07 December 2018

Who can be arbitrator in Hungary? How and when the arbitral tribunal is constituted, and what happens if one of the parties fails to appoint arbitrator? What are the basic obligations of arbitrators and how does their mandate terminate? We address these questions in this article.

Who can be arbitrator in Hungary?

By respecting the parties’ private autonomy to the maximum extent possible, the Hungarian Arbitration Act regulates only the reasons which prevent a person from being arbitrator. Based on this, the following person may not be arbitrator:

  1. who is under the age of 24 year;
  2. who has been deprived of civil rights by final court ruling;
  3. who was sentenced to prison by final ruling;
  4. who is under guardianship or supported decision-making affecting capacity to proceed under the law;
  5. who is barred from practicing a profession made subject to having a university degree;
  6. a person against whom the court applied subjection to probation;
  7. who formerly took part in the parties’ legal dispute referred to arbitration court or in their legal dispute connected therewith as a mediator, as the representative of one of the parties or as an expert;

In addition, the persons holding certain position in the Hungarian public administration (e.g. government officials, judges, etc.) can not be arbitrators during their official mandate.

The nationality cannot be a reason, preventing a person from being arbitrator, however, the parties can deviate from this provision in the arbitration agreement. The parties are free to determine any further criteria regarding the qualification or other characteristic of arbitrators in the arbitration agreement.

The number of arbitrators

According to the Arbitration Act, and the Rules of Procedure of the Arbitration Court of the Hungarian Chamber of Commerce and Industry (HCCI) the parties shall freely decide the number of arbitrators; however, the number of arbitrators may only be an odd number. If the parties have not agreed on the number of arbitrators, the number of arbitrators shall be three.

Appointment of arbitrators

The claimant shall nominate an arbitrator or submit a request for the appointment of an arbitrator by the arbitration court in its statement of claim, whereas the respondent shall nominate an arbitrator in the statement of defence even if it objects to the jurisdiction of the arbitration court.

In case of a panel comprised of three arbitrators each party nominates one arbitrator, and the two arbitrators thus nominated shall elect the presiding arbitrator. If a party fails to nominate an arbitrator within 30 (thirty) days from receipt of the request to do so, or if the two arbitrators do not agree upon the person of the president within 30 (thirty)  days from their nomination, the missing one shall be appointed by the Metropolitan Court upon a request by any party. The same rule applies, if the parties cannot agree upon the person of the sole arbitrator within 30 (thirty) days.

The court proceedings for appointing the missing arbitrator may take several months, and there is no remedy against the court decision, however the court-appointed arbitrator can be also challenged if there grounds for this.

In case of arbitral proceedings in front of the Arbitration Court of the HCCI, the appointment of arbitrators is managed by the Presidency of the Arbitration Court, who shall appoint the arbitration within 30 (thirty) days.

The Arbitration Act provides that in case of appointing an arbitrator, the following circumstances shall be taken into account: the qualification criteria or other feature determined by the parties in the arbitration agreement, and any other circumstance which ensures the impartiality and independency of the arbitration.

The time of constitution of the tribunal

While the Arbitration Act is silent on this matter, the Rules of Procedure of the HCCI defines the time of constitution of the arbitral tribunal shall be which is the day when the statements of acceptance of both the arbitrators nominated by the parties and the presiding arbitrator were received by the Arbitration Court of the HCCI.

From this moment, any measures are taken by the arbitral tribunal.

Multy-party arbitration

The Rules of Procedure of the HCCI regulates the situation, where there are several claimants and/or respondents. In this case the claimants can jointly appoint one arbitrator and the respondents can also jointly appoint one arbitrator, and the president of the tribunal is appointed in accordance with the general rules.

Should the respondents fail to nominate an arbitrator, the Arbitration Court shall appoint an arbitrator both for the claimant and respondent each. Thereby the earlier nomination of an arbitrator by the claimant shall become ineffective. Taking into account the circumstances of the proceedings the Arbitration Court may however decide to appoint an arbitrator for the respondents only. In this case the nomination by the claimant remains effective.

Acceptance, disclosure and other obligations

An arbitrator’s mandate starts with the acceptance of his or her nomination. Arbitrators shall be independent and impartial throughout the fulfilment of their mission.

The arbitrator shall disclose all circumstances likely to give rise to justifiable doubts as to his or her impartiality or independence, not only when accepting the mandate, but throughout the whole arbitral proceedings.

The Rules of Procedure of the Arbitration Court of the HCCI highlights that throughout the proceedings the arbitrators may not accept instructions. They shall keep all circumstances of which they obtained knowledge while fulfilling their duties fully confidential also after the termination of proceedings. They may not provide any information nor make any statements on any cases, whether pending or closed.