RETRIAL IN HUNGARIAN ARBITRATION

30 November 2018

The new Hungarian Act on Arbitration, entered into force on 1st January 2018 (“Arbitration Act”) introduced a new type of remedy against arbitral awards, the retrial of case. What is the deadline of retrial and under what conditions can it be sought? What are the consequences of a successful application? Can parties opt-out from retrial? We address these question in this article.

Why?

It can happen that the party losing the arbitration becomes aware of evidences that it could not submit during the arbitration. The fresh evidence may be so strong, that if it was taken into account in the arbitral proceedings, the losing party could have been the winner of the case.

Whether it is possible to submit the dispute before the arbitrators again?

The former arbitration regime in Hungary provided no clear and satisfying answer to this question, so the legislator decided to introduce a new remedy, the so-called retrial, by trying to make balance between speed and fairness of the arbitral proceedings.

Under what conditions?

The party has to refer to a fact or evidence that he could not submit in the basic proceedings without his own fault, provided that these could have resulted in a decision more favourable to the party. All of these conditions have crucial relevance, as we will see later.

It is important that only facts or evidences existing during the basic procedure can be invoked as grounds for retrial, so this remedy cannot be sought based on new facts or evidences, arising after the rendering of the arbitral award.

What is the deadline of the application?

The parties may submit the request for retrial within one  (1) year from receipt of the arbitral award. The deadline cannot be lengthened, so if the party fails it, the petition shall be rejected without any remedy.

What are the basic procedural rules of retrial?

The procedure of retrial basically takes place according to the original rules of arbitral proceedings, but there are a few special provisions that are detailed in this article.

The admissibility of the petition for retrial shall be resolved by decision by the arbitration tribunal rendering the contested award.

In the case of the incapacity of a member of the arbitration tribunal, an arbitrator appointed in the procedure as provided in the general rules of the Arbitration Act shall proceed instead of him or her. Before the decision on admissibility, the arbitration panel may hear the parties.

There is no legal remedy against the admissibility decision.

What are the cases in which petition for retrial shall be rejected?

The arbitral tribunal shall reject the application in three cases. First, as mentioned above, the application will be refused if it was submitted after the expiry of one year calculated from the receipt of the award.

The second reason also originates from the requirements of the petition for retrial, rejection is expected if the arguments raised by the party submitting the petition even when proved to correspond to the facts are not suitable for adopting a decision more favorable to the party.

Last but not least, the tribunal dismisses the petition if the party did not submit the fact or evidence in the basic proceedings by reason of his own fault. (Eg. in case the evidence was available already in the original proceedings).

What are the consequences of a successful petition?

The award against which the retrial petition is made stays final and enforceable during the retrial proceedings, however, if the arbitration tribunal considered the retrial admissible, and the success of the petition appears to be probable, the enforcement of the award can be suspended.

When the retrial is admissible, the proceedings shall be conducted within the limits of the petition, and based on its result the arbitration tribunal either maintains the contested award in its effect or adopt a new decision, in addition to abrogating the award fully or partly.

The award rendered in retrial can also be a subject to annulment procedure.

Opt-out from the regime

Based on the Hungarian Arbitration Act, the retrial is a default remedy, but the parties may opt-out from its application, when entering into the arbitration agreement, or later.

For example the sample clause of the Arbitration Court of the Hungarian Chamber of Commerce and Industry (HCCI) expressly excludes the parties’ right to seek retrial after the final decision.