ARBITRAL PROCEEDINGS IN HUNGARY – PART II – CONDUCT OF PROCEEDINGS

14 November 2018

How the arbitration procedure is started in Hungary? Until which point is it possible to modify the claim and the statement of defence? What are the consequences of the default of the claimant and the respondent? When oral hearing is mandatory? We summarise the answers among others to these question in our present article.

Starting the procedure

The Arbitration Act provides that the arbitration starts on the day on which the adverse party receives the request for arbitration.  Since the adverse party may obstruct the receipt of the request for arbitration, the Rules of Procedure of the Permanent Arbitration Court (“Arbitration Court”) of the Hungarian Chamber of Commerce and Industry (HCCI) (“Rules of Procedure”) provides that the arbitration shall commence on the day on which the Statement of Claim was received by the Arbitration Court.

The Rules of Procedure defines the mandatory minimum content of the Statement of Claim (data of parties, facts & evidences regarding jurisdiction, the right sought, the statement of relief, amount of dispute, nomination of arbitrator, statement regarding language and applicable law, payment of gees).  In case the Statement of Claim lacks the above mentioned, the Claimant shall remedy the defects within 30 (thirty) days, in the absence of which the procedure is terminated by the Arbitration Court.

Statement of defense, counterclaim

The statement of defense shall be submitted within 30 (thirty) days from receipt of the statement of claim. Upon request by the respondent this time limit may be extended by thirty days. It may contain especially an objection to the jurisdiction of the arbitration court, statements relating to the merits of the claim acknowledging or denying it, set-off claims or counterclaims, and other formal accessories required by the HCCI rules.

The respondent may, until the closing of proceedings, file a counterclaim, if it was filed with unjustified delay, the tribunal may decide to hear the counterclaim in separate proceedings. The same deadline is applicable to filing a set-off claim, provided that the arbitral tribunal has jurisdiction over the claim to be asserted by set-off.

Case management conference

The rules of HCCI provide that the tribunal holds a case management conference at the beginning of the proceedings in order to plan and make clear the progress of the procedure. In this session the tribunal decides whether it holds a hearing for the purposes of presenting the positions and evidence or conducts the proceedings without holding a hearing. In light of these the arbitral tribunal shall establish the procedural timetable and set time limits for each procedural act, and after that, it shall render a procedural order on the agreed terms and course of the proceedings.

Although the case management conference is similar to , the “Terms of reference” regulated by the procedural rules of the International Chamber of Commerce (ICC) regulation, its legal effects are not the same, in relation with the modification of claim and counterclaim.

Amendments to the claim and statement of defence

The Rules of Procedures of the HCCI are far more flexible concerning the amendments to the claim and statement of defence, than the ICC regulation or the ordinary Hungarian litigation rules.

According to the Rules of Procedure, any of the parties may modify or add to the claim or defence (counterclaim) during the arbitration proceedings, until the closing of proceedings, except when the arbitration tribunal does not allow the modification by reason of the delay caused thereof. The tribunal may also decide that the modification is allowed, but the extra costs due to the delay shall be borne by the party submitting the modification.

It means that the arbitral tribunal evaluates the admissibility of the claim modification and its consequences on a case-by-case basis, taking into account the relevant facts of the case.

Hearings

As it was mentioned, during the case management conference the arbitral tribunal decides whether it holds a hearing or not. However, this decision is not binding, the arbitral tribunal shall hold a hearing if, in light of the circumstances of the case, it deems necessary, or, if any party so requests until the closing of proceedings. At the request of any of the parties it is mandatory to hold an oral hearing.

The hearing is not open to the public. The members of the arbitral tribunal, the parties and their representatives, the recording secretary, interpreters, witnesses and experts may be present at the hearing, as well as persons to the presence of whom all parties have consented.

Default of parties

In case the Claimant fails to remedy the defaults of the Statement of Claim, the Arbitration Court terminates the procedure.

If the respondent fails to submit its statement of defence even within the additional time limit set forth by the arbitral tribunal, the arbitral tribunal shall continue the proceedings without treating such failure in itself as an admission of the claimant’s allegations or claims, which is more favorable for the defaulting party, than the rules of civil litigation in Hungary.

In case without any proper reasons any of the parties fails to appear in the arbitration hearing or fails to submit their evidence, the arbitration panel may continue the proceedings and may adopt a decision on the basis of the available evidence.

Evidence

The Arbitration Act provides that the tribunal may order the taking of evidence from its own motion, even in the absence of any motion for evidence submitted by the parties. The tribunal may order the parties to produce evidences, the taking of witness testimony, the inspection of an object or place and the appointment of expert.

The parties are entitled to submit evidences, witness testimonies, the opinions of private experts.  However, the arbitration panel may not apply any financial penalty or other coercive measures against the witnesses and experts.

Closing of proceedings

After the last hearing or receipt of the post-hearing briefs filed afterwards the tribunal shall close the proceedings by order. After that further submissions and evidence my only be filed with prior leave of the panel. After closing the proceedings but prior to issuing its final decision the arbitral tribunal may in exceptionally justified case set a further hearing or order the parties to perform further procedural acts.

The panel has the obligation to notify the parties even if it decides the dispute without holding a hearing, in case of that, it shall notify the parties in advance of its intention to close the proceedings.