Arbitration

Arbitration agreements

What are the formal requirements for an enforceable arbitration agreement?

Except for the requirement that the agreement be in writing, there are no statutory requirements relating to the arbitration agreement. (An arbitration agreement can be concluded as part of another contract or in a separate agreement.) The interpretation of the term ‘in writing’ is not always straightforward, but it is usually accepted as being in writing if the arbitration clause is signed by each party and mailed or faxed to the other. The signature must originate from a person duly authorised to represent the party (valid proxy). In many cases, the validity of an arbitration clause is challenged on the grounds that the signing party was not an authorised representative. An arbitration agreement concluded electronically but without an electronic signature must also be considered to be in writing if the data communicated electronically (especially by email, fax or telex) could be accessed by the other party and is appropriate for later reference.

An arbitration clause is often included in one of the party’s standard terms and conditions. However, this type of arbitration clause forms part of the parties’ agreement only if both the party using the general terms and conditions specifically draws the attention of the other party to the arbitration clause; and the other party expressly accepts the arbitration clause.

Arbitral procedure

Does the domestic law contain substantive requirements for the procedure to be followed?

The Arbitration Act provides default rules governing the commencement of arbitral proceedings, although it does not cover all procedural rules, and additional legislation may apply.

Except for certain mandatory provisions of the Arbitration Act and general principles of civil procedure, the parties can freely:

  • agree the procedural rules to be observed by the arbitral tribunal (permanent arbitration courts are free to establish their procedural rules within the boundaries of the Arbitration Act; their rules must be respected, and the infringement of these rules can be a ground to invalidate the award); and
  • stipulate the use of an arbitration institution’s rules.

In the event of default of the parties’ agreement, an arbitral tribunal can determine the procedural rules at its own discretion, within the framework of the default rules provided by the Arbitration Act.

It is debatable whether the procedural provisions of a foreign state can be applied by the arbitration court. Some commentators believe the procedural laws cannot be chosen by the parties because of their public law nature.

Award

When and in what form must the award be delivered?

The award is committed in a written form and signed by the arbitrators. The award will state the reasons upon which it is based, unless it is an award on agreed terms. In addition, the award includes its date and the place of arbitration. One copy bearing the signature of the arbitrators will be delivered to each party. It usually takes six months to two years for an arbitration award to be made.

Appeal

On what grounds can an award be appealed to the court?

Arbitral awards are final and not appealable. However, a party to the arbitration and any third person affected by the award can file an annulment action with a court within 60 days of the date of delivery of the award. Legal grounds for the annulment are as follows:

  • any of the parties to the arbitration agreement lacked legal capacity;
  • the arbitration agreement is invalid under the law the parties have chosen or, in the absence of this choice, under Hungarian law;
  • a party was not given proper notice of the arbitrator’s appointment or of the arbitration proceedings, or was unable to present his or her case for other reasons;
  • the award was made in a legal dispute to which the arbitration clause did not apply or that was not covered by the arbitration agreement; if the award contains decisions on matters beyond the scope of the arbitration agreement, and decisions on matters validly submitted to arbitration can be separated from them, only the part of the award containing decisions not validly submitted to arbitration can be annulled;
  • the composition of the arbitral tribunal or the arbitration procedure did not comply with the arbitration agreement, unless the agreement was in conflict with any provisions of the Arbitration Act from which the parties cannot derogate, or the agreement was not in accordance with the Arbitration Act;
  • the matter of the dispute cannot be subject to arbitration under Hungarian law; or
  • the award violates Hungarian public policy.

The following may invalidate the award during the annulment proceedings:

  • breach of the arbitral institution’s rules;
  • breach of the parties’ agreement (including the procedural rules), unless the agreement conflicts with any mandatory provision of the Arbitration Act; or
  • the tribunal proceeded in a case where there was no arbitration clause.
Enforcement

What procedures exist for enforcement of foreign and domestic awards?

The enforcement of arbitral awards is subject to substantive rules. An arbitral award has the same effect as a final court judgment. Therefore, it is final and enforceable. However, a court will refuse to execute an arbitral award if, in its judgment, the matter in dispute cannot be subject to arbitration under Hungarian law or the award violates Hungarian public policy.

The enforcement procedure for arbitral awards is regulated by the Arbitration Act and the Act on Judicial Execution. A party that makes reference to an arbitral award or applies for its enforcement must supply the original award or a certified copy of it.

According to Act of XXVIII of 2017 on the Hungarian Code of International Private Law, recognition of a foreign decision (eg, a foreign arbitration award) does not require a separate procedure (this question is examined by the court in its procedure in which the question arises). However, the determination of domestic recognition could also be requested in a separate court procedure.

A foreign decision shall not be recognised if:

  • doing so would violate Hungarian public policy;
  • the party obliged by the decision did not attend the proceeding either in person or by proxy because the summons, claim or other document on the basis of which the proceeding was initiated was not served at his or her place of residence or habitual residence properly or timely to allow the adequate preparation of his or her defence;
  • proceedings involving the same cause of action and between the same parties were brought before Hungarian courts before the start of the foreign proceedings;
  • a Hungarian court has already decided the same cause of action between the same parties;
  • a foreign court other than the state of the court adopting the decision has already adopted a final decision in the same cause of action and between the same parties, provided that the previous decision fulfils the requirements for recognition in Hungary.

Hungary acceded to the 1958 New York Convention in 1962 and to the European Convention on International Commercial Arbitration 1961 (Geneva Convention) in 1964. Under the New York Convention, arbitral awards made in Hungary are enforceable in other member states of the New York Convention, save for the grounds listed in article V of the New York Convention. In certain jurisdictions, local rules may further limit the enforceability of awards made in Hungary.