From the perspective of analyzing the scope of the arbitration act, there have been three different regulatory frameworks over the past thirty years covered by the two arbitration acts. Comparing these frameworks provides useful and interesting insights.
In all three cases, the regulatory logic is the same: first, the law determines to which procedures the law is applicable as a general rule, and then it stipulates to which additional areas and to which special procedures can the application of the Act be extended beyond the scope of the general application set out as a general rule. The areas affected by the exception rule on the extension of scope were the following in all three time periods: the duties of state courts related to arbitration clauses; the "legal aid" options by the state courts; enforceability of the arbitration award and the refusal of enforcement of the awards.
There were several interpretations of the general rule set out in Act LXXI of 1994 on arbitration (former Arbitration Act) regarding its material scope. On the one hand, it was possible to interpret the Act as applicable if the seat of arbitration was in Hungary. However, it was also conceivable to interpret the Act in a manner (contrary to the UNCITRAL Model Law), according to which the Act only considered the seat of arbitration to be relevant in the case of ad hoc arbitration, but in the case of institutional arbitration, its applicability was determined on the basis of the seat of the permanent arbitral institution facilitating the proceedings. Under the former Arbitration Act, the exceptional rule concerning the extended scope of application was linked to the concept of international arbitration.
Act LX of 2017 on Arbitration (Arbitration Act), as it was in force before 8 August 2018, clearly ruled in favour of an interpretation contrary to the UNCITRAL Model Law. In the case of ad hoc arbitration, the seat of arbitration had to be in Hungary, and in the case of institutional arbitration, the proceedings had to be facilitated by a permanent arbitral institution established in Hungary for the Arbitration Act to apply. This version also linked the exception rule to the concept of international arbitration.
The currently effective version of the Arbitration Act eliminated the difference between the tests applicable to ad hoc and institutional arbitration when establishing the general rule on material scope and defined the scope of application of the Act for both types of proceedings based on the seat of arbitration. The exception rule extending the scope of application no longer linked to international proceedings, as this concept is no longer used in the latest text of the Act. Currently, the provisions affected by the extended scope are applicable in the case of arbitration seated outside Hungary only if the institutional background for the proceedings is provided by the Permanent Court of Arbitration operating under the Hungarian Chamber of Commerce and Industry.
The latest version of the Arbitration Act remedied some of the problems caused by the previous regulation by eliminating the distinction between the tests applicable in ad hoc and institutional arbitration in the general rule on determining the material scope of application, and by removing the reference to the seat of the permanent arbitration institution as a connecting factor.
However, the current regulation is also problematic, as in certain cases it causes serious legal disadvantages for the parties by linking the applicability of the exception rule relating to the extended material scope to proceedings before the Permanent Court of Arbitration operating under Hungarian Chamber of Commerce and Industry.
Within the regulatory areas subject to the exception, the provisions concerning the obligations of state courts in the presence of an arbitration agreement, and the enforcement of arbitral awards, are less influenced by the manner in which the Hungarian legislator defines the scope of the Arbitration Act. This is because these matters are also regulated by international conventions, such as the New York Convention and the European Convention, to which Hungary is a party. Even in the absence of the applicability of the Arbitration Act, there are therefore legal provisions that define the rights and obligations of Hungarian state courts related to the enforcement of arbitration clauses and arbitral awards.
However, the situation regarding "legal aid" rules remains difficult, as, in arbitral proceedings that are currently excluded from the scope of the Arbitration Act, there is no international convention that would provide for provisional measures, protective measures, preliminary evidence, or assistance during the evidence-taking procedure ordered by state courts.
The current rule leads to absurd situations where, for example, if two Hungarian companies engage the services of a foreign arbitration institution in a legal dispute that is connected to Hungary in all respects, the Hungarian courts cannot provide any "legal aid" to the parties. Such a legal disadvantage did not affect the parties either under the former Arbitration Act or under the previous version of the Arbitration Act.
The legal disadvantages caused by the current rules cannot be remedied by the parties through choice of law, as the parties cannot overrule the public law norms governing the rights and obligations of Hungarian state courts. In the vast majority of cases, the lack of support that Hungarian courts can provide for the conduct of arbitration proceedings cannot be remedied even if the parties have the option of turning to a foreign court, as in a legal dispute closely linked to Hungary, only Hungarian courts can provide effective "legal aid".
Overall, it can therefore be concluded that Section 1 of the Arbitration Act requires further amendment.