29 January 2025
newsletter
hungary
Has arbitration become cheaper than litigation in Hungary?
As of 28 January 2025, a legislative change has drastically increased procedural fees for litigation in Hungary. In contrast, the procedural costs of arbitration have remained the same. This raises the question: which option is now cheaper?
Before 28 January 2025
Arbitration procedures are globally and generally regarded as quicker and more cost-effective than regular court litigation. This is primarily due to their lower level of formalities, the single-instance nature of arbitration, and the arbitrators' vested interest in concluding the process and securing their fees.
This was not the case in Hungary. For many years, court litigation, even across multiple instances, proved to be cheaper than arbitration. This is because the procedural fees for court proceedings were capped at each stage, including the first instance, the second instance and extraordinary remedies. In arbitration cases, the arbitrator fees themselves (which are just one element of the procedural costs of arbitration) were often higher than all the caps in regular court litigation.
For cost-efficiency reasons, many complex, cross-border litigation cases were brought before regular courts in Hungary rather than arbitration. This is set to change, as the rules on procedural fees have drastically increased as of 28 January 2025.
Since 28 January 2025
The new rules have abolished the caps for the first-instance court procedure, while keeping the caps for the second-instance procedure and extraordinary remedies. This has made court litigation much more expensive, reducing the gap between the costs of litigation and arbitration.
The procedural fees for regular court litigation cases initiated after 28 January 2025 will be as follows:
|
Regular court litigation |
||||
|
Claim value (EUR) |
First instance (EUR) |
Second instance (EUR) |
Extraordinary remedy (EUR) |
Overall (EUR) |
|
25,000 |
1,224 |
2,000 |
2,500 |
5,724 |
|
125,000 |
6,974 |
6,250 |
8,750 |
21,974 |
|
250,000 |
10,099 |
6,250 |
8,750 |
25,099 |
|
625,000 |
17,599 |
6,250 |
8,750 |
32,599 |
|
1,250,000 |
20,724 |
6,250 |
8,750 |
35,724[1] |
The procedural fees for arbitration cases are as follows:
|
Arbitration |
|||
|
Claim value (EUR) |
Sole arbitrator |
Panel of arbitrators |
|
|
25,000 |
1,974 |
3,606 |
|
|
125,000 |
7,036 |
13,132 |
|
|
250,000 |
10,156 |
19,126 |
|
|
625,000 |
16,239 |
30,240 |
|
|
1,250,000 |
21,667 |
39,693 |
|
When comparing the numbers, it becomes clear that:
(i) for low-value cases (i.e. claim value lower or around EUR 25,000), regular court litigation will remain less expensive than arbitration, while
(ii) for mid-value to high-value cases (i.e. claim value higher than EUR 125,000), regular court litigation will become two times more expensive than arbitration with a sole arbitrator, while
(iii) for mid-value to high-value cases, regular court litigation will be almost as expensive as arbitration with a panel of arbitrators.
From a cost-efficiency perspective, the new rules and increased procedural fees could usher in a new era for arbitration in Hungary, potentially marking an end to high-value cases before regular courts. Whether arbitration can truly surpass the popularity of court litigation remains to be seen over time.
***
Please note that the above comparison is limited to procedural costs. Certain legal constraints may apply when choosing arbitration over litigation in certain areas.
author: Alexandra Bognár
co-authors
