1 Legal framework
1.1 What system of jurisprudence applies in your jurisdiction? What implications does this have for litigation?
There is a four-tier court system in Hungary (see also question 2.1).
Civil actions have two levels. As a general rule, civil actions proceed at first instance in the regional courts or – in minor cases specified by law – the district courts. Requests for remedy are also heard by regional courts or regional courts of appeal, depending on the proceeding at first instance. If a ruling is appealed, the decision of the court of second instance is final and binding. Parties may initiate a judicial review procedure before the Curia (ie, the supreme court) against a final and binding ruling on the grounds of infringement. Hungarian law provides a wide range of options for submitting requests for review. In addition to judicial review, another extraordinary remedy is retrial, which may be initiated with respect to the facts of the case (eg, evidence not considered).
1.2 What rules govern litigation in your jurisdiction?
The procedural rules applicable to civil suits in Hungary are governed by Act CXXX of 2016 (the Code of Civil Procedure), which came into force on 1 January 2018. The rules pertaining to the payment of court fees are laid down in Act XCIII of 1990. The fees of legal counsel are set out in Minister of Justice Decree 32/2003 (VIII.22).
1.3 Do any special regimes apply to specific claims?
The Code of Civil Procedure sets out rules that partly depart from the general rules on:
- actions initiated by so-called payment order procedures prior to litigation;
- actions on personal status or capacity (eg, matrimonial actions;
- actions for the enforcement of personality rights (eg, press corrections);
- labour actions;
- enforcement actions;
- actions brought to change a decision in a possessory matter; and
- actions for the collective enforcement of rights (class actions).
1.4 Which bilateral and multilateral instruments have relevance to litigation in your jurisdiction?
Hungary is an EU member state and thus all applicable EU regulations (eg, Regulation 1215/2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters; Regulation 861/2007 establishing a European small claims procedure) also apply in Hungary. In addition, agreements on mutual legal assistance and recognition with individual countries are pertinent to Hungarian civil procedural law. The Ministry of Justice regularly publishes the international treaties that are applicable to specific foreign countries.
2 Judicial structure
2.1 What courts exist in your jurisdiction and how are they structured?
The judicial system comprises:
- district courts (in the country and in Budapest, in Hungarian: "járásbíróság" and "kerületi bíróság");
- 20 regional courts in each county and the capital (in Hungarian: "törvényszék";
- five regional courts of appeal (in Hungarian: "ítélőtábla"); and
- the Curia (ie, the supreme court, in Hungarian: "Kúria" ).
2.2 What specialist courts or tribunals exist in your jurisdiction?
The Constitutional Court in Hungary is outside the regular judicial structure. The Constitutional Court may be approached with constitutional complaints that challenge final and binding civil action rulings as unconstitutional.
3.1 What formalities apply before litigation can be commenced in your jurisdiction?
Payment orders should be used in the first place to enforce financial claims not exceeding HUF 3 million between the parties (Section 3 of Act L of 2009). An action may be filed if the obligor challenges the payment order. Parties without legal counsel must submit the statement of claim to the court using the dedicated form. Parties with legal counsel and legal entities must submit documents to the court electronically using dedicated software.
3.2 Do any pre-action protocols or similar rules apply prior to the commencement of litigation? What are the consequences of non-compliance?
Filing a civil action in Hungary is not conditional on a previous attempt by the parties to settle their dispute out of court.
3.3 What other factors should a party consider before commencing litigation in your jurisdiction?
Parties typically consider their chances of winning and the resulting risk of litigation costs, as well as the solvency of the adverse party.
4 Commencing litigation
4.1 What rules on limitations periods apply in your jurisdiction?
As a main rule, there is no deadline by which to file an action in the context of procedural law. Limitations in time follow from substantive law – for example:
- where the validity of a contract is repudiated (Section 6:89(3) of Act V of 2013 (the Civil Code));
- due to lapse of the claim (Section 6:25(1)(c) of the Civil Code); or
- upon the setting aside of an arbitration award (Section 47(3) of Act LX of 2017).
4.2 What rules on jurisdiction and how this is determined apply in your jurisdiction?
The rules on jurisdiction for litigants that are resident in an EU member state are set forth in the so-called Brussels I Regulation (1215/2012 l) and the Brussels II Regulation (2201/2003). For litigants from other countries, the rules on private international law apply (Sections 88–108 of Act XXVIII of 2017), which differentiate between exclusive and excluded jurisdiction. In addition, Hungary is a party to international conventions that also specify rules on jurisdiction (eg, Article 31(1) of the Convention on the Contract for the International Carriage of Goods by Road).
4.3 Are class actions permitted in your jurisdiction?
Yes, the Code of Civil Procedure has provided for class actions since 1 January 2018 (Sections 571–591). However, given the uncertainty regarding the application of these rules, we are not aware of any class actions having been filed as yet. The prosecutor may also initiate a so-called ‘action in the public interest' – for example, to establish the invalidity of unfair stipulations of general contracts. Decisions passed in such actions have erga omnes effect.
4.4 What are the formal requirements for commencing litigation?
Except in minor cases, the parties must proceed with legal counsel. Foreign lawyers do not qualify as legal counsel (see also question 3.1).
4.5 What are the procedural and substantive requirements for commencing litigation?
The parties must prove their legal capacity in court – for example, by submitting an extract from the company register. In most cases, the parties must be represented by their legal counsel. The statement of claim must include the content elements specified by law and the attachments specified by law must also be enclosed (Sections 170–171 of the Code of Civil Procedure).
4.6 Are interim remedies available in your jurisdiction? If so, how are they obtained?
Yes, the parties may request:
- a preliminary injunction before submission of the statement of claim (Sections 108–109 of the Code of Civil Procedure); and
- a preliminary injunction (Sections 103–108) or the suspension of a proceeding in progress (Section 129) after submission of the statement of claim.
A preliminary injunction may be sought, for example, to prevent any change to the prevailing situation.
4.7 Under what circumstances must security for costs be provided?
As a main rule, security for litigation costs may be provided at the defendant's request if the plaintiff is resident in a non-European Economic Area (EEA) state or another country not deemed equivalent to an EEA state under an international treaty. The court may also issue a preliminary injunction subject to the provision of security.
5.1 What rules apply to disclosure in your jurisdiction? Do any exceptions apply to certain types of documents?
Only the court and the litigants may access the court files, including online. Rulings are published online in anonymised form. They are publicly available at https://eakta.birosag.hu/anonimizalt-hatarozatok. In some exceptional cases, even the litigants are not allowed to access certain documents and data (eg, personal data of witnesses; business secrets). Document discovery is not available under Hungarian law.
5.2 What rules on third-party disclosure apply in your jurisdiction?
As a main rule, third parties may not access the documents of the proceeding, but they may attend public hearings (see also question 5.1).
5.3 What rules on privilege apply in your jurisdiction? Does attorney-client privilege extend to in-house counsel?
The protection of business secrets, professional secrets (eg, attorney-client privilege), so-called classified data and other secrets specified by law (eg, tax secrets) is ensured by law (Sections 163(2), 322(2) and 290(1)(c) of the Code of Civil Procedure). As a general rule, no unauthorised persons may access privileged documents and no witnesses may be heard in relation to such privileges. The rules on attorney-client privilege do not apply to registered in-house legal counsel (Section 10(1) of Act LXXVIII of 2017).
5.4 How have technological advances affected the disclosure process in your jurisdiction?
The personal data of witnesses must be submitted to the court using a dedicated form. The court must ensure that access to documents is compliant with the regulations (Section 162(5) of the Code of Civil Procedure), which is possible electronically in cases initiated after 1 January 2020.
5.5 What specific considerations should be borne in mind during the disclosure process, for both plaintiff and defendant?
Where a document containing business secrets or personal data is submitted:
- that information must be deleted from the document;
- the document must be submitted in anonymised form and on a separate form; and
- the party submitting the document must indicate its request for the document to be treated confidentially – for example, because it contains business secrets (Sections 285(1) and 322(2) of the Code of Civil Procedure).
6.1 What types of evidence are permissible in your jurisdiction?
Hungarian civil procedural law is based on the principle of free assessment of evidence – that is, it does not limit the scope of motions to present evidence in suit or of the means of evidence. However, if ascertaining or assessing a fact requires expertise that the court lacks, then an expert must be engaged if motioned. The law sets out separate rules on documentary evidence, witness evidence, expert evidence and inspection. The statements of the parties are not deemed to be evidence. However, the court may consider unlawful means of evidence only in exceptional cases (Section 269 of the Code of Civil Procedure).
6.2 What rules apply to expert evidence in your jurisdiction? What specific considerations should be borne in mind when preparing and presenting expert evidence?
Experts in civil actions may be appointed only if special expertise is required to determine the boundaries of the dispute or to establish or assess a relevant fact of the case (Section 300(1) of the Code of Civil Procedure). Experts may be engaged:
- by court appointment;
- as an expert appointed in another procedure (eg, a criminal procedure); and
- by a party.
Only experts listed in the register of expert witnesses may act as experts in civil actions (Section 300(2) of the Code of Civil Procedure). No expert need be engaged to determine a legal question. An expert opinion issued by an expert engaged by a party may be submitted only if this is permitted by the court (Section 302(1) of the Code of Civil Procedure).
6.3 What other factors should be borne in mind when preparing and presenting evidence in your jurisdiction?
There is an opportunity to obtain preliminary evidence (ie, before bringing an action). Preliminary evidence may be ordered by a notary public (Section 17 of Act XLV of 2008) or the court (Sections 334 and following of the Code of Civil Procedure). This may be applicable if, for example, the presentation of evidence could not be successfully completed during the litigation. In the case of construction disputes, the expert body linked to the chamber of commerce may also take evidence out of court, which counts as an expert opinion in the litigation.
The motion for the presentation of evidence must clearly state the facts to be proved, and the demonstration of said facts must be justified as being necessary to decide on the case.
7 Court proceedings
7.1 What case management powers do the courts have in your jurisdiction?
The court will reject submissions which are not compliant with the procedural requirements and may impose a fine on the responsible party. The court will decide on the litigants' motions for the presentation of evidence and the court is the first to question witnesses and experts. The court may exclude the public from the hearing. The court will close the litigation by issuing a decision on the merits of the case, but is also entitled to stay, suspend or terminate the proceeding. The court may extend deadlines only in certain limited cases defined and to the extent set forth by law. The court may decide to join cases only upon request.
7.2 Are court proceedings in your jurisdiction public or private? If the former, are any options available to the parties to keep the proceedings or related information confidential?
As a main rule, court hearings are public (Article XXVIII(1) of the Constitution). In cases specified by law (Section 231(2) of the Code of Civil Procedure), the court may – ex officio or upon request – exclude the public from the entire hearing or part thereof (eg, to protect business secrets). Currently, the publicity of hearings may be limited, on account of the COVID-19 pandemic (Section 138(2) of Act LVIII of 2020).
7.3 How is the applicable law determined? What happens in the event of a conflict of laws?
The court determines the applicable law on the basis of the submitted documents and the pleadings of the litigants. If the facts are subject to the rules on private international law, Hungarian judges will apply EU law (the Rome I Regulation (593/2008) and the Rome II Regulation (864/2007)) or Act XXVIII of 2017 on private international law, depending on whether the litigants are EU residents. The court will determine the substance of the applicable law ex officio. In the course thereof, the court will consider:
- the parties' statements;
- expert opinions submitted by or obtained at the motion of the parties; and
- information provided in response to a request from the minister for justice.
7.4 What rules apply to the joinder of third parties?
Third parties may voluntarily intervene in the action (Section 41(1) of the Code of Civil Procedure), and may also be impleaded by a litigant (Section 41(1)); and the plaintiff may also involve further defendants in the action (Section 53). If a party (eg, an insurer) has a legal interest in the outcome of a lawsuit in progress between other persons, it may intervene in the action on behalf of (but not as) the party with the same interest (Section 44(5)). If a party is seeking to enforce a claim against a third party due to failure in the action (eg, a general contractor against a subcontractor) or anticipates a claim by a third party, it may implead such third party.
7.5 How do the court proceedings unfold in your jurisdiction? What specific considerations should be borne in mind at each stage of the process, for both plaintiff and defendant?
Civil procedures at first instance consist of:
- a preparatory or first phase, which establishes the scope of the legal dispute, the applicable provisions of the law, the facts to be evidenced and so on); and
- a trial phase, which involves the taking of evidence, the evaluation of evidence and proof of facts.
In the statement of claim and the statement of defence, as well as during the first phase, the parties must present all claims, facts and rights, because they have very limited opportunities later on to add to or change any of their initial pleadings. The parties must also specify the applicable law, so the principle of ‘iura novit curia' does not fully prevail. The first phase takes place in writing; while the first hearing and the second phase are conducted verbally. The litigants present the facts, their legal arguments, their motion to present evidence and the claim for action in the first phase. The second phase consists of the evidentiary hearing of the facts demonstrated as substantial during the first phase. Save for rare exceptions, the court is bound to the parties' petitions. No evidence may be presented at second instance or in a judicial review procedure.
7.6 What is the typical timeframe for the court proceedings?
The general duration of lawsuits depends on the complexity of the case (eg, whether expert evidence is involved; the number of witnesses heard) and the cooperation of the parties. In our experience, simple cases take a year on average from the first hearing until the first instance decision, and altogether about one and a half to two years for the lawsuit to be closed with a final and binding ruling. According to statistics, the average duration of more complex cases (eg, medical compensation claims, actions against insurers) is three and a half years. A review procedure takes another nine to 12 months on average.
8 Judgment and remedies
8.1 What types of judgments, orders and other remedies are available in your jurisdiction?
The court will dismiss inappropriate claims. The court will issue a judgment on the merits of the case and in all other cases will issue an order. Interim rulings and partial rulings can also be made under Hungarian law. If the defendant does not submit a written counterclaim, the court will issue an injunction (Section 181(1) of the Code of Civil Procedure). Upon failure to comply with a time limit, the relevant party may submit a request for restitutio in integrum. Appeal is the ordinary remedy; while review and retrial are extraordinary remedies. Parties may submit a statement of opposition against a court injunction (Section 182 of the code).
9.1 On what grounds may a judgment be appealed in your jurisdiction?
An appeal may be lodged on account of a flaw in the decision under substantive law and/or the irregularity of the proceedings at first instance. There are cases in which no appeal may be brought (eg, decisions made on the setting-aside of an arbitration award). In such cases the first instance decision becomes legal and binding, but the parties may typically submit a request for review against it.
9.2 What is the appeals process? Is the judgment stayed while the appeal is pending?
Appeals against judgments must be lodged with the court of first instance within 15 days of the communication thereof. The court of first instance will submit the appeal to the court of appeal, unless it dismisses it ex officio (eg, due to belatedness). The court may proceed only according to the substance of the appeal. Appeals may not be amended and there is no opportunity to present evidence in the appeal proceedings. As a main rule, the first instance ruling is not final and binding or enforceable as a result of the appeal. However, first instance decisions are preliminarily enforceable in certain cases (eg, a claim proven by a public instrument; a decision against the defendant with respect to a claim acknowledged by the defendant), regardless of whether an appeal is pending (Section 362 of the Code of Civil Procedure).
9.3 What specific considerations should be borne in mind during the appeals process, for both plaintiff and defendant?
In addition to compliance with the time limits, the parties must be mindful of including all content required by law in the appeal (Section 371(1) of the Code of Civil Procedure) and submitting the appeal to the court of first instance. The court of appeal – apart from rare exceptions – is bound by the pleadings of the appeal; therefore, the appeal must be comprehensive. The defendant must remember to submit its counter-appeal to the court of appeal; and if the defendant also finds the decision wrongful, then a cross-appeal must be submitted instead of a counter-appeal.
10.1 How are domestic judgments enforced in your jurisdiction?
Court decisions and notarial deeds are enforced by court bailiffs. The party seeking enforcement may request the court of first instance to issue a writ of enforcement once the court decision has become final and legally binding.
10.2 How are foreign judgments enforced in your jurisdiction?
Court decisions made within the European Union are enforced on the basis of the Brussels I and Brussels II Regulations. Decisions outside the European Union are governed by:
- Act XXVIII of 2017 on private international law;
- Act LIII of 1994 on judicial enforcement; and
- any international treaty in effect with the relevant state.
The court of first instance (in Budapest the Buda Central District Court) at the defendant's registered seat or, in default thereof, the regional court at the location of the defendant's assets has the power to order enforcement.
10.3 What specific considerations should be borne in mind during the enforcement process, for both plaintiff and defendant?
Enforcement costs are relatively high – for example, they would amount to around 15% of a claim of HUF 10 million, pursuant to Minister of Justice Decree 35/2015 (XI.10) and Act LIII of 1994. They are advanced by the party seeking enforcement. For this reason, before commencing the procedure, the party seeking enforcement should consider whether it would be cost effective to initiate enforcement for the total claim or whether – in the case of a business debtor – it would be more expedient to initiate liquidation.
11 Costs, fees and funding
11.1 What costs and fees are incurred when litigating in your jurisdiction?
Litigation costs in most cases include the duties payable to the court and the attorneys' fees of the litigants. The costs of witnesses and expert fees may also count towards the litigation costs. Pursuant to Section 80 of the Code of Civil Procedure, litigation costs include costs that a party incurs prior to the action if these are necessary to enforce the right in action. Under Hungarian law, the parties bear the litigation costs – including the adverse party's costs (eg, attorneys' fee) – in proportion to their success or loss.
11.2 Are contingency fees and similar arrangements permitted in your jurisdiction?
Attorneys' fee may be freely arranged between client and attorney. However, attorneys' fees that are subject to a successful outcome (ie, contingency fees) may not be enforceable before the court to the extent that these exceed two-thirds of the total attorneys' fees (Section 30(3) of Act LXXVIII of 2017). Courts usually reduce the requested attorneys' fees; thus, even if a party wins the case, it may not receive full reimbursement of its total costs.
11.3 Is third-party funding permitted in your jurisdiction?
Yes, a third party may fund the litigation costs of either litigant.
11.4 What other strategies should parties consider to mitigate the costs of litigation?
Court fees may be reduced if the parties reach a settlement in the action (Section 58 of Act XCIII of 1990). In the suit itself, a party should seek a written procedure (pleading) and propose that witnesses be heard via the court approached, and that the proceeding court consider expert opinions available from other proceedings (Section 306(1) of the Code of Civil Procedure). If the party gives no grounds for action and acknowledges the claim without submitting a defence, the litigation costs will be borne by the other party.
12 Trends and predictions
12.1 How would you describe the current litigation landscape and prevailing trends in your jurisdiction? Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?
The courts have rejected many statements of claim for formal reasons since 1 January 2018 (when the Code of Civil Procedure came into force); thus, the legislature has introduced facilitations with the effective date of 1 January 2021. The duration of legal proceedings has been slightly shortened under the new act and the procedure itself has become more focused, leaving the parties' legal counsel with fewer opportunities to prolong the action. The Code of Civil Procedure allows for means of electronic communication to be used to hear the parties, witnesses and experts, or to conduct an inspection. The detailed rules are set out in a decree of the minister of the interior. Due to the health risks posed by the COVID-19 pandemic, the opportunity to hold online court hearings was introduced in Spring 2020. However, the courts – for reasons unknown to us – made little use of this opportunity, and although there are still legal grounds to avail of this opportunity (Section 138(1) of Act LVIII of 2020), they remain reluctant to do so. Since 1 July 2020, the so-called ‘limited precedent system' has prevailed in Hungarian jurisprudence, meaning that lower courts are bound by the published decisions of the Curia. Any deviations therefrom must be justified in detail in the court's decision (Section 346(5) of the Code of Civil Procedure).
13 Tips and traps
13.1 What would be your recommendations to parties facing litigation in your jurisdiction and what potential pitfalls would you highlight?
As the initiation and conduct of civil actions in Hungary are bound by strict rules on form and content, it is recommended to engage legal counsel even in cases where this is not mandatory. The court may dismiss the statement of claim due to procedural non-compliance and will decide against a defendant that fails to submit a written statement of defence according to the claim, which can incur unnecessary expenses.
If the debtor is a Hungarian legal entity that does not contest the claim, it may be more practical to initiate a liquidation procedure instead of filing an action, because many debtors are much more willing to pay in such cases. By fending off liquidation procedure with such voluntary payment, the debtor also incurs less costs.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.