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Material Compensation for Delay in Civil Proceedings from 1 January 2022

Material Compensation for Delay in Civil Proceedings from 1 January 2022

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By ratifying the European Convention on Human Rights in 1992, Hungary has committed itself to ensure the right to a fair trial within a reasonable time and to guarantee the right to an effective remedy for any violation of this right. In its judgment in Gazso v. Hungary, the European Court of Human Rights called on Hungary to establish a domestic remedy capable to handle the structural deficiencies identified in the judgment. As a result, at the end of June 2021, a new Act on the Enforcement of Material Compensation for Delay in Civil Proceedings was published in the Hungarian Official Gazette, which will enter into force on 1 January 2022. The Act establishes a new legal remedy for compensation for fundamental rights violations, called ‘material compensation’ which is different from the general compensation (in Hungarian: “kartalanitas”), indemnification or non-pecuniary compensation (in Hungarian: “serelemdij”).

The Act defines the time periods which may be regarded as reasonable and which must necessarily be sufficient to enable the court to carry out the procedural actions necessary for a reasoned decision in the case in question. Exceeding those time limits is what the legislature objectively regards as a breach of a fundamental right in relation to judicial proceedings. The Act declares a period of five years (60 months) to be sufficient for the conclusion of civil proceedings as a general rule. In specific cases requiring a rapid decision (e.g. labour disputes), a shorter objective period has been established for the entire judicial procedure.

Only the party of the court procedure is entitled to material compensation, i.e. other persons involved in the proceedings (e.g. interveners) are not entitled to claim such compensation. The Act defines the grounds of exclusion from the right to claim material compensation. Such grounds include, for example, if the party has already received a so-called ‘fair compensation’ in proceedings before the European Court of Human Rights for violation of the fundamental right to have the proceedings completed within a reasonable time.

A claim for material compensation may be brought in a civil non-contentious procedure before a court. The General Court of Debrecen and the General Court of Pécs will have jurisdiction and exclusive competence to hear the proceedings. In order to ensure the efficient and expeditious conduct of the non-contentious proceedings, the Act defines a maximum time limit of 15 days for the court's general obligation to take action and a time limit of 30 days for the written submission of the counterclaim. The court must issue a decision on the merits of the proceedings within 3 months from the receipt of the counterclaim.

A separate government decree will determine the amount of the material compensation for delay in civil proceedings and the rules for calculating the amount to be paid.

By Lidia Suveges, Attorney at law, KCG Partners Law Firm

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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