Hungarian court enforces foreign arbitration award notwithstanding potential challenge at the seat of the arbitration
01. 06. 2021
The court’s judgment
According to a recent judgment of the Regional Appellate Court of Szeged (Szegedi Ítélőtábla), a foreign arbitral award may be recognized in Hungary even if it was never served on the award debtor and even if it may still be challenged at the seat of the arbitration (in Ukraine).
In its judgment, the Court distinguishes between the recognition and the enforcement of foreign arbitral awards.
According to the Court, the recognition of foreign arbitral awards is governed by Article IV of the New York Convention, which requires the recognition of an arbitral award if the award creditor furnishes an original or authenticated copy of (a) the arbitral award and (b) the agreement to arbitrate. As long as the award creditor furnishes these two documents and there is no special reason to refuse recognition (such as a violation of Hungarian public policy) Hungarian courts are required to recognize the award, even if the payment deadline in the award has not lapsed (for example, because the award hasn’t been notified to the award debtor).
Regarding the enforcement of the award, the Court explained that if the payment deadline of the arbitral award has not lapsed, that could in principle bar the enforcement of the award against the award debtor, but not to the recognition of the arbitral award in Hungary. However, in this case, the arbitral tribunal declared its award immediately enforceable and, therefore, the award could be enforced against the award debtor, even if the award had not been served on the award debtor.
Finally, the Court noted that even if the arbitral award had not been properly served on the award debtor, the award debtor had not been deprived of a legal recourse against the award in Ukraine, as the award debtor could challenge the award before Ukranian courts, once the award had been properly served on the award debtor. Therefore, the possibility of a potential challenge against the arbitral award at the seat of the arbitration did not bar the recognition and enforcement of the arbitral award in Hungary, as it wasn’t contrary to Hungarian public policy or Article V(1)(e) of the New York Convention.
Our take on the judgment
The Court’s judgment confirms the pro-arbitration stance of Hungarian courts in at least two ways.
First, the judgment confirms that Hungarian courts will take a narrow view on the exceptions to the recognition and enforcement of arbitral awards contained in the New York Convention and will not hesitate to recognize foreign arbitral awards even if the payment deadline under the arbitral award has not lapsed or is in dispute.
And second, taken to its logical conclusion, the Court’s judgment signals that Hungarian courts will recognize and enforce a foreign arbitral award, even if a challenge against the award is still potentially open or pending in the foreign country where the award had been rendered (at the seat of the arbitration).
(Judgment ÍH 2021.22 Szegedi Ítélőtábla)