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Dispute Resolution in Construction Law Matters in Hungary

In Hungary basically we can differentiate three different forms of settling legal disputes in connection with construction and design contracts. These possible claim enforcements are as follows: out of court dispute settlements (reconciliation between the parties in front of Dispute Adjudication Boards /DAB/, or via payment order procedure), in front of an ordinary state court via civil lawsuit, or in front of Hungarian or international arbitration courts.

From the above mentioned opportunities the possibility of claim enforcement in front of ordinary courts is open in all cases, whereas the contract is signed upon Hungarian law. Currently in Hungary there is one Arbitration Court attached to the Hungarian Chamber of Commerce. In so far as the contracting parties would like to use this or the international arbitration court in the settling of their dispute based upon a contract signed, according to Hungarian law, in a way that they put down this intention of theirs either in the contract or at latest in a written agreement at the development of their legal dispute. One of the greatest advantages of the Arbitration Court functioning beside the Hungarian Chamber of Commerce is that each of the parties can delegate an arbitrator from the list of arbitrators to the board of arbitrators and the two delegated arbitrators will choose the third member of the board of arbitrators who is also the President. An additional advantage is that the procedure of the arbitration court is quicker than the procedure of the ordinary state court, as cases usually finish within a few months in front of these arbitration courts, whereas in front of state courts – where the procedure is in two instances – in certain cases the procedure can last for years and sometimes the revision of the Supreme Court may be requested. In case of the constraint of the arbitration court according to Hungarian law, there is a possibility of the procedure in front of ordinary state courts, only the statement of invalidation of the verdict of the arbitration court can be required, as long as the verdict of the arbitration court.

In Hungary most of the construction lawsuits can last up to several years in front of ordinary courts, as long as the parties receive the final and definitive sentence. With regard to this fact in certain nominated cases (where the occurrence of the completion or its certification is disputable, or the completion is not disputable but payment has not been carried out, or there is a dispute in connection with the financial guarantees – mortgage, bank guarantee etc. – ensuring employer payment) there is an opportunity to turn to the Completion Validation Expert Organization attached to the Hungarian Chamber of Commerce since 2013, which can issue an expert opinion within 60 days upon request. As long as any of the parties do not agree with the expert report, there is a possibility to turn to court within 60 days following receipt of the expert report, and the court should have an accelerated procedure taken into consideration the report of the Completion Validation Expert Organization in a way as it would have been made by a forensic expert delegated by the court. These legal procedures last definitely shorter than other legal procedures in construction cases.

There is an opportunity to settle disputes out of court. It can be an agreement between the contracting parties, a written agreement, but in case of the consent of the contracting parties, even third parties, organizations dealing with out of court legal disputes or persons can be involved. In the latter case for instance a mediator can facilitate the settlement between the parties, or the conciliatory body beside the Hungarian Chamber of Commerce, but the decision of the latter can only be mandatory for the parties if they assumed it in writing at the beginning of the procedure to subject themselves to the decision of the conciliatory body. In connection with out of court dispute procedure it should be mentioned that as far as the parties accepted the application of one of the FIDIC-contract samples as they are to proceed according to the dispute settling rules included in it. In this regard we are only referring to the role of Dispute Adjudication Board.

An order for payment in front of a notary public has a special temporary character between out of court and litigation dispute. Except for certain cases, this procedure shall start in cases where the claim does not exceed HUF 3,000,000 (EUR 9,800). This procedure cannot be started if the amount of the claim is over HUF 30,000,000 (approx. EUR 98,000). You can initiate this procedure electronically in which the formal but not the substantive checking of the claim, the notary public releases a payment notice for the person indicated as the debtor in order to accomplish his payment obligation within 15 days, or if he does not agree with the claim to initiate a protest within 15 days at the notary public. In the case of the protest of the debtor, the creditor can initiate a civil law suit within 15 days in front of the competent court, thus the out of court procedure will be transferred to court procedure.

Dr. Tamás BALÁZS
Attorney at law
Managing Partner

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