Blog » RECOGNITION AND ENFORCEMENT OF ARBITRAL AWARDS IN HUNGARY
RECOGNITION AND ENFORCEMENT OF ARBITRAL AWARDS IN HUNGARY
14 January 2019
How domestic and international arbitral awards are enforced in Hungary? On what basis can be the enforcement refused? What kind of remedies are available against the “exequatur”? We summarise the answers for these question in this article.
Recognition of international awards (New York Convention)
While domestic arbitral awards can be enforced directly, without any preliminary procedure, international arbitral awards at first shall be formally recognized in the Hungarian legal order, and they can be enforced afterwards.
The main legal source governing the recognition and enforcement of international arbitral awards is the Convention on the Recognition and Enforcement of Foreign Arbitral Awards („the Convention”), which entered inti force in Hungary in 1962.
It is important that Hungary adhered to the New York Convention with the following two reservations:
- the Convention applies only to awards made in another contracting state, outside Hungary, and
- the concept of “commercial relationship” shall be interpreted in the light of Hungarian law. According to the case law, this concept shall be given a broad interpretation.
The “exequatur” procedure
As mentioned above, before judicial enforcement, the foreign arbitral award shall undergo an examination, the so-called “exequatur” procedure in which it shall be formally recognized in the national legal order as having the same legal force, as a domestic award.
The party requesting the recognition and enforcement shall submit together with its request the certified copy of the arbitral award, as well as the arbitration agreement.
If the award or the agreement is not made in Hungarian language the applicant party shall produce an official translation of these documents. In Hungary, the only official translator institution is the Hungarian Office for Translation and Attestation (OFFI).
The case law of Hungarian courts confirms that compliance with the above administrative requirements is strictly interpreted, and in case the applicants submits only simple copies, or simple translation of documents, that leads to the rejection of the application.
Decision on recognition of the award
Based on the New York Convention, recognition and enforcement of the award may be refused only if one of the following reasons exist:
- The parties to the agreement were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or failing any indication thereon, under the law of the country where the award was made; or
- The party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case; or
- The award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration; or
- The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place; or
- The award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made.
The abovementioned reasons are applicable only at the request of the party against whom the enforcement is invoked.
When it comes to point e) based on case law, the sole fact that setting aside proceedings has been started in the country of origin seeking annulment the foreign arbitral award does not constitute a valid reason for staying the exequatur proceedings, if the enforcement of the arbitral award has not been suspended by the foreign court, hearing the setting aside procedure.
Recognition and enforcement of an arbitral award may also be refused if the competent court finds that:
- The subject matter of the difference is not capable of settlement by arbitration under the law of Hungary; or
- The recognition or enforcement of the award would be contrary to the public policy of Hungary.
It is well settled case-law in Hungary that the foreign arbitral award shall not be reviewed as to the substance in the “exequatur” procedure, and in addition to the grounds for refusal based on the above provisions of the New York Convention, Hungarian court can only examine the compliance with the formal requirements.
In case there are no grounds for refusal of recognition of the arbitral award, and the formal requirements are met, the court issues the “exequatur” in the framework of an order which establishes that the foreign arbitral award may be subject of judicial enforcement procedure under the same condition as a domestic court judgment.
Remedies against the decision on recognition
The decision on recognition may be appealed by both the applicant and the award-debtor within 15 (fifteen) days as of receipt of the first instance decision.
The Regional Court of Appeal is competent for the appeal procedure in which both, questions of fact and questions of law can be raised by the parties.
The second instance decision of the Regional Court of Appeal, recognizing the foreign award may be subject to an extraordinary remedy in front of the Curia (Supreme Court of Hungary), the so-called request for review within 45 (forty-five) days as of the receipt of the second instance court decision. This remedy is limited to questions of law.
9.5.Enforcement of arbitral awards
It goes without saying that in case of domestic awards, no recognition procedure is needed, so enforcement can be started once the deadline for the performance, specified in the award has been expired.
When it comes to international awards, once the decision of “exequatur” is final, the international arbitral award has the same legal force as a domestic arbitral award, and the enforcement can be started as well.
Since based on Hungarian law, the arbitration award has the same effect as a final court decision, its enforcement is governed by the general legal regulations on judicial enforcement.
The arbitral award can be enforced in front of the local court, where the award-debtor has its registered seat. In the absence of such, in front of the local court where the award debtor has seizeable assets or branch or representative office, by submitting an application for enforcement.
The court examines the application, and in case it complies with the relevant legal provisions, it orders the judicial enforcement by confirming the application for enforcement, and by sending the case file to the court bailiff.
The court bailiff then requests the party seeking the enforcement of the arbitral award to advance the costs of enforcement, and once this sum has been paid, he makes the enforcement measures: seizure of bank accounts, real estates, company shares, movable assets, etc.
Remedies in enforcement
The debtor against whom the enforcement procedure is directd can request the court to review its decision, ordering the judicial enforcement at any time during the enforcement. In case the court establishes that the enforcement was ordered unlawfully, it terminates the enforcement procedure, in other cases it rejects the application of the debtor.
The decision of the court of first instance in relation with the enforcement is subject to appeal within 15 (fifteen) days from the receipt of the decision. The appeal has no suspensory effect on the enforcement of the award.
In case the first instance court decision is appealed, the second instance court delivers a decision, by upholding or modifying the challenged decision. The second instance court decision is non-appealable and final.
However, in case of enforcement of an international arbitral award, the second instance court decision is subject to an extraordinary remedy, the so-called request for review, within 45 (fourty-five) days from the receipt of second-instance decision in front of the Curia.
 Supreme Court Judgment No. BH 2004.9.639.
 Supreme Court decisions no. BH 2004.285, BH 2004.19, BH 1999.223.
 See Supreme Court decision No. BH+ 2013.1.31.
 The refusal for adjourning the hearing in arbitral proceedings shall not be contrary with Hungarian public policy based on case law. See Supreme Court decision No. BH2013.505.
 Supreme Court Decision No. BH+ 2015.5.209
Hungary: Steps Towards Differentiating Between Domestic and International Procedural Public Policy
Drawing a well-defined line of demarcation between domestic and international public policy when enforcing foreign arbitral awards sends a clear pro-arbitration message from national courts in any jurisdiction. Does Hungarian case law come close to this level of sophistication? This post analyses this question in the context of procedural public policy, and it does so based on two recent appellate court decisions rendered in the context of enforcement of arbitral awards in accordance with the New York Convention.Read more »
EU ISSUED NEW GDPR STANDARD CONTRACTUAL CLAUSES – WHEN AND HOW TO USE THEM?
During summer 2021, the European Commission published two new "standard contractual clauses" on data protection regulation, which can be applied on the one hand, to the legal relationship between data controllers and data processors covered by the GDPR , and to the transfers of personal data to third countries, on the other. In this article, we answer the questions: what these SCCs regulate, how do they differ from the previous SCCs and how can your company use the new SCCs?Read more »
CAN THE NON-COMPETITION AGREEMENT BE VALID WITHOUT A PRECISE COMPENSATION IN HUNGARY?
The non-compete agreement may provide protection of the legitimate economic interests of the employer even after the termination of employment relationship. However, the Hungarian Labour Code lays down strict requirements for the agreement. In our article we analyse a recent decision of the Supreme Court about the importance of the precise determination of the compensation, so you as an employer can conclude a valid non-compete agreement.Read more »