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HOW TO SUE US RESIDENTS IN HUNGARIAN COURTS THROUGH ANCHOR-DEFENDANTS?

16 June 2022

Based on the basic principle of international civil litigation, a person can usually be sued only in the courts of his or her own country. However, this makes it very difficult for a claimant who wants to enforce his rights against several defendants living in different countries. Can the jurisdiction of Hungarian courts existing in respect of a domestic defendant (the so-called anchor defendant) be extended to other, foreign defendants as well? In this article, we analyse the practical application of the new rules entered into force in 2018, based on a recent decision of the Hungarian Supreme Court.

1. Background

Claimant I is a public figure and Claimant II is a journalist for a public newspaper. The Claimants, who reside in Hungary, filed a lawsuit against three defendants in a Hungarian court because photographs of them published in a book without their consent, unlawfully.

Defendant I, who lives in the United States, is the author of a book containing the infringing photographs. Defendant II, a company incorporated in the USA, is the publisher of the book. Defendant III is a company incorporated in Hungary that was involved in the distribution of the book in Hungary (collectively, the "Defendants").

Claimants sought the Court to declare that Defendants had infringed their personality rights and to impose additional objective sanctions (injunctions, etc.) against Defendants I-II.

According to Claimants, under the new Private International Law Act ("Private International Law Act" or "PIL")[i] in effect as of 2018, the Hungarian court has jurisdiction over Defendants I-II who are domiciled in the US, given that the claims against the Defendants are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings.

Defendants disputed the jurisdiction of the Hungarian courts, arguing that the domestic domicile of Defendant III did not establish it and that Defendant III had in the meantime ceased to distribute the books. Defendants therefore disputed that the court has jurisdiction in respect of the U.S.-based Defendants I-II.

2. Decisions of the court of first and second instance

The court of first instance established its jurisdiction over all three Defendants and ruled on the merits of the case. In its decision, the court dismissed the Claimants’ action as unfounded.

The second instance court amended the judgment and held that the Defendants I and II had infringed the right of personality (likeness) of the Claimant I.

Defendants I and II were barred from further infringement and ordered to give moral reparation. The court of second instance also found Hungarian jurisdiction over all three Defendants.

3. Judicial review procedure and the decision of the Curia

Defendants I-II requested the judicial review of the final judgment. They sought the setting aside of the final judgment due to the lack of jurisdiction of the Hungarian courts. They argued that the Claimants sued Defendant III solely in order to be able to initiate legal proceedings in Hungary against Defendants I and II, both of whom are US residents. Given the fact that the claim against Defendant III is unlawful, the claims shall be rejected in respect of all the Defendants.

According to the judgment of the Hungarian Supreme Court[ii], the request for judicial review was unfounded.

According to the reasoning of the decision, the provisions of the Private International Law Act are applicable with regard to the US domicile of Defendants I-II and the Hungarian domicile of Defendant III, given that, in the absence of a defendant domiciled in another EU Member State, the Brussels Ia Regulation, a legal source which otherwise has priority over domestic rules, did not apply.

According to the Curia, the violation of the right to privacy was committed jointly by the defendants: Defendant I as the author, Defendant II as the publisher and Defendant III as the distributor of the book in Hungary. The joint infringement resulted in a joint relationship between the Defendants.

According to the Curia, the adjudication of the infringement in separate lawsuits would be cumbersome and could lead to conflicting decisions.

The Curia therefore found that the court of first instance was justified in concluding that for reasons of expediency, it had jurisdiction over all the Defendants based on the Hungarian domicile of Defendant III.

4. Analysis of the decision

The basic principle of international civil procedural law is the so-called actor sequitur forum rei, under which a defendant may, as a general rule, be sued only in the courts of the country where he is domiciled.

However, there are complex cross-border cases in which it is appropriate to allow the claimant to pursue his claims against several defendants in front of one court, in order to ensure that the case is dealt with in a unified manner, avoiding potential conflicting judgments rendered in separate proceedings.

5. Joint procedure against several defendants - the development of domestic law

The above-mentioned possibility was introduced in the former Private International Law codex (PIL Law Decree)[iii] in 2000, in preparation for Hungary's accession to the EU. At that time, the legislator "exported" the  provisions of the old Code of Civil Procedure[iv] in respect of “co-litigants”, allowing for the procedure against several defendants, to the PIL Law Decree.

According to the rules of the former Code of Civil Procedure on co-litigants, two or more defendants could be jointly sued if the claims in the action arose out of the same legal relationship or if the subject matter of the action was a common right or a common liability that could only be resolved uniformly.[v]

The above domestic rule was stricter than the similar rule of the "Brussels regime" in the EU, in relation to which the EU Court of Justice had explained in the Kalfelis v. Schröder case that a claimant may sue more than one defendant before the court having jurisdiction with regard to the domicile of one of the defendants (the so called “anchor-defendant”), where there is such a close connection between the Claimant's claims against the defendants that it is appropriate to adjudicate on them together in order to avoid irreconcilable judgments resulting from separate proceedings.[vi]

The above case-law of the Court of Justice of the EU was later incorporated into the Brussels I Regulation, and after into Article 8 (1) of the Brussels Ia Regulation. The Hungarian legislator harmonised the domestic rules with the above provision of the Brussels Ia Regulation, by copy-pasting the said provision into Section 90 (1) of the new Private International Law Act.

6. The importance of the new domestic rules

While the old rule of the PIL Law Decree focused on legal relationship between the co-defendants,  taking a static substantive law-based approach, the new rule of the PIL, in line with EU law, approaches the issue from a dynamic, procedural point of view, allowing the claimant to sue several defendants before one court on the basis of the formulation of the claimant’s claims and on procedural expediency.

Due to the new rules, the claimant generally has more freedom and, if he files his claim properly against different defendants, he can sue several defendants together, even in cases where the claims arise, for example, from different legal relationships.

In addition, the new rules may be of particular relevance in case of infringements that take place through contractual chains, where all the defendants in the contractual chain, who are parties to separate legal relationships, can be sued jointly, which is typical for example in the case of copyright infringements.

However, in the case at hand, the Supreme Court did not assess this aspect as it considered the Defendants’ conduct as a joint infringement, which, according to the judgment, created a multi-party relationship between them. The fact that the Curia - in our view unnecessarily - insisted on emphasising that the Claimants’ actions concern the same legal relationship, is due to the effect of the legal thinking forged under the previous legislation.

However, if we examine this case carefully, the Defendants committed the infringement with separate conducts (e.g., use, publication, distribution), so the infringements can be considered as the Defendants' separate legal relationships with the Claimants.

Under the new domestic PIL rules, the existence of several legal relationship is not an obstacle to sue more defendants jointly, as the relevant circumstance is not whether there is one or more legal relationships between the defendants, but the close connection between the Claimants' claims against the defendants, which could have been established in the above case without any doubt, given that the Claimants sought a declaration of infringement in respect of all three defendants.

7. Devil in the details

To sum up the above, Section 90 (1) of the new PIL, and its interpretation by the Hungarian Supreme Court principally makes easier for the claimant to sue persons domiciled in third countries, outside the EU. At the same time, the question, whether it is possible in a given case, can be answered only in the light of the domestic procedural rules.

This is because while article 8 (1) of the Brussels Ia Regulation establish not only the jurisdiction of the Hungarian courts, but the territorial competence of the given Hungarian court, Section 90 (1) of the PIL establishes only Hungarian jurisdiction, while the territorial competence of the court is governed by the Hungarian Civil Procedure Code.[1]

Considering the above, persons domiciled in a non-EU third-country and a Hungarian defendant can actually be sued in front of the same Hungarian court, in case further conditions are met, the analysis of which would go beyond the frames of this article.

Based on the above, the recent judgment of the Hungarian Supreme Court confirms that under the new Hungarian legislation, claimants can sue multiple defendants jointly in front of Hungarian courts generally easier, under the same conditions as under the Brussels regime. Whether claimants can really benefit from the new regime and the favouarable case law, depends on the individual circumstances of the given case.

 

[1] Act CXXX of 2016 on Civil Proceedings

[i] The claimants based the jurisdiction of the Hungarian court on Section 90 (1) of Act XXVIII of 2017 on Private International Law (hereinafter: PILA.)

[ii] In our article we analyse the decision published under No. BH 2022.5.125 I.

[iii] Law Decree No. 13 of 1979 on International Private Law

[iv] Section 51 of Act III of 1952 on the Code of Civil Procedure

[v] Section 51 a-b of Act III of 1952 on the Code of Civil Procedure

[vi] Case 189/87. sz. Athanasios Kalfelis v Bankhaus Schröder, Münchmeyer, Hengst and Co. and others