Legal framework of mediation
The Mediation Procedure in Hungary
In Hungary, the foundations of the institution of mediation started to be laid at the time of the regime change, but it took more than a decade for the legislation to be adopted. The foundations of the mediation procedure in civil and commercial disputes were laid down in Act LV of 2002 (hereinafter: the Act), which contains the basic institutional framework and rules of activity. I consider it important to mention that the Act was supported unanimously (313 votes in favour, 1 abstention and no votes against) by the Members of Parliament who attended the session of the National Assembly. The Act contains partly administrative provisions related to the operation of mediation and partly dispositive provisions on the mediation procedure and defines the scope of mediation services that may be provided prior to or in lieu of civil litigation. The Act was amended on 24 July 2012 to include the legal instrument of "Court Mediation" and on 15 March 2014 to include the rules on "Compulsory Mediation". Due to the diversity of legal areas, alternative dispute resolution procedures are also widely covered by domestic legislation.
The old Act XXII of 1992 (Old Labor Code) introduced an alternative forum for resolving labor disputes, the mandatory consultation institution, into the regulation of labor disputes (Sections 194-198) and labor legal disputes (Sections 199-202), before the court proceedings. The currently effective Act I of 2012 still regulates the possibility of mediation for resolving legal disputes, based on collective agreement or agreement between the parties.
The rules of the previous Civil Procedure Code from 1952 (hereinafter referred to as the "old CPC") also allowed for the settlement of disputes through mediation, and the resulting agreement was subject to fee exemptions. The institution of summoning the parties to attempt to reach an agreement facilitated this process. The solution of the old CPC was disadvantageous for the parties in that the case had to be ongoing, thereby increasing the parties' time and cost burdens. The new CPC has made this solution more efficient by regulating two separate sets of cases: the conciliation attempt related to the mediation procedure and the conciliation attempt without the mediation procedure.
It is important to note that the court may attempt to settle the dispute by agreement partially or entirely in any stage of the proceedings, even in the appellate proceedings. If there is a chance of success in the mediation procedure or if either party requests it, the court informs the parties about the essence of the mediation procedure, its conditions, and the rules regarding its suspension. Prior to submitting a lawsuit, the parties have the opportunity to try to settle the legal dispute through either mediation-related or non-mediation-related conciliation attempts. If an agreement is reached between the parties in the mediation procedure, either party may request a summons for a conciliation attempt before filing the lawsuit, at a court with jurisdiction and competence. If the parties who have concluded the agreement jointly request the conciliation attempt, it can be conducted in any court with jurisdiction and competence. The application must include the parties' names, addresses or registered offices, additional identification data, and the facts establishing the court's jurisdiction and competence, and the agreement itself must be attached. Legal representation is not mandatory for this summons for conciliation attempt. The court sets the deadline for the conciliation attempt thirty days after the receipt of the application, or fifteen days in the case of a joint request.
In case an agreement is not reached on the designated deadline, the court declares the proceedings unsuccessful and terminates them. However, if an agreement is reached between the parties and it complies with the legal provisions, the court issues a decision approving the agreement, which becomes an enforceable order.
Prior to initiating the lawsuit, a party may request a citation for a settlement attempt, even if no agreement has been reached between the parties in a previous mediation procedure. However, the rules of this procedure are stricter than the previous one. Legal representation is mandatory in this procedure, as the application must contain more information, such as the subject matter of the legal dispute and the content of the proposed agreement.
If no agreement is reached on the designated deadline, the court informs the parties about the possibility of using a mediation procedure. If all parties declare that they wish to use mediation, the procedure is suspended upon their joint request. During the suspension period, the parties have four months to participate in the mediation procedure, conclude a written agreement, submit it to the court, and request its approval by means of a decision, while continuing the non-litigious proceedings.
The CPC expands the possibility of using court mediation by introducing the non-contentious procedure of summoning for a conciliation attempt, which also provides a place for court mediation (Act LIII of 2020 on the Non-Contentious Procedure, Section 38/B (3)).
If the parties reach an agreement during the mediation process, they may submit it to the court for approval as a settlement agreement within the suspension period. If the agreement complies with the legal regulations, the court approves it by a ruling; otherwise, it denies the approval and continues the procedure.
The costs arising from the mediation in the course of the litigation are part of the litigation costs. If the parties reach a written agreement during the mediation process that complies with the legal regulations, but one party refuses to incorporate it into a settlement agreement before the court, it must bear the costs arising from the mediation regardless of the outcome of the litigation. If the parties reach a written agreement during the mediation process that does not comply with the legal regulations, and as a result, the litigation must continue, the costs arising from the mediation are borne equally by the parties.
The information available on the case is already known to the parties at the end of the discovery phase, so this is the best time in the litigation for the parties to assess their chances and consider whether or not it is worth going to mediation. Once the court has made an order closing the case, it will attempt to reach a settlement between the parties if there is a chance of success. The court will provide information about the possibility of using mediation, its methods and advantages, the possibility of including any agreement in a court settlement and the rules on injunctions. In the absence of an agreement, but where there is a willingness and readiness to reach an agreement, the parties may, in addition to the suspension, also have recourse to court or market mediation in connection with the pending litigation. If a written agreement is reached, they can seek court approval of it in the litigation (provided that the content of the written agreement complies with the law), so that whether they have used market or court mediation, the enforceability of the agreement is also ensured. If no agreement can be reached between the parties, the court will immediately hold a hearing on the merits or, if the circumstances of the case do not allow it, set a date and summon the parties.