July 17 2003 Supreme Court Rules on Validity of Arbitration Agreement Nógrádi Law Office | Arbitration & ADR - Hungary Arbitration & ADR A recent Supreme Court judgment (March 2003, BH 2003.126) set out the following principles in respect of the validity and enforceability of an arbitration agreement: According to Hungarian law, an arbitration agreement is an agreement through which the parties agree to submit any disputes which arise in respect of a definite legal relationship to arbitration. For such purposes, (i) at least one of the parties must be a commercial undertaking; (ii) the dispute must arise from its commercial activities; and (iii) the parties must be able to dispose freely of the subject matter of the proceedings. The plaintiffs in the case at hand challenged the jurisdiction of the arbitral tribunal on the basis of a formal defect, alleging that the arbitration agreement had not been countersigned by an attorney, and requested that the court proceed to resolve the case. The court refused to accept this argument, since the only requisite for an arbitration agreement is that it be executed in writing, either as part of another contract or in the form of a separate agreement. No further formal criteria are specified. Whenever a case which is the subject of a valid arbitration agreement is filed with the court, the court will refuse to hear the case and will reject the statement of claim, unless it finds that the arbitration agreement is either null and void, inoperative or unsuitable for being performed. On the other hand, the court is not entitled to remit the case to the arbitral tribunal. Where two parties are joined to a lawsuit but only one has submitted itself to arbitration, the arbitration agreement will be deemed unsuitable for performance and only the competent court may resolve the relevant dispute. Neither reasons of efficiency, nor the fact that actions filed for arbitration and with a court are closely related, may serve as grounds for disregarding the arbitration agreement. Where the jurisdiction of an arbitrational tribunal is stipulated in an arbitration agreement, all disputes, whether contractual or otherwise, fall within the tribunal's scope of authority. For further information on this topic please contact Péter Nógrádi at Nógrádí Law Office by telephone (+36 1 240 6347) or by fax (+36 1 240 6353) or by email ([email protected]).