Scope of application
The Hungarian legal system was influenced by German and Austrian law and is still based on the 19th century Austrian and German civil and commercial law codes; it has, however, developed significantly from these origins to keep up with the demands of the modern commercial world.

In 1911, shortly after the Austrian Code of Civil Procedure was introduced in 1895, a commercial arbitration system governed by the Hungarian Code of Civil Procedure was established.

In 1952, the Code of Civil Procedure was replaced by the Act on Civil Procedure, and the arbitral tribunals existing at the time were closed. Only foreign trade disputes could thereafter be referred to arbitration and these were dealt with by the newly-formed Court of Arbitration, which was attached to the Hungarian Economic Chamber (now the Hungarian Chamber of Commerce and Industry). Under the Moscow Convention of 1972, all disputes between trading organisations in different Member States of the Council for Mutual Economic Assistance (“COMECON”) (including Hungary) had to be referred to the arbitral tribunal attached to the chamber of commerce in the country of the defendant. Alter­natively, the parties could choose a third country’s arbitral tribunal, provided that the country was also a member of COMECON.

In 1994, the new Act LXXI on Arbitration (“the Act”) based on the UNCITRAL Model Law was introduced. The Act has removed the restrictions on arbitration contained in the Moscow Convention and the previous law governing arbitration in Hungary.

These rules were accompanied by Section 376 of Act CXX of 2001 on the Capital Market (“the Capital Market Act”), which came into force on 1 January 2002, providing frameworks for the establishment of the Permanent Court of Arbitration of the Money and Capital Markets.

Scope of application
The provisions of the Act apply to both ad hoc and permanent institutional arbitral tribunals, provided that the seat of the arbitration is in Hungary.

Parties
Under the provisions of the Act, there is a restriction on who may choose arbitration instead of court proceedings as a dispute resolution mechanism and who may be a party to arbitration proceedings. Pursuant to Section 3 (1) of the Act, arbitration may only take place if at least one of the parties is a physical or legal person dealing professionally with business activities, and the legal dispute is in connection with this activity. This rule does not apply to the proceedings of the Permanent Court of Arbitration of the Money and Capital Markets.

Subject matter
Family law issues, state and private guardianship issues, State administration and employment issues cannot be submitted to arbitration, but there are no other restrictions on the types of issues which may be determined by arbitration.

General principles
The general principles embodied in the Act include:

Equality of the parties:
In the course of the arbitral proceedings, the parties must receive equal treatment.

Party autonomy:
The parties have great scope to agree between themselves the rules that will govern the proceedings and there are very few provisions which cannot be waived by agreement (e.g. the right to apply to set aside the award cannot be waived).

Due process:
Each party must be given a proper opportunity to present its case.

Section 5 (1) of the Act defines an arbitration agreement as an agreement by which the parties agree to submit disputes (which may already have arisen or may in future arise between them in respect of a defined legal relationship), whether contractual or not, to arbitration.

Formal requirements
Sections 5 (2)–5 (5) of the Act set out the formal requirements for an arbitration agreement. An arbitration agreement must be in writing. It can be a separate agreement or form part (as a separate clause) of another agreement. An arbitration agreement will be deemed to be in writing if it is concluded between the parties by way of an exchange of letters, facsimiles, telexes, or by such other means of telecommunication which produce a permanent record of the agreement. It will also be deemed to be in writing if one of the parties states in its Statement of Claim that an arbitration agreement was entered into between them, and the other party does not deny this in its Statement of Defence.

If the parties wish their arbitration proceedings to be conducted under specific institutional arbitration rules, they should designate the applicable rules (e.g. the ICC Arbitration Rules) in their arbitration agreement in an unambiguous way. The applicable procedural rules may also be defined by designating in the arbitration agreement a permanent arbitration body, which uses its own rules, e.g. the Permanent Court of Arbitration attached to the Hungarian Chamber of Commerce and Industry (“the Court of Arbitration”). The Court of Arbitration has its own detailed Rules of Proceedings (“the Rules”), but also administers arbitration proceedings under the UNCITRAL Arbitration Rules. Other provisions, e.g. regarding the number and appointment of arbitrators and other procedural issues, may be included in the arbitration agreement but are not mandatory.

Mandatory/non-mandatory provisions
The parties are free to deviate from the provisions of the Act where the Act so provides (Section 61 of the Act).

Generally, however, the parties cannot agree that the arbitration award will be reviewed by a second-level arbitral body because, under the Act, the arbitration award issued by any permanent or ad hoc arbitral tribunal in Hungary is final and binding.

Domestic and international arbitrations
The Act draws a distinction between domestic and international arbitrations. Chapter VI (Sections 46–50) of the Act contains specific provisions applicable to international arbitration proceedings, but the other provisions of the Act apply also in international proceedings unless specifically modified by the provisions in Chapter VI.

Section 47 of the Act defines an arbitration as international if at the time of conclusion of the arbitration agreement:

• the parties have their seat or place of business in different States; or
• one of the following places is situated outside the State in which the parties have their seat or place of business:
  • the place of arbitration as determined in the arbitration agreement;
  • the place where performance of the obligations originating from the legal relationship of the parties takes place; or
  • the place with which the subject matter of the arbitration is most closely connected.

Section 46 (3) provides that in international cases the Court of Arbitration acts as permanent arbitral tribunal. In international arbitrations, the parties are free to choose the language of the arbitration (Section 48 of the Act) and the applicable substantive law (Section 49 of the Act).

Constitution of the arbitral tribunal
Pursuant to Section 12 of the Act, the following persons may not be arbitrators:

• those under 24 years of age;
• those who have been barred from public affairs by a non-appealable (final and binding) court judgment;
• those who have been placed under state guardianship by the court; or
• those who have been sentenced to imprisonment, without the right of further appeal, until the conviction has been erased from their criminal record.

Judges are also prohibited from accepting an appointment as arbitrator during the tenure of their office.

Section 13 (1) of the Act provides that the parties are free to agree on the number of arbitrators, provided the number of arbitrators is uneven. If the parties fail to agree on the number of arbitrators, the tribunal shall be composed of three arbitrators (Section 13 (2) of the Act).

Pursuant to Section 14 of the Act, the parties are also free to agree on the appointment procedure. Failing such agreement, the following rules apply.

Unless the parties otherwise agree, in arbitration proceedings with three arbitrators, each party appoints one arbitrator and the two party-appointed arbitrators in turn appoint the third arbitrator, who will be the chairman of the tribunal. Generally, the claimant appoints his arbitrator in the Statement of Claim. The defendant has 30 days from receipt of the claimant’s Statement of Claim to appoint his arbitrator.

If the claimant fails to appoint his arbitrator, the defendant may request that the county court makes the appointment (Section 14 (2) of the Act). In proceedings in the Court of Arbitration, the applicable provisions are set out in Article 18 of the Rules: if the claimant has neither appointed his arbitrator in his Statement of Claim nor requested that the Court of Arbitration appoint the arbitrator, the Court of Arbitration will request the claimant to remedy such failure. If the claimant fails to comply with the request of the Court of Arbitration within the time limit set out in the Rules, the Court of Arbitration will terminate the proceedings.

If the defendant fails to appoint his arbitrator:

• in the case of arbitration proceedings in the Court of Arbitration, its presidium shall appoint the defendant’s arbitrator (Article 18 (7) of the Rules); and
• in the case of ad hoc arbitration proceedings, the county court will appoint the defendant’s arbitrator upon the request of the claimant.

If, in an arbitration with a sole arbitrator, the parties cannot agree on the person to be the arbitrator, he shall be appointed by the County Court upon the request of either party (Section 14 (4) of the Act). The same procedure applies where, in the case of a tribunal consisting of three arbitrators, the two party-appointed arbitrators are unable to agree on the appointment of the chairman.

Section 17 (1) of the Act provides that a proposed arbitrator shall disclose to the parties without delay any circumstances likely to give rise to justifiable doubts as to his independence or impartiality. An arbitrator shall accept his appointment by written declaration addressed to the parties. The arbitrator’s signature on the deed containing the appointment will be regarded as acceptance (Section 17 (2) of the Act).

The challenge of arbitrators
The challenge procedures are set out in Sections 18–20 of the Act. Each party may challenge an arbitrator (or the chairman) if circumstances exist, which give rise to justifiable doubts as to his independence or impartiality, or if the arbitrator or the chairman does not possess the qualifications specified by the parties in their arbitration agreement. A party may challenge the arbitrator which it appointed only if the circumstances justifying such a challenge became known to it after the appointment was made.

The parties are free to agree on the procedure to be followed to challenge an arbitrator. Failing such agreement, the challenging party must send a written statement containing the reasons for the challenge to the arbitral tribunal within 15 days of becoming aware of the constitution of the arbitral tribunal, or within 15 days of becoming aware of any circumstances under which a challenge may take place.

If the challenged arbitrator does not withdraw from office, or if the other party does not agree to the challenge, the other members of the arbitral tribunal will decide the merits of the challenge made by a party. If no agreement can be reached, or if two arbitrators or the sole arbitrator have been challenged, the County Court shall decide the merits of the challenge upon the request of the challenging party. While such a request is pending, the arbitral tribunal – including the challenged arbitrator(s) – may continue the arbitral proceedings and make an award. In institutional arbitration proceedings in the Court of Arbitration, the Presidium of the Court of Arbitration will decide on the challenge if the arbitral tribunal cannot agree, or if two arbitrators or the sole arbitrator have been challenged.

Appointment of a substitute arbitrator
Section 23 of the Act provides that, if the mandate of an arbitrator terminates for any reason, a substitute arbitrator shall be appointed according to the same rules as were applicable to the appointment of the original arbitrator.

Arbitrators’ fees, expenses and immunity
The Act makes no provision regarding either the fees and expenses of arbitrators or their liability for breach of their duties. In institutional arbitration proceedings, the fees are set by the fee schedule of the arbitration institution. In ad hoc arbitration proceedings, the fees are determined based on the agreement between the parties and the arbitrators. The parties and the arbitrators also have to agree on the consequences of a failure by one of the arbitrators to fulfil his mandate.

The arbitrators, like state judges, must be independent and impartial and are not representatives of the parties. They may not receive any instructions from the parties or any institutional body.

Competence to rule on its own jurisdiction
The jurisdiction of the arbitral tribunal is determined by the arbitration agreement made by the parties. Pursuant to Section 24 of the Act, the arbitral tribunal may rule on its own jurisdiction, including the existence or validity of the arbitration agreement. An arbitration clause which is part of another agreement is treated as an independent (and severable) arbitration agreement. Accordingly, if the agreement of which the arbitration clause forms part is found to be null and void, this will not ipso jure affect the validity of the arbitration clause.

A plea that the arbitral tribunal does not have jurisdiction should be raised not later than at the time of submission of the defence on the merits. However, the arbitral tribunal may rule on a plea raised at a later stage if it considers that the delay was justified (Section 24 of the Act). A plea that the arbitral tribunal exceeded its jurisdiction shall be made without delay after the alleged excess of jurisdiction occurred.

The arbitration tribunal may rule on a plea of lack of jurisdiction either when the plea is raised or in its award on the merits. If the arbitral tribunal rules that it has jurisdiction, any party may, within 30 days of receiving notice of the ruling, request the County Court to rule on the jurisdiction of the arbitral tribunal. Regardless of such a request, the arbitral tribunal may continue the proceedings and make an award pending the decision of the County Court on jurisdiction.

Power to order interim measures
Pursuant to Section 26 of the Act, unless the parties otherwise agree, the arbitral tribunal may upon request order any party to comply with such interim measures as the arbitral tribunal may consider appropriate in respect of the subject matter of the dispute. In practice, any decision or order on interim measures issued by the arbitral tribunal is not enforceable (only the final arbitration award is enforceable); the arbitral tribunal may therefore request any court having jurisdiction to assist in issuing and enforcing such interim measures (see further below).

Permanent Court of Arbitration of the Money and Capital Markets
According to Section 376 of the Capital Market Act, the trade organisations of exchange markets, credit institutions and investment enterprises may jointly establish and operate the Permanent Court of Arbitration of the Money and Capital Markets. (On the basis of these rules, the Permanent Court of Arbitration of the Money and Capital Markets was actually established on 30 June 2002.) In terms of the competences and the procedures of the Permanent Court of Arbitration of the Money and Capital Markets, the provisions of the Act shall apply, with certain exceptions laid out below.

The Permanent Court of Arbitration of the Money and Capital Markets shall have jurisdiction in any disputes:

• in connection with the offering of securities, investment and commodity exchange services, and activities auxiliary to investment services falling within the scope of the Capital Market Act;
• between investors in connection with investment instruments;
• in connection with shareholders’ rights;
• in connection with exchange transactions;
• regarding an investment service provider’s refusal to provide services to a client in connection with investment instruments;
• in connection with the exchange’s internal regulations;
• in connection with the byelaws, standard service agreements and internal regulations of clearing corporations;
• clearing corporation financial services and activities auxiliary to financial services; and
• in connection with other services provided by investment and financial service providers, provided such services do not violate any exclusive rights; if the parties concerned have stipulated to resort to arbitration in an arbitration agreement; and the parties are able to freely dispose of the subject-matter of the proceedings.

In the cases defined in Paragraphs a), b) and d)–i) above, the proceedings of the Permanent Court of Arbitration of the Money and Capital Markets may exclusively be stipulated by the parties as a Permanent Court of arbitration with its seat in Hungary, including the cases deemed international under Section 47 of the Act.

Section 28 of the Act expressly provides that, subject to any mandatory provisions of the Act, the parties are free to agree on the procedure to be followed by the arbitral tribunal. The parties may also provide that the procedural rules of an arbitral institution shall apply. Failing such agreement, the arbitral tribunal may determine the procedure to be followed at its discretion, subject to the provisions of the Act.

Commencement of arbitration
Unless otherwise agreed by the parties, ad hoc arbitration proceedings are commenced when the other party receives the request to refer the dispute to arbitration (Section 32 of the Act).

In institutional arbitration proceedings in the Court of Arbitration, proceedings are commenced when the Statement of Claim is filed with the Secretariat.

Procedural powers of the tribunal
Section 28 of the Act provides that, unless the parties agree otherwise, the arbitral tribunal may, subject to the provisions of the Act, determine the rules of procedure at its own discretion. The presiding arbitrator shall decide questions of procedure if so authorised by the parties or by the other members of the arbitral tribunal (Section 38 (2) of the Act).

In institutional arbitration proceedings in the Court of Arbitration, the arbitrators will apply the procedural provisions set out in the Rules. If the Rules do not cover the specific point in issue, and if the parties do not agree otherwise, the arbitrators are free to determine the applicable rules (Article 17 of the Rules).

Place and language of arbitration
The parties are free to agree on the place of arbitration both in ad hoc and in institutional arbitration proceedings. Failing such agreement, in an institutional arbitration, the proceedings shall take place at the seat of the Court of Arbitration in Budapest (Article 7 of the Rules), while in the case of an ad hoc arbitration, the place shall be determined by the arbitral tribunal having regard to the circumstances of the case (Section 31 (1) of the Act).

Section 30 of the Act allows the parties to determine the language of the proceedings at any time before the commencement of the arbitration. Failing such agreement, the proceedings shall be conducted in the Hungarian language.

Submissions
In relation to ad hoc arbitration proceedings, Section 32 (1) provides only that, in its Statement of Claim, the claimant shall state its claim, the facts supporting it, and the points in issue. The parties may submit with their statements the documents which they consider to be relevant.

The Act contains no other provisions on the format, content and timetable of the parties’ submissions, but requires the parties to name their arbitrator in the Statement of Claim and the Statement of Defence. However, Section 34 (3) requires that all submissions to the arbitral tribunal by one party must be communicated to the other party.

In ad hoc arbitration proceedings, the arbitral tribunal will give directions and set the timetable for the parties’ submissions, unless otherwise agreed by the parties. In institutional arbitration proceedings, the arbitral tribunal will follow the procedural rules of the institution in relation to submissions.

In relation to institutional arbitration proceedings in the Court of Arbitration, Article 22 of the Rules is more specific and requires the claimant to indicate, in its Statement of Claim, the following:

• the names and addresses of the parties;
• any record establishing the jurisdiction of the Court of Arbitration;
• the claim;
• the legal grounds of the claim;
• the facts on which the claim is based;
• reference to any documents and evidence;
• the amount in dispute; and
• the claimant’s appointed arbitrator or a request for appointment of an arbitrator by the Court of Arbitration.

Article 25 of the Rules makes provision in relation to the Statement of Defence and extends the provisions applicable to the Statement of Claim to the contents of the Statement of Defence, where appropriate.

Oral hearing and written proceedings, default by the parties
The arbitral tribunal must hear the parties and give them the opportunity to make submissions at an oral hearing unless the parties agree otherwise (Section 34 (1) of the Act). The tribunal shall also hear all the witnesses and experts (if they are called by the tribunal upon the request of the parties to explain their written reports). The parties shall be given sufficient prior notice of any hearings or of any procedural action of the arbitral tribunal which involves the inspection of property or documents (Section 34 (2) of the Act). The arbitral tribunal will prepare minutes of the proceedings and shall serve a copy thereof on each of the parties (Section 34 (4) of the Act). However, the parties are free to agree that the proceedings will be dealt with in writing without an oral hearing.

Pursuant to the default provisions in Section 35 of the Act, unless the parties agree otherwise, the arbitral tribunal shall terminate the proceedings if the claimant fails to present its Statement of Claim without giving sufficient reasons. If the defendant fails to present its Statement of Defence, the arbitral tribunal shall continue the proceedings without considering such failure in itself as acceptance of the claimant’s allegations. If any of the parties fails to attend any of the arbitral hearings, or fails to produce its evidence, the arbitral tribunal may continue the proceedings and make an award on the basis of the evidence before it.

Confidentiality
The Act contains an express provision in Section 29 that the arbitration proceedings are private and not open to the public unless otherwise agreed by the parties.

Evidence
There is no specific Section in the Act dealing with evidence. The parties are free to prove their case by the usual means of documentary, witness or expert evidence. Section 34 (1) of the Act clarifies that the arbitral tribunal has no power to compel witnesses to attend and give evidence before it; but, pursuant to Section 37 (3) of the Act, the arbitral tribunal may call upon the assistance of the local court in relation to the production of evidence or the examination of witnesses. Pursuant to Section 36 of the Act, unless otherwise agreed by the parties, the arbitral tribunal has the power to appoint one or more experts to report on specific issues. The arbitral tribunal may require any party to provide an expert so appointed with relevant information or documents. In institutional arbitration proceedings before the Court of Arbitration, Article 35 of the Rules contains specific procedural rules in relation to evidence.

Choice of law
In international arbitrations, the parties are free, pursuant to Section 49 (1) of the Act, to determine the applicable substantive law according to which the arbitral tribunal must make its award. If the parties fail to determine the applicable law, it shall be determined by the arbitral tribunal (Section 49 (2) of the Act).

The parties may authorise the arbitral tribunal to make its decision ex aequo et bono (instead of pursuant to the applicable law).

Section 50 of the Act clarifies that the tribunal shall decide the dispute in accordance with the terms of the contract as well as taking into account the trade practices applicable to the transaction in issue.

Decisionmaking by the tribunal
The Act does not stipulate an express time limit within which the tribunal must make its decision, but the arbitral tribunal should make its decision as soon as possible and normally within 30 days of the close of the arbitration proceedings. In institutional arbitration proceedings in the Court of Arbitration, the award, and the reasons on which it is based, shall be delivered in writing to the parties within 30 days (or 60 days in the case of an arbitral tribunal comprising a foreign arbitrator) of the close of the oral hearings (Article 41 of the Rules).

If the arbitral tribunal consists of more than one arbitrator, it shall make its decision by a majority of votes, unless the parties agree otherwise. Failing a majority, the presiding arbitrator shall make the decision (Section 38 (1) of the Act and Article 39 (1) of the Rules).

Form, content and effect of the award
Section 40 of the Act provides that the award must be in writing and must be signed by all of the arbitrators. However, in arbitral proceedings with more than one arbitrator, it is sufficient that the award be signed by a majority of arbitrators, provided that the award states the reason why signatures were omitted. The award must also state the date on which it is made and the place of the arbitration (Section 41 (3) of the Act).

Section 41 (2) of the Act requires that the award must state the reasons on which it is based, unless it is an award on agreed terms. A signed copy of the award shall be served on each of the parties (Section 41 (4) of the Act).

Article 40 of the Rules makes similar provision as to the form and content of an award in institutional proceedings in the Court of Arbitration.

The award is final, binding and non-appealable even if the parties have agreed otherwise. The award has the same effect as a court judgment and can be enforced with the assistance of the courts.

Settlement
The proceedings will terminate if the parties settle their dispute. The arbitral tribunal shall record the settlement in the form of an award on agreed terms if so requested by the parties, provided that the arbitral tribunal considers that the settlement is in accordance with the law (Section 39 (2) of the Act). An award on agreed terms has the same effect as any other award made by an arbitral tribunal.

Termination of proceedings
The arbitration can be terminated by a final award on the merits of the claim or by an order for termination of the arbitration. Pursuant to Section 42 (2) of the Act, the arbitral tribunal shall issue an order for termination if:

• the claimant fails to submit its Statement of Claim;
• the claimant withdraws its Statement of Claim, unless the defendant objects thereto and the arbitral tribunal accepts that the defendant has a legitimate interest in obtaining a final award;
• the parties agree to terminate the proceedings; or
• the arbitral tribunal finds that continuing the proceedings has become unnecessary or impossible for any other reason.

Article 44 of the Rules makes provision for the termination of institutional arbitration proceedings in the Court of Arbitration without a final award on the merits.

Save for the subsequent correction or interpretation of the award, or for the making of an additional award (as to which see further below), the mandate of the arbitral tribunal terminates with the termination of the proceedings.

Costs
Section 41 (2) of the Act (and Article 40 (1) of the Rules) require the arbitral tribunal to make provision for the costs of the proceedings, including the remuneration of the tribunal, in its final award and to state which party has to pay the costs (or any proportion thereof). The arbitral tribunal will generally apportion the costs between the parties. In practice, the losing party is usually ordered to pay the costs of the proceedings. However, if the winning party is successful only in part, the arbitral tribunal may require the parties to pay the costs in proportion to their relative success or failure. Correction and interpretation of the award

The relevant rules are set out in Sections 43–45 of the Act. Upon the request of either party, or upon the arbitral tribunal’s own initiative, the arbitral tribunal may correct any change or error in names, error in numbers or computation, spelling mistakes or any other typographical errors of a similar nature in the award.

If the parties so agree, the arbitral tribunal may interpret a specific part or point of the award upon the request of either party.

Either party may request an additional award if the arbitral tribunal failed to make an award on any claim presented in the arbitral proceedings.

A request for correction or interpretation of the award, or for an additional award, must be submitted to the arbitral tribunal within 30 days of receipt of the award unless the parties agree otherwise. The request must be made with notice given to the other party.

The jurisdiction of the courts
If a valid and binding arbitration agreement has been made by the parties, the ordinary courts are excluded from assuming jurisdiction over the subject matter specified in the arbitration agreement. Section 7 of the Act expressly provides that the courts shall not intervene in arbitration proceedings except where so provided by the Act.

However, the Act gives the courts limited jurisdiction to provide legal assistance to the arbitral process in certain circumstances. In addition to the courts’ powers in relation to the appointment and challenge of arbitrators discussed above, the courts have further powers (discussed below).

Stay of court proceedings
The court before which an action is brought in a matter which is the subject of an arbitration agreement must reject the claim without issuing a summons or shall terminate the action upon the request of any one of the parties, unless it finds the arbitration agreement null and void, inoperative or incapable of being performed. The application for the non-suit of the action must be made no later than in the defendant’s response on the merits.

The court therefore has jurisdiction to determine the validity of the arbitration agreement before dismissing the claim. The court also has jurisdiction to review the arbitral tribunal’s assumption of jurisdiction upon application of a party (see below for further details).

Preliminary rulings on jurisdiction
If the arbitral tribunal finds pursuant to Section 24 of the Act that it has jurisdiction, within 30 days of receiving notice of the ruling, a party may request that the competent County Court decide on the jurisdiction of the arbitral tribunal (Section 25 (1) of the Act).

Interim protective measures
According to Section 26 of the Act, unless the parties otherwise agree, the arbitral tribunal may, upon request, order any party to take such interim measures as the arbitral tribunal considers necessary in respect of the subject matter of the dispute. In practice, an order granting interim measures issued by the arbitral tribunal is not enforceable (only a final arbitration award is enforceable). Parties to arbitration proceedings, therefore, may at any stage before or during the arbitration proceedings apply to the competent court for interim measures under Section 37 (2) of the Act. The court may order measures to safeguard the claim of one party (e.g. by freezing a bank account) in a case pending before an arbitral tribunal if the party requesting such measure provides sufficient grounds for the measure to be granted and the claim is supported by security (Section 37 (2) of the Act). Section 37 (1) of the Act expressly provides that such applications are permitted despite the existence of an arbitration agreement.

Obtaining evidence and other court assistance
The local courts have jurisdiction pursuant to Section 37 (3) of the Act to assist the arbitral tribunal with obtaining evidence if the production of evidence before the arbitral tribunal is likely to entail considerable difficulties or disproportionately high additional costs.

Pursuant to Section 54 of the Act, an arbitration award cannot be appealed to the court. The parties may only challenge the award by applying to the competent County Court for the award to be set aside, but only for the reasons specified in Section 55 of the Act. These are:

• the party which concluded the arbitration agreement did not have legal capacity;
• the arbitration agreement is not valid under the law which the parties have chosen, or failing any indication thereon, under Hungarian law;
• a party was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings, or was otherwise unable to present their case;
• the award was made in a legal dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration; provided that the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the award which contains decisions not submitted to arbitration may be set aside; or
• the composition of the arbitral tribunal, or the arbitral procedure, was not in accordance with the agreement of the parties, unless such agreement was in conflict with a mandatory provision of the Act, or failing such agreement, was not in accordance with the Act.

The setting aside of the arbitration award may also be requested if:

• the subject matter of the dispute is not capable of settlement by arbitration under Hungarian law; or
• the award is in conflict with the rules of Hungarian public policy.

The application for setting aside the award must be submitted to the court within 60 days of the receipt of the award. No appeal may be lodged against the judgment of the court on an application for setting aside the arbitration award, but any party may apply to the Supreme Court of the Republic of Hungary for the so-called judicial revision thereof on the basis of a substantial breach of law committed by the court adjudging the application for setting aside the arbitration award.

Domestic awards
Pursuant to Section 58 of the Act, the effect of an arbitration award is the same as that of a final and binding (non-appealable) court judgment. The court which has jurisdiction for enforcement is the local court where the defendant has its seat or place of business or where the defendant has saleable property. The enforcement is governed by the local legal rules on enforcement. The court may only refuse enforcement of the award if the subject matter of the dispute is not arbitrable under Hungarian law, or if the award is contrary to the rules of Hungarian public policy (Section 59 of the Act).

Foreign awards
Awards issued outside Hungary are enforceable in Hungary according to the provisions of multilateral conventions or bilateral treaties ratified by Hungary. The most important arbitration convention to which Hungary is a party is the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

If there is an international treaty under which the award may be enforced, the competent court for enforcement is the county court where the defendant has its seat or place of business or where the defendant has saleable property. The party applying for enforcement must supply the original award and the original arbitration agreement or certified copies of these documents, and must attach a certified Hungarian translation of such documents if issued in a foreign language.

The court will only refuse to enforce the award if (i) the subject matter of the dispute is not arbitrable under Hungarian law; or (ii) the award is contrary to the rules of Hungarian public policy.

The local courts have jurisdiction to provide assistance in obtaining evidence and other court assistance in accordance with Section 37 of the Act, whereas the county courts have jurisdiction in all other arbitration matters, including the challenge (setting aside) of an award (Section 51 of the Act).

Arbitration has a long tradition in Hungary but, until the change of regime in 1990, it was not a popular method of dispute resolution and had no comprehensive legal framework. The previous legal system did not recognise ad hoc arbitration and only foreign trade disputes could be arbitrated in Hungary.

The Act, which is based on the UNCITRAL Model Law, now provides a modern framework for arbitration and assures the autonomy of the parties and of the arbitration process. In accordance with the Act, new permanent arbitration institutions were established to deal with general and specific issues (e.g. e-commerce, stock and commodity exchange disputes). The most popular permanent arbitration institution in Hungary is the Permanent Court of Arbitration attached to the Hungarian Chamber of Commerce and Industry, which is used not only by Hungarian, but also by international companies.

Ormai és Társai CMS Cameron McKenna LLP
YBL Palace
Károlyi Mihály utca, 12
1053 Budapest, Hungary


Dr Milan Kohlrusz
T +36 1 48 34-843
F +36 1 48 34-801
E milan.kohlrusz@cms-cmck.com