Hungary
In your jurisdiction, are there any formal ADR procedures available for resolving commercial disputes other than litigating (or arbitrating) to a final hearing?
Parties invariably informally negotiate to some degree at the outset of a dispute either as an alternative to or at the same time as, litigation or arbitration.
Negotiation is a voluntary and entirely informal process of negotiation to settle a dispute, with the process being entirely under the control of the parties to the dispute. It is the most accessible way of resolving disputes, therefore, it is no coincidence that it is the number one form of dispute resolution, and the most preferred first step for people to take in Hungary. The main types of more formal ADR in Hungary are mediation and conciliation.
In mediation, the parties are assisted in resolving the dispute by a mediator who is agreed by the parties to the dispute. The most important task of the mediator is to create a dispute environment that is structured and adapted to the parties, to clarify the basis and nature of the dispute and to help the parties reach a consensus, which involves identifying the parties’ common interests and identifying, confirming, and validating the various possible points of agreement.
The conciliation bodies which operate alongside the regional chambers of commerce, help to resolve consumer disputes quickly, efficiently, and cheaply. Their aim is to reach an agreement between consumers and sellers or service providers. They are made up of an equal number of members from the organizations representing the interests of consumers and business chambers, and one independent person. The procedure may be initiated by the consumer if the seller’s or supplier’s complaints’ handling process has failed to reach a resolution. The decision of the conciliation body is only a recommendation unless the seller or supplier has agreed in advance to be bound by it. The conciliation procedure or decision does not preclude the consumer from going to court.
Does engaging in ADR have any effect on potential or existing litigation or arbitration?
Engaging in ADR does not itself stop time running for the purpose of limitation of actions nor does it impose an automatic stay on any proceedings or arbitration already commenced, although this can simultaneously be achieved by other means. The right to litigate or arbitrate is also not directly affected by engaging in ADR. Unless the parties have agreed they will try an ADR process before issuing proceedings, litigation or arbitration can be commenced or continued whilst ADR is pursued and will be available if no settlement is secured.
Is ADR compulsory and if so are there any consequences if a party fails to engage in ADR? If it is not compulsory are there any plans for this to change?
ADR is not compulsory in Hungary (it is just an option for the parties) and there are no current plans to make it compulsory.
In civil proceedings, the court may attempt, at any time during the proceedings, to steer the parties towards a settlement concerning the whole or certain parts of the dispute.
If the parties reach an agreement in the mediation procedure before court proceedings are instituted, either of the parties may request the court vested with competence and jurisdiction, to be summoned to settlement negotiations, for the purpose of approving a negotiated settlement.
Before the ruling, bringing case initiation to an end, is adopted, the court shall attempt to arrange a settlement between the parties if there is any possibility to make it successful. The court shall provide information on the possibility of having recourse to mediation, the methods available, on its advantages and on the prospect of fixing the agreement, if any, in a court-approved settlement, and on the rules of staying the proceedings.
Can the parties agree, in advance of any potential dispute, to engage in ADR?
Yes. The parties can agree in advance that they will or may try one or more ADR methods to resolve any dispute that may arise, and many commercial contracts will include dispute resolution clauses involving one or more of these methods. This has the advantage of putting ADR automatically “on the agenda” in the event of a dispute and providing a mechanism for reaching a quick solution.
When does ADR generally take place?
ADR can take place any time from pre-issue to appeal but the optimum timing in any dispute will depend on the particular circumstances, including whether the issues in dispute are sufficiently clear.
Is ADR subject to without prejudice privilege and/or confidential? If not, is there any other means to protect confidential information?
Yes. ADR in Hungary is generally confidential and will be protected by without prejudice privilege, given that mediation and conciliation procedures are not public. In the case of mediation, mediators must handle any data and information obtained in a mediation process in strict confidentiality. Mediators shall remain under the obligation of confidentiality following the termination of professional mediation activities.
Does the output from ADR create precedents?
As ADR is private, it does not create a precedent and helps avoid adverse publicity associated with a court judgment. For this reason, it is unsuitable if you need a court decision allocating blame or require and an injunction. A settlement achieved through ADR is usually recorded in a written agreement which will be enforceable between the parties. It is generally not binding on third parties.
Who bears the costs of ADR?
Typically, the parties share the cost of ADR, albeit it is open to the parties to agree to something different as part of the settlement terms.
Is your jurisdiction subject to any specific rules for cross border ADR?
Yes, Hungary implemented the rules of the Cross Border Mediation (EU Directive 2008/52/). Hungary has not signed the United Nations Convention on International Settlement Agreements Resulting from Mediation 2020 (Singapore Convention).
Are there any particularly unusual features of ADR in your jurisdiction that you are aware are different to other jurisdictions?
There is an obligation for mediators in Hungary to be legally qualified. In addition to the persons and organizations enumerated below, court secretaries and judges, including judges placed on the reserve service roster, shall also be entitled to pursue mediation activities. The minister in charge of the judicial system shall maintain a register of mediators, also containing the names of legal persons and unincorporated business associations employing mediators. A natural person who is not under guardianship or conservatorship or under the effect of advocated decision-making, and who satisfies the following requirements shall be admitted into the register upon notification:
- have a university-level degree and at least five years of experience in the field for which a university-level degree is required from the time of obtaining the said degree
- provide proof of having completed the professional training course decreed by the minister for mediators
- have no prior criminal record and not be restrained by court order from practicing the activities of mediators
A legal person shall be admitted into the register upon notification if:
- it has the activity of mediation registered in its instrument of constitution, and
- it has a member, or an employee employed under a contract of employment or other work-related contractual relationship, who is licensed to engage in professional mediation and whose license to engage in professional mediation has not been suspended
According to Section 1 (3) of the Act LV of 2002 on Mediation, mediation shall not be applied: in guardianship actions, or actions of origin, with the exception of actions brought in disputes arising in connection with the exercise of parental custody in actions for custody of a child, actions for the dissolution of adoption, with the exception of actions for the enforcement of personality rights for belonging to a certain community in actions for the enforcement of rights relating to personality, actions for overturning the notary’s resolution adopted in actions in rem and in enforcement actions provided for in the Act on the Code of Civil Procedure. In matrimonial actions, the court’s decision is required as regards the annulment, and for establishing the validity, existence or non-existence of a marriage, and also for the dissolution of a marriage.
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