A. LEGISLATION AND RULES
A.1 Legislation
Hungarian arbitration law is based on the amended UNCITRAL Model Law of 2006, therefore following international standards and creating an attractive arbitration environment. There are three specific aspects of Hungarian arbitration law:
- The availability of a retrial procedure, with an opt-out possibility
- The fact that when an arbitration award is set aside the parties do not have to pay arbitration fees and costs in the repeated arbitration proceedings (these are covered from a reserve fund)
- An arbitration award rendered in Hungary may be set aside on grounds that the arbitration panel has not evaluated an expert opinion prepared by the Technical Forensic Expert Panel ((Teljesítésigazolási Szakértői Szerv – an expert institution, the officials and members of which are appointed by government officials) and submitted by one of the parties (such an expert opinion may still be rejected, but this shall be reasoned).
There have been no material amendments to arbitration laws in Hungary in 2024 or in early 2025. One minor amendment provides that if an arbitration award concerns rights, facts or data that need to be registered in the land registry, it shall be sent to the Hungarian Chamber of Civil Law Notaries, who shall appoint a notary public for instituting the required registration. Another amendment re-regulated the qualifications required for the appointment to the Presidency of the Arbitration Court attached to the Hungarian Chamber of Commerce and Industry (also known as the Commercial Arbitration Court), the main arbitral institution in Hungary.
A.2 Institutions, rules and infrastructure
The Arbitration Court attached to the Hungarian Chamber of Commerce and Industry (also known as the Commercial Arbitration Court), has slightly revised its Rules of Proceedings in 2024. The most significant amendment is that dissenting opinions are now available to the parties. Dissenting opinions may, however, not contain information concerning the deliberations within the panel. In addition, cases with a value below HUF 5 million are to be adjudicated by a sole arbitrator unless otherwise agreed by the parties. In cases decided by a sole arbitrator the hearings shall be held online as a main rule, while in expedited proceedings hearings must be exclusively held online. A new electronic filing system has also been introduced. Other than that, arbitration fees and costs have slightly been increased.
There were no other significant developments concerning institutions, rules and infrastructure in 2024 or in early 2025.
B. CASES
B.1 Award no. 2/11/2022
This lease dispute concerned the price increase mechanism of utility and service costs payable by a tenant. The relevance of the case is that the arbitration panel addressed the conditions under which a declaratory judgment may be sought in arbitration.
The claimant (as tenant) sought a declaratory judgment concerning the maximum allowed increase of the utility and service costs. The respondent (represented by the author of this summary) argued that because (under Hungarian law) arbitration may be agreed in lieu of ordinary court proceedings, disputes that are not admissible before ordinary courts are not admissible in arbitration either. Therefore, the same criteria that apply to admissibility of declaratory claims before the ordinary courts should apply in arbitration proceedings, too. The arbitration panel in principle accepted this argument and found that “[t]here are two conjunctive conditions for bringing an action for declaratory relief: the declaration sought is necessary for protection of claimant’s rights against the respondent and by nature of the relationship, or in the absence of expiry of the obligation or for other reason, the claimant is not able to submit a claim for damages or other remedy. [arbitration practice in harmony with article 172 (3) of the Hungarian Code of Civil Procedure]”[1].
B.2 Award no. 2/2/2023
This dispute concerned the modification of a lease agreement by the arbitration court. The relevance of the case is that it confirms that contract modification may also be sought in arbitration proceedings.
The claimant (as landlord) and the respondent (as tenant) signed a lease agreement for 35 years with a possibility to extend by 15 years in connection with an industrial property. The parties also signed a land usage contract which did not contain an arbitration clause. The parties modified both contracts after five years.
The claimant requested the arbitration panel to modify the lease fees in both contracts, because those were not in line with the market values.
The arbitration panel established that in the case of the land usage contract, the arbitration court did not have jurisdiction, but in the case of the lease agreement they did have jurisdiction. According to the arbitration panel the claimant needed to prove that there were significant changes in the real estate market which caused higher lease fees and that the original lease fee was set at market value. The claimant was not able to prove this even with expert opinions and therefore, while maintaining the theoretical possibility of contract modification in arbitration proceedings, the arbitration panel rejected the claimant’s claim.
B.3. Award no. 3/6/2023
This dispute concerned a claim based on suretyship, where the claim was assigned several times. The relevance of the case is that the arbitration panel made it clear that access to evidence by the other party may not be limited on grounds of business secrecy.
The claimant enforced a claim that was assigned several times before its assignment to the claimant. The respondent contested the first assignment of the claim and on that ground, the legal standing of the claimant as well as the jurisdiction of the arbitral tribunal (as the arbitration clause was part of the allegedly assigned contract). The claimant submitted documentary evidence relating to the first assignment requesting that it should only be accessible to the arbitration panel, but not to the respondent on grounds of business secrecy. The arbitration panel found that the request of the claimant could not be entertained having regard to the equality of arms, which excludes reliance on evidence only known to one of the parties and the arbitration tribunal. The panel found that without such evidence the panel was not even in a position to decide on its jurisdiction, therefore, the dispute could not be adjudicated and the proceedings had to be terminated. The arbitration panel emphasized the confidential nature of arbitration proceedings, which would have allowed maintaining business secrecy even if the evidence was available to the respondent.
B.4. Award no. 1/10/2022
This dispute concerned the jurisdiction of the arbitration court.
The claimant as landlord initiated the arbitration procedure against individuals, who were the two members (shareholders) of the former tenant company at the time of its dissolution. According to the Hungarian civil code the members of a legal entity dissolved without a legal successor are liable for the unsatisfied debts of the legal entity in proportion to their share of the distributed assets.
The arbitration panel established that the arbitration clause applies to the dispute between the landlord and the former members. The arbitration panel rejected the defendants’ jurisdictional objection and confirmed its jurisdiction by bifurcating the proceedings and allowing the parties to challenge the decision on jurisdiction.
On the respondents’ application, the state court found that the arbitration court did not have jurisdiction in this case, because the Arbitration Act of 2017 requires an agreement between parties to establish arbitral jurisdiction, which was not present in this case. Therefore, the respondents’ liability alone was insufficient to establish arbitral jurisdiction.
As a result of the court decision, the arbitration panel terminated the procedure. This termination did not affect the parties’ rights to pursue their claims in regular court proceedings.
B.5. Award no. 3/3/2023
This dispute concerned the lease of commercial premises during the COVID-19 pandemic. The relevance of the case lies in findings related to arbitration clauses.
The respondent, an enterprising individual, submitted an objection to the jurisdiction of the arbitration court on grounds that (i) they did not understand what the arbitration clause meant and that (ii) the arbitration clause did not properly name the Arbitration Court attached to the Hungarian Chamber of Commerce and Industry. The arbitration panel found that as the respondent was engaged in business activities, he should have known the institutions relevant to the business field, such as the arbitration court. The panel also found that the parties clearly agreed to arbitration and it was also clear that the parties did not choose ad-hoc arbitration. Therefore, irrespective of the wrong designation of the arbitration court, it could be clearly established that the dispute falls into the competence of the Arbitration Court attached to the Hungarian Chamber of Commerce and Industry (note that under Hungarian law, only arbitral institutions established by law may operate, and the subject matter competence of arbitration institutions other than the Arbitration Court attached to the Hungarian Chamber of Commerce and Industry is limited).
B.6. Award no. 1/11/2022
This dispute concerned a contract for the covering of a swimming pool. The relevance of the case is that the arbitration panel assessed the role of the Technical Forensic Expert Panel’s opinion in arbitration proceedings.
The arbitration case revolved around a contractual dispute between the claimant and the respondent. The respondent withheld part of the contractual fee due to alleged faulty performance. The arbitration had to determine whether the plaintiff fulfilled its contractual obligations.
The claimant provided an expert opinion prepared by the Technical Forensic Expert Panel. Based on this opinion the arbitration found that the claimant had largely fulfilled its obligations, and the respondent’s non-cooperation prevented the rectification of minor defects.
Ultimately, the arbitration awarded the claimant’s claim primarily and adjusted the respondent’s set-off claim, ordering the payment of the withheld fee minus the recognized reduction for incomplete work.
B.7. Award no. 5/3/2023
This dispute concerned the reduction of rent in relation to the lease of commercial premises during the COVID-19 pandemic. The relevance of the case lies in findings related to arbitration clauses.
As part of its defense, the respondent also submitted an objection to the jurisdiction of the arbitration court on grounds that unlike the model clause published by the Arbitration Court attached to the Hungarian Chamber of Commerce and Industry, the arbitration clause between the parties did not contain an exclusion of the jurisdiction/competence of the state courts. Therefore, in the respondent’s view the parties did not intend to exclude the state court’s procedure, which resulted in an invalid arbitration clause. This was based on a published judicial decision which found that an arbitration clause providing for arbitration for certain disputes and state court procedure for other disputes arising from the same contract was invalid. The arbitration panel found that the exclusion of the competence of the state courts was not an essential element of the arbitration clause, and the clause at hand was clear enough, in that the parties agreed to arbitration without such exclusion. Similarly, the panel pointed out that the wording of the model arbitration clause did not affect the assessment of the validity of an arbitration clause. Accordingly, the panel established its competence.
B.8. Award no. 1/3/2023
This dispute concerned the assessment of statute of limitations objections in arbitration.
The claimant and the respondent signed a supply contract for the provision of online instrumentation, installation supervision, commissioning, calibration and training services. The parties also concluded a maintenance agreement.
The claimant rescinded the contract on the grounds of defective performance and the respondent disputed this.
In the arbitration procedure the respondent raised an objection based on the statute of limitation.
The arbitral tribunal found that court practice based on the Hungarian Code of Civil Procedure did not apply to arbitration unless agreed upon by the parties. Therefore, even though court practice requires that the objection based on the statute of limitation is examined first, and the merits are examined only if that objection fails, the panel proceeded with the examination of whether the claimant’s rescission was well founded first, regardless of the statute of limitation objection.
The parties deviated from the civil code’s regulation on rescission in their contract. The arbitration panel examined whether those conditions were met or not and established that the rescission criteria were not met, and the claimant’s rescission claim was unfounded. The tribunal dismissed the claimant’s claim and ordered them to bear the arbitration costs.
B.9. Award no. 2/6/2023
This dispute concerned the double sale of real estate, the possibility to substitute the registration permit of the seller (needed for the registration of the ownership of the buyer in the land registry) by an arbitration award and adverse possession based on contractual title. The relevance of the case lies in that it addresses the effects of insolvency on the arbitrability of claims against the insolvent entity, the possibility of bringing alternative claims in arbitration, and the arbitration court’s powers to order registration in the land registry.
The claimant purchased real estate from the respondent. However, despite the claimant paying the purchase price, the respondent had not issued the registration permit that the seller needed for the registration of the ownership of the buyer in the land registry. The respondent became insolvent, and its liquidator attempted to sell the real estate again. The claimant sought a finding that it has acquired title to the real estate by way of adverse possession based on contractual title. In the alternative, they sought the substitution of the registration permit by an award of the arbitration court. The arbitration panel found that while not specifically regulated by arbitration law and the rules of procedure, alternative claims are admissible in arbitration proceedings. The arbitration panel also found that while the law prohibits the enforcement of monetary claims against the insolvency estate outside of the insolvency procedure, and Hungarian arbitration law repeats that provision, the claim is arbitrable as it is not a monetary claim (we note that while the argument is correct, even though the claim was not a monetary claim, it evidently affected the insolvency estate). Finally, the arbitration panel stated that as an arbitration award has the same legal force as a court judgment, the arbitration court qualifies as an ‘authority’ in land registry procedures and may therefore order registration in the land registry of its award (in this respect please see section A1 and the recent change in arbitration law addressing this issue). The arbitration panel also confirmed that it has the same powers to substitute a legal declaration by its award as the state court.
B.10. Award no. 1/12/2022
This dispute concerned liability for damages caused by breach of contract.
The claimant (as developer) and the respondent (as customer) concluded a software development agreement for the development of an application. The function of the application was to enable the respondent employer to communicate with their employees through this application.
The claimant claimed unpaid development fees. The respondent terminated the agreement due to non-performance and requested damages from the claimant.
The arbitration panel found that the claimant had established a new performance date, but had not complied with it. Therefore, the arbitration court found a breach of contract by the claimant and did not find any justifiable reason to exempt them from liability. According to the Hungarian civil code, damages must be compensated to the extent that the respondent was able to prove they were foreseeable at the time of concluding the contract. Hungarian law requires that damages be clearly proven with realistic and verifiable data, which the respondent failed to do. The arbitration panel noted that the respondent’s damages claims were based on the potential, conditional income from future licensing agreements, which was not a protected interest under Hungarian civil law. Additionally, the respondent did not take steps to mitigate the damages by hiring another developer after the contract termination.
[1] The civil procedure rule invoked by the panel also requires that the declaration concerns the existence or non-existence of a right or legal relationship.
