On 1 January 2018, the new Hungarian Code of Civil Procedure came into force. In addition to completely restructuring court proceedings, it also introduces class actions and thereby reforms collective litigation.
Unlike legal action by associations which could already be initiated before by the consumer protection authority, the public prosecutors’ office and the competition authority, a class action allows a claimant to initiate collective action himself. The introduction of the class action is to facilitate efficient proceedings for the assertion of claims of several claimants, especially in those cases where there would be no individual lawsuit for an injured party.
However, the precise scope of application of consumer protection class actions – which in addition to the distribution sector could also be of high importance for production – remains unclear.
1. Class action requirements
(a) Group of at least 10 claimants
A class action in accordance with sections 580 ff. of the Hungarian Code of Civil Procedure can be brought by a group of at least ten claimants if the claims of all claimants are based on the same facts. The claimants enter into an agreement on the assertion of the claim by way of a class action and the claim is asserted by one claimant as a representative in the name and on behalf of the other claimants. Accordingly, the class action is based on the “opt-in model”, i.e. a potential claimant has to actively join the collective action and is not automatically included as a result of his or her claim. Consequently, such claimant cannot simply withdraw from the proceedings again. Instead, the claimant requires the court’s approval for this pursuant to section 587(1) of the Hungarian Code of Civil Procedure and such withdrawal is only possible during the early stage of the trial.
(b) Court approval
A class action requires prior court approval. If the court rejects the application for a class action due to the claim or the facts lacking representative nature, the claimants can assert their claims individually or remedy the missing requirement for the class action to make it admissible.
(c) Assertion of procedural rights by the representative claimant only
In class action proceedings, only the representative claimant has procedural rights and obligations and, for example, a court settlement concluded by the representative claimant remains valid even if it breaches a provision of the class action agreement.
(d) Legal force and effect
The court makes a uniform decision on the claim and the decision has legal effect for all registered claimants involved in the class action. A pending class action or an already resolved class action do not preclude the initiation of another class action or of individual proceedings based on the same facts. However, if there is a pending legal action by an association with respect to the same facts, the court seised of the class action can stay the class action proceedings until conclusion of the lawsuit initiated by the association.
2. Class action only in certain disputes – and probably not for product liability claims
A class action for asserting a common representative claim of a group is possible only in disputes arising from a consumer contract, employment or damage to health resulting from environmental pollution.
Disputes arising from consumer contracts – for example due to invalid general terms and conditions – clearly fall within the scope of application of a class action. Whether product liability claims where a contract between the consumer and the manufacturer as respondent does not exist can also be asserted by way of class action is questionable. Judging by the language of the Code of Civil Procedure this would clearly have to be denied since a consumer can directly take legal action for damages in a product liability case against the manufacturer of a faulty product without a contract between the parties involved being required. The explanatory memorandum to the act, however, refers to claims and claims based on property law in consumer disputes in the broadest sense. The assertion of a product liability claim could easily be subsumed under this.
As long as the courts do not take a different stand, it is to be assumed that the newly introduced class action in Hungary does not apply to product liability claims.