1 Scope of Private International Law
The scope of the apil covers ‘private international law matters’ (in Hungarian: ‘nemzetközi magánjogi tényállás’), i.e., fact patterns that contain a substantial international element. The purpose of the apil is to determine the applicable law, the jurisdictional and procedural rules, and the conditions of recognition and enforcement of foreign judgments in private law matters having a foreign element.1 Accordingly, the apil does not apply to purely domestic matters, irrespective of whether the case is purely Hungarian or related exclusively to a single foreign country.
The concept of ‘private international law matter’ has a real legal function. In a case between two Russian companies, the Supreme Court held that the apil was not applicable since there was no foreign (or rather international) element in the controversy. Since it was the apil that contained the rules on international jurisdiction, the Court concluded that those rules included in the apil were not applicable and, hence, Hungarian courts had no jurisdiction.2
The notion of ‘private international law matter’ had a pivotal role also in a case before the Permanent Arbitration Court attached to the Hungarian Chamber of Commerce and Industry, where two Hungarian firms subjected their contract with no foreign element to English law. The arbitral tribunal refused to apply English law. It held that the case was not a ‘private international law matter’, as it involved no substantial foreign element; hence, the rules of the apil were not applicable. Unfortunately, the tribunal treated the choice-of-law clause as invalid and did not examine whether English law could be applied in place of the non-mandatory rules (ius dispositivum) of Hungarian law, similarly to a case where a contract refers to a set of standard contractual terms.3
In Case Gf.ii.20.176/2007/5, the first defendant was a Hungarian limited liability company that was in liquidation; the liquidator sold the first defendant’s real estate located in Hungary to the second and third defendants (both
In Case Pf.iv.20.352/2007/4, the plaintiffs were passengers in a Hungarian bus, which had a collision in Austria. They claimed compensation from the tortfeasor’s liability insurer (a Hungarian company). The High Court of Appeal of Győr held that the apil was not applicable because the motor-vehicle- liability insurance relationship contained no foreign element. The circumstance that the damages were sustained abroad did not qualify as a substantial foreign element. Unfortunately, the High Court of Appeal failed to consider that the legal relationship between the injured party and the liability insurer (the motor-vehicle-liability insurance relationship) is accessory to the delictual relationship between the injured person and the wrongdoer. It is to be noted that in this case the court, at the end of the day, applied Austrian law due to one of the then effective and since repealed provisions of the government decree on motor-vehicle-liability insurance, which provided that in case of damage caused abroad, the insurer’s payment obligation is governed by the law of the place where the loss occurred.
The same question of scope emerges in the application of the EU pil instruments, which are applicable to ‘situations involving a conflict of laws’.4
2 State Law, Non-state Law
The rules of the apil deal with state law and with matters where there is a need to choose between two or more different state laws. Non-state law, including religious law and lex mercatoria, plays no role in the application of pil unless it is transformed into law by a state (which implies that it becomes state law). For instance, Hungarian courts are not mandated to apply sharia as religious
3 Choice-of-Law Rules
3.1 Taxonomy of Choice-of-Law Rules
Hungarian pil, in accordance with international practice, distinguishes between unilateral and multilateral choice-of-law norms. Unilateral rules do not determine the applicable law at large, but prescribe those cases a Hungarian substantive rule is applicable to. On the other hand, multilateral choice-of-law norms contain a mechanism for the determination of the applicable law, which may be either Hungarian or foreign law. Hungarian pil is predominantly made up of multilateral choice-of-law norms; unilateral rules are exceptional.
According to Hungarian pil, multilateral choice-of-law rules have two layers: the hypothesis and the disposition. The hypothesis contains legal notions (such as contract, delictual liability, unjust enrichment, in rem rights), while the disposition contains connecting factors (such as nationality, habitual residence, the place where the damages occurred). Choice of law does not deal with facts but determines the law applicable to legal concepts and legal questions.
It is unsettled whether choice-of-law norms contain a third element, i.e., sanction. The majority position is that they contain no sanction and have, hence, only two elements (hypothesis and disposition), since the legal consequences (sanction) are embedded in the law invoked.5 Accordingly, choice-of-law rules are considered to have no legal consequences in terms of sanction, aside from the duty to apply the law determined by them. This duty is, however, generally not considered to be a legal consequence but merely the bare consequence of linking the legal question to a particular legal system. This is an important differentia specifica of choice-of-law rules: contrary to substantive norms, which naturally involve legal consequences as a conceptual element, choice-of-law rules do not directly provide for a legal consequence (though
Hypothesis |
Disposition |
Sanction |
|---|---|---|
Legal notion, concept, institution |
Connecting factor |
No sanction. / The command to apply the law determined by the choice-of-law rule. |
Given that choice-of-law rules solve legal problems indirectly, by reference to a legal system, they are ‘blind’ and normally contain no value judgement. This principle is, however, not without exception and choice of law, at times, gives way to substantive considerations, such as favor testamenti or the application of the law more favorable to the child.
3.2 Connecting Factors
The heart of the choice-of-law rule is the connecting factor, which links the legal question to a legal system. Most choice-of-law rules use objective connecting factors, which embed circumstances that are not dependent (at least not directly) on the will of the parties. Party autonomy, i.e., the right to choose the applicable law, is conceived as a subjective connecting factor, given that it is based on a subjective element (the will of the parties or the party). Circumstances that can be influenced by the parties indirectly are considered objective connecting factors. For instance, although a party may be relatively free to choose his place of living or habitual residence, these are considered objective connecting factors. The choice about the place of living or habitual residence indirectly determines the applicable law and it is usually influenced by considerations that go beyond the issue of the applicable law.
3.3 Combination of Connecting Factors
In numerous fields the apil uses a set of connecting factors to determine the applicable law. These provisions can be taxonomized as follows.
Cumulative connecting factors are used in cases where an act must be judged on the basis of more than one legal system (and, hence, has to comply with the requirements of more than one legal system). The reason for using cumulative connecting factors is to obviate the risk of limping legal relations. For instance, according to Section 26 of the apil, the substantive validity of a marriage is governed by the personal laws of the two spouses. The marriage is invalid if it fails to comply with the substantive requirements under either law. In the same vein, according to Section 33 of the apil, the validity of an adoption is subject to the cumulative conditions under the personal laws of the adoptive parent and the person to be adopted.
Alternative connecting factors are used in cases where pil has substantive considerations. In this case the substantive law result is recognized if it is recognized under any of the laws indicated by the listed connecting factors. For instance, inspired by the principle of favor testamenti, Section 64 of the apil provides that an oral will is formally valid if it complies with Hungarian law, the lex loci actus, the personal law, the law of the place of living, or the habitual residence of the deceased or, in the case of immovable property, the lex rei sitae. As a further example, Section 34 of the apil establishes, as a general rule, that the legal relationship between parent and child is governed by the lex fori, but the court may take into account the law of another, closely connected state, if this is justified by the interests of the child.
3.4
The apil gives the parties broad freedom to choose the applicable law, though it establishes no such right in general. The parties can choose the law only where the apil specifically authorizes them to and it contains such rules in various fields ranging from contracts and torts to matrimonial property and property law. Section 9 of the apil establishes general rules for party choice (but, as noted, not a general right to choose the applicable law).
In Hungarian scholarship, in accordance with international practice, two theories of party autonomy are recognized, depending on the residual role of the law that would be applicable in the absence of the parties’ choice: ‘choice in the substantive sense’ (in Hungarian: ‘anyagi jogi jogválasztás’, in German: ‘materiellrechtliche Rechtswahl’) and ‘choice in conflict sense’ (in Hungarian: ‘kollíziós jogválasztás’, in German: ‘kollisionsrechtliche Rechtswahl’). ‘Choice in the conflict sense’ implies that the rules of the chosen law are to be applied irrespective of the mandatory rules of the law that would otherwise be applicable in the absence of the parties’ choice. The concept of ‘choice in the substantive sense’ implies that the law chosen by the parties can be applied only within the limits of the mandatory rules of the law that would otherwise be applicable. In other words, under this concept the parties have no more freedom than under substantive law; they can derogate from non-mandatory rules (ius dispositivum) but cannot go against mandatory norms (ius cogens). In this sense, the parties’ choice of law works in the same way as a contractual reference to standard terms or to commercial customs and usages.
The apil generally follows the approach of ‘choice in the conflict sense’; if the parties choose the law to be applied to the contract, that law governs the agreement irrespective of the norms of the law that would be applicable in the absence of the parties’ choice. Of course, the imperative rules (overriding mandatory rules) of that law might be applicable.
Exceptions to the prevalence of ‘choice in the conflict sense’ can be found in the field of contractual and non-contractual obligations in respect of matters that have no (or no relevant) international element (Sections 50(4) and 63(3) of the apil). If the contractual or non-contractual legal relationship is connected to the law of a single state, the parties’ choice cannot interfere with the application of the mandatory rules of the law of that state. The apil contains no exceptions to the ‘choice in the conflict sense’ principle outside the field of contracts and non-contractual legal relationships. The reason is that outside the law of obligations the parties do not have the liberty to choose whichever law they please, but their freedom of choice is limited, that is, they can choose only from a list of laws that are statutorily considered to be connected. This implies that if the parties choose the law in accordance with a connecting
The apil’s rules on party autonomy may be taxonomized from three aspects: is the choice of the applicable law based on a unilateral decision or on an agreement; may the applicable law be chosen implicitly or only explicitly (by express declaration); can the parties choose any law, even an unconnected law, or is their choice limited to a list provided by the law? Along these lines there is an important difference between party autonomy in the field of obligations (contracts and torts) and that in other fields, such as family and succession law. In the former case, the parties may, both explicitly and implicitly, choose the law of any state (including unconnected states).6 On the other hand, in other fields (such as matrimonial property, name, property law), the parties’ choice may only be explicit (the law does not recognize the parties’ implicit choice) and they can choose only from the options set out in the apil (that is, the apil determines a set of laws the parties may choose from). In none of these cases may the parties’ choice interfere with the rights of third parties (Section 9(2) of the apil).
The choice of the applicable law may be unilateral or bi-or multilateral. While the law applicable to the contract is chosen by the parties, in numerous cases it is chosen by means of a unilateral declaration. This cluster of cases embraces not only matters where there is no opposing party (such as names), but also adversarial proceedings (such as the violations of personality rights).
The parties can choose the applicable law by agreement in the realm of contracts (Section 50(1) of the apil), non-contractual oblitgations (Section 63(1) of the apil), matrimonial property and the property relations between registered partners and cohabitants (Sections 28(1), 36 and 37(1) of the apil), and some other property rights (Sections 44(3), 45 (1) and (2) of the apil).
A party can unilaterally choose the law applicable to his name (Section 16 of the apil), the legal declaration made for the case in which he or she is placed under guardianship or protective measures (Section 19 of the apil), and personality rights (Section 23 of the apil).
The choice can be either explicit or implicit. According to Section 9(1) of the apil, as a general principle, the choice must be explicit, unless a special provision of the apil expressly allows an implicit choice. The apil contains such special provisions permitting implicit choice only as regards contractual (Section 50(1) of the apil) and non-contractual obligations (Section 63(1) of
The freedom of choice can be either complete (authorizing the parties to choose any law) or à la carte (allowing them to choose only one of the laws listed by the apil). In the field of contractual and non-contractual obligations, the choice is free in the sense that the parties can choose any law, including those of legal systems that are completely unconnected to the case. Beyond this, however, the choice is restricted to the laws that are linked to the matter by way of a listed connecting factor. As regards names, a person may choose Hungarian law, and a citizen of multiple jurisdictions, as to the birth name, can choose the law of any of his citizenships (Section 16 of the apil). As regards the existence, validity, scope, modification, and withdrawal of a declaration made by an adult with the capacity for the case of the future limitation of his disposing capacity or the absence of his capacity to protect his interests, the person may choose the law of any of his citizenships or habitual residence(s) or the lex rei sitae (Section 19 of the apil). As regards personality rights, a person may choose the law of his center of interests, the law of the wrongdoer’s habitual residence, or Hungarian law. Where matrimonial property and the property consequences of registered partnerships and cohabitations are concerned, the spouses (partners, cohabitants) may choose the law of a state of which one of the spouses is a citizen or is habitually resident in or Hungarian law (Sections 28(1) and 36–37 of the apil). In the case of a sale with reservation of title, the law of the state of destination may be chosen as regards the property law aspects (Section 44(3) of the apil); in the case of transfer of title, the parties may choose between the lex rei sitae and the law of the state of destination (Section 45(1) of the apil); in the case of the transfer of an undertaking (business), although not of real estates, the personal law of the legal predecessor may be chosen (Section 45(2) of the apil).
3.5 Dépeçage
When it comes to choice of law, it is not the law applicable to the matter at large, but that applicable to a particular legal question, that must be sought. A matter may contain numerous questions coming under different legal headings. The legal capacity of one of the contracting parties is an issue of personal law, the question whether that person was the author of a copyright work is an intellectual property law issue, while the conclusion and validity of a license agreement is a contractual question. The laws applicable to these questions are to be determined separately.
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4.1 Characterization (Classification)
As the hypothesis of the choice-of-law rule is made up of legal notions and not statutory fact patterns applicable to real-life cases, the very first question to be asked concerning its application is how these legal notions are defined. The application of a choice-of-law rule presupposes the identification of a legal notion that necessitates the application of the rule and calls for characterization, that is, the issue at stake must be classified as coming under a legal concept.
Under the apil, characterization, in principle, must be done on the basis of the lex fori (Hungarian law), but, exceptionally, the putative lex causae may also be taken into account. Section 4 of the apil adopts the lex fori approach as a general principle; it provides that the characterization of facts and legal issues is governed by the concepts and notions of Hungarian law. Nevertheless, it also takes account of cases where a legal institution is unknown to Hungarian law or is known but understood as having a different content or different designation. If a legal institution in unknown to Hungarian law, characterization must be carried out based on the foreign law that contains it. In this case, the function and purpose of the legal institution in the foreign law must be taken into account. If the legal institution is not unknown to Hungarian law but has a different function or purpose than in the foreign legal system, the latter must be taken into consideration during characterization. Accordingly, in principle, the lex fori must be applied to the question of characterization,7 but, as an exception, the presumptive lex causae may also be taken into consideration. Characterization is to be done based on the notions, structure, and thinking of Hungarian law.
For example, in civil law jurisdictions, including Hungary, prescription is a substantive-law question, but in most US states it is a procedural issue. A similar divergence exists regarding the quantum of damages: in English and Scottish law this has traditionally been considered a procedural issue,8 whereas in Hungarian civil law it is, for the most part, a question of substantive law. In some cases, a legal institution, such as the institution of separation (separatio a thoro et mensa), is completely unknown to Hungarian law.
Section 4 of the apil grants the court the ability to investigate the presumptive lex causae when carrying out the characterization. The apil’s explanatory
In Case Gpkf.ii.26.269/2008/2, the plaintiff, in a matter where the parties stipulated the application of English law, moved for a Mareva injunction, arguing that this remedy is a substantive-law concept under English law, and so English law had to be applied. It is to be noted that, according to Section 66 of the apil, the procedure of Hungarian courts and authorities is governed by Hungarian law. The High Court of Appeal of Győr held, based on Article 4 of the apil, that the Mareva injunction addressed a question of procedural law, and procedure was governed by Hungarian law.
Since EU choice-of-law rules have largely replaced national provisions, the question of characterization raises novel and interesting dilemmas, which are to be tackled autonomously in the different EU law instruments (e.g., Rome i Regulation, Rome ii Regulation). The terms in the EU pil instruments must be given an autonomous meaning and be construed uniformly and in a coherent manner.9
While the problem of preliminary question is well known in scholarship, it is not specifically regulated by the apil and has not given rise to any case law.
4.2 Time Dimension and Change of the Applicable Law
The applicable law is, in essence, determined by the circumstances and the rules in place at the time when the facts occurred. The apil does not specify this principle; nonetheless, it can be deduced from its general approach and special rules. For instance, Section 39 of the apil provides for the application of the lex rei sitae in respect of property rights and other in rem rights, and
In the same vein, as a general principle, Section 14 of the apil rules out the negative retrospective effects of the applicable law and results in the accumulation of the applicable laws. This implies that, in principle, pil cases must be judged on the basis of the circumstances prevailing at the time when the facts emerged. Section 14 of the apil provides that the change in circumstances that determine the applicable law affects the legal relationships that have validly come into existence only if the apil specifically provides so. This implies that the applicable law has no retrospective effects, or at least no negative ones, and the applicable law must be determined based on the circumstances that prevailed at the time the facts giving rise to the legal effect emerged. If the applicable law changes because the circumstances underlying the connecting factor change (place of living, citizenship, etc.), the new applicable law will be applicable only for the future and will not affect the validity of the legal relationships that have already occurred. Accordingly, Section 14 of the apil implies the acumulation of the applicable law.
This means, for instance, that if the law applicable to matrimonial property changes, the property effects that emerged under the previously applicable law remain notwithstanding the change of the lex causae. Put another way, the earlier applicable law remains applicable to the facts that emerged before the applicable law changed. For instance, if an English husband and an Italian wife have lived in Hungary since 2019, as they have no common citizenship, their personal and property relations are governed by Hungarian law (last common place of living). If, in 2021, the Italian wife acquires English citizenship and abandons her Italian citizenship, the applicable law changes to English law (common citizenship). In this case, Section 14 of the apil implies that the Hungarian court should apply Hungarian and English law cumulatively and English law will not invalidate the property law consequences (marriage contract, acquisition of property) that arose before the Italian wife acquired English citizenship. Note that Hungarian law follows the principle of community of matrimonial property, while English law features the separation of property. If, in 2022, the Hungarian court dissolved the marriage and the matrimonial property, at the time of the court proceedings the applicable law (due to the common citizenship) would be English law; however, the validly effected property law consequences that emerged before 2021 (before the wife acquired English citizenship) under the then applicable Hungarian law are respected. If, in 2020, the husband purchased an apartment out of the income he earned during the marriage, this qualifies as common property under Hungarian law (unless there is a marriage contract providing otherwise). When the Hungarian
4.3 Fraudulent Connection (Evasion of the Law)
The connecting factor embedded in the choice-of-law rule determines the connection relevant for the determination of the applicable law. Contrary to the old apil,10 the currently effective apil contains no specific rule on fraudulent connection (evasion of the law). Hence, as a general principle, the court does not investigate how and why the fact referred to in the choice-of-law rule’s connecting factor came into existence and what the parties’ motivation was. The general escape clause may, however, be used to address the issues raised by cases where the parties endeavor to have a law applied with the help of an artificial or sham foreign element created by them in order to circumvent the otherwise applicable law.
4.4 Reference to the Law of States with Multiple Legal Orders
Section 6 of the apil deals with the application of the law of states with more than one legal system. It provides that where the state whose law is invoked has multiple legal systems, the applicable law shall be determined by its interterritorial choice-of-law rules. The same principle applies if the state applies different rules to different groups of persons (e.g., religious groups): the internal (interpersonal) choice-of-law rules apply. In the absence of interterritorial or interpersonal rules, including where their content cannot be ascertained or they do not lead to a single law, the principle of closest connection governs the determination of the applicable law.
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5.1 Judicial Notice and Proof of Foreign Law
The application of foreign law is not contingent on reciprocity (that is, the requirement that the foreign state whose law is supposed to be applied also applies Hungarian law). Contrary to the old apil,11 the currently effective apil contains no specific provision on this question, but it is generally understood that reciprocity is not a requirement of the application of foreign law.
The starting point for Hungarian choice of law is that the law to be applied is the one that has the closest connection with the case, i.e., the proper law, because this is the law that provides the adequate answer for the legal question raised. The application of foreign law is not a matter of comity; hence, it cannot depend on whether the other sovereign is also ready to apply Hungarian law.
Although EU pil instruments are silent on the question of reciprocity, Hungarian courts apply the law determined by these instruments without inquiring whether there is reciprocity.
One of the pivotal questions of choice of law is the determination of the content of foreign law. According to Hungarian private international law, foreign law is to be applied as it is applied in the foreign country by the foreign court, i.e., not only the statutory language but also judicial practice and social context are to be considered.12
The forum is assumed to be ex officio familiar with its own law and to be its most authentic interpreter (iura novit curia). Nonetheless, with respect to foreign law, this may not be the case. Moreover, the application and identification of the foreign law might be burdensome. The question is who should bear the burden and risk of ascertaining the content of foreign law. The answer to this question depends on whether foreign law is considered to be a factual or a legal issue. Facts are, in principle, to be proved by the parties and it is, normally, the plaintiff who bears the burden of proof. On the other hand, it is not the parties’ duty to prove what the law is, it is the court’s business to know
Sections 7–8 of the apil deal with the determination of foreign law and provide for different tools, which are meant to help the court or administrative authority to determine the content of foreign law. The court has to apply foreign law of its own motion (ex officio). If the court is familiar with the foreign law it can rely on its own knowledge. The court may appoint an expert13 and consider the allegations made and evidence submitted by the parties. The court may also contact the minister of justice, who provides information about the foreign law. Although this is supposed to be a tool of last resort, it is normally used automatically in judicial practice. The minister of justice contacts the state concerned for information. Hungary is party to the 1968 European Convention on Information on Foreign Law (London) and to its Strasbourg Protocol of 1978, so the minister may seek information based on the Convention.14 Information about the foreign law may also be obtained via the European Judicial Network.15
In Case Pf.vi.26.608/2001/6, the Supreme Court vacated the first instance judgment and remanded the case because the first instance court had failed to realize that there was an international element in the matter. It had applied Hungarian instead of German law, which was applicable in this case according to the old apil. The judgment stressed that the court must apply foreign law of its own motion and, hence, the failure to apply the lex causae is a ground that necessitates the repetition of the entire evidentiary procedure.
In Case Gf.4.30.112/2006/5, in a case decided under the old apil, the High Court of Appeal of Debrecen held that the court has to determine the content of foreign law of its own motion. Hence, it cannot establish the content of foreign law solely on the basis of the plaintiff’s submission; the court is not relieved of the obligation to determine the content of foreign law ex officio, even if there is no dispute between the parties as to the question of the applicable law. The High Court of Appeal stressed that the determination of the content of the foreign law is not the parties’ but the court’s task.
It is hoped that this practice will change under the currently effective apil, whose language gives more discretion to the court. This may be taken as an
In Case Gfv.vii.30.130/2016,16 in relation to a claim that was submitted in the context of insolvency proceedings, the Supreme Court established that it was the party’s duty to refer to any eventual choice-of-law agreement and submit the relevant evidence. This implies that if the procedural rules do not allow a party to raise new facts, that party is barred from referring to the choice-of-law agreement. According to the facts of the case, the creditor submitted a claim to the liquidator, which was rejected. The creditor attacked the decision before the court, which also rejected the claim. The creditor appealed and, in the appeal, referred to the parties’ choice of Austrian law and attached the pertinent contractual documentation. The Supreme Court affirmed the appeal court’s refusal to consider this evidence. According to the rules of civil procedure, no new facts may be raised in the appeal unless the party learned the new fact or obtained the new evidence after the first instance decision was made. The fact that, instead of the law of the seller (Hungarian law), Austrian law was applicable due to the parties’ choice qualified as such a new fact. The Supreme Court noted that the court can acquire knowledge of the choice only from the parties’ submissions, and it is the parties’ duty to inform the court that the case is governed by a law different from that applicable under the general rules.17
Section 8(3) of the apil provides that if the content of the foreign law cannot be established within a reasonable time, Hungarian law must be applied. Section 8(3) also provides that if the case cannot be adjudicated based on Hungarian law, the court has to apply the law closest to the lex causae. The latter is a law that is akin to the applicable law and, hence, is based on similar principles. By way of example, if a contract is governed by Lebanese law but the provisions of Lebanese law cannot be ascertained, Section 8(3) allows the court to adjudicate on the contractual dispute on the basis of French law, given the similarities between the two sytems. It ought to be noted that the apil’s
5.2 Renvoi (Remission, Transmission)
When choice-of-law rules lead to the application of foreign law, the question emerges whether the foreign legal system is invoked in its entirety, or the choice-of-law rule refers solely to the substantive law of the foreign legal system. In the former case the reference is to be understood widely (i.e., the foreign legal system is invoked in its entirety), while in the latter case the reference is to be understood narrowly (i.e. only the substantive law of the foreign legal system is invoked, with the exclusion of the choice-of-law rules).
If the choice-of-law rules invoke the foreign legal system in its entirety, including the foreign rules that determine the applicable law, the choice-of-law problem re-emerges, in this case on the basis of foreign choice-of-law rules. Foreign choice-of-law rules may refer to themselves, may refer back to the law of the forum (remission), or may point to the law of a third country (transmission).
The problem of renvoi is to be solved on the basis of the requirement of international decisional harmony. There is harmony between the legal systems concerned if the choice-of-law rules of the forum and those of the law invoked by the former lead to the application of the same law. Nevertheless, the problem of renvoi can essentially be resolved only if the two legal systems follow different approaches in respect of this question, i.e., one of them precludes remission, while the other permits it, or vice versa. If the two legal systems adopt the same approach, no international harmony can be reached.
Assume that Peter International is the citizen of country ‘B’ and has his habitual residence in country ‘A’; country ‘A’ follows the principle of citizenship (nationality) and country ‘B’ follows that of habitual residence when determining the lex personae. In this case, the law of country ‘A’ points to the law of country ‘B’ (lex patriae), and the law of country ‘B’ points to the law of country ‘A’ (habitual residence).
If both systems preclude remission, the courts of the two countries apply different laws. The courts of country ‘A’, applying their choice-of-law rules, will apply the law of citizenship without accepting remission, which is the law of country ‘B’, while the courts of country ‘B’, applying their choice-of-law rules, will apply the law of habitual residence without accepting remission, which is the law of country ‘A’. The same international disharmony emerges if both
Accordingly, it seems to be impossible to find a generally applicable solution that could serve as a panacea for renvoi situations. The approach of English courts (foreign court doctrine) may at first glance seem to be such a solution; nevertheless, this method works only as long as a single country applies it. According to the foreign court doctrine, the English judge puts himself in the foreign judge’s shoes and tries to identify the law the foreign court would apply and then, applies that law.18
Hungarian private international law has a simple solution concerning the problem of renvoi: it accepts remission and transmission only where the reference to foreign law is based on citizenship.
Section 5 of the apil provides that if the apil points to a foreign law, this is a reference to the substantive rules of the legal system invoked. Nevertheless, if the reference to foreign law is based on citizenship and the foreign law refers back to Hungarian law or to the law of the third country, the remission and transmission have to be taken into account. Accordingly, in this case, if the foreign law refers back to Hungarian law, Hungarian law has to be applied; if it refers to the law of a third country, the law of that country has to be applied. In this case, the substantive law of Hungary (remission) or that of the third country invoked (transmission) has to be applied, with the exclusion of their choice-of-law rules. Nonethless, this exception works only if the reference to foreign law is based on citizenship. In all other cases the general rule applies,
EU choice-of-law instruments, with the exception of the Succession Regulation,19 exclude renvoi and point to the substantive rules of the lex causae.20
5.3 Application and Adaptation
Foreign law has to be applied as law and not as fact. According to Sections 7–8 of the apil, the applicable foreign law has to be applied ex officio and the court has to ascertain its content ex officio. The foreign law has to be applied and interpreted in the way it is applied and interpreted in the foreign jurisdiction. Any error in applying the foreign law amounts to a legal error.
The fragmentation of the applicable law resulting from the principle that choice of law determines the law applicable to individual legal questions and not to the case at large may lead to unjust or unintended consequences. The individual rules of a legal system interact with each other. Legal institutions are created in the context of a given legal system, taking into account the contextual legal notions. In terms of practice, the law of a country may be very generous in the field of spousal maintenance because it follows the principle of separation in the field of matrimonial property. Here, maintenance may serve the purpose of compensating one of the spouses for the loss of their matrimonial status, while in community-of-property systems there is normally nothing to be compensated for, since the spouses normally end up with half of the gains. Moreover, inheritance rules may also be shaped by matrimonial property considerations. For example, the surviving spouse may inherit one part of a legacy to counterbalance the division of property in marriage law, while in systems featuring the community of matrimonial property the surviving spouse may inherit not ownership but merely some kind of life interest (usufruct). If the rules of different legal systems are taken out of their context and mixed in their application, this could lead to over-or under-compensation: although under most substantive laws there is no rose without thorns, choice of law may lead to situations where the spouse gets only the roses or only the thorns.
The apil contains no provision on assimilation or adaptation. However, the rules on characterization may be used to correct the unjust or unintended consequences of the fragmentation of the applicable law. The rules
5.4 Ordre Public (Public Policy) and Imperative Rules (Overriding Mandatory Rules)
Public policy (in French: ‘ordre public’, in German: ‘öffentliche Ordnung’, in Hungarian: ‘közrend’) is a traditional concept of pil which has an important role in both choice of law and international civil procedural law. Public policy and imperative (overriding mandatory) rules have the same roots: the former is a negative, the latter are positive expressions of the same consideration. The forum always gives precedence to its own public policy and imperative norms and may, in some cases, give consideration to the imperative rules of third countries.
The starting point in choice of law is that the forum recognizes foreign law as equivalent to its own law (even if the two are different) and endeavors to identify the legal system that is most closely related to the case (or, more precisely, to the legal question), since this will provide the appropriate answer. This is, however, a very generous rule, since the law mandates the application of foreign law without knowing its content. The court usually learns the content of the foreign law after identifying it as applicable. Due to the ‘blindness’ of choice of law, the application of foreign law is, in fact, a ‘leap in the dark’.21 It is possible for the foreign law not only to differ from the law of the forum, but for the extent of divergence to be intolerable for the court.
Public policy is relevant in different fields of pil. First, in choice of law: if the application of the foreign law breaches the forum’s public policy, it cannot be applied. Second, with respect to the recognition and enforcement of foreign judgments and arbitral awards: a foreign judgment or award that is contrary to Hungarian public policy cannot be recognized and enforced in Hungary.
Public policy is a traditionally indefinable term. Section 12 of the apil provides that foreign law cannot be applied if the result of its application in the given case manifestly and gravely infringes the fundamental values and constitutional principles of the Hungarian legal system (‘if the result thereof in the given case obviously and seriously violated the fundamental values and constitutional principles of the Hungarian legal system’).
Recourse to the public policy clause is highly exceptional in Hungary and is reserved for cases where the application of the foreign law would be manifestly contrary to the fundamental principles of Hungarian law.22 Here, it is not the foreign law as such that is measured, but its application in the concrete case. Textbook examples of breach of Hungarian public policy include polygamy, discrimination based on gender, and punitive damages, as well as the failure adequately to protect the weaker party (such as an employee or consumer).
Pursuant to Section 12(2) of the apil, in the event that the application of the foreign law is found to infringe Hungarian public policy and there are no means of avoiding the infringement, Hungarian law is to be applied instead. Accordingly, the application of Hungarian law is not automatic in cases where the application of the foreign law is contrary to Hungarian public policy. Hungarian law steps in only if the matter cannot be resolved otherwise. For instance, if foreign law discriminates on the basis of gender, its application may breach Hungarian public policy in the given case. However, this does not necessarily mean that Hungarian law has to be applied instead. The court may simply ignore the discriminatory provision and apply the general rules of the foreign law without it to avoid a discriminatory outcome.
Imperative rules (overriding mandatory rules) are provisions that are to be applied unconditionally. They have a public policy character, are applicable irrespective of the lex causae, and override any eventual conflicting provisions. Section 13(1) of the apil provides that a provision of Hungarian law is imperative if it can be clearly established on the basis of its content and purpose that it needs to be applied unconditionally to the legal relationsips coming within the scope of the apil. While in most cases the imperative nature of a norm can be established only on the basis of the above factors, some rules are explicitly stated by the law to be imperative. For instance, according to Section 26(4) of the apil, the Hungarian rules on unavoidable marriage impediments are imperative and, irrespective of the applicable law, a marriage cannot be
Section 13(2) of the apil authorizes the court to consider the imperative rules of foreign countries if they are closely connected to the case and have decisive importance in its resolution.
In Case 17.P.22.503/2004/107, the Budapest-Capital Regional Court examined the rules of Iranian law, which provide that the husband has an unqualified right to terminate the marriage via a unilateral declaration without giving any reasons (talaq divorce), while the wife may request the dissolution of the marriage only under certain conditions (e.g. if the husband does not maintain her, the marriage causes hardship or inconvenience to her, etc.). The Budapest-Capital Regional Court held that these provisions of the Iranian Civil Code discriminate on the basis of gender as to the right to institute divorce proceedings and, hence, violate Hungarian public policy.
EU pil instruments authorize courts to refuse to apply a foreign law if to do so would violate the forum’s public policy23 or imperative norms.24 Article 9(3) of the Rome i Regulation allows (but does not oblige) the court to take into consideration the imperative norms of the place of performance of the contract ‘in so far as those overriding mandatory provisions render the performance of the contract unlawful’. In considering whether to give effect to those provisions, the court shall take into consideration their nature and purpose and the consequences of their application or non-application. Article 30 of the Succession Regulation provides for the application of the imperative norms of the situs of certain assets (‘immovable property, certain enterprises or other special categories of assets’). In both cases, the imperative rules of the third country are relevant also from the perspective of practical enforceability. The contract’s place of performance may easily be the place of enforcement, and ignorance of the local imperative rules may thwart the judgment’s enforcement in that country. In the same vein, to have practical legal effects a decision under succession law needs to be recognized in the country where the real estate is located. This recognition is, however, dubious if the decision is incompatible with the local imperative rules.
In Case Gf.20062/2015/8,25 the 1980 Rome Convention was applied but the High Court of Appeal of Győr also referred to the Rome i Regulation when interpreting the Convention, and specifically to the concept of imperative
In Case Gfv.v.30.045/2019/9.,26 the plaintiff bank sought a declaratory judgment establishing that, due to the civil war in Libya and the embargo measures adopted by the European Union against it, it was freed from the duties consequent on the bank guarantee it had issued. Although, in the declaration the bank chose Libyan law to be applied to the bank guarantee, in its statement of claim it relied exclusively on the European embargo measures without any reference to Libyan law and argued that the latter was irrelevant in relation to its request for a declaratory judgment.
The Budapest-Capital Regional Court decided for the plaintiff on the basis of the Embargo Regulation27 without ascertaining the content of Libyan law.
The High Court of Appeal of Budapest overturned the judgment. It held that although the provisions of the Embargo Regulation qualified as imperative norms under Article 9 of the Rome i Regulation and, as such, replaced the rules of the applicable law, the impact of these rules on the plaintiff’s contractual obligations could be established only on the basis of the joint interpretation of these imperative norms and the rules of lex causae. According to the Court, the provisions of the Embargo Regulation affected the execution of contracts but did not change the substantive law, because, as far as unconditional application was concerned, it interfered with civil law relationships only as regards the performance, in order provisionally to prevent an increase in the pecuniary assets of the persons concerned. The rules of the embargo regulated the performance of the contract but were not relevant to the legal effects of the fact that underlay the legal relationship. The High Court of Appeal of Budapest also held that the public policy exception enshrined in Article 21 of the Rome i Regulation does not rule out the application of the lex causae in its totality; it merely excludes its application to specific facts. It may not be reasonably
On appeal, the Supreme Court reversed the High Court of Appeal of Budapest’s judgment and reinstated that of the Budapest-Capital Regional Court. The Supreme Court established that the scope of the imperative norms is not affected by the choice-of-law norms and, hence, they impact substantive law relationships.28 The payment of the bank guarantee came under the prohibition of the imperative norm and, hence, the latter not only had paramount importance in the case29 but, according to the Supreme Court, it was not essential to ascertain the content of Libyan law in order to adjudicate on the plaintiff’s petition. Because of the Embargo Regulation, no payment could be made during the time the bank guarantee was open and the payment obligation could not linger on after that, as the embargo did not aim to extend the legal relationships concerned. Hence, the Court could establish that the bank guarantee had expired, and the bank had no payment obligations anymore.30 As to the ascertainment of the content of foreign law, the Supreme Court noted that this was the responsibility not of the parties but of the court, which had to apply the foreign law ex officio. While the parties may certainly make submissions and submit evidence, this does not relieve the court of its responsibility. In the event of a civil war in the country concerned, which complicates intercourse with the foreign state and hinders the ascertainment of the content of foreign law, the court may conclude, with reference to Section 5(3) of the apil, that the content of the foreign law cannot be determined and, hence, Hungarian law must be applied.31
Section 2 of the apil.
Court judgment published under number ebh2004. 1047. and bh2004. 376.
Decision of the Arbitral Tribunal attached to the Hungarian Chamber of Commerce and Industry published under number vb1998. 3.
See, e.g., Article 1(1) of the Rome i Regulation, Article 1(1) of the Rome ii Regulation, Article 1(1) of the Rome iii Regulation.
F. Mádl & L. Vékás, Nemzetközi magánjog, nemzetközi gazdasági kapcsolatok joga (Akadémiai Kiadó, Budapest, 2004), 85; Cs.I. Nagy, Nemzetközi magánjog (hvg-Orac, Budapest, 2017), 32–33.
Section 9 of the apil provides that, unless the apil provides otherwise, the parties’ choice has to be explicit. However, the rules on contracts and torts (in Sections 50(1) and 63 (1) of the apil) recognize the parties’ right to make implicit choices.
See Case 8. G. 40.160/2008/46. (Budapest-Capital Regional Court).
Boys v Chaplin [1971] a.c. 356.; McElroy v McAllister [1949] s.c. 110.; Harding v Wealands [2006] ukhl 32, hl, 66–67.
See Cs. I. Nagy, “Az egységes fogalomértelmezés követelménye a formálódó közösségi nemzetközi magánjogban, különös tekintettel a polgári és kereskedelmi ügy, a szerződés és a szerződésen kívüli kötelem fogalmára,” (2) Európai Jog (2008), 3–12.
Section 8 of the old apil defined fraudulent connection as the parties’ endeavor to have a foreign law applied with the help of an artificial or sham foreign element created by them in order to circumvent the otherwise applicable Hungarian law. Interestingly, the rules on fraudulent connection were applicable only if the parties endeavored to evade Hungarian law and to have foreign law applied; the purview of the above provisions did not cover the situation where they strove for Hungarian law. Hence, in a case of fraudulent connection Hungarian law had to be applied, as the evasion of a foreign law did not amount to fraudulent connection.
Section 6 of the old apil established that the application of foreign law, in principle, did not depend on reciprocity: Hungarian courts applied the foreign law even if the foreign sovereign refused to apply Hungarian law. Nevertheless, Section 6 of the old apil also provided that a piece of legislation could make the application of foreign law dependent on reciprocity; in this case, until the contrary was proved, it was to be presumed that there was reciprocity. Finally, Section 6 of the old apil also provided that if a piece of legislation expressly required that the existence of reciprocity be proved, the court had to contact the minister of justice, who had the power to make a binding declaration in this regard.
Cs. I. Nagy, Nemzetközi magánjog (hvg-Orac, Budapest, 2017), 39.
Note that Hungarian civil procedural law follows the model of court-appointed experts, contrary to the common law notion of expert witness.
Promulgated by Government Regulation 140 of 1992.
Decision 2001/470/ec establishing a European Judicial Network in civil and commercial matters, [2001] oj l 174/25, as amended by Decision 568/2009/ec, [2009] oj l 168/35.
Reported as bh 2017.3.97.
Para. 23.
J.G. Collier, Conflict of Laws (cup, Cambridge, 2004), 21.
Article 34 of the Succession Regulation.
See Article 20 of the Rome i Regulation, Article 24 of the Rome ii Regulation, Article 11 of the Rome iii Regulation. \ For the Insolvency Regulation see paragraph 87 of the Virgos-Schmit Report; for the Maintenance Regulation see Article 12 of the 2007 Hague Protocol.
L. Raape, Internationales Privatrecht (Franz Vahlen Verlag, Berlin u. Fankfurt am Main, 1961), 90.
See Case Gf.ii.20.304/2005/4. (High Court of Appeal of Győr).
Article 21 of the Rome i Regulation; Article 26 of the Rome ii Regulation; Article 12 of the Rome iii Regulation; Article 35 of the Succession Regulation.
Article 9 of the Rome i Regulation; Article 16 of the Rome ii Regulation.
Appealed from Case G.20918/2011/115 (Győr Regional Court).
Appealed from Case Gf.40608/2017/12 (High Court of Appeal of Budapest), appealed from Case 29.G.42.778/2016/38 (Budapest-Capital Regional Court).
Regulation 204/2011 of 2 March 2011 concerning restrictive measures in view of the situation in Libya. oj l 58, 3.3.2011, pp. 1–13.
Para. 49.
Para. 52.
Para. 64.
Paras 53–54.