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Enforcement Has Finally Arrived in the 21st Century

Enforcement Has Finally Arrived in the 21st Century

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The healthcare emergency situation has accelerated the digitisation of tasks and processes in a wide range of areas. Enforcement proceedings based on notarial deeds are no exception, where an electronic procedure became mandatory a few months ago. The only question is how long the signature itself will still need to be in writing.

What is a notarial deed good for?

The most important feature of a notarial deed is that it is directly enforceable. That is, if the obligor fails to perform its obligation under a notarial deed, the obligee may immediately request the enforcement of the obligation based on such document. In most cases, doing so helps to avoid a lengthy court procedure. Notarial deeds can be most commonly found in bank financing, where the bank requires the debtor to sign the loan agreement and the collateral agreements in a notarial deed as a condition of the loan. In addition, this format is also often preferred in commercial relations today. Thus for example, in the case of an appropriately worded statement included in a notarial deed, a landlord can expel a non-paying tenant from his or her property without litigation. But the legal position of a market participant is equally improved if its debtor acknowledges its debt in a statement made before a notary.

Notarial deed: from paper to electronic form

Like all documents, notarial deeds are traditionally drafted on paper. This is then signed by the parties before the notary, who keeps the document and provides certified copies thereof to the clients.

The first stage in the development of notarial deeds was when the notary could issue an electronic copy of the paper-based document. What this means is that the notary scanned the original document, affixed its electronic signature and time stamp to it and handed it over to the parties in the form of an e-file. More recently, however, it has also been possible for a notary to create the notarial deed in electronic form in the first place. This is subject to the condition that each of the signatories have an electronic signature and affix that to the statement instead of a handwritten signature. It should be noted, however, that this does not replace either the obligation to appear before the notary or the reading of the document, which often takes hours. So there is still room for improvement.

When enforcement also becomes electronic

The notarial deed fulfils its real function when the parties intend to enforce the claim based on it. In the past, this was only possible on paper: the interested party personally initiated the enforcement of the notarial deed before the notary by presenting it (together with the necessary annexes).

However, from 1 April this year, the situation has changed. Entities subject to electronic communication (i.e. companies, public bodies and their legal representatives) can now only initiate enforcement proceedings by submitting an online application. In addition, they must also submit the documents on which enforcement is based (such as the notarial deed in question) in authentic electronic form. That is, if someone does not possess an electronic copy of the document (or did not sign the notarial deed electronically), then he or she must first request that the authentic instrument be digitised and only then can initiate enforcement. This provision will encourage business entities to get their notarial deed issued electronically in the first place or to request an electronic copy immediately.

What is there to come?

The quarantine has given a big boost to the spread of digital and online solutions in all aspects of life. Linking enforcement procedures to electronic form further strengthens this process. Therefore, market operators (such as banks, financial companies, but sooner or later also individuals) should consider if the actual physical signature of their documents is still viable in the long run. At the end of this process actual hand-signed documents will be a real relic.

By Boglarka Zsibrita, Attorney at Law, Jalsovszky

Hungary Knowledge Partner

Nagy és Trócsányi was founded in 1991, turned into limited professional partnership (in Hungarian: ügyvédi iroda) in 1992, with the aim of offering sophisticated legal services. The firm continues to seek excellence in a comprehensive and modern practice, which spans international commercial and business law. 

The firm’s lawyers provide clients with advice and representation in an active, thoughtful and ethical manner, with a real understanding of clients‘ business needs and the markets in which they operate.

The firm is one of the largest home-grown independent law firms in Hungary. Currently Nagy és Trócsányi has 26 lawyers out of which there are 8 active partners. All partners are equity partners.

Nagy és Trócsányi is a legal entity and registered with the Budapest Bar Association. All lawyers of the Budapest office are either members of, or registered as clerks with, the Budapest Bar Association. Several of the firm’s lawyers are admitted attorneys or registered as legal consultants in New York.

The firm advises a broad range of clients, including numerous multinational corporations. 

Our activity focuses on the following practice areas: M&A, company law, litigation and dispute resolution, real estate law, banking and finance, project financing, insolvency and restructuring, venture capital investment, taxation, competition, utilities, energy, media and telecommunication.

Nagy és Trócsányi is the exclusive member firm in Hungary for Lex Mundi – the world’s leading network of independent law firms with in-depth experience in 100+countries worldwide.

The firm advises a broad range of clients, including numerous multinational corporations. Among our key clients are: OTP Bank, Sberbank, Erste Bank, Scania, KS ORKA, Mannvit, DAF Trucks, Booking.com, Museum of Fine Arts of Budapest, Hungarian Post Pte Ltd, Hiventures, Strabag, CPI Hungary, Givaudan, Marks & Spencer, CBA.

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