The above-mentioned possibility was introduced in the former Private International Law codex (PIL Law Decree)(3) in 2000, in preparation for Hungary's accession to the European Union. At that time, the legislature "exported" the provisions of the old Code of Civil Procedure(4) in respect of "co-litigants", allowing for the procedure against several defendants, to the PIL Law Decree.

According to the rules of the former Code of Civil Procedure on co-litigants, two or more defendants could be jointly sued if the claims in the action arose out of the same legal relationship or if the subject matter of the action was a common right or a common liability that could only be resolved uniformly.(5)

The above domestic rule was stricter than the similar rule of the "Brussels regime" in the European Union. The European Court of Justice (ECJ) had explained in the Kalfelis v Schröder case that a claimant may sue more than one defendant if the court has jurisdiction over the domicile of one of the defendants (the so-called "anchor-defendant"). This is possible where there is such a close connection between the claimant's claims against the defendants that it is appropriate to adjudicate on them together to avoid irreconcilable judgments resulting from separate proceedings.(6)

The above case law of the ECJ was later incorporated into the Brussels I Regulation, and after into article 8(1) of the Brussels Ia Regulation. The Hungarian legislature harmonised the domestic rules with the above provision of the Brussels Ia Regulation, by copying the provision into section 90(1) of the new PIL.

Importance of new domestic rules
While the old rule of the PIL Law Decree focused on legal relationship between the co-defendants, taking a static substantive law-based approach, the new rule of the PIL, in line with EU law, approaches the issue from a dynamic, procedural point of view, allowing the claimant to sue several defendants before one court based on the formulation of the claimant's claims and on procedural expediency.

Due to the new rules, the claimant generally has more freedom and, if they file their claim properly against different defendants, they can sue several defendants together, even in cases where the claims arise, for example, from different legal relationships.

In addition, the new rules may be of particular relevance in case of infringements that take place through contractual chains, where all the defendants in the contractual chain who are parties to separate legal relationships can be sued jointly, which is typical for example in the case of copyright infringements.

However, in the case at hand, the Supreme Court did not assess this aspect as it considered the defendants' conduct as a joint infringement, which, according to the judgment, created a multi-party relationship between them. The fact that the Court insisted on emphasising that the claimants' actions concerned the same legal relationship is the result of the legal thinking forged under the previous legislation.

However, the defendants committed the infringement in different ways (eg, use, publication and distribution), so the infringements could be considered as the defendants' separate legal relationships with the claimants.

Under the new domestic PIL rules, the existence of several legal relationships is not an obstacle to sue more defendants jointly, as the relevant circumstance is not whether there is one or more legal relationship between the defendants. However, the close connection between the claimants' claims against the defendants, could have been established in the above case without any doubt, given that the claimants sought a declaration of infringement in respect of all three defendants.

To sum up the above, section 90(1) of the new PIL, and its interpretation by the Hungarian Supreme Court principally makes easier for the claimant to sue persons domiciled in third countries, outside the European Union.

The devil is in the details
At the same time, the question of whether this is possible in any given case can be answered only in the light of the domestic procedural rules.

This is because while article 8(1) of the Brussels Ia Regulation establishes not only the jurisdiction of the Hungarian courts, but also the territorial competence of the given Hungarian court, section 90(1) of the PIL establishes only Hungarian jurisdiction, while the territorial competence of the court is governed by the Hungarian Civil Procedure Code.(7) Considering the above, persons domiciled in a non-EU country and a Hungarian defendant can be sued in front of the same Hungarian court, in case further conditions are met.

The old rules on co-litigants still apply for the territorial competence of domestic courts. In addition, suing all defendants in front of the same domestic court is easy in case both the claimant and the Hungarian defendant have their residence and/or registered seat in the same court district.

In other cases, some creativity is needed from the claimant to show some connecting factors between the defendants and the court (eg, place of signature or performance of contract, place of harmful event or occurrence of damage, etc,), to sue all defendants in front of the same court.

In summary, the recent judgment of the Hungarian Supreme Court confirms that under the new Hungarian legislation claimants theoretically can sue multiple defendants jointly in front of the Hungarian courts under the same conditions as under the Brussels regime, for the sake of ease. Whether claimants can really benefit from the new regime and the favourable case law depends on the individual circumstances of a given case.

 

Endnotes

(1) The claimants based the jurisdiction of the Hungarian court on section 90(1) of Act XXVIII of 2017 on Private International Law.

(2) Decision No. BH 2022.5.125 I.

(3) Law Decree No. 13 of 1979 on International Private Law.

(4) Section 51 of Act III of 1952 on the Code of Civil Procedure.

(5) Section 51 a-b of Act III of 1952 on the Code of Civil Procedure.

(6) Case 189/87, Athanasios Kalfelis v Bankhaus Schröder, Münchmeyer, Hengst and Co and others.

(7) Act CXXX of 2016 on Civil Proceedings.