On 26 June, the Hungarian Constitutional Court – based on the motion filed on 18 July 2017 by the Hungarian Minister of Justice, acting on behalf of the Government – made its decision on the interpretation of the Hungarian Fundamental Law regarding the legal nature and the ratification of the Agreement on a Unified Patent Court (UPCA). In short, the question was whether the ratification and entry into force of the UPCA would be compatible with the Fundamental Law. In the Constitutional Court's view, the proclamation of the UPCA is contrary to Article 25 of the Fundamental Law.

Art. 25 of the Fundamental Law states: (1) Courts shall administer justice. The supreme judicial authority shall be the Curia. (2) The courts shall adjudicate: a) criminal cases, private cases, and other matters defined by law; b) the legality of administrative decisions; c) the legality of municipal decrees, and shall annul them where appropriate; d) cases in which to declare a municipal government at fault in failing to comply with legislative requirements defined by law. (3) In addition to what is contained in Para.(2) hereof, the Curia shall ensure the unification of jurisprudence, and shall pass resolutions in the interest of law which shall be binding for all courts. (4) The judicial system shall be organised at hierarchical levels. Special courts for specific groups of cases may be established. (5) The President of the Országos Bírósági Hivatal [in English: National Office for the Judiciary] shall manage the central administrative affairs of the courts. The Országos Bírói Tanács [in English: National Committee of Justices] shall oversee the central administration of courts. The Országos Bírói Tanács and other bodies of judicial self-government shall participate in the administration of the courts. (6) The President of the Országos Bírósági Hivatal shall be elected by Parliament from among the judges for a period of nine years on a recommendation by the President of the Republic. The President of the Országos Bírósági Hivatal shall be elected by a two-thirds majority of votes of Members of Parliament. The President of the Curia shall have a seat in the Országos Bírói Tanács, and other members shall be elected by the judges as specified in an implementing act. (7) Other bodies may also be authorised to hear certain disputes under an act of Parliament. (8) Detailed rules of the organisational structure and administration of courts and for the supervision of their central administration, the legal status and the remuneration of judges shall be laid down in an implementing act.

Based on the petition of the Government, the Constitutional Court had to assess two key questions regarding the applicable constitutional rules for the ratification of the UPCA.

1. The Constitutional Court examined the nature of “enhanced cooperation” and whether it should be considered as part of EU law, or as an international treaty outside of the EU framework.

The Constitutional Court emphasised that Hungary did not disband on its sovereignty by joining the European Union. Instead on the basis of Article E) of the Fundamental Law, it allowed certain of its constitutional competencies to be exercised jointly with the other Member States through the institutions of the European Union – only to the extent necessary – to exercise the rights and fulfil the obligations deriving from the founding treaties. Therefore, the sovereignty of Hungary should be presumed when assessing the exercise of other competencies. The Constitutional Court stated that enhanced cooperation itself is based on EU law, and the EU actions authorising the creation and execution thereof are part of EU law, which fall under Article E) of the Fundamental Law. This is not necessarily the case for separate international treaties concluded within enhanced cooperation (such as the UPCA), which should be assessed otherwise.

Art. E) of the Fundamental Law states: (1) Hungary shall take an active part in establishing a European unity in the pursuit of freedom, well-being and security for the peoples of Europe. (2) In its role as a Member State of the European Union and by virtue of international treaty, Hungary may - to the extent necessary for exercising its rights and discharging its obligations stemming from the founding Treaties - exercise certain competencies deriving from the Fundamental Law, together with the other Member States, through the institutions of the European Union. (3) General binding rules of conduct may be laid down in European Union legislation within the framework set out in Para. (2). (4) The votes of two-thirds of all Members of Parliament shall be required to authorise the recognition of an international treaty referred to in Para. (2) as binding in scope.

The Constitutional Court concluded that a distinction must be made between forms of co-operation aimed at the mere implementation of (i) the competencies named in the EU's founding treaties and (ii) those beyond them. If the competence regarding the creation of the institution has already been defined in the founding treaties of the EU, the legal basis for the international treaty is Article E) of the Fundamental Law. In other cases it is Article Q).

Art. Q) of the Fundamental Law states: (1) In order to establish and maintain peace and security, and to ensure the sustainable development of humanity, Hungary shall endeavour to live in harmony with all the peoples and countries of the world. (2) Hungary shall ensure that Hungarian law is in conformity with international law in order to comply with its obligations under international law. (3) Hungary shall accept the generally recognised rules of international law. Other sources of international law shall be incorporated into Hungarian law upon their promulgation by laws.

This means in practise that Hungary may conclude an international treaty, where the parties to such are only EU Member States, and which establishes an institution applying EU law. This treaty becomes part of EU law under Article E) only if its legal basis can be found in the founding treaties.

Since the Constitutional Court has competence only for an abstract interpretation, it has not examined whether the UPCA – as an agreement concluded within the framework of enhanced cooperation – would fall within the scope of EU law or in international law. The Court stressed that in the future, the Government as the proposer of the draft bill regarding the ratification of the given international treaty should examine whether the ratification is to be made on the basis of Article E) or Q).

2. The Government aimed to know what are the requirements under Article Q) of the Fundamental Law for ratification of an international treaty establishing an international court having exclusive jurisdiction for certain categories of cases, applying Hungarian, as well as foreign law, and whose decision can be appealed only within its organisation.

Here the Constitutional Court noted that the UPC would apply EU law, other international treaties, and also national law of the Member States, thus creating a common court which forms part of the judicial system of the Member States, and where in a particular group of cases Hungarian law will also be applied. Furthermore, not only the main proceedings but the appeal proceedings will fall within the competence of the UPC. Therefore, its decisions will be completely excluded from the domestic system of legal remedies and constitutional review.

The Court pointed out that Hungary recognises the jurisdiction of several international courts, but these typically examine the question of international or EU law and, if they decide on the merits and have made a binding decision, then the signatory state as a litigant party is also represented in the proceeding. Therefore, an international court having exclusive jurisdiction – irrespective of the will of the parties – for direct actions between private individuals must be considered differently, especially if it applies Hungarian law. Thus, the international treaty establishing such a court affects the Fundamental Law’s chapter on domestic courts. Under Article 25 of the Fundamental Law, domestic judicial forums in general have exclusive competence to deal with direct actions between individuals.

Therefore, in the Constitutional Court’s view, an international treaty which transfers jurisdiction over direct actions of individuals defined in Article 25 to an international institution – meaning that decisions made this way will be completely excluded from constitutional review and Hungarian state jurisdiction – cannot be ratified on the basis of Article Q).

In conclusion, and in light of the decision of the Constitutional Court in the case, the UPCA cannot be ratified according to Article Q) as it would be in breach of the Fundamental Law. It is now for the Government to assess whether or not the ratification of the UPCA is possible under Article E) of the Fundamental Law; or would the amendment of the Fundamental Law be necessary in order to ratify the UPCA.

The decision of the Hungarian Constitutional Court is available here (in Hungarian only).