Blog » FREEZING INJUNCTIONS IN HUNGARY 1 - WHEN SHOULD YOU REQUEST?
FREEZING INJUNCTIONS IN HUNGARY 1 - WHEN SHOULD YOU REQUEST?
27 February 2017
Nothing is worse than a won court battle, if during litigation the defendant had time to dissipate its assets. To prevent this in a Hungarian business litigation, you can seek a freezing injunction, and your defendant cannot frustrate the judgment when it comes to enforcement. If you want to know the details read further this article, which is the first part of a three-part article series in this matter.
In this first article, we summarise the situations when you can submit an application for a freezing injunction to the Hungarian judge.
Freezing injunction based on first instance judgment
If you have at least a first-instance judgment against your defendant, issued by a Hungarian or other EU court, you can
seek a freezing injunction from the court of first instance. The judgment shall order the defendant to pay a certain amount of money, so other type of judgments (etc. declaratory judgment, etc.) cannot be “protected” by freezing injunction.
If the judgment is delivered in a construction litigation, and it is based on the expert report of the Expert Body of Performance Certification, the court is obliged to order the freezing injunction for the amount not exceeding HUF 400 Million.
Freezing injunction in ongoing Hungarian litigation
If you started a business litigation in Hungary, but the court has not yet issued a judgment, the freezing injunction may be sought in the following cases:
- if your claim (to be more precise, its existence, quantity and maturity) is certified by an authentic public document or by private documents having full evidentiary force;
- if your claim satisfies the conditions under point 1) and you evidence that you started a Hungarian arbitration procedure;
- in intellectual property land competition litigation;
It is worth to dedicate few words for the conditions mentioned under point 1) because they are relevant in both general business litigation before ordinary courts and in arbitration proceedings, and these type of procedures cover the vast majority of business dispute resolution in Hungary.
When it comes to formal requirements, in Hungary authentic public documents in business are the notarized documents, while a written contract, duly signed by the representatives of the corporate parties meets the criteria of a private document having full evidentiary force.
Based on this, the non-payment of the due purchase price based on a sale and purchase contract, or the delay of paying back the loan on the basis of a loan agreement can meet the above conditions, if it is duly signed by the business partners, and it is well-drafted.
The same goes for the claim arising from a construction contract, where the performance of the contractor was validated with a performance certificate, duly issued by the employer.
On the contrary, a contract concluded through a mere e-mail correspondence, or orally, or even a poorly drafted written contract will not satisfy the above conditions.
The same goes for the cases, where the contract is well-drafted, but the claim is based on the breach of contract, and the circumstances of the breach are not evidenced in the form mentioned above.
At the same time, in case of assignment, it is settled case law, that the assignment contract does not have to fulfil the above mentioned formal criteria, if the claim, arisen upon the assigned contract meets them.
Freezing injunction in other EU litigation
The dissipation or hiding of business assets is a major risk in cross-border litigations, for this reason, freezing injunction can be sought with more preferential conditions for Hungarian assets of the defendant in case there is an ongoing litigation before other EU court.
So, if you started a civil or commercial litigation before the court of any EU member state based on the Brussels Regulation, you can seek the freezing injunction from the Hungarian courts regarding the assets of the defendant situated in Hungary, even if your claim does not satisfy the criteria under point 1), discussed above in details.
Freezing injunction against shareholders
In Hungary, there are some company forms, where, under certain circumstances, the shareholders themselves can be liable for the debts of the company: these are the general partnership (Kkt.) and the limited partnership.
If you have an enforceable judgment against a general partnership (Kkt.) or a limited partnership (Bt.) you can seek a freezing injunction against the shareholders of the mentioned companies, to secure your future claim against the shareholders in case of non-payment by the company.
Freezing injunctions are useful tools in several types of Hungarian business litigations, or even in litigations ongoing in front of other European courts, if assets located in Hungary are concerned.
If your claim is supported by solid documentation, you do not have to wait with submitting the application for freezing injunction until the first instance judgment is delivered., and you can secure the satisfaction of your claim in due time.
To know what kind of freezing injunction can be sought in front of the Hungarian court, do not miss our next article, dealing with the different types of freezing injunctions.
CAN YOUR DEBTOR ESCAPE LIQUIDATION BY SETTING OFF CLAIMS IN HUNGARY?
The initiation of a liquidation procedure is an effective debt collection method, since the debtor may only avoid being liquidated by paying the claim if the conditions specified in the Act on Bankruptcy Proceedings and Liquidation (Bankruptcy Act) are met. For this reason, in the case of liquidation, one of the most common defences of the debtor is the reference to offsetting. But can the debtor refer to offsetting without limitation during liquidation? In our short article we answer this question.Read more »
SZIGET FESTIVAL FINED RECORD HUF 30 MILLION FOR GDPR BREACHES – WHAT WENT WRONG?
A few days prior to the first anniversary of the entry into force of the GDPR the Hungarian Data Protection Authority imposed the biggest data protection fine in Hungary so far. The target was the biggest Hungarian festival organizer company thanks to whom the public may enjoy the SZIGET, the VOLT or the Balaton Sound Festival. The Data Protection Authority reviewed the check-in system of the festival and the data processing in relation with the check-in. In our short article we summarize the mistakes the Authority identified.Read more »
CONSTRUCTION TRUSTEESHIP IN HUNGARY - GETTING PAID IN CONSTRUCTION PROJECTS AS SUBCONTRACTOR
Construction trusteeship, as mandatory collateral management of major private construction projects in Hungary, strives for protecting subcontractors against non-paying general contractor, by allowing direct payments from employer under certain conditions. How does it work in practice and what are the limits of subcontractor protection? We address these issues in this article.Read more »