Hungary

Hungary does not operate separate commercial courts. Commercial disputes are heard within the general court system by specialised judges who, subject to the size of the respective court, form a commercial department. The Hungarian judicial system operates on four hierarchical levels. In civil and commercial cases, judicial functions are exercised by the Curia, the courts of appeal, the regional courts and the district courts.

District courts

District courts hear the majority of the cases at first instance. There are 107 district courts outside Budapest and six district courts in Budapest. These six consolidated courts serve all 23 districts of the capital. District courts are headed by a president, and within these courts, specialised departments may be established, depending on the nature of the cases and the size of the respective courts, such as civil, commercial, criminal etc.

Regional courts

Regional courts act both as courts of first and second instance. A case may reach a regional court in two ways. First, a party may file an appeal against a decision delivered at first instance by a district court. Second, certain cases are initiated directly before the regional courts, in which case they act as courts of first instance. These cases are typically of particular significance, either because of the high value of the claim (above HUF 30 million, approximately EUR 80,000) or because of their special nature like intellectual property, securities or corporate disputes.

Regional courts operate under the leadership of a president and consist of departments, specialised groups, and various judicial divisions.

Courts of appeal

The five courts of appeal review appeals against decisions of the regional courts. They constitute the intermediate level between the regional courts and the Curia and were established to ensure effective appellate review.

Operating under the leadership of a president, the courts of appeal function through departments and criminal, civil, and labour law divisions. In certain proceedings defined by law, the courts of appeal may also act as courts of first instance.

Curia

At the top of the judicial hierarchy stands the Curia, headed by its president. Its primary role is to ensure the uniformity and consistency of the judicial practice. It adjudicates extraordinary legal remedies against decisions of the regional courts and the courts of appeal, reviews judicial practice and adopts binding uniformity decisions, which guide judicial practice nationwide.

Private law disputes — and, within this category, commercial litigation — are governed by the Hungarian Code of Civil Procedure (Act CXXX of 2016 (CCP)). The CCP follows a strict, structured, and front-loaded procedural model, placing strong emphasis on the early clarification of claims, legal grounds, and evidence.

Proceedings are adversarial but judge-driven. Parties are required to present their complete factual and legal case at an early stage of the proceedings, and the procedural framework of the case becomes fixed upon the closure of the preparatory phase. Submission of late allegations or evidence is subject to strict limitations. The CCP operates with a divided procedural structure, under which the proceedings consist of a preparatory phase and a merits phase; as a result, clear temporal and functional limits are established for the performance, restriction, or exclusion of specific procedural acts.

Where the parties intend to opt out of state court adjudication, they may refer their dispute to ad hoc or permanent courts of arbitration. The most notable is the Permanent Court of Arbitration attached to the Hungarian Chamber of Commerce and Industry. Arbitration in Hungary is governed by Act LX of 2017 on Arbitration, which is based on the UNCITRAL Model Law on International Commercial Arbitration adopted by the United Nations Commission on International Trade Law.

Hungarian law does not impose a general mandatory pre-action protocol. Nevertheless, parties are expected to act in good faith, and courts may take into account whether the claimant attempted an amicable settlement prior to commencing the court proceeding.

The relevance of pre-litigation settlement has increased following recent amendments to the Hungarian court duty regime. A uniform fee applies to claims up to HUF 300,000 (approximately EUR 780), while higher-value claims are subject to a progressive, eight-tier fee system based on a fixed amount plus a percentage of the excess claim amount. The reform reduces fees in lower-value cases but significantly increases litigation costs in higher-value disputes and abolishes the former fee cap. Consequently, litigation in high-value matters has become considerably more expensive.

Hungarian procedural law expressly allows parties to request a court-summoned settlement attempt prior to initiating proceedings, regardless of whether mediation has taken place. Both mediation-related and standalone settlement attempts offer cost-efficient alternatives to litigation and should be considered before filing a claim.

Arbitration is the dominant ADR method for high-value commercial disputes, particularly in cross-border transactions. The most prominent institution is the Permanent Arbitration Court attached to the Hungarian Chamber of Commerce and Industry (HCCI).

Mediation is legally recognised but less frequently used in large commercial cases, often serving as a parallel or pre-litigation tool rather than a full alternative.

In order to promote the out-of-court settlement of civil disputes, Hungarian law also provides for mediation, regulated by Act LV of 2002 on Mediation. In addition, certain categories of disputes are subject to special statutory procedural rules, as set out in sector-specific legislation. By way of example, disputes affecting the freedom and fairness of economic competition are governed by Act LVII of 1996 on the Prohibition of Unfair Market Practices and Restrictive Competition, which contains procedural provisions applicable to such proceedings.

In commercial cases, first-instance proceedings typically reach a substantive hearing within 6–12  months, depending on complexity and court workload. Full first-instance decision usually takes 12–24 months. Appeals add a further 6–12 months. Expedited proceedings and interim relief are available in urgent cases.

Hungarian civil procedure does not provide for common-law style discovery. There is no general obligation to disclose adverse documents. Parties must submit and prove the facts they rely on. Courts, however, may order targeted production of specific documents if their relevance and possession by the opposing party are demonstrated.

Witnesses may be compelled to give testimony. Under Hungarian civil procedure, witnesses and other persons whose participation in the taking of evidence is deemed necessary by the court are under a general duty to cooperate. Failure to comply without prior justification for good cause may result in cost reimbursement orders, fines, compulsory appearance or notification of the person’s employer or superior. A witness may refuse to testify only in exceptional cases.

Cross-examination exists but differs from the common-law model. Questioning is led by the court, and parties may ask supplementary questions through the judge who may allow them or their representatives to address the witness directly.

Hungarian courts apply the “loser pays” principle as a starting point. Courts have discretion to reduce recoverable costs if they are deemed excessive or disproportionate.

Conduct of the parties, including procedural behaviour or unnecessary requests or acts, may influence cost allocation.

Injunctive relief

The Hungarian procedural law does not provide for an exact list of potential interim remedies. In practice, injunctive measures may, in particular, be ordered to prevent changes to the existing situation where restoration would later be impossible, to avoid the frustration of the applicant’s subsequent exercise of rights, to avert imminent and direct harm, or for other exceptionally justified reasons. Applicants must demonstrate urgency, some likelihood of success on the merits, and a risk of irreparable harm. Any injunctive measure must remain within the substantive scope of the claim asserted in the main proceedings.

Preliminary taking of evidence

Hungarian law also recognises the possibility of preliminary (preventive) taking of evidence. Upon application by an interested party, evidence may be taken either prior to the commencement of proceedings or during pending litigation — once the statement of claim is procedurally admissible — where:

• the evidence could not be effectively obtained at a later stage or would involve significant difficulty;
• the advance taking of evidence is likely to facilitate the avoidance of litigation or its completion within a reasonable time; or
• such advance evidence-taking is expressly permitted by law.

Preliminary enforceability

Certain judgments must be declared preliminary enforceable irrespective of any appeal, including:

• decisions ordering maintenance or other periodic payments;
• judgments requiring the cessation of unlawful interference with possession; and
• judgments based on claims acknowledged by the defendant or substantiated by public instruments or fully probative private documents.

In exceptional cases, non-monetary judgments may also be declared provisionally enforceable where delaying enforcement would cause the claimant disproportionate or difficult-to-quantify harm, subject to the provision of adequate security where required.

Security measures

Hungarian law also provides for so-called “security measures” within the framework of enforcement proceedings. In contrast to the remedies outlined above, which are governed by the CCP, security measures are regulated by Act LIII of 1994 on Judicial Enforcement. Such measures may be ordered where there is a risk that, by the time the enforcement proceedings are concluded, the assets serving as security for the claim — or the asset constituting the subject matter of the claim itself — will no longer be available for enforcement. In practice such security measures are rarely granted.

Other

Certain types of disputes may also be subject to sector-specific legislation. This is particularly the case in matters affecting competition or regulated markets, as well as in disputes relating to intellectual property (IP) rights, where additional statutory regimes may provide for special interim or protective measures.

Hungarian courts generally respect arbitration agreements. Proceedings commenced in breach of a valid arbitration clause are routinely dismissed if the arbitration agreement is invoked by the defendant.

An arbitral award has the same legal effect as a final and binding court judgment. Hungarian courts will refuse enforcement of an arbitral award only on limited grounds, in particular when:

• the subject matter of the dispute is not arbitrable under Hungarian law; or
• enforcement of the award would be contrary to Hungarian public policy.

State courts also play a supportive role in arbitral proceedings. In particular, courts may rule on jurisdictional issues, grant interim and security measures in support of arbitration, and hear applications for the setting aside of arbitral awards, thereby ensuring the effective operation and enforcement of arbitration within the Hungarian legal framework.

Arbitration in Hungary is governed by Act LX of 2017 on Arbitration, which is closely based on the UNCITRAL Model Law. The Act expressly provides that its provisions must be interpreted in accordance with the principle of good faith and with due regard to the official explanatory notes to the 2006 amended UNCITRAL Model Law, as published by UNCITRAL and made available in Hungarian translation by the Permanent Court of Arbitration attached to the Hungarian Chamber of Commerce and Industry.

Arbitrators may order interim measures, including security and injunctive relief. In proceedings before a Hungarian arbitral tribunal, a party may, together with an application for interim relief, also request that the opposing party be subjected to a preliminary measure designed to ensure that the purpose of the requested interim measure is not frustrated. This mechanism allows the tribunal to preserve the effectiveness of interim relief by preventing conduct that could undermine or render ineffective the interim measure sought.

Courts may assist in enforcement or grant interim measures where the arbitral tribunal is not yet constituted. More specifically, in connection with arbitral proceedings — irrespective of the seat of arbitration — Hungarian state courts retain jurisdiction, under the rules of civil procedure, to order preliminary taking of evidence, interim measures, and security measures.

Action to set aside the arbitral award

Arbitral awards cannot be appealed on the merits. Awards may only be set aside on limited procedural grounds, such as lack of jurisdiction, serious procedural irregularity, or violation of public policy. These grounds mirror the standards set out in the UNCITRAL Model Law.

Hungarian arbitration law expressly provides that no appeal lies against an arbitral award. This, however, does not mean that arbitral awards are entirely immune from judicial review. Rather, it reflects that the concept of an ordinary appeal, as known in civil court proceedings, is not applicable to arbitral awards. Accordingly, an arbitral award may be reviewed by state courts only in annulment proceedings, the sole purpose of which is to determine whether any statutory ground for setting aside exists.

Under the Hungarian Arbitration Act, an award may be set aside only if the claimant proves, in summary, that:

• a party to the arbitration agreement lacked legal capacity, or the arbitration agreement was invalid;
• the party was not duly notified of the appointment of an arbitrator or the arbitral proceedings, or was otherwise unable to present its case;
• the award exceeds the scope of the arbitration agreement (with partial annulment available where separable);
• the composition of the arbitral tribunal or the procedure violated the parties’ agreement or mandatory statutory rules;

or if the court finds that:

• the dispute was not arbitrable under Hungarian law;
• enforcement of the award would violate Hungarian public policy; or
• the arbitral tribunal failed to substantively assess an expert opinion issued by the Performance Certification Expert Body submitted by a party.

Reopening of arbitral proceedings

The Hungarian Arbitration Act has also introduced a new, exceptional form of post-award remedy, namely the reopening of arbitral proceedings. Unless the parties agree otherwise, an application for reopening may be filed within one year from receipt of the arbitral award if a party relies on a fact or piece of evidence that, through no fault of its own, could not be invoked in the original proceedings and which, if assessed, could have led to a more favourable decision.

This mechanism provides an additional layer of recourse beyond annulment, closely resembling the concept of retrial known from civil litigation. Importantly, the application must be submitted to the arbitral tribunal itself, requesting a review of the award on narrowly defined grounds.

The possibility of reopening, however, introduces a degree of legal uncertainty, as it may delay the finality of the arbitral award for up to one year. For this reason, the Arbitration Act allows the parties to exclude the application of reopening by agreement, which is generally advisable to preserve the final and binding nature of arbitral awards.

Hungary is a party to the New York Convention (1958) on the recognition and enforcement of arbitral awards and applies EU instruments such as Brussels I bis for judgments within the EU and is also party to various bilateral enforcement treaties.

Enforcement of domestic judgments is primarily governed by Act LIII of 1994 on Judicial Enforcement, while CCP determines when a judgment becomes enforceable.

Final and binding monetary and non-monetary judgments are enforceable. Interim or non-final decisions are generally excluded unless expressly declared enforceable. Under Hungarian law, enforceable titles extend beyond judgments to include settlements approved by state courts as well as those endorsed by arbitral tribunals.

EU judgments are enforceable without exequatur under Brussels I bis. Non-EU judgments require recognition proceedings before Hungarian courts. Arbitral awards are enforced through recognition under the New York Convention framework.

The enforcement of judgments rendered by courts outside the European Union is governed by Hungarian domestic law, in particular Act XXVIII of 2017 on Private International Law, provided that neither EU law nor an applicable international treaty prevails. Under this Act, a foreign judgment may be recognised in Hungary if the foreign court’s jurisdiction is acceptable under Hungarian private international law rules, the decision is final and binding under the law of the state of origin, and none of the statutory grounds for refusal — such as a conflict with Hungarian public policy — apply.

Recognition takes place upon the application of the party seeking enforcement in Hungary. During the recognition proceedings, the competent Hungarian court examines compliance with the formal and jurisdictional requirements for enforceability but does not review the merits of the underlying dispute.

Where a foreign judgment satisfies the applicable requirements for recognition and enforceability, the Hungarian court issues an enforcement certificate confirming that the decision is enforceable in the same manner as a judgment of a Hungarian court. A decision granting such certificate may be challenged by way of appeal and, where applicable, further review. Once the enforcement certificate has been issued, enforcement proceeds in accordance with the rules governing the execution of domestic judgments, using the same statutory enforcement mechanisms available under Hungarian law.

Available enforcement measures include:

• asset seizure;
• prompt collection over bank accounts;
• charges and mortgages over property;
• appointment of a judicial enforcement officer; and
• insolvency proceedings.

Execution is handled by court-appointed bailiffs under judicial supervision.

In Hungarian judicial enforcement practice, the enforcement of monetary claims constitutes the most common and typical form of compulsory execution. Where enforcement concerns a monetary obligation, execution is carried out against the debtor’s assets. The Enforcement Act (Act LIII of 1994 on Judicial Enforcement) categorises the debtor’s property into four main asset groups, each subject to specific enforcement methods:

• wages and other employment-related income;
• funds held with payment service providers;
• movable property; and
• immovable property.

Enforcement measures are applied in accordance with the statutory hierarchy and procedural rules governing each asset category.

By contrast, the enforcement of specific acts or omissions does not seek to satisfy a monetary claim, but rather to compel the debtor to perform or refrain from performing a particular act. In such cases, enforcement relies on legally sanctioned coercive measures to ensure compliance with the obligation imposed by the enforceable title, rather than on the liquidation of assets.

Courts may order provisional seizure, asset freezing, or security measures to prevent dissipation pending enforcement.

Under the Hungarian Enforcement Act, interim protective measures are available even before an enforceable instrument can be issued, provided that the applicant demonstrates a risk that the subsequent satisfaction of the claim would be jeopardised. In such cases, the court may order security measures aimed at preserving the creditor’s position.

In the case of monetary claims, the bailiff may demand immediate payment from the debtor and, failing such payment, proceed to seize the debtor’s assets. The bailiff may also order the freezing of funds held with payment service providers, preventing any disbursement to the debtor or third parties and extending, where necessary, to future incoming funds.

Where the interim measure concerns movable property the bailiff may seize the assets, while interim measures relating to immovable property are effected through the registration of a restriction in the land registry. These measures serve to preserve assets pending the availability of full enforcement and are designed to prevent dissipation or concealment of property prior to execution.

Proceeding on the assumptions outlined in the Model Answer, would a court in this jurisdiction recognise and enforce the arbitral award under the New York Convention?

In particular:

• Does the award fall within the scope of Article V(1) of the Convention, or would any of the grounds in Article V(1) justify refusal on the assumed facts?
• Is the subject matter of the dispute capable of settlement by arbitration under domestic law for the purposes of Article V(2)(a)?
• Would recognition or enforcement of the award be contrary to public policy within the meaning of Article V(2)(b)?

Response

Under the New York Convention, Article V(1) provides an exhaustive list of grounds for refusal of recognition and enforcement, which must be established by the party resisting enforcement.

1. Enforcement may be refused if the arbitration agreement is invalid or if a party lacked capacity. In the present case, the facts expressly confirm that the law governing the arbitration agreement and the law of the seat recognise the dispute as arbitrable. Accordingly, no ground for refusal arises under Article V(1)(a).
2. Refusal may be justified if the party against whom the award is invoked was not given proper notice or was otherwise unable to present its case. The factual background does not indicate any procedural irregularity or due process concern; therefore, this ground does not appear to be applicable.
3. Enforcement may be refused where the award exceeds the scope of the arbitration agreement or the tribunal’s mandate. However, the facts (in particular points 9, 13 and 14) clearly define the limited jurisdiction of the tribunal, and the award appears to fall squarely within that mandate. As such, no refusal is warranted under Article V(1)(c).
4. Refusal may also be based on the improper constitution of the tribunal or procedural irregularities. No such deficiencies are apparent from the facts, rendering this ground irrelevant.
5. Finally, enforcement may be refused if the award is not yet binding or has been set aside or suspended. In the present case, the award is final and binding, and there is no indication of annulment or suspension; consequently, Article V(1)(e) does not provide a basis for refusal.

These grounds are to be interpreted restrictively, in line with the Convention’s pro-enforcement bias.

The analysis therefore turns to Article V(2)(a) and (b), namely non-arbitrability and public policy.

Non-arbitrability

With respect to non-arbitrability, the Hungarian Arbitration Act expressly delineates categories of disputes that may not be submitted to arbitration. Subject to limited statutory exceptions, arbitration is excluded in disputes arising from consumer contracts, in special proceedings regulated under Part Seven of the Hungarian Code of Civil Procedure (Act CXXX of 2016), and in matters falling within the scope of the Administrative Litigation Act (Act I of 2017).

Based on the description of the case, the arbitral tribunal confirmed that the underlying court judgment was final, that payment had not been made within the agreed 28-day period, and consequently ordered the payment of the contractual sum and interest, without examining or re-litigating the merits of the original court proceedings. From the perspective of non-arbitrability, the key issue is how this dispute is to be characterised, and whether — based on such characterisation — it falls within the category of “enforcement-related proceedings” regulated under Part Seven of the Hungarian Code of Civil Procedure, which falls within the scope of non-arbitrability.

In this respect, it should be emphasised that the arbitral award is enforcing a separate contractual obligation arising upon non-payment. The arbitral award does not simply declare an obligation to enforce the original judgment, but rather examines the non-performance of a contractual obligation. The parties have, in effect, transformed the obligation to pay the amount awarded in the original judgement into a contractual obligation. For the event of non-payment of that amount, they provided for recourse to arbitration, within which the arbitral tribunal is not merely required to reproduce the original judgment, but must determine whether the judgment is final and unpaid, order payment of the contractual sum, decide on interest, and, pursuant to the clause, may also order the provision of security.

Under the Hungarian Arbitration Act, arbitration is defined as a procedure chosen by the parties for the resolution of disputes arising from commercial legal relationships, as an alternative to state court litigation. The term “commercial” is interpreted broadly and includes all commercial or economic relationships, whether contractual or non-contractual. On this basis, and given that commercial matters include disputes arising from contractual relationships, the present case falls within this category. The proceedings leading to the arbitral award, as well as the award itself, concern the non-performance of a contractual obligation (upon non-payment of the original judgment, a contractual obligation arises to pay an amount equivalent to the judgment debt). In this context, the tribunal verifies finality and non-payment, and orders the contractual sum, interest, and, where applicable, security. Therefore, on the assumed facts, the arbitral tribunal’s role goes beyond the mere verification of a court judgment. In summary, the parties are in dispute over a contractual (and thus commercial) legal relationship.

At the same time, none of the excluded categories of disputes apply. The dispute does not arise from a consumer contract, does not fall within the special proceedings regulated under Part Seven of the Code of Civil Procedure — where enforcement-related actions are covered (such as actions for termination or limitation of enforcement, enforcement claim actions, actions for toleration of seizure, actions for recovery of claims, or actions for joining enforcement proceedings) — and it does not qualify as an administrative dispute.

Accordingly, it can be argued that the dispute does not fall within the scope of non-arbitrable matters under Hungarian law, and therefore does not, on this ground, preclude recognition or enforcement of the arbitral award.

Public policy

Hungarian public policy places particular emphasis on the principle of res judicata and the finality of judicial decisions. Enforcement may be refused if an arbitral tribunal re-examines the merits of a dispute already decided by a final court judgment, thereby undermining its material legal force. In the present case, however, the tribunal confined its review to verifying the finality of the underlying judgment and the lapse of the payment deadline, without revisiting the substantive issues. On this basis, it did not encroach upon the material finality of the judgment.

That said, it is not entirely inconceivable that a party might invoke public policy by arguing that the contractual mechanism effectively seeks to replicate or circumvent statutory enforcement procedures, thereby blurring the distinction between judicial enforcement and arbitration. While such an argument could be framed in terms of protecting the integrity of the enforcement regime, it would require a broad interpretation of public policy. In the absence of clear precedent, and given the generally restrictive approach to the public policy exception, the likelihood of success of such an argument appears limited.

Conclusion

On the assumed facts, and taking into account that the dispute concerns the non-performance of a separate contractual obligation rather than a re-examination of the underlying court judgment, a Hungarian court would recognise and enforce the award under the New York Convention. None of the grounds in Article V(1) or Article V(2) — including non-arbitrability or public policy under Hungarian law — would justify refusal.

Finally, it may be noted that no issue of double enforcement arises from the coexistence of the original court judgment and the arbitral award. A single claim may appear in different legal forms or before different forums without giving rise to conceptual difficulty. The arbitration clause expressly includes safeguards to prevent double recovery, and the general prohibition of double recovery would in any event preclude such an outcome. Taken together, these safeguards provide sufficient protection against the risk of double enforcement and do not, in themselves, constitute a ground for refusing recognition or enforcement of the award.