For the time being, litigation is more common in Hungary than arbitration, but the popularity of the latter is constantly growing. Furthermore, Hungarian parties are also increasingly confident in the efficiency and speed of this dispute settlement method.
The recent reform of the Arbitration Act and the institutional system has also increased the popularity of arbitration in Hungary.
In addition, the latest changes to the Code of Civil Procedure, which have made litigation less effective and more rigid in many aspects, are also leading to a tendency for parties to opt for arbitration.
According to statistical data published on the website of the Hungarian Chamber of Commerce and Industry, 94 cases were initiated before the permanent arbitral tribunal attached to the chamber in 2018, 65 cases in 2019, and 80 cases in 2020. About 15% of the cases were between international parties, and in 85% all parties were Hungarian.
According to the available statistics, the pandemic did not significantly affect the number of cases in 2020. As regards year 2021, there is no data available yet.
Due to restrictive measures, personal presence hearings have only been held in very few cases since March 2020, so the Commercial Arbitration Court has introduced the possibility of online case management conferences and hearings. It is expected that the possibility of online hearings will remain available to the parties even after the restrictions have been lifted as a cost-effective and time-efficient solution in many respects.
The key industries in which the parties have frequently used arbitration in the past year as an alternative dispute resolution method are the construction sector and long-term business leases. In the construction sector, disputes arising from large investments (roads, railways, etc) regulated by FIDIC-based contracts, as well as disputes arising from a lack of capacity, are the most common.
Given the lack of published statistics on the sectoral distribution of arbitration cases, the exact distribution between each industry and the exact involvement of the main industries cannot be determined.
Since the institutional reforms introduced in 2018, the permanent arbitration court (ie, the Commercial Arbitration Court), operating alongside the Hungarian Chamber of Commerce and Industry, has exclusive competence in almost all matters (except for disputes relating to agriculture and sports). Therefore, it is the Commercial Arbitration Court that is most used for international arbitration as well. According to the available statistics, about 15% of cases brought before the Commercial Arbitration Court since 2018 have been between international parties.
For some of the court proceedings relating to arbitration proceedings, the Hungarian Arbitration Act designates the Budapest Metropolitan Court as the proceeding court. These proceedings include cases where the court acts as the appointing authority, when it decides on a motion to challenge an arbitrator, when it finds that the arbitrator’s mandate has been terminated for any other reason, when it decides on an objection to the arbitration panel's competence, and in a lawsuit for the setting aside of the arbitral award.
In cases relating to the recognition and enforcement of arbitral awards or interim measures rendered by the arbitral tribunal, and to the assistance provided by the courts to the evidentiary procedure, the competent court is determined by the general Hungarian procedural rules on competence and national jurisdiction (such as the Civil Procedure Code and the Act on Judicial Enforcement).
The national legislation governing international arbitration in Hungary is Act LX of 2017 on Arbitration (Hungarian Arbitration Act, or Act), which is based on the 1985 UNCITRAL Model Law on International Commercial Arbitration (Model Law) as amended in 2006. The Act expressly stipulates that it shall be interpreted subject to the explanations given in the 2006 version of the Model Law (Section 3 (3)).
However, the Hungarian Arbitration Act diverges from the Model Law in a few significant aspects. The Act regulates domestic and international arbitrations in a uniform manner; under the Act, the extraterritorial effect of the provisions listed in Article 1 (2) of the Model Law is confined to arbitral proceedings seated abroad but administered by a Hungarian permanent court of arbitration. Another divergence is the introduction of the possibility of retrial proceedings as a special legal remedy against arbitral awards.
The Hungarian Arbitration Act was passed by the Hungarian Parliament in 2017 and entered into force on 1 January 2018. While the previous Hungarian arbitration act (Act LXXI of 1994) was based on the 1985 version of the Model Law, the new Act mirrors the 2006 version of the Model Law.
In addition, the new Act abolished two of the formerly existing permanent courts of arbitration (the Permanent Court of Arbitration for Money and Capital Markets and the Permanent Court of Arbitration for Energy) and established a new permanent court of arbitration (the Commercial Arbitration Court, attached to the Hungarian Chamber of Commerce and Industry), which has exclusive competence in all domestic institutional arbitration cases seated in Hungary except for legal disputes relating to sports and agricultural matters. In order to maintain the enforceability of arbitration clauses, the Act provides that if the competence of the abolished arbitration courts was stipulated in an arbitration agreement concluded before 1 January 2018, the arbitration agreement shall be regarded as a provision for the jurisdiction of the Commercial Arbitration Court.
The rather unfortunate wording of the original version of Section 1 (1) of the Act defining the territorial scope of application was corrected in August 2018; thus, it is now clear that the Act applies in all cases where the seat of arbitration is in Hungary. However, the extraterritorial effect of certain provisions of the Act (such as Sections 9-10 on the role of courts in case of a dispute subject to an arbitration agreement; Sections 26-28 on the enforcement of interim measures rendered by the arbitral tribunal; Section 40 on court assistance in taking of evidence; and Sections 53-54 on the enforcement of arbitral awards) are confined to institutional arbitral proceedings where the seat of arbitration is outside of Hungary but the proceeding is administered by a Hungarian permanent court of arbitration.
The validity and enforceability of an arbitration agreement is governed by Section 8 of the Hungarian Arbitration Act.
As a requirement regarding the content of an arbitration agreement, the Act stipulates that the arbitration agreement must define the – contractual or non-contractual – legal relationship of the parties out of which the disputes might arise in the future out of which a specified dispute which they wish to arbitrate has already arisen or will arise in the future.
As a formal requirement, an arbitration agreement, which can be a separate agreement or a clause forming part of the main contract, shall be in writing. According to Section 8 (3)-(5), an arbitration agreement is deemed to be in writing if:
The scope of disputes that can be arbitrated under the Hungarian Arbitration Act is broad.
The few exceptions from arbitrability are listed in Section 1 (3)-(4) of the Hungarian Arbitration Act. The Act stipulates that disputes arising out of a consumer contract (except for disputes relating to fiduciary asset management contracts), proceedings regulated in Chapter 7 of Act CXXX of 2016 on Civil Procedure (such as family law, public and private guardianship issues, as well as labour and enforcement disputes) and disputes falling within the scope of Act I of 2017 on Administrative Court Procedure are non-arbitrable.
In general, Hungarian state courts are arbitration-friendly and enforce arbitration agreements except for cases where the invalidity or unenforceability of the arbitration agreement can be established prima facie.
Neither the Hungarian Arbitration Act nor the Hungarian international private law provides specific rules on the law governing arbitration agreements. If the parties do not expressly agree on the law applicable to an arbitration agreement, the Hungarian courts will most often consider the law applicable to the main contract to be applicable to the arbitration agreement as well.
If the law applicable to the main contract is not based on the agreement of the parties but on other rules of international private law, Hungarian courts may apply the law of the seat of arbitration to the arbitration agreement.
Hungarian law applies the rule of separability, which means that an arbitration agreement, even if it forms a part of the main contract, shall be treated as an independent agreement. Consequently, a decision of the arbitral tribunal on the non-existence, invalidity or unenforceability of the main contract shall not necessarily affect the existence and validity of the arbitration agreement and the competence of the arbitral tribunal. Section 17 (1) of the Hungarian Arbitration Act adopts the same concept as Article 16 (1) of the 2006 version of the Model Law.
Under Hungarian law, the parties have a broad autonomy to select the arbitrators, to determine the number of arbitrators (provided that they choose an odd number) and to determine the procedure for the selection of arbitrators.
In accordance with Section 12 (7) of the Hungarian Arbitration Act, the following persons cannot be nominated as arbitrators:
Section 40 (5) of Act CLXII of 2011 on the status and compensation of judges stipulates that sitting Hungarian judges are prohibited by law from accepting arbitrator mandates.
The Hungarian Arbitration Act sets out the default mechanism for the appointment of arbitrators, which shall be applied if the parties did not choose a method for selecting arbitrators or the method chosen by the parties fails.
If the parties agreed that there would be a sole arbitrator, they shall jointly appoint the sole arbitrator. If no agreement can be reached regarding the nomination of a sole arbitrator, upon request of one of the parties, the sole arbitrator shall be appointed by the Budapest Metropolitan Court, or by the Board of the Commercial Arbitration Court if the dispute is administered by the Commercial Arbitration Court.
The default provisions for the appointment of a tribunal comprising three arbitrators stipulate that each party shall appoint one arbitrator within 30 days of a written request by the other party to do so, and the party-appointed arbitrators shall jointly nominate the chairperson within 30 days of their appointment. If either of the parties fails to appoint an arbitrator, or the party-appointed arbitrators fail to agree on the chairperson, upon request of either of the parties, the missing arbitrator shall be appointed by the Budapest Metropolitan Court, or by the Board of the Commercial Arbitration Court if the dispute is administered by the Commercial Arbitration Court.
The mechanisms stipulated for a three-member tribunal shall apply mutatis mutandis in case of a tribunal comprising more than three arbitrators with the parties nominating arbitrators in equal proportions, and the missing arbitrator being appointed by the majority vote of the other members of the tribunal.
The appointing authority must pay due regard to the arbitrator’s professional qualifications and any other factors set out in the arbitration agreement, as well as to all other circumstances relevant to ensuring the appointment of an independent and impartial arbitrator. In cases where the Board of the Commercial Arbitration Court acts as appointing authority, the arbitrator shall be appointed from the list of suggested arbitrators. However, if arbitrators from the list of suggested arbitrators do not satisfy the professional qualifications or other characteristics set out in the arbitration agreement, then the Board of the Commercial Arbitration Court shall not be confined to the list of suggested arbitrators.
Hungarian law does not provide a specific mechanism for the appointment of arbitrators in case of multi-party arbitrations.
Hungarian courts intervene in the selection of arbitrators only if one of the parties so requests in line with the rules on default mechanisms for the selection of arbitrators (see 4.2 Default Procedures).
In accordance with Section 13 of the Hungarian Arbitration Act, the appointment of an arbitrator may only be challenged if there are circumstances that raise justified doubts as to his or her impartiality or independence, or if he or she does not have the qualifications or fails to meet the other prerequisites agreed by the parties. A party may object to an arbitrator it has appointed only if the circumstances on which the objection is based first became known to the party after the appointment was made.
Parties are free to agree on a procedure for the challenge or removal of arbitrators, but cannot deviate from the rules of the Hungarian Arbitration Act on unsuccessful challenges.
If the parties do not set out a procedure for challenge or removal, the default mechanism of the Hungarian Arbitration Act shall apply. Section 14 of the Act stipulates that the party that wishes to challenge an arbitrator shall send a reasoned statement regarding the challenge to the arbitral tribunal within 15 days of becoming aware of the composition of the arbitral tribunal, or within 15 days of becoming aware of the underlying reasons for the challenge.
If the challenged arbitrator does not voluntarily withdraw from office, or if the other party does not agree to the challenge, it is up to the arbitral tribunal to decide on the motion for challenge.
If the challenge was unsuccessful using the procedures described above, upon request of the challenging party submitted within 30 days of the receipt of the decision on the rejection of the challenge, the challenge shall be decided by the Budapest Metropolitan Court, or the Board of the Commercial Arbitration Court if the dispute is administered by the Commercial Arbitration Court. If the Board of the Commercial Arbitration Court rejects the challenge, the challenging party may, within 30 days, request the Budapest Metropolitan Court to decide on the challenge.
The decision of the Budapest Metropolitan Court on the challenge is final and binding and cannot be appealed. Until the order is served, the arbitral tribunal, including the arbitrator concerned by the motion for challenge, may continue the proceedings and render its award.
According to the case law of the Hungarian Supreme Court, the failure of an arbitrator to disclose a circumstance that may give rise to doubts as to his or her impartiality is automatically considered a ground for setting aside the arbitral award (Gfv.30.141/2010/24).
Under Section 13 (1) of the Hungarian Arbitration Act and Section 23 (1) of the Rules of Procedure of the Commercial Arbitration Court, an appointed arbitrator must disclose any circumstances that are likely to give rise to doubt as to his or her impartiality or independence, prior to accepting an appointment. The arbitrator shall comply with this obligation throughout the whole proceeding, that is to say, from his or her appointment up to the closing of the arbitration proceeding and the rendering of the arbitral award.
Under the Hungarian Arbitration Act the members of the Board of the Commercial Arbitration Court may only appear in arbitral proceedings as party-appointed arbitrators; they cannot be nominated by the Board of the Commercial Arbitration Court.
The disputes that are excluded from the wide scope of subject matters that are capable of being resolved by arbitration are listed in 3.2 Arbitrability.
Hungarian law recognises the principle of competence-competence, which means that the arbitral tribunal may rule on its own jurisdiction, including a challenge to the existence or validity of the arbitration agreement (Section 16 (1) of the Hungarian Arbitration Act).
In accordance with Section 17 of the Hungarian Arbitration Act, the arbitral tribunal may rule on an objection to its jurisdiction either as a preliminary issue or in its final award. In the former case, any party may, within 30 days after receiving notice of such a ruling, request the Budapest Metropolitan Court to rule on the jurisdiction of the arbitral tribunal. The arbitral tribunal may continue its proceeding and render an award until it is served with the ruling of the Budapest Metropolitan Court on the jurisdiction of the tribunal.
An objection to the jurisdiction of the arbitral tribunal shall be raised no later than the time the statement of defence is submitted. The fact that a party has nominated or participated in the nomination of an arbitrator shall not preclude the party from raising an objection to the jurisdiction. An objection alleging that the arbitral tribunal has exceeded its competence shall be raised immediately in the event of an alleged excess of competence; however, the arbitration panel may accept an objection at a later stage if it considers the delay in the objection to be justified.
As elaborated in 5.3 Circumstances for Court Intervention, parties have the right to go to court to challenge the jurisdiction of the arbitral tribunal if the arbitral tribunal bifurcated the proceedings and ruled on its own jurisdiction as a preliminary issue. If the arbitral tribunal rules on its jurisdiction in the final award, parties may only challenge the jurisdiction of the arbitral tribunal in setting-aside proceedings before the Budapest Metropolitan Court, which may be initiated after the final arbitral award has been rendered.
Hungarian courts have the right to assess questions of both fact and law and undertake a full review of the arbitration agreement to determine its existence and validity. The court is not bound by the arbitral tribunal’s decision regarding its own jurisdiction.
The court seized of the matter which is the subject of an arbitration agreement shall terminate the proceedings if the respondent so requests at the latest in the respondent's written defence. The court shall not terminate the proceedings if it finds that the arbitration agreement does not exist or is invalid, void or unenforceable.
The extraterritorial effect of Article 9 of the Act obliging the Hungarian courts to terminate the proceedings upon request of the respondent if there is an arbitration agreement between the parties is confined to cases where the arbitral proceeding seated outside of Hungary is administered by a Hungarian permanent court of arbitration. This means that if a court is seized of an action in a matter of which the parties have made an arbitration agreement providing for an arbitral proceeding seated outside of Hungary and not administered by a Hungarian permanent court of arbitration, the Act does not call on Hungarian courts to terminate the proceedings upon request of the respondent. In the absence of such specific procedural provision, Hungarian courts shall refer the parties to arbitration by reference to Article II (3) of the New York Convention.
The Hungarian Arbitration Act contains an explicit provision stipulating that both universal and single legal successors are bound by the arbitration agreement. The Act also recognises the parties’ freedom to opt out of this provision and agree that the arbitration agreement applies only to disputes between them, and that their possible successor or successors may enforce the claim arising from the legal relationship only before an ordinary court.
The Hungarian Arbitration Act provides the possibility for the arbitral tribunal to adjudicate a claim filed by or against a person that is not a party to the arbitration agreement. This is possible if a claim by or against a person not party to the contract can only be adjudicated uniformly with the dispute which is the subject of the arbitration agreement. Another prerequisite is that such third party submits to the jurisdiction of the arbitral tribunal in a written declaration. The law does not specify when claims can be decided only uniformly; it must always be decided by the arbitral tribunal on the basis of substantive law, considering the circumstances of the specific case.
Unless the parties agree otherwise, the arbitral tribunal may, upon either party’s request, make an order for interim measures. Along with the request for interim measures, the party may request the court to issue a preliminary order directing the other party not to frustrate the purpose of the interim measures requested. A preliminary order can be issued if the arbitral tribunal considers it an existing risk that the prior disclosure of the request for interim measures to the party against which the measures were requested would frustrate the purpose of the measures.
With an order for interim measures the arbitral tribunal may direct the parties to:
In case of non-compliance with the interim measures ordered by the arbitral tribunal, interim measures and preliminary orders may be enforced by Hungarian courts in accordance with the rules on judicial enforcement (Act LIII of 1994 on Judicial Enforcement). Enforcement of the interim relief may be denied by the Hungarian courts (i) on the same grounds as those upon which the final award can be set aside (see 11.1 Grounds for Appeal); (ii) if the arbitral tribunal’s decision with respect to the provision of security in connection with the interim measures has not been complied with; (iii) if the interim measures have been rescinded or suspended by the arbitral tribunal; or (iv) if the interim measures are incompatible with the jurisdiction of the court.
Due to the unfortunate wording of Section 1 (2) of the Act on the extraterritorial effect of certain provisions, the Hungarian courts may only enforce interim measures rendered by arbitral tribunals if the seat of the arbitral proceeding is in Hungary or if the arbitral proceeding seated outside of Hungary is administered by a Hungarian permanent court of arbitration.
Preliminary orders are binding on the parties but cannot be enforced via judicial enforcement.
The existence of a valid and enforceable arbitration agreement does not preclude the parties from requesting preliminary or interim relief from the Hungarian courts, provided that the Hungarian court has international jurisdiction to order such relief. Any party may seek interim or preliminary relief from Hungarian courts before or after the constitution of the arbitral tribunal.
Hungarian courts are also entitled to enforce interim measures ordered by the arbitral tribunal; however, preliminary orders of the arbitral tribunal cannot be enforced via judicial enforcement. Hungarian courts can enforce interim measures ordered by the arbitral tribunal even if the seat of arbitration is outside of Hungary, but only if the arbitral proceeding is administered by a permanent court of arbitration seated in Hungary.
The provisions of the Hungarian Arbitration Act permitting national courts to grant preliminary/interim relief in relation to arbitral proceedings have an extraterritorial effect, which means that they are applicable even if the seat of arbitration is outside of Hungary.
The Hungarian Arbitration Act does not contain any provisions on emergency arbitrators.
Hungarian arbitration law does not contain any provision explicitly granting an arbitral tribunal the power to order security for costs.
The Hungarian Arbitration Act recognises the parties’ freedom in determining the rules of procedure applicable to their arbitral proceeding; however, as a mandatory and fundamental principle it declares that the parties’ right to equal treatment and the right to be heard shall be granted in the arbitral procedure.
In the absence of an agreement by the parties regarding the procedural rules or a reference to a set of rules to be administered by an institution, it is up to the arbitral tribunal, subject to the Hungarian Arbitration Act, to determine the rules governing the arbitral procedure.
The framework of default procedural rules determined by the Hungarian Arbitration Act addresses, inter alia, the seat of arbitration, the commencement of the arbitral proceedings, the language of the proceedings, the statements of claim and defence, the oral hearings and the written proceedings, the intervention in the proceedings by a third party having legal interest, the consequences of a party’s default, as well as the rules on expert evidence.
Because, under Hungarian arbitration law, party autonomy is the governing principle in the determination of the rules governing the arbitral procedure, the Hungarian Arbitration Act does not set out any mandatory procedural steps that are required by law.
The arbitral tribunal has the power to decide on its own jurisdiction and, in the absence of the parties’ agreement, on the law applicable to the merits of the case, as well as on the merits of the case and allocation of procedural cost. If the parties have authorised the arbitral tribunal to do so, it may render its decision based on principles of equity. The arbitral tribunal’s competence also includes deciding on the admissibility, relevance and weight of evidence. If the parties did not agree otherwise, the arbitral tribunal has the power to issue interim measures and preliminary orders.
It is the arbitrators’ duty to remain independent and impartial throughout the arbitral proceeding and to disclose any circumstance that might give rise to doubt as to their impartiality and independence. The arbitrators have the duty to treat the parties fairly, and must ensure that each party’s right to be heard is observed. As regards the adjudication of the legal dispute, the Hungarian Arbitration Act stipulates that the arbitral tribunal shall in all cases make its decision in accordance with the terms of the contract and shall take into account the trade practices applicable to the transaction.
The Hungarian Arbitration Act does not stipulate any particular qualifications or other requirements for legal representatives appearing in arbitral proceedings. This means that legal representatives appearing in arbitral proceedings do not necessarily have to have a Hungarian legal qualification.
There is no specific provision in the Hungarian Arbitration Act dealing with the means of evidence the parties may use in the arbitral procedure.
Section 36 (5) of the Hungarian Arbitration Act declares that the arbitral tribunal shall not impose fines or other coercive measures on witnesses and experts.
Section 49 of the Hungarian Arbitration Act sets out default provisions in relation to the appointment of experts, which are to be applied unless agreed otherwise by the parties. In accordance with these rules, the arbitral tribunal may appoint one or more experts to provide an opinion on a matter identified by the arbitration panel for which the arbitration panel does not have the specific expertise to assess, and the arbitral tribunal may require either party to provide information to the expert or to present or make available an exhibit for the purpose of inspection. The expert may be requested to present a written or an oral expert opinion, and appear at the hearing in order to be questioned by the tribunal, the parties or other experts appointed by the parties.
The Hungarian Arbitration Act does not stipulate specific rules of evidence that apply to arbitral proceedings. The general principle is the free evaluation of evidence.
In arbitral proceedings governed by the Rules of the Commercial Arbitration Court, Article 40 of the Rules contains specific procedural rules in relation to the taking of evidence. According to these rules, the arbitral tribunal is not bound by the parties’ motions for the taking of evidence and may order the taking of evidence even without a motion from the parties to do so. The details of the method of taking witness testimony, with specific regard to written witness statements possibly to be filed in advance and the taking of oral testimony at a hearing, shall be established during the case management conference and in the procedural order recording the outcome thereof.
The IBA Rules on the Taking of Evidence in International Arbitration are in some cases referred to and used by tribunals as guidelines.
As declared in Section 36 (5) of the Hungarian Arbitration Act, the arbitral tribunal does not have any powers of compulsion to impose fines or other coercive measures on witnesses and experts.
The arbitral tribunal or, with its approval, a party may apply to the Hungarian courts for assistance in taking of evidence. In assisting the evidentiary procedure in an arbitral procedure, Hungarian courts are bound by the general Hungarian procedural law, which means that only the procedures for taking evidence provided for in the provisions of the Hungarian Civil Procedure Code on preliminary evidence are available. This provision of the Hungarian Arbitration Act applies only in arbitral procedures seated in Hungary, or in procedures seated outside of Hungary but administered by a Hungarian permanent court of arbitration.
The Hungarian Arbitration Act stipulates that arbitral proceedings are private and confidential, unless agreed otherwise by the parties.
It might be regarded as an exception to rule of confidentiality of arbitral proceedings that according to the Act it is the duty of the Board of the Commercial Arbitration Court to publish and make available an anonymised and searchable extract of any award or order terminating the proceedings in arbitrations administered by the Commercial Arbitration Court on the website of the Commercial Arbitration Court six months after it was rendered.
An arbitral award and an order terminating the proceeding shall be in writing, contain the date and place of arbitration and be signed by all of the arbitrators. However, if the order states the reason for the missing signatures, it is sufficient if the majority of the arbitrators sign the award.
Unless the parties agree otherwise, the arbitral tribunal shall make its decision by a simple majority of votes and in the absence of a simple majority, it is up to the chair of the tribunal to make the decision.
The Hungarian Arbitration Act stipulates that the award must state the reasons on which it is based, unless based on a settlement between the parties.
If a party so requests, the arbitral award shall contain the decision on the costs of the proceeding and shall decide which party is to bear the costs or in what proportion the parties are to bear the costs.
There is no deadline stipulated by the Hungarian Arbitration Act by which the tribunal must render its decision; however, the Act provides that the arbitral tribunal shall make its decision as soon as possible.
In case of arbitral proceedings administered by the Commercial Arbitration Court under its Rules, the arbitral tribunal shall present the award to the Arbitration Court within 45 days from the closing of proceedings at the latest. The Arbitration Court may in exceptionally justified cases extend this time limit (Section 43 (3) of the Rules).
The types of remedies an arbitral tribunal may award depend on the remedies and the limits recognised by the law applicable to the merits of case. Hungarian arbitration law does not contain any provision on the types of remedies that can be awarded; thus, there are no limits or any other prescriptions provided for by the law.
Punitive damages as a potential remedy are alien to Hungarian law and therefore may be considered contrary to Hungarian public policy.
Hungarian arbitration law does not contain any explicit provisions on whether the parties are entitled to recover interest. An arbitral tribunal is generally entitled to award default interest; however, the particularities depend on the relevant provisions of the law applicable to the merits.
The arbitral tribunal must render a decision on the costs (including the arbitration fees and the legal costs) and the allocation of such costs if either of the parties so requests. The decision on the costs and the allocation thereof shall be contained in the final award or the order terminating the proceeding.
The Hungarian Arbitration Act does not contain any express provision on cost allocation. In general, the costs are allocated by the arbitral tribunal in proportion to the relative success or failure of the parties.
In arbitral proceedings administered by the Commercial Arbitration Court under its Rules, the general rule for cost allocation is that the costs shall be borne by the unsuccessful party to the extent it was unsuccessful; however, the arbitral tribunal may deviate from this general rule in justified cases. If it deviates from the general rule, the arbitral tribunal shall take into account especially the parties’ conduct throughout the proceedings in fostering or hindering those proceedings and the settlement of the dispute.
Under Hungarian arbitration law no appeal against the merits of the award is available.
The parties may request the arbitral tribunal, within 30 days from the receipt of the award and subject to the notification of the other parties, to correct a typographical or calculation error in the award, to provide an interpretation in relation to a specific part of the award, or to supplement the award with regard to a claim presented during the proceeding but which the arbitral tribunal failed to rule on.
An award rendered in an arbitral proceeding seated in Hungary may only be challenged by an application to set aside the award. The request for setting aside shall be submitted to the Budapest Metropolitan Court within 60 days from the receipt of the award by the requesting party. The court may set aside the award only if the party requesting the setting aside proves that:
The setting aside of the arbitral award can also be ordered if the Budapest Metropolitan Court finds that:
The Hungarian Arbitration Act introduced a new type of remedy against an arbitral award, namely a retrial proceeding, which can be initiated up to one year following the receipt of the arbitral award. The party requesting the retrial proceeding shall refer to facts or evidence that it could not submit in the initial proceeding for reasons that were not its own fault, provided that the submission of such facts or evidence could have resulted in a more beneficial award. If the retrial is permitted, the reopened arbitral proceeding shall be limited to the scope of the request for retrial and the arbitral tribunal may maintain the award, or partially or fully revoke it and issue a new award. The parties may opt out of the provisions of the Hungarian Arbitration Act on retrial proceedings either in the arbitration agreement or at a later stage when determining the rules applicable to the conduct of the arbitral proceeding.
Under Hungarian arbitration law, parties can neither expand the list of grounds for challenge of an arbitral award nor exclude any of the grounds listed in the Hungarian Arbitration Act.
However, parties are free to opt out of the rules on retrial proceedings and thus they can exclude the possibility of a retrial.
Hungarian courts are not entitled to review the merits of an award. In the setting-aside procedure the courts’ entitlement to review the award is limited to the grounds listed in Section 47 of the Hungarian Arbitration Act.
Hungary ratified the New York Convention (Convention on the Recognition and Enforcement of Foreign Arbitral Awards) on 5 March 1962, and the New York Convention was enacted into Hungarian national law by Statutory Decree No. 25 of 1962. Upon ratification of the Convention, in accordance with Section I(3), Hungary made the reservation of reciprocity and the commercial reservation.
Neither of the reservations have been withdrawn yet. However, in connection with the commercial reservation, a published court decision (BH 2004/369) in this regard stated that since the current Hungarian law does not recognise the concept of commercial relationship, the reservation to the New York Convention must be interpreted as meaning that all foreign arbitral awards must be recognised and enforced in Hungary, provided that the parties have lawfully concluded the arbitration agreement on which the proceedings are based in accordance with Hungarian law.
In addition, Hungary is a party to the Geneva Convention (European Convention on International Commercial Arbitration 1961) and the ICSID Convention (Convention on the Settlement of Investment Disputes between States and Nationals of Other States).
In case of arbitral proceedings seated outside of Hungary, the first step before the enforcement procedure is the recognition of the arbitral award pursuant to the New York Convention, if applicable in light of the reservation of reciprocity, or other multilateral or bilateral treaties.
The recognition of the arbitral award may be requested from the county court which has competence for the enforcement, that is, the county court located where the respondent has its seat or place of business or where it has sellable assets ‒ or in the case of a foreign entity, the seat of its Hungarian branch or commercial representation. The application for recognition can be made together with the request for enforcement, and the courts will decide simultaneously on both requests. Once the foreign award is recognised, it is deemed to be enforceable in the same way as domestic awards, ie, it is equivalent to the judgment of Hungarian courts.
Arbitral awards are enforced by the county court located where the respondent has its seat or place of business or where it has sellable assets ‒ or in the case of foreign entities, the seat of its Hungarian branch or commercial representation in accordance with the provisions of Act LIII of 1994 on Judicial Enforcement. The party requesting enforcement shall submit the original or a certified copy of the arbitration agreement.
The approach of Hungarian courts towards the recognition and enforcement of arbitral awards is in general arbitration-friendly, and courts interpret the grounds for the rejection of recognition and enforcement very restrictively.
Rejection of recognition and enforcement of arbitral awards with reference to the violation of Hungarian public policy is especially rare and confined to cases where the enforcement of the arbitral award is deemed to be "manifestly" incompatible with fundamental principles of Hungarian law.
Hungarian arbitration law does not contain any provisions on class-action arbitration or group arbitration.
Hungarian law does not provide a specific ethical code or other professional standards applicable to counsels and arbitrators in arbitral proceedings.
Hungarian arbitration law does not contain any provisions on third-party funding, mainly because there is no established culture of third-party funding and third-party funders in Hungary, neither in the context of litigation nor in that of arbitration.
The Hungarian Arbitration Act does not contain any provisions on the consolidation of separate arbitral proceedings. As there is no mandatory provision of the Act prohibiting consolidation, parties to the arbitral proceedings at issue have the freedom to agree on the consolidation of the proceedings.
In arbitral proceedings administered by the Commercial Arbitration Court under its Rules, the Commercial Arbitration Court may consolidate several arbitral proceedings commenced before it if all parties to all of those arbitrations unanimously so request or consent to the consolidation. The arbitrations shall be consolidated into the arbitration that was first commenced, except when the parties have unanimously requested or consented to the consolidation of the arbitral proceedings into another arbitration.
See 5.7 Third Parties.