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Hungary's legal system provides for the better known types of alternative dispute resolution (ADR), so parties can try to settle disputes via arbitration or mediation instead of going to court.
The law as it stands does not make it compulsory for parties to use alternative dispute resolution mechanisms to settle disputes.
In the Hungarian legal system, legal regulations at different levels - mainly Parliamentary Acts - govern alternative dispute resolution. They are set out below.
Under Act LXXI of 1994 on Arbitration, the arbitration procedure can be used instead of court proceedings if (a) at least one of the parties is a person professionally engaged in economic activities to which the legal dispute relates (if this is not the case, ad hoc or permanent arbitration may also be decided on if allowed by the law); (b) if the parties can freely decide on the subject of the procedure; and (c) if arbitration proceedings were provided for by the parties in a written arbitration contract. The law may exclude the resolution of legal disputes by means of arbitration, and in certain types of civil actions arbitration cannot be used.
Arbitrators must be independent and impartial; they may not be representatives of the parties. Arbitrators may not accept orders in the course of the proceedings and must maintain complete confidentiality in respect of the facts that come to their knowledge, even after the proceedings have ended. In the case of the permanent court of arbitration, the arbitrators must declare all this in writing on being elected/appointed.
Unless otherwise provided by the law, the permanent court of arbitration attached to the Hungarian Chamber of Commerce and Industry (based at 1055 Budapest, Kossuth tér 6-8) acts as the permanent court of arbitration in international cases.
In certain sports-related cases and if the parties so request, the Permanent Court of Arbitration for Sport endeavours to bring about agreement. The cases concerned are primarily legal disputes between sport associations and their members, disputes between sport association members regarding their sports association-related activities, and disputes between sport associations/organisations or sportspeople and sports experts. The Permanent Court of Arbitration for Sport operates under the authority of the National Sports Association. The Presidium elects its President and at least 15 members for a term of four years from among lawyers with special legal qualifications and at least five years' legal practice in the field of sports. The Presidium elects two members of the Permanent Court of Arbitration for Sports upon the recommendation of the Hungarian Olympic Committee.
With the exceptions provided for by the law, the provisions of Act LXXI of 1994 on Arbitration apply to the procedure followed by the Permanent Court of Arbitration for Sports.
Under Act LV of 2002 on Mediation, the parties (natural persons, legal persons, business entities without legal personality, other organisations) to a civil dispute connected with their personal and pecuniary rights may, if they so agree and if the law does not limit their right of disposition, use a mediation procedure to seek resolution. They may initiate such a procedure by calling on the services of a mediator. The Act specifies the range of civil legal actions in which mediation is not possible and where its provisions cannot apply to mediation and conciliation proceedings governed by other acts or to mediation in arbitration proceedings. The Ministry of Justice publishes the register of mediators on its website: www.im.hu.
Under Act CXVI of 2000 on Mediation in Healthcare, a mediation procedure may be used to achieve the out-of-court resolution of legal disputes concerning service provision by healthcare providers to patients and to ensure fast and effective enforcement of the parties' rights. The parties must submit their mediation request to the regional chamber of judicial experts located nearest to the patient's home or to the place where the healthcare services concerned are provided. The healthcare provider must make the register of regional chambers of judicial experts public in an accessible manner. The register of healthcare mediators is kept by the Hungarian Chamber of Judicial Experts (1027 Budapest, Bem rakpart 33-34., I. 122.).
Under the 2003 amendment to Decree No. 149/1997 (IX. 10.) Korm. on child welfare agencies, child protection and child welfare administration, mediation in child protection matters was introduced from 1 January 2005 in cases where the parents or other persons authorised to maintain relations cannot agree on the manner or time of contact. Mediation in child protection matters can be initiated on the basis of a joint application by the parties to a child protection mediator. The register of child protection mediators is kept by the National Institute of Family and Social Policy. The register can be inspected in the official premises of the Court of Guardians and of the child welfare services.
ADR may be employed in civil and commercial disputes where its use is not restricted by any legal regulation.
In civil and commercial cases, the contracts between the parties may stipulate that arbitration is to be used instead of court proceedings to settle disputes relating to contractual terms and conditions. If such a clause is contained in the contract, it is binding on the parties.
The ADR proceedings described are regulated by high-level legal instruments, parliamentary acts and government decrees which contain rigorous provisions concerning the system of procedures and the requirement of confidentiality. These provisions provide adequate guarantees that ARD proceedings are as reliable as court proceedings.
It is not compulsory to obtain legal representation or legal advice when using ADR. Parties are free to decide whether to request legal representatives (with full powers), to obtain legal advice or information by calling in a lawyer or notary public, or to seek legal advice under the system of legal aid institutions for the socially disadvantaged provided for by Act LXXX of 2003 on legal assistance.
The rules governing the different types of proceedings set out clearly the system of payment of the costs to be borne by the parties. In certain cases the parties are free to agree on the fees and costs incurred in the proceedings, while in other cases the amounts are specified in legal regulations. In arbitration proceedings the court judgment sets the amount of costs and who is to bear them. In mediation proceedings the parties and the mediator are free to agree on the amounts of the fees and costs and who is to pay what; if the parties cannot agree on the latter, they pay them in equal proportions. In healthcare mediation proceedings the fees and costs involved are laid down by the law, but the parties are free to agree on how they are to be borne.
Since the entry into force on 1 April 2004 of Act LXXXX of 2003 on legal assistance, persons eligible for legal assistance under the Act can receive information from the legal assistance provider on the possibilities of settling a legal dispute out of court, or a document is drawn up that could help resolve the dispute. The legal adviser's fee is paid or advanced by the state according to the assisted person’s income and property.
In healthcare mediation proceedings the parties are free to agree on who bears the costs. Where the parties cannot agree, the law specifies who should bear the costs in particular cases. As a general rule it provides that the general costs of the proceedings are to be split equally between the parties. A separate regulation sets out the amount of general and ancillary costs of the proceedings.
A judgment made by a court of arbitration cannot be appealed. In certain cases provided for by the law, either party or any person concerning whom a provision is contained in the judgment may, within 60 days of delivery of the judgment, ask the court to annul it (e.g. if the party that concluded the arbitration agreement did not have legal capacity or competence; if the arbitration contract is invalid under the rules of the legal system governing it or, in the absence of a provision specifying the legal system, under Hungarian law; if the parties were not duly notified of the appointment of the arbitrator or of the arbitration proceedings, or it was otherwise impossible for them to present their case; if the judgment concerned a dispute to which the arbitration clause did not apply or which is not covered by the provisions of the arbitration contract, etc.).
The possibility of annulment is excluded if the 60-day deadline referred to above is not met.
If during the proceedings the parties come to an agreement on the dispute, the court of arbitration issues an order closing the proceedings. At the request of the parties, the court of arbitration will incorporate the agreement (with the terms and conditions set forth in it) into a judgment, provided that it deems the agreement to comply with the legal regulations. The force of an agreement incorporated into a judgment of the court of arbitration is equivalent to that of a judgment passed by it.
Under the Mediation Act, on termination of the mediation proceedings the parties may bring their dispute to court, since agreements made in mediation proceedings are not officially enforceable.
The case may be taken to court within the general limitation period. The initiation of mediation proceedings interrupts the limitation period.
The effect of an arbitration ruling is the same as that of a valid court judgment and the legal rules on judicial enforcement are applicable.
If the necessary conditions are met, the competent local court appends an enforcement order to a binding decision of the consumer protection conciliation body or of the healthcare mediation council and to an agreement concluded before the healthcare mediation council.
A contact agreement reached in child protection mediation proceedings must be presented to the court of guardians within 8 days. The court of guardians approves the agreement at the parties' request. If no agreement is reached in mediation, proceedings will be initiated by the court of guardians.Top
Last update: 22-08-2007