Financial Arbitration – Expanding Possibilities

A new provision of the Hungarian Arbitration Act entered into force on 1 January 2021, which may attract the attention of investors.

The stipulation of arbitration proceedings in consumer contracts was generally prohibited until the end of the last year. However, this prohibition, which is intended to ensure the better protection of consumer interests, is not necessarily appropriate in every situation – for example, in the case of legal relationships related to fiduciary asset management contracts. Consumer contracts may also occur in this area, in the case of which – according to the earlier rules – the stipulation of arbitration proceedings was not allowed.

This was not practical because the stipulation of arbitration is not rare in the area of fiduciary asset management due to the confidentiality of arbitration proceedings.  Also, the stipulation of arbitration can fully clarify the issue of jurisdiction in international transactions. Besides, such legal relationships are quite special and arbitration makes it possible to involve the specialists of this area as judges. It is also not irrelevant that, in this case, the language of the proceedings shall be chosen by the parties, which can lead to savings in translation and interpretation costs compared to proceedings before state courts to be conducted in Hungarian.

In recognition of these aspects, the legislator has made possible the stipulation of arbitration in fiduciary asset management contracts from 1 January 2021 even if a particular contract covers consumer relationship in a legal sense. (The general prohibition remained beyond these cases.)

The legislator has also made possible from the same date that parties can appoint the board members of the Permanent Court of Arbitration attached to the Hungarian Chamber of Commerce and Industry as an arbitrator.  This was not allowed earlier. However, the board members may still not act as party representatives in the proceedings before this arbitration court.


Contributing Advisors

Gábor Horváth

Senior Attorney at Law, Kapolyi Law Firm