WHEN CAN YOU SUE YOUR DEBTOR IN HUNGARY?

02 May 2023

Foreign creditors often come to us with saying that they have a debtor in Hungary, or that the debtor has assets in Hungary and intends to initiate legal proceedings against it. When analysing the initiation of a civil action, the question often arises whether the debtor can be sued in Hungary?

1. Laws governing jurisdiction in Hungary

The rules of jurisdiction in Hungary are basically determined by the Brussels I Regulation[1] (“Regulation”) applicable to cross-border disputes between parties located in the EU states, and the Act on the private international law[2] (“Private International Law Act” or “PIL Act”) applicable in other cross-border cases.

Moreover, we note that there are also bilateral or multilateral international treaties, conventions, which regulates the jurisdiction of the Hungarian courts.

2. Exclusive jurisdiction

Firstly, we note that in certain cases only the Hungarian courts has jurisdiction over the legal proceedings.

Only Hungarian courts shall proceed a) in procedures, the subject matter of which is an in-rem right established on immovable property located in Hungary, or the lease or usufructuary lease of such property, d) in procedures concerning the registration of rights, facts and data in the public registers kept in Hungary, e) in procedures concerning enforcement in Hungary.

In line of the above, in a similar foreign case, the Hungarian courts shall have no jurisdiction over the cases. (e.g.: litigation concerning a lease of a foreign real estate, registration in a foreign registry etc.)

3. Defendant’s domicile in Hungary

In the absence of exclusive jurisdiction, the basic principle of international civil procedural law is the so-called "actor sequitur forum rei", under which a defendant may be sued only in the courts of the country in which they are domiciled. Both the Brussels I Regulation and the PIL Act follow this principle with exceptions.

However, if there is no exclusive Hungarian jurisdiction or your debtor is not domiciled in Hungary, under what other jurisdictional provisions can you bring a lawsuit in Hungary against your debtor?

4. The place of performance of the obligation is in Hungary

The Hungarian court may also have jurisdiction if the place of performance of the obligation is in Hungary. The place of performance of the obligation could be stipulated in the contract between the parties, therefore, we recommend you to regulate this issue in your contract.

In the absence of the above mentioned contractual clause, according to both the Brussels I Regulation and the PIL Act, the place of performance of the obligation is in the case of the sale of goods, the state where, under the contract, the goods were delivered or should have been delivered, in the case of the provision of services, the place in a state where, under the contract, the services were provided or should have been provided.

5. The place of damage is in Hungary

Furthermore, in case of tort, if the harmful event occurred in Hungary, the Hungarian courts have jurisdiction over the lawsuit.

6. Joint procedure against several defendants

You can also sue your debtor in Hungary if he is one of a number of defendants, any one of them is domiciled in Hungary, provided the claims are closely connected.

7. Assets in Hungary

If the defendant who is not domiciled or habitually resident in the EU and there is no exclusive jurisdiction or court of choice agreement, the Brussels Ia Regulation cannot be applied in the case concerned, and the PIL shall be applied.

In the above case, if it is a property lawsuit, according to the PIL, the Hungarian court may have jurisdiction if the defendant has assets that can be enforced in Hungary.

8. Choice of court agreement

You can also sue your debtor in Hungary if the contract between you and the debtor contains a valid choice of court agreement according to which the Hungarian courts have the jurisdiction over the legal disputes arising from the contract.

You can conclude it a) in writing or evidenced in writing b) in a form which accords with practices which the parties have established between themselves c) in international trade or commerce, in a form which accords with a usage of which the parties are or ought to have been aware and which in such trade or commerce is widely known to, and regularly observed in the trade or commerce concerned.

9. Entering an appearance before a Hungarian court

Lastly, we note that the jurisdiction of the Hungarian court is also established, subject to the exceptions (e.g.: exclusive jurisdiction) if the defendant submits a counterclaim without objecting to the lack of jurisdiction of the Hungarian courts.