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19 May 2020
While COVID-19 has been dominating the headlines, a new act, which entered into force on 1 April 2020 and fundamentally reforms the role of judge-made law in Hungary, has received less attention.
This article examines why this landmark bill was passed, the extent to which it means the adoption of common law and what its potential impact will be on litigation in Hungary.
The radically different approaches of the continental and common law systems regarding judge-made law can be demonstrated by:
The act was adopted by Parliament in December 2019 and entered into force on 1 April 2020. It marks a milestone in the development of Hungarian law (which belongs to the Romano-Germanic legal family), since it is a shift from the above principle according to which law is made by the legislature, towards common law, where the existence of judge-made law is widely accepted.
Thus far, judge-made law has not been officially present in the Hungarian legal system as the Fundamental Law does not list high court decisions among the sources of law.(2) However, the lower courts tend to invoke Supreme Court judgments in the reasoning of their decisions.
Nevertheless, according to the Fundamental Law, the main function of the Supreme Court is not to make the law, but to ensure that it is uniformly applied. To achieve this objective, the legislature allows the court to:
In addition to fulfilling its legal obligation by publishing its final decisions in the Collection of Court Decisions, the Supreme Court published non-binding guidelines without any legal authorisation.
For example, in 2017 the Supreme Court issued general guidelines in the field of civil and business law to interpret the new Civil Procedure Code, which entered into force in 2018.(3)
In practice, judge-made law was present as a kind of 'secondary law' to fill gaps in legal provisions with content.
However, the majority of the Supreme Court's instruments were not judicial decisions delivered in individual cases, but rather abstract guidelines of an administrative nature, which were hardly reconcilable with the classic function of a court.
The above practice, according to which higher courts issue general guidelines as quasi-law makers, was often criticised by the Venice Commission. Thus, the Council of Europe aims to ensure the consistency of case law through judicial decisions brought in individual cases.(4)
In addition, since 2012, the published decisions of the Supreme Court in individual cases have not had the same binding force in Hungary. While 'decisions in principle' (the so-called 'EBD' and 'EBH'), which were selected by judicial leaders in an administrative way, were binding for the lower courts, other published judicial decisions could be derogated from. In practice, this caused legal uncertainty.
The main concept of the reform effective from 1 April 2020 is that, instead of administrative activity, the uniform application of law will be ensured by classical judicial decisions, and the published individual decisions of the Supreme Court will have equal weight.
To this effect:
The limited precedent system means that the lower courts must follow the interpretations of Supreme Court decisions as a main rule. In exceptional cases, a lower court wishing to derogate from a Supreme Court decision must justify the reasons for doing so in its judgment.
Supreme Court decisions will not be a "source of law" in the classic sense, as judges can derogate therefrom on a discretionary basis; however, their role will become significantly stronger because any derogations by the lower courts must be duly justified.
Such derogations will presumably occur if:
According to the previous system of remedies, a final second-instance court decision could be challenged before the Supreme Court by a request for judicial review. There was only one legal remedy against a Supreme Court judgment made in the judicial review procedure – namely, the constitutional complaint, by which a review of the unconstitutional judgment could be requested in front of the Constitutional Court.
The latest reform introduces the uniformity complaint as a new legal remedy, which can be used:
A separate chamber of the Supreme Court (the so-called 'uniformity council') adjudicates the uniformity complaint. Its members include the president of the Supreme Court and other president-appointed judges of the court.
If the uniformity complaint procedure is successful, the judgment delivered has the same effect as a decision made in a uniformity procedure by the Supreme Court – namely, it is published in the Hungarian Gazette, which means that in addition to binding the parties in litigation, the judgment will oblige the courts adjudging the same legal issue in the future.
The reform aims to make the legal situation clearer and more transparent than before and strengthen legal certainty; therefore, its aim cannot be contested.
Critics of the reform point out that there is no guarantee that importing a well-established legal institution from a foreign legal system – namely, the system of precedent of common-law jurisdictions – will have a positive effect in a country whose legal culture has developed differently for centuries.(5)
With regard to the reform's practical difficulties, it is worth considering that the Supreme Court has approximately 40,000 published judgments. Since 1 April 2020 all of these decisions have the same legal effect.
At first sight, this seems like a great opportunity for legal representatives to find the most suitable Supreme Court decisions to supports their client's case. However, this enormous legal database has not been properly organised; therefore, it will make litigation more difficult and delay proceedings in the short term.
When it comes to the new extraordinary legal remedy, the uniformity complaint, in addition to the fact that the president of the Supreme Court has relatively broad powers because they can choose the judges who adjudicate the complaints, this extra legal remedy is likely to delay litigation.
Arguably, the reform's effectiveness will depend on how effectively an organisation can monitor itself, as in the uniformity complaint procedure the Supreme Court judges must review and self-monitor the decisions of their colleagues.
The reform's objectives cannot be called into question; however, whether the abovementioned novelties will strengthen legal certainty in Hungary remains to be seen.
For further information on this topic please contact Richard Schmidt at SMARTLEGAL Schmidt & Partners by telephone (+36 1 490 09 49) or email (firstname.lastname@example.org). The SMARTLEGAL Schmidt & Partners website can be accessed at smartlegal.hu.
Laws shall be Acts, government decrees, prime ministerial decrees, ministerial decrees, decrees of the Governor of the Hungarian National Bank, decrees of the heads of independent regulatory organs and local government decrees. In addition, decrees of the National Defence Council adopted during a state of national crisis and decrees of the President of the Republic adopted during a state of emergency shall also be laws.
The practice of guidelines adopted by the Supreme Court or another highest court and binding on lower courts which exists in certain post-Soviet countries is problematic in this respect… 'Under a system of judicial independence the higher courts ensure the consistency of case law throughout the territory of the country through their decisions in the individual cases'.
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