1 The Pervasive Principle of Closest Connection
The principle of closest connections plays two important roles in Hungarian private international law. First, choice-of-law rules are, for the most part, inspired by this principle and convert it into specific norms. Second, the principle of closest connection also has a normative role. The apil contains a general fallback rule (Section 11) that determines, with reference to the principle of closest connection, the law applicable to matters not covered by a specific choice-of-law rule. Furthermore, the apil also contains a general escape clause (Section 10) which, again with reference to the principle of closest connection, empowers the judge to apply a law different from the one pointed to by the specific rules of the apil.
Section 11 of the apil contains an all-embracing and pervasive choice-of-law rule: if the apil contains no specific provision as to a legal relationship that comes within its scope (that is, a private international law case), the law of the most closely connected country has to be applied. This is a general fallback rule and not an escape clause. Section 11 of the apil applies only if the apil contains no specific choice-of-law rule concerning a given case. Contrary to the general escape clause included in Section 10 of the apil and discussed below, Section 11 does not authorize the court to depart from a specific choice-of-law rule set out in the apil.
According to Section 10 of the apil, if, in the light of its facts, it is obvious that the case is substantially more closely connected to a law different from that determined by the apil’s specific provisions, by way of exception, the court can apply this more closely connected law. Accordingly, the principle of closest connection can be considered a general rule behind all the choice-of-law rules of the apil also in the sense that the judge always has the right, on the basis of the general escape clause embedded in Section 10 of the apil, to set aside a specific choice-of-law norm and to apply the law that is manifestly more closely connected with the case.
The general escape clause does not apply if the parties chose the applicable law, that is, the court may not rely on Section 10 of the apil to disapply the law chosen by the parties.
It is an important requirement that the court has to make the decision on the applicability of the general escape clause within 30 days after receiving the
Section 10 of the apil may be of help in cases where the court does not find the applicable law appropriate. The court’s approach to the property relations between the spouses and the treatment of the marriage contract in Case Pfv.ii.21.240/2007/4 may provide an example of this. The matter was adjudicated on the basis of the old apil, which contained no general escape clause. The court could not find a choice-of-law solution but tried to correct the inappropriateness of the applicable law by means of the leeway it had under substantive law. Here, the plaintiff was a Swedish-Iranian dual citizen and, at the time of the court proceedings, lived in Sweden, while the defendant had only Iranian citizenship. On the basis of Section 11 of the old apil, the plaintiff’s personal law was Swedish law (she had dual citizenship, neither of which was Hungarian, and thus the personal law was determined by the place of living). On the other hand, the defendant’s personal law was Iranian law. Since the spouses had no common personal law, the court applied the law of the last common place of living, which was Hungary. Nonetheless, the Supreme Court noted in its judgment that, although Hungarian law was to be applied to the personal and property relationships between the spouses, when examining under Hungarian law whether the marriage contract was contrary to good morals, the traditions and principles of Iranian law (as the law of the country both spouses stemmed from) also had to be taken into account as part of the court’s balancing. That is, the foregoing element was a circumstance that had relevance also in the application of Hungarian substantive law. Under the currently effective apil, the court could rely on Section 10 to apply Iranian instead of Hungarian law.
Given the tight deadline set by Section 10 of the apil for the application of the general escape clause, it is assumed that it may be mainly used in cases where the parties jointly request the court to apply a law different from the lex causae. If the parties have the right to choose the applicable law, they may make use of party autonomy. However, if they have no such right in a given case but find the law set out by the apil to be inappropriate, they may jointly request the court to apply Section 10 of the apil.
2 Personal Law
The meaning of personal law (lex personae) is twofold: it has both a substantive-law and a choice-of-law face; lex personae (personal law) is both a bundle of substantive-law issues and a set of connecting factors. On the one hand, the
2.1 Natural Persons
According to Section 15(1) of the apil, natural persons’ personal law encompasses legal capacity, capacity to act, and personality rights.
‘Legal capacity’ is used as the translation of the Hungarian concept of ‘jogképesség’, which is the equivalent of the German concept of ‘Rechtsfähigkeit’. A person having legal capacity can be the holder of rights and obligations; legal capacity implies the quality of being a legal subject. Nevertheless, it is not all those with legal capacity who can enter into commitments, but only those that have ‘capacity to act’1 (in Hungarian: ‘cselekvőképesség’; in German: ‘Geschäftsfähigkeit’). ‘Capacity to act’ implies the legal faculty to make decisions amending the person’s rights and obligations. Only persons (or entities) having legal capacity can have capacity to act. On the other hand, not all persons who are legal subjects, i.e., have legal capacity, have capacity to act. Minors or mentally disabled persons have no or restricted capacity to act. Nonetheless, it has to be noted that, in Hungarian law, ‘capacity to act’ is different from and does not extend to ‘delictual capacity’, which is a tort law question.
Section 15 of the apil determines the personal law of natural persons by means of three subsidiary connecting factors: citizenship (nationality), habitual residence, and lex fori. Domicile plays no role in this regard.
The principal connecting factor used by the apil for determining a natural person’s lex personae is citizenship (lex patriae). If a person has multiple citizenships, the applicable law is determined by the citizenship to which, considering the circumstances of the matter, he or she has the closest connection. Where one of the multiple citizenships is Hungarian, there is a rebuttable presumption that the person is most closely connected to Hungary. If the person has multiple citizenships none of which is Hungarian and has no closer connection to any of them, or if the person’s citizenship cannot be identified, as well as in the case of stateless persons, personal law is determined by the habitual residence. If the applicable law cannot be identified on the basis of the foregoing rules, Hungarian law has to be applied.
The place of living is the place where someone lives permanently or with the purpose of settling down. On the other hand, habitual residence refers to the place where the person has the center of his life; the circumstances revealing the person’s intentions need to be taken into account in this regard. Accordingly, subjective elements need to be taken into account as to both the ‘place of living’ and ‘habitual residence’; however, ‘habitual residence’ is more a factual than a subjective issue.
The apil sets out two cases where the lex fori (Hungarian law) is used as an alternative connecting factor to protect legitimate expectations. Section 17 of the apil provides that in respect of transactions concerning Hungary the person shall be regarded as having capacity to act if he or she has such capacity under Hungarian law. In respect to everyday transactions of minor importance that are concluded and performed in Hungary, as well as all transactions whose legal consequences arise in Hungary, a person’s capacity to act can be established on the basis of Hungarian law if he or she has no or restricted disposing capacity under his personal law.
Furthermore, Hungarian law has to be applied to the question of death and the presumption of death of a missing person if a domestic legal interest warrants this. Such interest can be the settling of the legal status of property located in Hungary, such as where the person concerned has property located in Hungary and the adjudication of the property’s legal fate (from the point of view of inheritance law) necessitates a decision on the question of death or the presumption of death of a missing person.2
Hungarian law uses different terms for guardianship over minors (in Hungarian: ‘gyámság’) and guardianship over adults (in Hungarian: ‘gondnokság’).
Guardianship over minors is governed by the law of the hearing court, but if the interests of the child warrant, a closely connected law may exceptionally be applied or taken into account.3 Given that the apil is applied solely
Guardianship over adults and other protective measures that do not affect the person’s capacity to act are not governed by the personal law but by the law of habitual residence of the person concerned. However, if the interests of the adult concerned warrant it, the court may exceptionally apply or take into account the law of a state to which the case is more closely connected.4
The law of the habitual residence also applies to the legal declarations an adult makes for the situation in which he or she would be placed under guardianship or protective measures would be adopted to protect these interests; however, in his written declaration, he or she may also choose the law of his citizenship, earlier habitual residence, or the situs of the assets.5
The law of the appointing court applies to the legal representation of a person restricted in managing his own affairs and to the ad hoc guardianship of adults.6
The personal law of stateless persons is determined by their habitual residence.7
The personal law of refugees is Hungarian law. The rationale of this rule is that it would be inappropriate to keep such persons subjected to the law of the country of origin they fled from. At the same time, the rights and obligations acquired remain intact.8
2.2 Names of Natural Persons
The name of a natural person is governed by their personal law, but the application of Hungarian law may be requested. In addition to this, with respect to their birth name, Section 16(2) of the apil grants natural persons having multiple citizenships the ability to choose the law of any country whose citizenship they have. As regards married names, Section 16(3) of the apil provides that the parties may jointly request the application of the law of the citizenship of either spouse. In the absence of a joint request, the married name is governed by the law applicable to the spouses’ personal and property relations, which is determined by Section 27 of the apil. The law that served as the basis
Section 16 was inserted in the apil with the desire to comply with the cjeu’s judgment in Carlos Garcia Avello.9 In this case, the legal dispute arose out of Belgium’s refusal to change, in accordance with Spanish customs, the surnames of the two children of a Spanish father and a Belgian mother, who had dual citizenship. Under Belgian law, the children acquire the surname of their father, while under Spanish law the children take the first surnames of the parents. In this ruling, the cjeu, essentially, established that a dual citizen who is the citizen of two Member States is entitled to choose a name that complies with the law or customs of either Member State. It held that Articles 18 (prohibition of discrimination based on nationality) and 20 (Union citizenship) tfeu preclude Member States from ‘refusing to grant an application for a change of surname made on behalf of minor children resident in that State and having dual nationality of that State and of another Member State, in the case where the purpose of that application is to enable those children to bear the surname to which they are entitled according to the law and tradition of the second Member State’.10
In the absence of Section 16 the question of name would come under personal law, which is presumed to be Hungarian law, if the person has multiple citizenships but is also a citizen of Hungary. Although this rebuttable presumption is maintained, as to name, the person is granted the right to choose the law of any country he or she is a citizen of. In this regard, Section 16 goes beyond the judgment in Carlos Garcia Avello. Under the apil, the right to choose between the various laws applies irrespective of whether the person concerned chooses the law of a Member State or not; what is more, the person has the right to choose irrespective of whether the matter has any link to the EU at all. For instance, a person having dual Hungarian-Russian citizenship can opt for the latter when registering his name (or rather his parents would do that acting as statutory representatives); a US-Canadian citizen would also have the right to choose, although such a case, absent additional circumstances, would probably not be an EU matter and, thus, would fall outside the scope of the judgment in Carlos Garcia Avello.
2.3
The personal law of legal persons (lex societas), according to Section 22(4) of the apil, embraces the legal person’s legal capacity, coming into existence, representation, personality rights, and organizational and internal matters, and the responsibility of the legal person, its members, and officers.
In general, there are two approaches to connecting a legal person to a particular legal system. Common law systems normally follow the principle of incorporation (registration, in German: ‘Gründungstheorie’), while civil-law legal systems traditionally follow the principle of seat (in German: ‘Sitztheorie’).
Section 22 of the apil sets out three subsidiary connecting factors with regard to the lex societas. Although Hungary is a continental system, it follows the principle of incorporation. If the place of incorporation fails to determine the applicable law because the organization was incorporated under the laws of more than one state, the law of the registered seat must be applied. If the registered seat also fails to determine the applicable law because the organization has no or more than one registered seat and is not incorporated in any of those states, the legal person’s actual seat (central administration/management) determines the applicable law.11
In Case Cgf.ii.32.573/1997/7, the Company Court interpreted the concept of legal capacity in the context of proceedings for company registration. According to the facts, the Company Court refused to register a company because one of its founders, which was a company, was not registered at the time when the articles of association were signed. In the relevant period, the concept of ‘pre-company’, i.e., the notion that a company is granted limited legal capacity before its final registration, was unknown in Hungarian company law (this was introduced only by the Company Act of 1997), and the court considered the company taking part in the process of foundation to be ‘non-existent’. On appeal, the appellate court held that the question whether the German company had legal capacity was to be adjudicated upon according to German law, as this was the company’s personal law. According to German law, the company, as a pre-company, acquired limited legal capacity before final registration and, in this case, the duly signed articles of association and the request for registration were submitted to the competent German authority; hence, the business entity was to be regarded as a pre-company at the time the Hungarian company’s articles of association were signed.
In Case Gf.i.30.059/2000/5, the Supreme Court held that it was the plaintiff’s duty and burden to prove that it had legal capacity under its personal law (in
In Case bh2001.537, the choice-of-law question was the applicability of the then-effective rule of Hungarian company law that a one-person company, i.e., a company having only one shareholder or member, cannot be the only member of another one-person company. The court held that this provision is also applicable to foreign one-man companies when they want to establish a one-person company in Hungary. Accordingly, the court held that this prohibition was not part of the founder’s personal law but was a question coming under the lex personae of the Hungarian company the founder aimed to establish.
2.4 Personality Rights
Article 1(2)(g) of the Rome ii Regulation excludes from its scope non-contractual obligations arising out of violations of privacy and rights relating to personality, including defamation.12 This raises questions of interpretation in the context of Hungarian law’s wide definition of personality rights, which extends to all illicit acts concerning the personality, including personal injury.
In Case Pfv.viii.20.109/2019,13 the Supreme Court encountered this question of characterization. In this case, the parents claimed non-pecuniary damages because their child was killed in a traffic accident, as this interfered with their personality right to the protection of private and family life.14 Under Hungarian law the legal basis of the claim for damages was the violation of a personality right. Nonetheless, the Supreme Court held that the terms used in Article 1(2)(g) of the Rome ii Regulation had to be given an autonomous meaning and the term ‘personality rights’ had a narrower import under the Regulation than under Hungarian law. The Supreme Court established that a closer look to the legislative history demonstrated that Article 1(2)(g) of the Rome ii Regulation was destined to address violations of personality rights committed via the media and the EU legislator aimed to create a uniform regime for delictual
Outside the scope of the Rome ii Regulation, the law applicable to personality rights is determined by Section 23 of the apil. The apil here has a twofold approach. The existence of individual personality rights comes under the purview of personal law, while their violation and its legal consequences are subject to choice-of-law rules similar to those applicable to delictual liability.
According to Section 15(1) of the apil, the personal law of humans embraces personality rights. Section 22(4)(d) of the apil contains the same rule for legal persons.
Violation of personality rights and its legal consequences (as this is a question having delictual features) are governed by the law of the injured party’s habitual residence (the registered seat in the case of legal persons). The party has, however, the right unilaterally to choose the law of his center of interests, the law of the wrongdoer’s habitual residence (the registered seat in the case of legal persons) or Hungarian law.18
3 Contractual Obligations
The law applicable to contracts is predominantly regulated by the Rome i Regulation, and Hungarian courts have produced a significant amount of case law on the Regulation’s application. The apil applies only in matters falling outside the scope of the Regulation and it is of highly limited practical relevance. Notable matters not covered by the Rome i Regulation include negotiable instruments, arbitration, and choice-of-court agreements, the question of representation (power of attorney), trusts, and certain insurance contracts.
In Case G.20348/2013/83, the Rome i Regulation was not applicable ratione temporis. However, the Győr Regional Court, as obiter dictum, indicated that the Rome i Regulation would not apply anyway; one of the contracting parties was Austrian but the other one was from the Cayman Islands. It seems that the court conceived the scope of the Rome i Regulation as applying only to EU
3.1 Hungarian Choice-of-Law Rules
Sections 50–51 of the apil establish the general rules applicable to contracts falling outside the scope of the Rome i Regulation. The parties have the right to choose the applicable law. In the absence of a choice, the most closely connected law has to be applied. Section 52 of the apil contains special choice-of-law rules for arbitration agreements. Unilateral declarations are governed by the same choice-of-law rules as contracts unless the apil provides otherwise.
The scope of the lex contractus covers the conclusion, existence, validity, interpretation, performance, and breach of the contract, including contractual damages, as well as its cancellation, rescission, and termination.
The existence and validity of the contract come under the lex contractus (Section 53 of the apil), which is, as noted above, the most closely connected law (Section 51 of the apil), provided the parties did not choose the law to be applicable. Nonetheless, the apil also uses a set of alternative connecting factors driven by the motivation as far as possible to save the formal validity of the contract. According to Section 54 of the apil, if the parties are present in the same country when concluding the contract, the latter is valid if it complies with either the lex contractus or the lex loci actus. If the parties are in different states, the contract is formally valid if it complies with the lex contractus or with the law of the state where either of the parties was or had his place of habitual residence at the time of its conclusion. Unilateral declarations made in the context of an existing or contemplated contract are formally valid if they comply with the lex contractus, the lex loci actus, or the law of the habitual residence. If, however, the contract concerns property rights in or the lease of immovable property, those mandatory rules of the situs that apply irrespective of the place of the contract’s conclusion and the lex contractus shall apply.
Representation is one of the very few contractual issues that are excluded from the scope of the Rome i Regulation and are regulated by the apil. Agency gives rise to two legal relationships. The internal relationship between the principal and the agent is governed by the Rome i Regulation. It qualifies as a contract for the provision of services under Article 4(1)(b) and is governed by the law of the country where the service provider has his habitual residence. The external relationship based on the authority of the agent is excluded from the scope of the Rome i Regulation pursuant to its Article 1(2)(g). The law applicable to the external dimension of agency (representation) is determined by Section 53 of the apil, which provides that the existence and validity of a
In Case Gf.40063/2017/13,19 the contractual dispute centered around the right of representation. The parties concluded a guarantee agreement. However, the signatory on behalf of the guarantor had no right of representation. The employee who signed the contract (Mr. B. R.) was not a statutory representative of the guarantor and had no power of attorney. The question was whether Mr. B. R.’s action bound the defendant on account of implicit approval. This question appears to fall outside the scope of the Rome i Regulation: Article 1(2)(f) excludes from the scope of the Regulation ‘questions governed by the law of companies’, while Article 1(2)(g) excludes ‘the question whether an agent is able to bind a principal, or an organ to bind a company or other body corporate or unincorporated, in relation to a third party’. Nonetheless, the High Court of Appeal of Budapest affirmed the Budapest-Capital Regional Court’s judgment which extended the lex contractus established under the Rome i Regulation (Hungarian law) to the question of representation. Under Hungarian law, the above issue qualifies as a contractual question,20 and so may come under the lex contractus. Nonetheless, the rules limiting the scope of the Rome i Regulation, that is, the exclusions listed in Article 1(2), should have an autonomous EU law meaning, and the reference to ‘the question whether an agent is able to bind a principal’ seems to embrace the issue of implicit approval of the actions of a non-representative.
It has to be noted that the above error concerned the reasoning of the judgment alone and had no bearing on the substantive outcome. If the question of implicit approval is not covered by the Rome i Regulation, the applicable law has to be established on the basis of national choice-of-law rules, which also pointed to Hungarian law as the lex contractus. The court considered that the parties had chosen Hungarian law to govern their contractual relationship, and this choice was valid also under Hungarian pil.21 The question of
Negotiable instruments, such as bills of exchange (drafts), checks, promissory notes, and letters of credit, are excluded from the scope of the Rome i and Rome ii Regulations.24 Thus, they come under the scope of the apil.
According to Section 57 of the apil, the formalities and nature of negotiable instruments, including the question whether they are payable to bearer or to order, are governed by the law that applies to the incorporated right. If the security incorporates an in rem right, the rules on property rights, including the principle of lex rei sitae, apply.
The ad rem right incorporated in the negotiable instruments is governed by the law chosen by the parties or, absent this, the law of the place where the security was issued, or, if this cannot be ascertained, the personal law of the issuer shall apply. The membership rights incorporated in instruments such as shares are governed by the personal law of the issuer. The in rem rights incorporated in a security (such as a bill of lading) are governed by the law of the state where the security was issued. If the instrument incorporates more than one right, the parties may choose the applicable law; absent this, the law governing the right that constitutes the central element of the instrument shall apply.25
The law applicable to insurance contracts is partially regulated by the Rome i Regulation. Article 1(2)(j) of the Regulation excludes certain insurance contracts from its scope, and these, hence, are governed by national choice-of-law rules. The apil contains no specific provisions on insurance contracts. Accordingly, insurance contracts not covered by the Rome i Regulation are governed by the apil’s general contractual choice-of-law rules included in Sections 50–51, that is, the lex pro voluntate and, in the absence of a choice by the parties, the most closely connected law.
3.2 The Rome i Regulation in the Practice of Hungarian Courts
The Rome i Regulation comprehensively (almost exhaustively) regulates the choice-of-law questions of contracts and leaves only a very limited residual role to national regimes.26 It has universal application; that is, it applies irrespective of whether or not the case contains an EU element and whether the law specified by the Regulation is the law of a Member State.27
3.2.1 Party Autonomy
The parties have the right to choose the applicable law under Article 3 of the Rome i Regulation. They may choose a law for the whole contract, or to apply to one or some of its parts, and they may choose different laws for different parts of the contract. They may also agree to change the applicable law, but this cannot prejudice the contract’s formal validity and cannot adversely affect the rights of third parties.
Article 3(3)-(4) of the Rome i Regulation deals with the parties’ choice of law in domestic contracts. Article 3(3) provides that the parties are free to choose the applicable law also in contracts that have no international element, but in this case the choice is only a ‘choice in a substantive sense’. The mandatory rules of the law applicable in the absence of a choice cannot be derogated from, and if there is a conflict between the chosen law and the mandatory rules of the law applicable in the absence of a choice the latter prevails. Interestingly, the Regulation implicitly introduces the notion of purely EU matters (contracts)
Hungarian courts have applied the above provisions of the Rome i Regulation in numerous cases and have developed a case law concerning questions like implied choice, the timeframe of the parties’ choice, and the effect on third parties.
In Case Gf.40321/2014/9,28 the parties stipulated the application of the Hungarian Civil Code. The High Court of Appeal of Budapest considered this to be an implicit choice of Hungarian law under the Rome i Regulation.
On the other hand, in Case Gf.40051/2014/8,29 the High Court of Appeal of Pécs, when examining whether the parties chose German law, found the references to the German Civil Code (bgb) insufficient because the contract also referred to the Hungarian Civil Code.
The parties were Hungarian companies (seated and registered in Hungary) and entered into a construction contract which used the ‘Vergabe-und Vertragsordnung für Bauleistungen’(vob), a German standard contract worked out for construction projects. The vob contains references to German law. The High Court of Appeal of Pécs held that the references by the vob to the provisions of the German Civil Code (bgb) were not sufficient to establish the choice of German law, as the contract also contained references to certain sources of Hungarian law.
In Case Pf.20370/2013/6, the High Court of Appeal of Pécs apparently misconceived party autonomy and ignored the parties’ choice of law without any detailed analysis. It found that the contract was invalid because the choice of Austrian law ran counter to the Rome i Regulation and the general principle of law that the law that must be applied is that of the country to which the case is most closely connected.
In Case Pf.20024/2016/3, the parties chose Austrian law in the contract but, during the civil proceedings, jointly asked the court to apply Hungarian law to the question of validity. The High Court of Appeal of Pécs, applying the Rome i Regulation, confirmed that the parties were free to choose different laws for different parts of the contract or different contractual questions: they had the right to choose Hungarian law to govern the existence and validity of the contract without impairing the applicability of Austrian law to the rest of the contractual issues.
The Budapest-Capital Regional Court, upheld by the High Court of Appeal of Budapest, found that, taking into account the circumstances of the case, the above clause embedded an implicit choice of Hungarian law. First, the choice-of-law clause in the distribution contract did not extend to the guarantee agreement, because the parties to the latter specifically addressed the issues of jurisdiction and applicable law. Second, given that the parties chose Hungarian courts and one of them, the party seeking a security, was Hungarian, it could reasonably be inferred that the term ‘Act on the Civil Code’ referred to the Hungarian Civil Code and, in turn, the parties had implicitly chosen Hungarian law.
In Case P.25471/2015/47, the Budapest-Capital Regional Court dealt with the effects of choice-of-law and choice-of-court agreements on third parties under the Rome i Regulation. It held that while forum-selection clauses may not bind non-parties, the law chosen by the parties does. Choice-of-court agreements involve derogation of jurisdiction, which, as a waiver of a right, cannot bind non-parties. On the other hand, in choice of law, the parties’ agreement cannot be conceived as a mutual waiver of a right and it qualifies as a connecting factor and, as such, determines the applicable law erga omnes.
In Case Pfv.i.21.730/2019,32 the Supreme Court held that an implicit choice of law can be established under the Rome i Regulation if the parties made a choice in an earlier contract and it cannot be inferred from the circumstances that their intentions have changed, or if, in the context of the contractual rights and obligations, the parties refer to a law or other piece of legislation of a given country or if they refer to concepts of substantive law that exist only in a given country.33 The parties’ choice-of-court agreement can also indicate that they envisioned the law of the chosen court. However, forum selection in itself cannot be considered to imply the choice of the lex fori.34
3.2.2 Objective Connecting Factors
The Rome i Regulation establishes a clear but still flexible architecture for determining the lex contractus and a set of connecting factors relating to different specific contractual issues (see below). Where the parties do not choose the applicable law, the law generally applicable to the contract is determined by a three-layer system.
Second, if the agreement does not come under any of the contracts listed above or combines the elements of two or more nominated contracts, the presumably applicable law is to be determined by means of the principle of characteristic performance (Article 4(2) Rome i Regulation).
Third, if the characteristic performance cannot be identified, the law that has to be applied is that of the country that has the closest connection with the contract (Article 4(3) of the Rome i Regulation).
The above connecting factors, however, entail merely rebuttable presumptions. The principle of closest connection is not only a subsidiary principle, which comes into play if the contract is not nominated and the characteristic performance cannot be determined, but may be used to depart from the above connecting factors and apply a law different from the one indicated above. Hence, the connecting factors determined for the nominated contracts and the concept of characteristic performance create only rebuttable presumptions. According to Article 4(4) of the Rome i Regulation, if the court finds that the contract is more closely connected to a different legal system, it has to
The above architecture is supplemented by a set of special rules governing different types of contracts. Contracts of carriage are regulated in Article 5 of the Regulation. The Rome i Regulation establishes special rules in respect of three types of contract involving a weaker party: consumer contracts (Article 6), insurance contracts (Article 7), and individual employment contracts (Article 8).
Hungarian courts have developed a significant amount of case law concerning sales contracts and contracts for the provision of services.
In Case Pfv.i.21.730/2019,39 the parties, as part of an English-language settlement concluded in London, agreed that the defendants, as a form of indemnification, would for a certain price and within a certain time-limit purchase real estate located in Hungary and confer on the plaintiffs title to the real estate chosen by the latter. Nonetheless, the parties did not agree to transfer the ownership of specific estates. The Supreme Court applied the Rome i Regulation and found that this agreement came under none of the points of Article 4(1). Because it did not involve the transfer of ownership of specific properties, it did not come under Article 4(1)(c) (‘contract relating to a right in rem in immovable property […] shall be governed by the law of the country where the property is situated’). Instead, the court applied Article 4(2) of the Rome i Regulation (principle of characteristic performance) and concluded that, as the habitual residence of the obligor (the defendant), who promised to transfer the ownership of immovable assets, was in Hungary, Hungarian law applied. The Court noted that Article 4(3) of the Rome i Regulation also pointed to Hungarian law (most closely connected law).
In Case 43.Pf.632341/2019/4,40 the Budapest-Capital Regional Court held that a loan contract does not qualify as a contract for the provision of services under Article 4(1)(b) of the Rome i Regulation (which provides for the application of ‘the law of the country where the service provider has his habitual residence’), but comes under Article 4(2), which provides for the application of the ‘law of the country where the party required to effect the characteristic performance of the contract has his habitual residence’. The court held that the characteristic performance is effected by the creditor; hence, the two provisions pointed to the application of the same law.
The High Court of Appeal of Győr, applying the Rome i Regulation, held that the works contract between the Hungarian contractor and the German sub-contractor was governed by German law, as this was the law of the party providing the characteristic performance. It found that the circumstances that the contract was concluded in Hungary, the construction was coordinated by the Hungarian company and that the contract was related, in economic terms, to another construction contract were irrelevant. Interestingly, although, as a contract for the provision of services, the works contract arguably came under Article 4(1)(b) of the Rome i Regulation, the court based its conclusion on Article 4(2), which provides that ‘the contract shall be governed by the law of the country where the party required to effect the characteristic performance of the contract has his habitual residence’.
In Case Pfv.v.20.594/2017/6,42 the plaintiff, a German national, and a Hungarian company concluded a contract whereby the plaintiff promised to establish a company in Russia and become the managing director of that company (including by acquiring a work permit). The plaintiff’s place of living could not be ascertained; it was either Germany or Russia. The parties did not choose the applicable law. The plaintiff sued for his fee, while the defendant refused to pay, arguing that although the company was registered, the plaintiff did not acquire a work permit and, thus, could not become the company’s managing director.
The Budapest-Capital Regional Court43 affirmed the first instance court’s decision44 to apply Hungarian law. The Supreme Court upheld that judgment. Article 4(1)(b) of the Rome i Regulation provides that ‘a contract for the provision of services shall be governed by the law of the country where the service provider has his habitual residence’. Article 19(1) of the Rome i Regulation defines ‘[t]he habitual residence of a natural person acting in the course of his business activity’ as ‘his principal place of business’. On the basis of this, either Russian or German law should have been applied. Nonetheless, the plaintiff’s
The Supreme Court, in line with the Budapest-Capital Regional Court, reasoned that the contract had no connection to either German or Russian law. The parties had envisioned entering into an employment contract under Russian law once the plaintiff had acquired the necessary work permit and concluded the service contract for the interim period. When concluding the contract, the parties were aware of the opportunity to choose the applicable law. They agreed that the the employment contract, which was to be concluded after the acquisition of the work permit, should be governed by Russian law, but did not choose the law applicable to the provisional service agreement. In fact, the purpose of the latter was to avoid breaching the Russian rules on employment (the contract was concluded between the plaintiff and the defendant and not the plaintiff and the Russian company that was supposed to be his later employer). The Supreme Court established that the parties wanted to make use of the possibilities offered by the internal market and, at the time the contract was concluded, none of them wished to have Russian law applied. The Court inferred that the reason why the parties did not choose the law applicable to the service contract was that they considered it to be truly provisional and the choice of the applicable law not to be relevant. The Supreme Court noted that this also underpinned the conclusion that the business relationship between the parties, as well as the contractual construction was more closely connected to the defendant’s personal law, that is, Hungarian law.45
In Case Gf.20090/2020/5, the parties concluded a service contract. The High Court of Appeal of Győr established that, due to Articles 4(1)(b) and 19 of the Rome i Regulation, Hungarian law applied, because the service provider’s principal place of business was in Hungary. The Court stressed that the fact that the service was provided in Austria (place of performance) could, in itself, not give rise to the application of the escape clause contained in Article 4(3) of the Regulation.
3.2.3
In Articles 10–18 the Rome i Regulation sets out special rules (connecting factors) for specific contractual issues.
Article 10(1) of the Regulation provides that consent and material validity are governed by the law that would otherwise govern the contract if the contract were to come into existence and were valid. Article 10(2) adds, however, that ‘a party, in order to establish that he or she did not consent, may rely upon the law of the country in which he or she has his habitual residence if it appears from the circumstances that it would not be reasonable to determine the effect of his conduct in accordance with the law’ that governs the contract.
A good example of the potential application of Article 10(2) of the Regulation is the German legal institution of ‘confirmation letter’ (‘kaufmännisches Beschtätigungsschreiben’). The confirmation letter is sent after the conclusion of the agreement (which may occur orally or by telephone or telex). The fundamental rule is that if the receiver of the letter remains silent, the content of the contract is determined by the confirmation letter unless the sender did not observe the requirement of good faith or the difference between the initial agreement and the confirmation letter is so great that the sender could not reasonably have expected the receiver to approve it. The confirmation letter works also in cases where the parties ‘almost’ concluded the initial agreement (‘abschlussreif’). In this case the letter not only confirms or changes but creates the contract. The receiver is expected to object immediately; otherwise, the letter determines the content of the agreement. The notion of the confirmation letter is a commercial law concept; nevertheless, only the receiver needs to be a merchant.
Although confirmation letters may have evidentiary value in different legal systems, their decisive impact on the content of contractual relationships is peculiar to German law.46 In Hungarian law, silence, in itself, infers no agreement. The parties’ concurrence of wills is based on an offer and an acceptance, and the same rule applies to amendment of the contract. Hence, the silence of the recipient of a confirmation letter, in itself, does not infer agreement.
Assume that a German and a Hungarian enterprise, after several long weeks of negotiation, reach a compromise whereby the Hungarian firm becomes the distributor of the German supplier’s products. The parties conclude no written agreement, but their email conversation and the minutes of the meetings reveal a consensus on the substantial issues, including the choice of German
Article 11 of the Rome i Regulation sets out alternative connecting factors for formal validity to save the contract if it is formally invalid under the lex contractus. This provision does not apply to consumer contracts, since here the formal requirement serves the purpose of protecting the consumer as the weaker party.
If the contract is concluded between persons present in the same country, the law of the country where the contract was concluded can save it (locus regit actum) if it is eventually formally invalid under the lex contractus. If the contract is concluded between persons present in different countries, the contract is valid if it satisfies the formal requirements of the lex contractus, the law of the place where any of the parties was present when concluding the contract or the law of the habitual residence of any of the parties.
Article 11(3) of the Rome i Regulation deals with unilateral acts done in the context of an existing or contemplated contract, for instance, declarations and notices of termination, rescission, cancellation, the exercise of other rights for breach of contract (e.g., price reduction, determination of a grace period) and the exercise of an option). They are formally valid if they comply with the lex contractus, the lex loci actus, or the law of the habitual residence of the person who carries out the act.
Article 11(5) of the Rome i Regulation subjects contracts concerning in rem rights in or tenancies of real estate to the unconditionally applicable formal
The above provision raises an interesting question of interpretation under Hungarian law. On the one hand, simple written form is sufficient for the formal validity of contracts concerning in rem rights in immovable property.47 On the other hand, simple written contracts cannot serve as the basis of an entry into the land registry. Entries may be made only on the basis of deeds that meet extra formal requirements, such as deeds countersigned by an attorney and notarial deeds. This creates a divergence between the fomal validity of the contract and its registrability in the land registry. It is notworthy that, according to Hungarian property law, registration is constitutive: albeit that, in certain exceptional cases, legal title to real estate can be acquired without registration (for instance, in cases of adverse possession and matrimonial common property), the acquisition of in rem rights, in principle, requires registration. If a written contract does not meet the formal requirements established by the land registry, the contract may still be valid, but not registrable. In this case, the party may seek a declaratory judgment which, in turn, can serve as the basis of registration. This means that the formal requirements governing registrability in the land registry are not covered by Article 11(5) of the Rome i Regulation, as they are not mandatory and do not affect the validity of the contract.
Article 12(2) of the Rome i Regulation provides that ‘[i]In relation to the manner of performance and the steps to be taken in the event of defective performance, regard shall be had to the law of the country in which performance takes place’. This provision does not prescribe the application of the lex loci solutionis but provides for its consideration. The lex contractus remains applicable to the question of performance and the steps to be taken in the event of defective performance, but the law of the place of performance must be taken into account to avoid unforseen effects.
Article 13 of the Rome i Regulation aims to obviate unforseen effects concerning incapacity, which is otherwise a question of personal law. A party may have no or scant information about the position of the other party’s personal law on capacity and, hence, may, without knowing, conclude a contract with a
Article 14 of the Rome i Regulation deals with the issues of assignment and contractual subrogation. Here two legal relationships are to be distinguished. The first is the relationship between the assignor and the assignee, which is an independent ‘sale of claim’ agreement. This relationship is characterized by the privity of the assignor and the assignee, which has, in principle, nothing to do with the claim sold. Accordingly, ‘[t]he relationship between assignor and assignee under a voluntary assignment or contractual subrogation of a claim against another person (the debtor) shall be governed by the law that applies to the contract between the assignor and assignee under this Regulation’.48 Nevertheless, this principle is not applicable to the questions attached to the ‘act of assignment’, like the assigned or subrogated claim’s ‘assignability, the relationship between the assignee and the debtor, the conditions under which the assignment or subrogation can be invoked against the debtor and whether the debtor’s obligations have been discharged’. For instance, different laws may regulate differently whether the claim can be assigned at all, whether and when the debtor is to be notified about the assignment, whether the debtor can object to the assignment or set off against the assignee claims he or she has against the assignor (the original creditor). These questions cannot be separated from the law governing the contractual claim ‘to be sold’, and, hence, are subjected to ‘[t]he law governing the assigned or subrogated claim’.49 Under Article 14, ‘[t]he concept of assignment in this Article includes outright transfers of claims, transfers of claims by way of security and pledges or other security rights over claims’.50
Legal subrogation raises an additional question: which law governs the question whether the claim is transferred by law? Article 15 provides that this question is governed by the law that obliges the third person to pay instead of the debtor. Assume that a French insurer concludes an insurance contract with an English company, subjecting their agreement to English law. Subsequently, a Hungarian firm causes damage to the English company in Hungary, and it, in turn, submits a claim to the French insurer. Assume that the English company’s
Unfortunately, Article 15 of the Rome i Regulation is silent as to some important questions. First, it does not tell us which law governs the legal subrogation if the third party satisfies the creditor without being obliged to do so. For instance, the buyer realizes that the real estate purchased serves as a collateral and decides to pay the full amount of the loan to the bank in order to avoid the auctioning of the property. This situation may give rise to legal subrogation, though the third party had no duty to satisfy the bank. Article 15 reckons with this situation (‘or has in fact satisfied the creditor in discharge of that duty’) but still determines the applicable law with reference to the law governing the third person’s duty to satisfy the creditor. Second, Article 15 is at fault for determining the law that governs the defenses (objections, set-off) of the debtor.
Article 16 of the Rome i Regulation determines the law applicable to contribution among debtors having multiple (joint and several) liability. This states that ‘the law governing the debtor’s obligation towards the creditor also governs the debtor’s right to claim recourse from the other debtors. The other debtors may rely on the defences they had against the creditor to the extent allowed by the law governing their obligations towards the creditor’.
Set-off is ‘governed by the law applicable to the claim against which the right to set-off is asserted’.53
According to the generally accepted principle, procedure is governed by the lex fori. Article 1(3) of the Rome i Regulation excludes evidence and procedure from the Regulation’s scope. Nonetheless, the distinction between substantive and procedural questions may raise questions of characterization. Article 18 of the Rome i Regulation addresses an important set of these delimitation issues: the burden of proof and legal presumptions. Although predominantly a procedural question, substantive law may establish rules on the burden of
4 Non-contractual Obligations
EU legislation almost entirely took over national rules on non-contractual obligations. The Rome ii Regulation comprehensively (almost exhaustively) regulates the choice-of-law questions of non-contractual obligations and leaves only a very limited residual role to national regimes. The Regulation has universal application, that is, it applies irrespective of whether the case contains an EU element and whether or not the law specified by the Regulation is the law of a Member State.55 Notable matters not covered by the Rome ii Regulation include non-contractual obligations arising out of company law including the personal liability of officers and members for the obligations of the company and the personal liability of auditors to the company or its members in the statutory audits of accounting documents, nuclear damage, and violations of privacy and rights relating to personality, including defamation.56
4.1 Hungarian Choice-of-Law Rules
Sections 60–63 of the apil set out the choice-of-law rules on non-contractual obligations. These rules are of limited relevance, given the Rome ii Regulation’s
As regards party autonomy, there is an important difference between the apil and the Rome ii Regulation. The apil allows the choice of the applicable law only after the event has occured (the legal relationship has come into existence). Under the Rome ii Regulation, economic entitites may make a choice at any time (before or after the event occurrs) and the ex post facto limitation applies only to cases where not all the parties are pursuing an economic activity. According to Section 63 of the apil, the parties have the right to choose, explicitly or implicitly, the applicable law but only after the legal relationship has emerged. On the other hand, Article 14 of the Rome ii Regulation also enables the parties to choose the applicable law beforehand, provided ‘all the parties are pursuing a commercial activity’.
The rules on the law applicable to non-contractual obligations absent party choice are set out in Sections 60–62 of the apil, which mirror Article 4 of the Rome ii Regulation. If the parties do not choose the applicable law the principle of lex loci damni applies. If the habitual residence of the parties is in the same state, the law of that state shall apply. If the non-contractual legal relationship is closely connected to a pre-existing legal relationship, the law governing the latter shall apply to this legal relationship too.
The old apil, in Sections 32–35, followed the principle of lex loci delicti commissi (delictum implied both conduct and omission), which was supplemented by the ubiquity principle (the law of the country where the damage occurred, i.e. the lex loci damni, was to be applied if it was more favorable to the injured person), the notion of common domicile (common place of living), and the application of the lex bandi in the case of registered watercraft and aircraft. Special connecting factors were applied to the question whether a person was capable of being liable for the loss and to traffic regulations. The currently effective apil discarded this principle and switched to the lex loci damni. The legislative choice to adopt the approach of the Rome ii Regulation and, thus, to create harmony between the EU and national choice-of-law rules was justified by the fact that the overwhelming majority of tort matters come under the Rome ii Regulation and the apil’s rules play a very marginal role in this field.
4.2 The Rome ii Regulation in the Practice of Hungarian Courts
The Rome ii Regulation regulates non-contractual obligations in a rather exhaustive manner. Besides delictual liability (torts), it also covers unjust enrichment, negotiorum gestio, and culpa in contrahendo. Furthermore, the regulation covers not only claims for damages but also claims emerging from
Hungarian courts have produced a significant amount of case law concerning the Rome ii Regulation. This has extended, among others, to questions like the difference between contractual and non-contractual matters, the Regulations’s exclusion of violations of personality rights, party autonomy, and the determination of the place where the damage occurred.59
4.2.1 Scope of Application; Delimitation of Contractual and Delictual Matters
The distinction between contractual and delictual matters may raise questions of interpretation under the Rome ii Regulation in matters where the plaintiff’s claim may be considered both contractual and delictual.
If the injured person has insurance cover for the risk (damaging event), the law applicable to the delictual matter is to be separated from the legal relationship between the insurer and the insured, as well as from the subrogation of the insured person’s claim to the insurer. In Case Pf.viii.22.740/1997/3., the Austrian shipper contracted with an Austrian forwarding company for transporting certain goods from Vienna to St. Petersburg; the latter contracted with a Hungarian company for the carriage of the goods. At the same time, the shipper concluded an insurance contract with an Austrian insurer, which covered the loss of the consignment. As the goods did not arrive at the place of destination, the Austrian insurer compensated the Austrian shipper for the loss and, afterwards, it sued the carrier directly. Since the plaintiff did not sue the forwarding company, the shipper had a direct contractual relationship with, the Supreme Court considered it to be non-contractual and applied the corresponding choice-of-law rules, applying Hungarian law to this issue. In respect of the question whether the insurer acquired the Austrian shipper’s claim due to subrogation, the Supreme Court applied Austrian law and established the statutory subrogation of the claim.
In Case P.24487/2012/47, the Hungarian plaintiff sued a Greek hospital for medical malpractice that occurred in Greece. The plaintiff was spending his
Issues of characterization and scope emerged in cases involving traffic accidents. Courts have considered the law applicable to delictual liability to extend to the rules on compulsory motor vehicle liability insurance. While in the cases encountered by the courts this entailed no practical problems (because the lex contractus as to the insurance contract and the law applicable to the tort were the same), this summary approach will have to be rectified in cases where the wrongdoer’s insurance contract is governed by a law different from that of the tort.
In Case Pfv.20852/2014/6,60 although both the tortfeasor and the victim were Hungarian citizens and the accident happened in Hungary, the Supreme Court examined the question of applicable law, as the car owned by the plaintiff was registered in Germany. The Supreme Court held that Hungarian law was applicable to the claim and, as part of that, also applied Act lxii of 2009 on mandatory motor vehicle liability insurance. Interestingly, Act lxii of 2009 addresses various issues related to the motor vehicle liability insurance contract: the duty to have insurance coverage, the conclusion and termination of the insurance contract, the insurance company’s payment obligation and extent, the geographical and temporal scope of the insurance contract, the payment of the insurance fee, the insurance company’s right of subrogation, etc.
Although in the case concerned this made no substantive difference, it has to be noted that the Court’s reference appears to have been excessive and treating the rules on mandatory motor vehicle insurance as delictual in nature may be regarded as an error of characterization. The Rome ii Regulation determines the law applicable to non-contractual obligations (the relationship between the tortfeasor and the injured person) and does not apply to contractual obligations (the relationship between the tortfeasor and the insurance company it has a contract with). It may have made a difference (that may have made the Supreme Court engage in a more detailed characterization) if the wrongdoer’s
The same was established in Case Pf.641647/2013/4,61 where the Budapest-Capital Regional Court applied Hungarian law (as that of the place of the accident) and the Hungarian rules on mandatory motor vehicle liability insurance.
In Case Pfv.viii.20.109/2019,62 the Supreme Court encountered an interesting question of characterization. Article 1(2)(g) excludes non-contractual obligations arising out of violations of privacy and rights relating to personality, including defamation, from the scope of the Rome ii Regulation. In Hungarian law, personality rights have a wide meaning and extend to protection against various illicit acts entailing non-monetary damage (e.g., personal injury). In this case, the parents claimed non-monetary damage because their child was killed in a traffic accident, as this impaired their personality right to the protection of private and family life.63 As a corollary, under Hungarian law the legal basis of the claim for damages was the violation of a personality right. Nonetheless, the Supreme Court held that the terms used in Article 1(2)(g) of the Rome ii Regulation have to be given an autonomous meaning and the term ‘personality rights’ has a narrower import under the Regulation than under Hungarian law. The Supreme Court established that a closer look at the legislative history demonstrates that Article 1(2)(g) of the Rome ii Regulation is destined to address violations of personality rights committed via the media and the EU legislator aimed to create a uniform regime for delictual claims emerging from traffic accidents as to both personal injuries and monetary damages. This finds reflection also in various parts of the preamble to and the provisions of the Regulation, such as recitals (17) and (33) and Articles 2(1) and 4(1).64 This was confirmed also in Case C-350/14 Florin Lazar v Allianz SpA.65 As a corollary, the Supreme Court applied English law.66
4.2.2 Party Autonomy
Article 14 of the Rome ii Regulation gives the parties the freedom to choose the law applicable to the non-contractual relationship. This freedom applies
Hungarian courts have been very permissive as to party autonomy.
In Case P.21013/2011/49, the parties requested the court to apply Hungarian law. The Győr Regional Court treated this as a choice-of-law agreement under Article 14(1) of the Rome ii Regulation.
In Case Pf.631007/2014/3,70 the parties chose Hungarian law in the appeal proceedings and the Budapest-Capital Regional Court considered this a valid choice. It must be noted that the first instance court applied Hungarian law, as the law applicable absent the parties’ choice; the appeal court disagreed with the first instance court on this but accepted the parties’ agreement on the application of Hungarian law. The sanctioning of this belated party choice goes against scholarship’s majority opinion that the applicable law can be chosen at any time until the first instance judgment is entered.71 Furthermore, the 2017 apil, adopted since then, specifically limits the choice of the applicable law to the preliminary stage of the first instance proceedings.72
4.2.3 Objective Connecting Factors for Delictual Liability
The Regulation establishes an elaborate scheme for delictual liability, which consists of a general rule (Article 4) and several special rules tailored to the particulars of delictual matters: product liability (Article 5), unfair competition and acts restricting free competition (Article 6), environmental damage
The Rome ii Regulation’s general rule on delictual liability (torts) consists of three layers: the law of the country where the damage occurred (lex loci damni), the law of the common habitual residence,74 and an escape clause based on the principle of closest connection.
According to the general rule, the law applicable to a non-contractual obligation arising out of a tort/delict shall be the law of the country in which the damage occurs irrespective of the country in which the event giving rise to the damage occurred and irrespective of the country or countries in which the indirect consequences of that event occur.75
The Regulation discarded the principle of lex loci delicti commissi (the law of the place where the harmful action or omission occurred). At the same time, it must be noted that the damnum relevant from the point of view of determining the applicable law should not be confused with the damnum in relation to which the tortfeasor may be liable under substantive law. From the perspective of choice of law, not all detriments resulting from an injurious act or omission (delict, tort), but only direct ones, are to be taken into account.76 The place of the damnum is to be established irrespective of the ‘indirect consequences’. Obviously, the foregoing is far from implying that the indirect consequences would not be relevant from a substantive law point of view. Quite the contrary: Article 4(1) of the Rome ii Regulation deals exclusively with the choice-of-law relevance of indirect damage. Recital 17 of the Regulation provides clear guidance in this regard: in cases of personal injury or damage to property, the country in which the damage occurs should be the country where the injury was sustained or the property was damaged. Accordingly, the lex loci damni approach leads to the application of a law different from the law of the place
The principle of common domicile became, in effect, a standard principle in the field of delictual liability.77 The Rome ii Regulation provides that if the habitual residence of the parties is in the same country, it is not the lex loci damni but the common habitual residence that determines the applicable law. According to Article 4(2) of the Rome ii Regulation: where the person claimed to be liable and the person sustaining damage both have their habitual residence in the same country at the time when the damage occurs, the law of that country shall apply.
Finally, the third step of the Rome ii Regulation contains an escape clause,78 which authorizes the court to apply the law of another country if it is clear from all the circumstances of the case that the tort/delict is manifestly more closely connected with that country. A manifestly closer connection with another country might be based in particular on a pre-existing relationship between the parties, such as a contract, that is closely connected with the tort/delict in question.79
Hungarian courts have developed an extensive case law in the application of the Regulation.
In Case P.24487/2012/47, when it came to the application of the principle of lex loci damni, the Budapest-Capital Regional Court, in line with preamble (17) to the Rome ii Regulation, took into account the direct damage alone (personal injury in Greece) and considered the indirect (consequential) damage occurring in Hungary to be irrelevant in the context of determining the applicable law. This is noteworthy in the light of the circumstance that, concerning jurisdiction, the Court found that the indirect damage sustained in Hungary gave rise to Hungarian jurisdiction under the Brussels i Regulation and otherwise established the liability of the Greek defendant for that indirect damage based on Greek substantive law.
On the other hand, in Case P.24479/2015/96,80 the Budapest District Court for the ii and iii Districts erroneously construed the principle of lex loci damni.
In Case Pfv.v.20.490/2018/10,81 the Supreme Court held, in the context of a traffic accident which occurred in Germany, that the existence and extent of delictual liability is governed by the Rome ii Regulation and, hence, German law applies irrespective of whether the injured person sues the tortfeasor or the insurer directly.
As to the purview of the law applicable under the Rome ii Regulation, the Supreme Court interpreted Article 15 of the Regulation. It held that the notions contained in this provision had an autonomous EU-law meaning. As regards Article 15(c), which provides that the law to be applied under the Rome ii Regulation extends to ‘the existence, the nature and the assessment of damage or the remedy claimed’, the Supreme Court established that this provision embraces the question whether in-kind or pecuniary compensation must be awarded and, in the latter case, which rules apply in the event that there is a delay in payment. As a corollary, the Court concluded that default interests come under Article 15(c) of the Rome ii Regulation and, hence, in this case they were governed by German law.
4.2.4 Objective Connecting Factors for Unjust Enrichment, Negotiorum Gestio, and Culpa in Contrahendo
Article 10 of the Rome ii Regulation sets out four subsidiary connecting factors to determine the law applicable to unjust enrichment. First, if the unjust enrichment occurs in the context of a pre-existing legal relationship, the law governing this legal relationship is to be applied to the question of unjust enrichment. Second, in the absence of such a pre-existing legal relationship, if the parties have their habitual residence in the same country, the law of that country is applicable.82 Third, if the law cannot be determined on the basis of the foregoing rules, the law that has to be applied is that of the country in which the unjust enrichment took place. Finally, Article 10 contains an escape
Article 11 of the Rome ii Regulation uses essentially the same model to determine the law applicable to negotiorum gestio, with the difference that in the third step – in the absence of a pre-existing legal relationship and common habitual residence – the lex loci actus (law of the country ‘in which the act was performed’) has to be applied. The concept of ‘manifestly closest connection’ applies as an escape clause in the fourth step.
The classification of the culpa in contrahendo as contractual or non-contractual is diverse in the various legal systems. The Rome ii Regulation treats it as a non-contractual obligation, but when it comes to the connecting factor, it subjects the question, in principle, to the lex contractus. According to Article 12(1) of the Rome ii Regulation, ‘[t]he law applicable to a non-contractual obligation arising out of dealings prior to the conclusion of a contract, regardless of whether the contract was actually concluded or not, shall be the law that applies to the contract or that would have been applicable to it had it been entered into’. If the applicable law cannot be identified on the basis of the foregoing provision, the connecting factors of delictual liability (Article 4 of the Rome ii Regulation) apply: these are the lex loci damni, the law of the parties’ common habitual residence, and the principle of closest connection.83
5 Property Law
5.1 The General Principle of Lex Rei Sitae
In principle, in rem rights (ownership, usufruct, right to use, mortgage, pledge, possession, easements, etc.) are governed by the law of the country where the property is located (lex rei sitae).84 This applies to both movable and immovable property. As set out below, the apil establishes quite a few exceptions to the lex rei sitae principle as to movables but not as to immovables, which are always subject to the lex rei sitae.
The apil contains no specific rules on pollution. It can be established that the property law aspects of pollution are governed by the lex rei sitae, and the delictual aspects by the law applicable to torts (which is determined, predominantly, by the Rome ii Regulation). The distinction between the two legal categories may raise questions of characterization, which, pursuant to Section 4 of
The apil contains no specific rules on expropriation. The act of expropriation is generally viewed as having a public law nature and, as such, falls outside the scope of the apil. On the other hand, the property consequences of expropriation (such as acquisition of title, the character of the mode of acquisition) are property-law questions and governed by the lex rei sitae.
The law applicable to the main thing also extends to its components and accessories. Other connections between and the aggregate of things are governed by the most closely connected law.85
The relevant moment from the point of view of the situs is the moment when the fact triggering the legal effect comes into existence. In the case of adverse possession, this is the time when the term of acquisitive prescription ends. The adverse possession of movables is governed by the law of the state where the property is situated when the prescriptive deadline expires. The mere fact that the location of the property changes does not interrupt the flow of prescription.86
An example could clarify the above rules. The deadline of prescription under Hungarian law is ten years for movables and 15 years for immovables.87 Under Austrian law the deadline of prescription is basically 30 years.88 If someone in Vienna possesses an artwork for 15 years and takes it to Szeged (Hungary) to an exhibition and then brings it back to the Austrian capital, he or she acquires legal title over it, since at the end of the deadline the property is located in Hungary. However, in such a case, the court may apply Austrian law on the basis of the general excape clause embedded in Section 10 of the apil on the ground that, although the specific choice-of-law rule points to Hungarian law, the matter is more closely connected with Austrian law.
Section 41(1)-(2) of the apil deals with the change of the situs. In this case, ‘the rights acquired previously may be recognised in accordance with the law of the new place of location of the thing. If the legal effect of the acquisition of a right in rem did not take place at the previous place of location and the movable thing is relocated to the territory of another state permanently, the law of this latter state shall apply to the acquisition of rights’.
5.2
The apil establishes several exceptions to the general principle of lex rei sitae. First, Sections 42–44 of the apil set out objective different connecting factors in respect of movable property. Second, Sections 44(3) and (5), 45 and 47 provide for party autonomy in certain cases and allow the choice of particular laws. Third, Section 46 establishes special rules for cultural goods.
5.2.1 Special Objective Connecting Factors
Registered vessels and aircraft are governed by the lex bandi (flag, emblem), railways by the law of the state where they were put into operation.89 Goods in transit (res in transitu) come under the law of the state of destination; however, the lex rei sitae applies to their eventual forced sale, storage, and pledging. The passenger’s personal law governs his personal items.90
The lex rei sitae also applies to security rights of an in rem character, including mortgage.91 Nonetheless, Section 44 of the apil contains special rules for in rem security rights. Such rights created (coming into existence) by registration are governed by the law of the state where the register is kept. This rule does not apply to registered in rem security rights, but only to those which are subject to constitutive registration, that is, that are created by the registration itself. If the coming into existence of the in rem security right does not require registration or the place of the register cannot be established, the applicable law will be the security debtor’s personal law.92 Security rights concerning payment accounts, bank deposits, or dematerialized negotiable instruments are governed by the law of the country where the register or account is kept or the central depository system operates.93 Security rights over claims are governed by the law chosen by the parties or, if they make no choice, by the locus of the register, and, in the absence of registration, by the security debtor’s personal law.94
5.2.2 Party Autonomy
In certain cases, the apil authorizes the parties to choose the law applicable to in rem rights. A common feature of these rules is that they apply in specific cases and limit the choice to the law or laws offered by the apil. In a case of
The general rule embedded in Section 9 of the apil applies to party autonomy in property matters. The choice of the applicable law can be made only expressly; the parties cannot make a choice implicitly. The apil’s explanatory memorandum notes that the parties’ choice of law binds only the parties, so it does not prejudice the rights of third parties acquired beforehand.
5.2.3 Cultural Property
Section 46 of the apil deals with the property law questions of unlawfully taken cultural property. Section 47 has general application, so it not only applies to cultural property, but has important implications for illegally transferred cultural property. Directive 2014/60/EU100 establishes rules and a mechanism for the return of cultural objects unlawfully removed from the territory of a Member State. It contains no choice-of-law rules.
In the case of illegally removed cultural goods, the state may base its claim of revindication, at its choice, on either its own law or the lex rei sitae. According to Section 46 of the apil, if cultural property is illegally transferred to another country, the country of origin may base its claim of revindication either on its own law or on the law of the state the thing was moved to (lex rei sitae). If, however, the law of the country of origin does not provide protection for a bona fide possessor, the possessor may claim such protection under the lex rei sitae. Section 47 of the apil extends this principle to claims of ownership in general.
6 Intellectual Property Rights
Hungarian private international law and the Rome ii Regulation unequivocally follow the principle of territoriality as regards intellectual property rights, i.e., the territorially competent state’s law governs intellectual property issues. Nevertheless, since intellectual property law has been largely unified through international treaties, especially the 1883 Paris Convention for the Protection of Industrial Property and the 1886 Berne Convention for the Protection of Literary and Artistic Works, the perspective of a substantive conflict between the legal systems is often restricted.101 At the same moment, there are several points of potential divergence: e.g. the existence of moral rights, and the royalty to be paid to visual artists on the resale of artworks (‘droit de suit’, ‘Folgerecht’).
The law applicable to non-contractual obligations, including non-contractual obligations arising from the infringement of intellectual property rights, is regulated by the Rome ii Regulation. Article 8 of the Regulation deals
Essentially, the same principle governs non-contractual obligations arising from unitary EU intellectual property rights, e.g., the Community Trade Mark (ctm); here, the connecting factor is the place of infringement. Article 8(2) of the Rome ii regulation provides that ‘[i]n the case of a non-contractual obligation arising from an infringement of a unitary Community intellectual property right, the law applicable shall, for any question that is not governed by the relevant Community instrument, be the law of the country in which the act of infringement was committed’.
Although Article 14 of the Regulation, under certain conditions, gives the parties the right to choose the law applicable to the non-contractual obligation, Article 8(3) excludes this possibility in respect of non-contractual obligations arising from the infringement of intellectual property rights.
Due to the adoption of the principle of territoriality and the exclusion of party choice, the provisions of the Rome ii Regulation are essentially in line with those of the apil.
Hungarian private international law follows the principle of lex loci protectionis as to intellectual property rights, including authors’ rights and industrial property.
6.1 Authors’ Rights
Section 48 of the apil determines the law applicable to authors’ rights (existence, content, termination, and enforcement) as the law of the state ‘for whose territory the protection is claimed’. The questions whether a copyright was infringed and what legal consequences the infringement triggers are governed by the lex loci protectionis. Accordingly, as to authors’ rights, the connecting factor is the territory over which the protection is requested. For example, if Hungarian courts encounter an allegation that an author’s rights were violated in Austria, it is Austrian law that is applicable to the question of ‘authors’ rights’, as it is the territory of Austria over which the protection is requested.
The interpretation of the term ‘authors’ rights’ is central to the application of the above provision. This much is certain that characterization under the apil is to be accomplished according to Hungarian law; hence, one must proceed from the Hungarian Act on Authors’ Rights.
The ownership and transfer of copyright (including its transferability or lack of transferability) are governed by the lex loci protectionis; however, the contractual aspects of the transfer come under the lex contractus.
The legal question to be answered by the Supreme Court was whether the author’s rights over the works could be transferred to the plaintiff (i.e., whether the plaintiff was the owner or only a licensee of these rights). The Court distinguished ‘authors’ rights’ questions from contractual issues and took the position that the question whether the ‘authors’ rights’ are transferable (and what restrictions are applicable to this transfer) comes under the concept of ‘authors’ rights’, demarcating it from the contractual features of the agreement (validity, performance, breach of contract, etc.). Since the plaintiff requested legal protection over the territory of Hungary, Hungarian law was the lex loci protectionis. As under Hungarian law authors’ rights cannot be transferred and only licenses can be granted, the parties’ agreement had to be re-characterized under the terms of Hungarian intellectual property law. Accordingly, the Supreme Court held that the parties’ contract for the transfer of copyright qualified as a non-exclusive license agreement under Hungarian law. Hence, since the plaintiff had no exclusive license, the author did not interfere with his rights when he granted an exclusive license to the defendant and the latter’s right could not impair the plaintiff’s license.
6.2
The apil follows the principle of territoriality (lex loci protectionis) as regards industrial property, such as patents, industrial designs, and trademarks. The scope of the lex loci protectionis extends to the creation, protection, and infringement of these rights. According to Section 49 of the apil, the existence, content, termination, and enforcement of industrial property rights are governed by the law of the state where the protection was granted or the application was made. Accordingly, the ownership and transfer of patents are governed by the lex loci protectionis; however, the contractual aspects of the transfer come under the lex contractus.
For instance, the questions whether a patent was infringed and what legal consequences the infringement triggers are governed by the lex loci protectionis. In a legal dispute between an Austrian plaintiff and a Polish defendant the Supreme Court established that the question whether a patent infringement was committed in Hungary was governed by Hungarian law.103
7 Family Law
7.1 Marriage
7.1.1 Existence, Validity, and Annulment
In Hungarian private international law, the connecting factors regarding the preconditions of marriage (validity, existence, non-existence) are twofold. The formal requirements, i.e., the technicalities of the conclusion of the marriage, are subject to the lex loci celebrationis, the substantive requirements, including marriage impediments, are subject to the personal laws of both spouses (cumulatively).
The interpretation of the terms ‘formal requirements of validity’ and ‘substantive law preconditions’ are pivotal to the interpretation of the above provision. As noted above, Hungarian choice of law follows the lex fori approach in respect of characterization; thus, the foregoing concepts are to be defined according to Hungarian substantive law.
The substantive law preconditions (age, prohibition of bigamy, interdiction of marriage between relatives) are based on the parties’ personal law. In order to avoid limping marriages, which are recognized in one country but not in another, the apil uses cumulative connecting factors: the parties can marry only if the personal law of neither of them precludes this; that is, the
7.1.2 Personal and Property Effects
The apil addresses the personal and property effects of the marriage jointly. Hungary does not take part in the enhanced cooperation concerning the Matrimonial Property Regulation; hence, the pil aspects of matrimonial property are regulated by the apil.
The property relations between the spouses, where they did not make use of the ability to choose the applicable law, and their personal relations, as to which there is no opportunity to choose the applicable law, are, according to Section 27 of the apil, governed by the law of the spouses’ joint citizenship or, failing this, by the law of their common habitual residence or last common habitual residence (if they no longer have such a residence) or, failing this, by Hungarian law. Section 29 of the apil establishes an alternative connecting factor for marriage contracts: they are fomally valid also if they comply with the lex loci contractus.
The parties may choose the law applicable to the property law relationships (but not the personal relationships). Three limitations apply to this choice. First, the parties have no unlimited right to choose any law they wish, but can choose from only the laws set out in Section 28 of the apil. Second, the parties must choose the applicable law expressly; implied choice of law is not recognized here. Third, the choice of the law applicable to the property relations between the spouses cannot impair the rights of third parties.105
The term ‘personal and property relations’ has a wide meaning and covers all aspects of the family law relationships between the spouses, except for maintenance, as that comes under the scope of the Maintenance Regulation.
Questions of characterization emerging from the delimitation between matrimonial and succession law issues are subject to the general rules of characterization embedded in Section 4 of the apil.
7.1.3
Hungary takes part in the enhanced cooperation concerning the Rome iii Regulation. Hence, the law applicable to divorce is determined by this legal instrument.106
The Rome iii Regulation’s application is strictly limited to the question of divorce and legal separation, with the exclusion of all the ancillary issues. The term ‘divorce’ is defined narrowly, and it does not embrace marriage annulment and the existence (or non-existence) of the marriage.107
The Regulation is widely based on party autonomy, albeit – contrary to contractual matters – that this is restricted to a set of laws determined by the Regulation. The spouses may designate one of the following laws: the law of common habitual residence, the law of the last common habitual residence, provided one of the spouses still resides there, the law of the state any of the spouses is a national of, and the lex fori.108
Section 30 of the apil provides that ‘[t]he spouses may choose the applicable law in accordance with Articles 5–7 of Council Regulation (EU) No 1259/2010 at the latest within the deadline set by the court in the pleading phase’.
Articles 6 and 7 of the Regulation deal with consent, as well as formal and material validity. The existence and material validity of the spouses’ choice is governed by the chosen law (‘the law which would govern it under this Regulation if the agreement or term were valid’). Article 7 establishes minimum formal requirements: the agreement shall be reduced to writing (electronic communication providing a durable record is deemed equivalent to writing), dated and signed by both spouses. In respect of additional formal requirements, the following scheme applies. The law of habitual residence is to be applied; however, habitual residence in non-participating Member States is disregarded. If the spouses have their habitual residence in the same participating Member State, the additional formal requirements of that country apply. If they have their habitual residences in different participating Member States, ‘the agreement shall be formally valid if it satisfies the requirements of either of those laws’. If only one of the spouses resides habitually in a participating Member State, the law of that state applies.
The Rome iii Regulation takes the sensitive nature and public policy character of divorce regulation into account. The rule that the marriage cannot be dissolved at all and the rule that it can be dissolved may equally raise public policy concerns. Hence, besides the public policy clause embedded in Article 12, Article 10 of the Regulation provides that if the applicable law ‘makes no provision for divorce or does not grant one of the spouses equal access to divorce or legal separation on grounds of their sex, the law of the forum shall apply’. On the other hand, Article 13 provides that ‘[n]othing in this Regulation shall oblige the courts of a participating Member State whose law does not provide for divorce or does not deem the marriage in question valid for the purposes of divorce proceedings to pronounce a divorce by virtue of the application of this Regulation’.
7.2 Same-Sex Registered Partnership
Hungary does not take part in the enhanced cooperation concerning the Regulation on the Property Consequences of Registered Partnerships; hence, the choice-of-law aspects of registered partnerships are regulated by the apil.
Same-sex marriage is unknown to both Hungarian substantive law and pil. Article L of the Constitution defines marriage as being between a man and a woman. Nonetheless, same-sex civil unions (registered partnerships) are recognized and are subject to essentially the same rules in terms of both substantive law and choice of law. The major substantive difference is that the rules on married name do not apply to same-sex registered partnerships and the couple cannot adopt children jointly.109
The law applicable to registered partnerships of same-sex couples is determined by Section 37 of the apil, which, in essence, reproduces the choice-of-law rules applicable to marriage. The formal requirements of the conclusion of a same-sex civil union (registered partnership) are governed by the lex loci celebrationis. The substantive requirements are subject to the personal laws of both spouses (cumulatively). The law governing the personal and property effects of same-sex registered partnerships is determined by the connecting
It is worth noting that the registration of a same-sex civil union cannot be accomplished in Hungary if the partners have neither Hungarian citizenship, nor place of living in Hungary, and their personal laws recognize same-sex marriage. Such legal systems generally do not know the concept of same-sex civil union (as the latter is essentially the surrogate of same-sex marriage), hence, the condition embedded in the first sentence of Section 37(2) of the apil is met: the personal law of the prospective partner in life does not recognize same-sex civil unions.
Section 37(2) of the apil provides that
It is not an impediment to the conclusion of a registered partnership and the validity thereof is not affected if the personal law of the intended registered partner does not provide for the legal institution of registered partnership of same-sex couples, provided that
a) the intended registered partner not having Hungarian citizenship proves that there would be no impediment to the conclusion of marriage under his personal law, and
b) at least one of the intended registered partners is a Hungarian citizen or has his place of habitual residence in Hungary.
Accordingly, the same-sex civil union can be validly established if the conditions of Section 37(2)(a) and (b) are met. Section 37(2)(a) requires that under the personal law of the partner in life who has no Hungarian citizenship the conclusion of the same-sex marriage would have no obstacle. Section 37(2)(b) requires that at least one of the prospective partners in life be a Hungarian citizen or have his place of living on the territory of Hungary.
Accordingly, if two Dutch citizens who live in Austria decide to establish a same-sex civil union in Hungary (while not transferring their place of living to Hungary), their application would be refused by the Hungarian registry office. Albeit that the same-sex marriage has no bar under their common personal law (Dutch law), neither of them has Hungarian citizenship or a place of living in Hungary. Perversely, the lack of Hungarian citizenship and place of living is not a hurdle in the case where the relevant laws do not recognize the institution of same-sex marriage but are more conservative (and less tolerant towards same-sex cohabitation) and recognize merely same-sex civil unions. Accordingly, if two Italian women living in Austria envision establishing a same-sex civil union in Hungary, this is no problem since Italian law does not
7.3 Cohabitation
Section 35 of the apil sets out subsidiary connecting factors for the existence, legal effects and dissolutation of cohabitation: the cohabitants’ joint citizenship, joint habitual residence (last joint habitual residence), and the lex fori. Pursuant to Section 36 of the apil, the parties have, however, the right to choose the law applicable to the property consequences of cohabitation under the same conditions as in respect to matrimonial property.
7.4 Maintenance Law
The choice of law for maintenance is comprehensively regulated by the Maintenance Regulation, which, in turn, in Article 15 refers to the 2007 Hague Protocol in respect of the determination of the applicable law. Pursuant to Articles 7–8 of the 2007 Hague Protocol, the parties may designate one of the laws listed here as applicable. In the absence of this, the applicable law is determined by Articles 3–6, which provide that, in principle, the law of the maintenance creditor’s habitual residence shall be applied. Exceptions to this rule are included in Articles 4–6.
In Case Pfv.22223/2017/4,110 the Supreme Court established that the 2007 Hague Protocol encapsulates a ‘moving connecting factor’. Article 3 of the 2007 Hague Protocol subjects maintenance obligations to the law of the habitual residence of the creditor, which may change over time, leading to the application of another law ‘from the moment when the change occurs’. In this case, the plaintiff, after the spouses separated, became habitually resident in Hungary; hence, Hungarian law applied to the claim for maintenance.
It is worth noting that Hungarian courts tend to take the foreign element into account also when Hungarian law is applicable to the matter and to interpret Hungarian substantive provisions accordingly. In Case Pfv.ii.21.906/1998/5., the German defendant was obliged to pay child maintenance, the amount of which was 7 percent of the father’s income (per child). The children lived in Hungary. The Supreme Court affirmed the judgment, although according to Hungarian law the amount of the child maintenance was expected to range between 15 and 25 percent of the obligor’s income. The Court justified this with
The Maintenance Regulation applies to ‘maintenance obligations arising from a family relationship, parentage, marriage or affinity’. Accordingly, it regulates spousal maintenance and child maintenance but does not apply to the maintenance of cohabitants. At the same time, the maintenance of cohabitants is not dealt with by the apil either. The reason is that this is a concept unknown to Hungarian law.
7.5 Application of the Law More Favorable to the Child
As a general choice-of-law rule, Section 25 of the apil provides that in family matters Hungarian law shall be applied if that is more favourable to the child.
7.6 Determination of Parenthood
Section 31 of the apil deals with family status and provides that the child’s personal law at the time of birth shall apply to the establishment of fatherhood and motherhood, as well as the rebuttal of the presumption of fatherhood. In respect of the recognition of the child by the father, the child’s personal law at the moment of recognition has to be applied. The recognition by the father of a conceived but unborn child is governed by the mother’s personal law at the moment of recognition.
7.7 Custody and Contact
Hungary is party to the 1996 Hague Convention. Hence, the apil applies only in matters that do not come under the Convention’s scope. Section 34 of the apil deals with the family law relationship between the parent and the child and guardianship over the child, and provides for the application of the lex fori. This provision does not apply to maintenance, as it comes under the scope of the Maintenance Regulation.
7.8 Guardianship
Section 34 of the apil deals with guardianship over the child and provides for the application of the lex fori.
7.9 Adoption
Section 33 of the apil sets out cumulative connecting factors in respect of the preconditions of adoption: the personal laws of the adopter and the person to be adopted are to be taken into account jointly. Contrary to the pre-conditions of adoption, its legal effects and termination are subject to the personal law of the adoptive person at the time of adoption and termination, respectively.
In Case Pfv.ii.20.996/2000/4, the child was not adopted by both adopters at the same time: the defendant (a Hungarian citizen) adopted the child in 1990, while the plaintiff (a German citizen) adopted him some years later, after the parties had married. The Supreme Court established that this qualified as a joint adoption notwithstanding the fact that the parties had adopted the child separately at different times.
7.10 Artificial Insemination, Surrogacy
The apil contains no specific rules on medically assisted procreation (e.g., test-tube baby, surrogacy). Questions related to family status emerging from medically assisted procreation are governed by the above general provisions. Lineage questions are, in principle, governed by the child’s personal law. Unfortunately, there is no case law on this.111
In practice, the choice-of-law problems related to the determination of family status may be avoided due to Hungarian courts’ generous recognition practice concerning foreign public deeds. This may be relevant especially in matters involving surrogacy. In Case 5.P.iii.20.970/2011/2, the Hungarian court recognized a Ukrainian birth certificate concerning a child who was born in the frame of a medically assisted procreation program.
7.11 Child Abduction
The apil contains no specific rules on the law applicable to child abduction; however, Section 34 of the apil establishes, as a general rule, that the legal relationship between the parent and the 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 as being in the best interests of the child.
Hungary is a member to the 1980 Hague Convention. The Convention applies if the child has been wrongfully removed or retained abroad, and provides that the question of wrongfulness is governed by the law of the country the child was removed from. According to Article 3 of the Convention, the removal and the retention are wrongful if they violate a custody right (attributed to a person, an institution, or any other body) ‘under the law of the state in which the child was habitually resident immediately before the removal or retention’
Accordingly, one of the pre-conditions of the application of the Hague Convention is that the removal or retention is illegal under the law of the state where ‘the child was habitually resident immediately before the removal or retention’. If the allegation is that the child was illegally abducted from Hungary, in principle, Hungarian law applies.
7.12 Protection of Adults
Hungary is not a member of the 2000 Hague Convention. Thus, the protection of adults, including guardianship over adults, is governed by national rules. Nonetheless, Hungary envisions joining the 2000 Hague Convention and, hence, the rules of the apil were brought into conformity with the Convention’s provisions.
Guardianship over adults and other protective measures that do not affect the person’s capacity to act are not governed by the personal law but by the law of the habitual residence of the person concerned. However, if the interests of the adult concerned warrant it, the court may exceptionally apply or take into account the law of a state to which the case is more closely connected.112
The law of the habitual residence also applies to the legal declarations an adult makes where he or she would be placed under guardianship or protective measures which would be adopted to protect his interests; however, in his written declaration he or she may also choose the law of his citizenship, earlier habitual residence, or the situs of the assets.113
The law of the appointing court shall apply to the legal representation of a person restricted in managing his own affairs and to ad hoc guardianship over adults.114
8 Succession Law
The Succession Regulation sets out the choice-of-law rules concerning succession matters in a comprehensive manner and leaves very little room for national private international law norms. The apil essentially regulates two aspects of international succession which fall outside of the scope of the Succession Regulation: verbal testaments and the status of unclaimed estate.
8.1
The apil does not provide for party autonomy as to the lex successionis.
According to Section 64 of the apil, oral wills are formally valid if they comply with Hungarian law, the lex loci actus, the personal law or the law of the domicile or place of habitual residence of the deceased. Oral wills concerning immovable property are also valid if they are in conformity with the law of the situs.
According to Section 65 of the apil, if an estate located in Hungary has no heir (unclaimed estate), Hungarian rules on succession by the Hungarian state shall apply.
The old apil followed the ‘unity of legacy’ principle in the field of inheritance law. Accordingly, inheritance legal relationships were subject to a single law (personal law); contrary to the ‘partition of legacy’ principle, where movable and immovable property is subjected to different laws (personal law in respect of movables, and the law of the situs in respect of immovables).
8.2 Scope and Application of the Succession Regulation
Although the Succession Regulation has practically taken over the field, it has produced very scant case law consisting of a handful of reported court cases. It ought to be noted that international succession matters do emerge regularly; it is only the number of court cases that is low. In Hungary, succession matters are, in the first place, settled in a probate procedure carried out by a notary. This is not a court procedure, and the notary normally does not adjudicate on succession law disputes and his decisions are not published. This probate procedure filters the cases and apparently results in a situation where the parties rarely have recourse to the court.
In Case Pfv.i.20.164/2019,115 the Succession Regulation was found to be inapplicable ratione materiae. Here, the plaintiff and the deceased (whose legal successor was the defendant, as the deceased’s heir) had allegedly agreed that the plaintiff would provide care and support for the deceased and, in exchange for this service, the deceased would bequeath his entire property to the plaintiff. However, in his will, the deceased bequeathed all his property to the defendant. The plaintiff sued the defendant for compensation for the services provided and referred to the alleged oral agreement with the deceased. The Supreme Court established that this claim was contractual and not covered by succession law. Hence, it did not come under the Succession Regulation but under the Brussels i Regulation. The Supreme Court carried
The Succession Regulation does not apply to legal capacity;116 hence, this comes under the scope of the apil, which treats it as part of personal law. Nonetheless, the Regulation’s exclusion is not complete: Article 26(1)(a) of the Regulation provides that testamentary capacity (that is, ‘the capacity of the person making the disposition of property upon death to make such a disposition’) pertains to substantive validity, which is, in turn, governed by the lex successionis as established by the Regulation.
Compulsory portion (forced heirship) is governed by the lex successionis and comes under the scope of the Succession Regulation,117 as does interpretation of the will.118
The will’s formal validity is governed by the lex successionis and comes under the scope of the Succession Regulation, with the exception of the formal validity of oral wills, which are governed by the apil. As noted above, according to Section 64 of the apil, oral wills are formally valid if they comply with Hungarian law, the lex loci actus, the personal law or the law of the domicile or place of habitual residence of the deceased; oral wills concerning immovable property are also valid if they are in conformity with the law of the situs.
Legacies,119 testamentary contracts,120 and the liability for the debts under the succession121 are governed by the lex successionis and come under the scope of the Succession Regulation.
9 The Law Applicable to Procedure
According to Section 66 of the apil, the procedure of Hungarian courts is governed by the lex fori unless the apil provides otherwise.
The distinction between substance and procedure may raise questions of characterization. In the application of the apil, characterization has to be
The EU choice-of-law instruments do not deal with the law applicable to procedure; however, they address certain borderline cases. The Rome i Regulation does not apply to evidence and procedure,122 but provides that ‘[t]he law governing a contractual obligation under this Regulation shall apply to the extent that, in matters of contractual obligations, it contains rules which raise presumptions of law or determine the burden of proof’. Furthermore, a ‘contract or an act intended to have legal effect may be proved by any mode of proof recognised by the law of the forum or by any of the laws referred to in Article 11 under which that contract or act is formally valid, provided that such mode of proof can be administered by the forum’.123 The same approach is followed by the Rome ii Regulation.124
An alternative translation of the Hungarian term could be ‘disposing capacity’.
Section 21 of the apil.
Section 34 of the apil.
Section 18 of the apil.
Section 19 of the apil.
Section 20 of the apil.
Section 15 of the apil.
Section 15 of the apil.
ecj, Case C-148/02, Carlos Garcia Avello v Belgian State (2003) eu:c:2003:539.
Para. 45.
Section 22 of the apil.
See Cs.I. Nagy & S. Szabó, “A way ahead toward a deeper integration of EU pil: the unification of the rules on violation of privacy and rights relating to personality,” in R. Somssich & T. Szabados, Central and Eastern European Countries After and Before the Accession, vol 1. (elte – Jean Monnet Center of Excellence, Budapest, 2011), 191–211, at 206–209.
Reported as bh 2020.8.242, appealed from Case Pf.633945/2018/6 (Budapest-Capital Regional Court), appealed from Case P.89585/2015/55 (Central District Court of Pest).
Para. 22.
Para. 24.
eu:c:2015:802, paras 25–26.
Para. 27.
Section 23 of the apil.
Appealed from Case G.42206/2012/102 (Budapest-Capital Regional Court).
Under Hungarian law, the actions of a person may bind the principal even if the former has no right of representation if the principal approves them either explicitly, or implicitly (that is, by indicative behavior). See Section 221(1) of the old Civil Code, which was applied in this case, and Section 6:14 of the Civil Code, the currently effective provision.
Section 25 of the apil, the applicable provision during the relevant time, and Section 50 of the apil, the currently effective provision.
Section 3 of the old apil, the applicable provision during the relevant time, and Section 4 of the apil, the currently effective provision.
On the one hand, this question is regulated among the rules on contracts. See Section 221(1) of the old Civil Code, and Section 6:14 of the current Civil Code. On the other hand, Hungarian choice-of-law rules concern solely statutory representation (but not contract-based power of attorney) as a question coming under personal law. See Section 18(1) of the old apil and Section 22(4)(c) of the apil.
Article 1(2)(d) of the Rome i Regulation; Article 1(2)(c) of the Rome ii Regulation.
Section 58 of the apil.
Article 1 of the Rome i Regulation. For an overview of the Hungarian case-law on the Rome I Regulation, see Cs.I. Nagy, “Application of EU Private International Law in Hungary,” in Cs.I. Nagy (ed.), Cross-border litigation in Central-Europe: EU private international law before national courts (Kluwer Law International, The Hague, 2022), 125–133.
Article 2 of the Rome i Regulation.
Appealed from Case G.40368/2012/52 (Budapest-Capital Regional Court).
Appealed from Case G.40161/2013/47 (Zalaegerszeg Regional Court).
Appealed from Case G.42206/2012/102 (Budapest-Capital Regional Court).
bh 2020.3.72. Appealed from Case Gf.40107/2018/8 (High Court of Appeal of Budapest), appealed from Case G.40375/2016/32 (Budapest-Capital Regional Court).
Reported as bh 2020.9.267. Appealed from Case Pf.20753/2019/4 (High Court of Appeal of Budapest), appealed from Case P.22918/2018/45 (Budapest-Capital Regional Court).
Para. 61.
Paras 62 and 64–66.
Article 4(1)(a)-(b) and (e)-(f) of the Rome i Regulation.
Article 4(1)(c)-(d) of the Rome i Regulation.
Article 4(1)(g) of the Rome i Regulation.
Article 4(1)(h) of the Rome i Regulation.
Reported as bh 2020.9.267. Appealed from Case Pf.20753/2019/4 (High Court of Appeal of Budapest), appealed from Case P.22918/2018/45 (Budapest-Capital Regional Court).
Appealed from Case P.21637/2016/78 (Budapest District Court for the xx, xxi and xxiii Districts) and affirmed by Case Pfv.20211/2020/3 (Supreme Court).
Appealed from Case G.20969/2014/61 (Győr Regional Court).
Reported as bh 2018.9.250.
Case Pf.638807/2016/4 (Budapest-Capital Regional Court).
Case P.22689/2012/57 (Central District Court of Buda).
Para. 52.
M. Esser, Commercial Letters of Confirmation in International Trade: Austrian, French, German and Swiss Law and Uniform Law Under the 1980 Sales Convention, available at
See Civil Law Doctrinal Decision xxv on the validity of contracts for transfers of real estate.
Article 14(1).
Article 14(2).
Article 14(3).
See Article 4(1) of the Rome ii Regulation.
An interesting question of interpretation arises if the surrogation is based on both law and contract.
Article 17 of the Rome i Regulation.
Section 6:519 of the Civil Code.
Article 2 of the Rome i Regulation.
Article 1(2) of the Rome ii Regulation.
Article 2 of the Rome ii Regulation.
Article 3.
For an overview of the Hungarian case-law on the Rome II Regulation, see Cs.I. Nagy, “Application of EU Private International Law in Hungary,” in Cs.I. Nagy (ed.), Cross-border litigation in Central-Europe: EU private international law before national courts (Kluwer Law International, The Hague, 2022), 134–137.
Appealed from Case Pf.640701/2013/4 (Budapest-Capital Regional Court), appealed from Case P.87875/2012/31 (Pest Central District Court).
Appealed from Case P.101521/2011/42 (Pest Central District Court). Affirmed in Case Pfv.21135/2014/4 (Supreme Court).
Reported as bh 2020.8.242, appealed from Case Pf.633945/2018/6 (Budapest-Capital Regional Court), appealed from Case P.89585/2015/55 (Central District Court of Pest).
Para. 22.
Para. 24.
eu:c:2015:802, paras 25–26.
Para. 27.
Article 6(4) of the Rome ii Regulation.
Article 8(4) of the Rome ii Regulation.
Article 14 of the Rome ii Regulation.
Appealed from Case P.8921013/2012/31 (Central District Court of Pest).
Cs.I. Nagy, Private International Law in Hungary (Kluwer, 2012). 76–77, para 158.
Section 50(2) of the 2017 apil.
Article 8 applies to non-contractual obligations arising from an infringement of an intellectual property right also where the infringement is not delictual but arises from unjust enrichment, negotiorum gestio, or culpa in contrahendo. Article 13 of the Rome ii Regulation.
The Rome ii Regulation does not define the term ‘habitual residence’ for natural persons acting outside their business, see Art. 23. See also T.C. Hartley, “Choice of Law for non-contractual liability: selected problems under the Rome ii Regulation,” 57 International and Comparative Law Quarterly (2008) 899–908, at 902. The terms may have been borrowed from the Hague conventions which, nevertheless, consitently refrain from defining this concept.
Article 4(1) of the Rome ii Regulation.
See Cs.I. Nagy, “A jogellenes károkozás kollíziós szabályai a Róma ii Rendeletben,” 55 Magyar Jog (2008), 542–549, at 543–544.
The principle’s roots are to be found in the German Rechtsanwendungsverordnung of December 7, 1942 (rgb1. i 706), see J. Kropholler, Internationales Privatrecht (Mohr Siebeck, Tübingen, 2004), 516–518, in the US judgment in Babcock v Jackson, 12 n.y. 2d 473 (1963), and in the House of Lords judgment in Boys v Chaplin [1969] 2 All er 1085.
See recital 14 of the Rome ii Regulation.
Article 4(3) of the Rome ii Regulation.
The judgment was appealed but the question of the law applicable was not revisited. Case Pf.632162/2019/4 (Budapest-Capital Regional Court).
Reported as bh 2019.10.270.
Cf. the application of the law of common domicile in the case of delicts.
Article 12(1) of the Rome ii Regulation.
Section 39 of the apil.
Section 39(3) of the apil.
Section 41(3)-(4) of the apil.
Section 5:44(1) of the Civil Code.
Section 1468 of the Austrian Civil Code (abgb).
Section 42 of the apil.
Section 43 of the apil.
Cs.I. Nagy, Nemzetközi magánjog (hvg-Orac, Budapest, 2017) 115.
Section 44(1)-(2) of the apil.
Section 44(4) of the apil.
Section 44(5) of the apil.
Section 44(3) of the apil.
Section 44(5) of the apil.
Section 45(1) of the apil.
Section 45(2) of the apil.
Section 47 of the apil.
Directive 2014/60/EU of the European Parliament and of the Council of 15 May 2014 on the return of cultural objects unlawfully removed from the territory of a Member State and amending Regulation (EU) No 1024/2012 (Recast), [2014] oj l 159/1.
Note that Hungary is party to both treaties.
Case Pfv. x. 21.909/2004. (Supreme Court), published under number bh 2006.114.
Case iv. 20 221/1983 (Supreme Court), published under number bh 1984.151.
Section 26 of the apil.
Section 9 of the apil.
As for the Hungarian case law on the Rome iii Regulation see Case Pf.634936/2019/12 (Budapest-Capital Regional Court), appealed from Case P.101627/2017/112 (Central District Court of Pest); Case Pfv.21582/2019/4 (Supreme Court), appealed from Case Pf.21234/2018/20 (Szolnok Regional Court), appealed from Case P.20663/2017/5 (Jászberény Local Court).
Article 1 of the Rome iii Regulation.
Article 5 of the Rome iii Regulation.
Act xxix of 2009.
Appealed from Case Pf.630704/2017/12 (Budapest-Capital Regional Court), appealed from Case P.22943/2013/73 (Budapest District Court for the Districts of iv and xv).
See Cs.I. Nagy, “Hungary,” in K. Trimmings & P. Beaumont (eds.), International Surrogacy Arrangements (Hart Publishing, Oxford, 2013), 175–186.
Section 18 of the apil.
Section 19 of the apil.
Section 20 of the apil.
Reported as bh 2020.3.78.
Article 1(2)(b) of the Succession Regulation.
Article 23(2)(h) of the Succession Regulation.
Article 26(1)(d) of the Succession Regulation.
Article 23(2)(e) and Recital 47 of the Succession Regulation.
Article 3(1)(b) and (d) of the Succession Regulation.
Article 23(1)(g) and (d) of the Succession Regulation.
Article 1(3) of the Rome i Regulation.
Article 18 of the Rome i Regulation.
Article 1(3) & 21–22 of the Rome i Regulation.