14 June 2024

If you are taking legal action against your debtor in Hungary, it is often the case that you want to proceed with the lawsuit until the very end at all costs. It is understandable, because your debtor has not paid, which caused you significant costs, time consuming preparations etc. For these reasons, settlements between the parties are quite rare in Hungary. In this article, we present 3 reasons why it may be worth concluding a settlement agreement with your debtor.

1. Fast enforceable decision

According to the Hungarian Civil Procedure Code (“CPC”), the parties can settle the legal dispute or some of the disputed matters at any stage of the proceedings.

If the settlement proposal is in compliance with the law, the court shall approve it by a court order.  A settlement approved by the court shall have the same effect as a judgment.

Based on the above, you can reach an enforceable settlement even in the first court hearing, avoiding years of further proceedings.

2. Reimbursable court fees

If the parties make the settlement during the so-called preparatory phase of the first instance procedure, 90% of the court fee can be reimbursed by the plaintiff. In case of a settlement after the preparatory phase, 50% of the court fee can be reimbursed.

It shall be noted that if the settlement is made in the appeal or judicial review procedure, the reduced fee is only applicable to the fee for the appeal or review procedure. Therefore, it is suggested that the parties should reach a settlement during the first instance proceedings, if they intend to do so.

3. Litigation costs

In the event of a settlement, the parties are free to agree on the costs of the litigation.

According to the CPC, if a settlement is concluded by the parties with the approval of the court, the party indicated in the agreement of the parties shall reimburse the litigation costs of the opposing party. In the absence of an agreement, the litigation costs incurred by the successful party specified in the settlement shall be reimbursed by the losing party specified in the settlement.

In the event of succeeding in the action partially, according to the settlement, in general, the litigation costs shall be paid by the succeeding party in proportion to the ratio of his succeeding.

If the ratio of succeeding and losing in the action cannot be determined, neither party shall reimburse any litigation costs.

4. Summary

It is obvious that you want to assert 100% of your rightful claim, there may be other factors (e.g. selling your company, acute cash flow problems etc.) in which a settlement, based on the above reasons, may be a more appropriate way to resolve the dispute.