11 December 2018

On what grounds can arbitrators be challenged and removed in Hungary? What are the main features of the challenge procedure? What is the difference in case of institutional arbitration? What happens if an arbitrator becomes incapable of performing his duties? We address these question in our article.

Basic obligations of arbitrators

Arbitrators shall be independent and impartial throughout the fulfilment of their whole mission, and they shall disclose all circumstances likely to give rise to justifiable doubts as to their impartiality or independence, not only when accepting the mandate, but throughout the whole arbitral proceedings.

In addition, in case the arbitration agreement of the parties contains any qualification or other criteria regarding the arbitrators (e.g. university degree, knowledge of language, nationality, etc.) they must comply with the said criteria.

Grounds for challenge

A motion for challenge may only be submitted against an arbitrator if

  1. any circumstances exist that raise lawful doubt as to his unbiased position or independence, or
  2. if he does not have the qualification or other criteria necessary in accordance with the parties agreement.

Hungarian state courts apply the IBA Guidelines on Conflict of Interest in International Arbitration, and according to case law, when evaluating the impartiality and independence a “reasonable third party approach” shall be applied.

The Arbitration Act further limits the challenge of arbitrators by providing that a party may exercise any objection against an arbitrator appointed by him or against an arbitrator in whose appointment he took part only for reasons that became known to him after the appointment.

Challenge procedure

The party wishing to challenge an arbitrator shall send a written statement of the reasons for the challenge to the arbitral tribunal within 15 (fifteen) days after becoming aware of the constitution of the arbitral tribunal or after becoming aware of any circumstance justifying the challenge.

If the other party or the arbitrator concerned does not agree with that, the arbitral tribunal shall decide on the challenge. In case the motion for challenge is rejected by the arbitral tribunal, the party can turn to the Metropolitan Court within 30 (thirty) days to decide on the motion.

While the challenge procedure is pending, the tribunal, including the challenged arbitrator, may continue the proceedings and may render a decision.

Challenge procedure in front of HCCI

In case of the arbitration proceedings is ongoing in front of the Court of Arbitration of the Hungarian Chamber of Commerce and Industry (HCCI), the following special rules apply:

  1. any challenge may be submitted until the closing of the proceedings;
  2. the arbitral tribunal’s decision rejecting the motion for challenge can be appealed in front the Presidency of the Arbitration Court within 30 (thirty) days.
  3. in case the Presidency of the Arbitration Court rejects the challenge, then the party can still turn to the Metropolitan Court within 30 (thirty) days to decide on the motion for challenge.

Incapacity or delaying the proceedings

The Arbitration Act regulates the situation when an arbitration becomes incapable of performing his or her duties, or when due to other reasons the arbitrator delays the arbitral proceeding for any unjustified reason.

In this case the parties can agree on terminate his mandate, or any party can request from the Metropolitan Court, to declare the termination the mandate of the arbitrator. There is no legal remedy against the decision of the state court.

In cases ongoing in front of the Court of Arbitration of the HCCI, the presidency shall be entitled to declare the termination of mandate of the arbitrator, in case the application is rejected, the party can start procedure within 30 (thirty) days in front of the Metropolitan Court.

Termination of an arbitrator’s mandate

In addition to successful challenge procedure or declaration of termination of mandate, an arbitrator’s mandate be terminated for the following reasons:

  1. with the termination of arbitral proceedings.
  2. when the arbitrator resigns from his office;
  3. when the parties agree upon the termination of the arbitrator’s mandate;

Resigning one’s office as an arbitrator and the agreement for termination of the arbitrator’s mandate by the parties shall take effect if all members of the proceeding arbitration tribunal and in the case of resignation all the parties have been notified thereof.

Substitution of arbitrators

If an arbitrator’s mandate terminates for any reason, a new arbitrator shall be appointed to replace him by applying the same provisions as those governing the appointment of the arbitrator with terminated mandate.