14 January 2019

How domestic and international arbitral awards are enforced in Hungary? On what basis can be the enforcement refused? What kind of remedies are available against the “exequatur”? We summarise the answers for these question in this article.

Enforcement of domestic awards

The arbitration award has the same effect as a final court decision, so in relation with its enforcement the general legal regulations on judicial enforcement shall apply.

The award can be enforced by the regional court, where the award-debtor has its registered seat. In the absence of such, in front of the regional court where the award debtor has seizable assets or branch or representative office.

The party who submits a petition for the enforcement of the award shall attach its original copy or certified copy to the application.

The regional court can refuse the enforcement only if the subject of the dispute may not be referred to arbitration, or the arbitration award is in conflict with Hungarian public order.

Enforcement of international awards (New York Convention)

The main legal source governing the enforcement of international arbitral awards is governed by the Convention on the Recognition and Enforcement of Foreign Arbitral Awards („New York Convention”), which entered inti force in Hungary in 1962.

It is important that Hungary adhered to the New York Convention with two reservations: i) the Convention applies only to awards made in another contracting state, outside Hungary, and ii) the concept of “commercial relationship” shall be interpreted in the light of national law.

In general, international arbitral awards shall be enforced according to the same Hungarian procedural rules governing the judicial enforcement of judgments made by state courts.

Refusal of the recognition and enforcement

Based on the New York Convention, recognition and enforcement of the award may be refused only if that party furnishes to the competent authority where the recognition and enforcement is sought, proof that:

 (a) The parties to the agreement were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or failing any indication thereon, under the law of the country where the award was made; or

(b) The party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case; or

(c) The award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration; or

 (d) The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place; or

 (e) The award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made.

The abovementioned reasons are applicable only at the request of the party against whom the enforcement is invoked.

 Recognition and enforcement of an arbitral award may also be refused if the competent authority sought finds that:

(a) The subject matter of the difference is not capable of settlement by arbitration under the law of Hungary; or

 (b) The recognition or enforcement of the award would be contrary to the public policy of Hungary.

Administrative measures

The Convention provides that the party requesting the recognition and enforcement shall submit together with its request the certified copy of the arbitral award, as well as the arbitration agreement.

If the award or the agreement is not made in Hungarian language the applicant party shall produce an official translation of these documents. In Hungary, the only official translator institution is the Hungarian Office for Translation and Attestation (OFFI).

Exequatur and remedies

In case the arbitral award is enforceable, the regional court issues the “exequatur” in the framework of an order which establishes that the foreign arbitral award may be subject of judicial enforcement procedure under the same condition as domestic court judgment.

The decision on “exequatur” may be appealed by both the applicant and award-debtor within 15 (fifteen) days as of receipt of the first instance decision.

The Regional Court of Appeal is competent for the appeal procedure in which both, questions of fact and questions of law can be raised by the parties. The appeal does not have suspensory effect on the enforcement of the award, but the enforcement procedure can be suspended based on request.

The second instance decision of the Regional Court of appeal may be subject to an extraordinary remedy in front of the Curia (Supreme Court of Hungary), the so-called request for review within 45 (forty-five) days as of the receipt of the second instance court decision. This remedy is limited to questions of law.

When it comes to the suspensory effect of the request for review, the same provisions apply that govern the appeal.