SETTING ASIDE ARBITRAL AWARDS IN HUNGARY

03 May 2024

Given that there is no right of appeal in arbitration proceedings, it is important to be aware of what other legal remedies are available to you against an arbitral award. According to the Hungarian Arbitration Act, the parties may request the competent state court to set aside the award, which is a “mandatory” remedy, which cannot be waived by the parties in advance.

1. Against which decisions?

Setting aside is a remedy available against arbitral awards, be they, final, partial, interim, or other type of awards.

It must be noted that based on case law, setting aside is not available against the so-called negative jurisdictional decisions of the tribunal, declining the jurisdiction to hear the dispute, even if the state court also declared the lack of its jurisdiction regarding the same claim[1].

2. Grounds of setting aside

According to the Hungarian Arbitration Act, the setting aside procedure can take place if the plaintiff evidences that

1. one of the parties entering into the arbitration agreement did not have the legal capacity or capacity to proceed; or the arbitration agreement is not effective in accordance with the rules of the law it was subjected to or, in the absence of such subjection, in accordance with Hungarian law; or
2. the party was not properly notified of the appointment of the arbitrator and of the procedure of the arbitration tribunal, or otherwise he was not able to present his case; or
3. the arbitration award extends to a dispute that was not considered in or is falling outside the submission to arbitration, or contains a decision beyond the scope of such submission, providing that if the cases submitted and not submitted can be separated from each other, the reversal of the arbitration award may only be requested with respect to the decision adopted on the part outside the submission; or
4. the composition of the arbitration tribunal or the arbitration proceedings did not comply with the parties’ agreement - except when the agreement is contrary to an obligatorily applicable rule of the Hungarian Arbitration Act - or in the absence of such an agreement did not comply with the provisions of the Arbitration Act;

In addition, the court can set aside the arbitral award, if

1. the subject of the dispute may not be referred to arbitration in accordance with Hungarian law, or (non-arbitrability)
2. the arbitration award conflicts with Hungarian public order (public order)

While in case of points a-d), it is the plaintiff, who has to claim and prove that one of the above provisions were non-respected in the arbitration, the grounds for setting aside under points e-f) (non-arbitrability; public order) may be taken into consideration by the court of its own motion.

3. Deadline and competent court

The claim for setting aside shall be submitted to the competent court within 60 (sixty) days from receipt of the arbitration award, failure to meet this deadline shall entail forfeiture of this kind of remedy. The Metropolitan Court of Budapest has exclusive competence to hear the case.

4. Hungarian Setting aside procedure and remedy

The setting aside procedure is considered as an “ordinary” litigation, where the state court can dismiss the action or set aside the arbitral award.

In case the arbitration award is set aside by the court, the arbitration proceedings may continue by appointment of arbitrators. This is possible, because the successful action against the award does not result in the nullity of the arbitration agreement, except if that was the concrete ground of the claim leading to setting aside the award.

 

The judgment of the Metropolitan Court is enforceable, but an extraordinary remedy is still available against it, the so-called request for review in front of the Hungarian Supreme Court to be submitted within 45 (forty-five) days as of the receipt of the judgment.