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SCOPE AND GENERAL PROVISIONS OF HUNGARIAN ARBITRATION ACT

27 September 2018

The Hungarian Arbitration Act entered into force on 1st January 2018. In this article we summarise its material scope (arbitrability), territorial scope and its other general provisions, like interpretation, the rules of written communications.

Entering into force

The Act LX of 2017 on Arbitration (“Arbitration Act”) entered into force on 1st January 2018.

The provisions of the Arbitration Act govern arbitration proceedings started on and after the day when it entered into force.

When it comes to arbitration agreements, the Arbitration Act has some retroactive effect, since its provisions govern not only arbitration agreements concluded after 1st January 2018, but those concluded before this date, too.

However, the following provisions are applicable to arbitration agreements concluded after this day: i) the provision rendering arbitration agreement invalid in consumer disputes ii) the provision determining substantive law to be applied in arbitral proceedings iii) the provision relative to legal succession in arbitration agreement.

Material scope - Arbitrability in Hungary

The Arbitration Act regulates both ad hoc and institutional arbitration in Hungary.

The Arbitration Act regulates arbitrability in broad sense by providing that any dispute arisen in a contractual or extra contractual commercial relation, may be subject to arbitration by ad hoc or permanent arbitrator bodies, instead of state court procedures. The term “commercial relation” has to be clarified by the case law.

The following legal disputes are excluded from arbitration:

  • consumer disputes
  • employment disputes
  • enforcement cases
  • actions against notarial resolution adopted in actions in rem
  • procedures regarding press remedies
  • bankruptcy & liquidation
  • administrative proceedings
  • competition law proceedings
  • family law matters

Territorial Scope

When it come to the territorial scope, the provisions of the Arbitration Act shall be applied whenever the place of arbitration is in Hungary.

In addition, the Arbitration Act may have extra-territorial application, because it provides that in case the procedure is conducted abroad by the Permanent Court of Arbitration attached the Hungarian Chamber of Commerce, certain provisions still apply, save international treaties provide otherwise (e.g. provisions regulating the relation between arbitration and certain court proceedings and the legal assistance of courts, the provisions relative to enforcement of interim measures, and certain security measures, the provisions relative to the enforcement of arbitral awards, etc.).

According to leading scholars, this latter provision should be applicable in case of proceedings conducted by the arbitral tribunals of foreign arbitral institutions or by ad hoc arbitral tribunals.

Limited party Autonomy

The party autonomy is limited, because differing from the provisions of the Arbitration Act by party agreement is only permitted in case the Arbitration Act itself so provides. A notable example for this possibility is the “retrial” as new remedy, introduced by the Arbitration Act, which can be waived by the parties in their arbitration agreement.

Interpretation

The Arbitration Act expressly refers to “good faith” and to the explanatory note of the UNCITRAL Model Law, revised in 2006, as guiding principles, in case any question arises as to its interpretation.

Written notifications

The Arbitration Act regulates the receipt of written notifications in a detailed manner, setting up presumptions of receipt, creating an effective communication regime.

Save the parties agreed otherwise, any written communication shall be deemed as received by the other party, if i) it was personally delivered to the other party, or ii) in case it was delivered at the place of business, domicile, habitual residence or postal address of the addressee.

In case the receipt of the written communication cannot be established after reasonable investigation, it shall be deemed as received, if it was sent to the last known place of business, domicile, habitual residence or postal address of the other party by a registered letter, or by any other means which certifies the attempt of delivery, save if the parties agreed otherwise. The written communication shall be deemed as received within 8 (days) in case of domestic addressee, and within 15 (fifteen) days in case of foreign addressee.