Highlights on the main points of the decision of the Constitutional Court in the case of the ex lege exclusion of arbitration in matters related to national wealth

10 July 2013

1. Article 17(3) of the Act on National Wealth  (Act  CXCVI/2011)  and the new Article 4 of the Act on Arbitration (Act LXXI/1994),which prohibit from going those who are responsible for the management of items belonging to „national wealth”  to  an arbitral tribunal in order to settle disputes on related economic matters, do not concern and therefore do not limit at all the capacity of other Hungarian enterpreneurs whose business activity does not involve items of national wealth to settle their disputes by arbitration.

2. The interstate arbitration clauses of the bilateral investment treaties do not fall either under the scope of application of the Act on Arbitration, which regulates only the industrial, commercial and civil law type arbitrations.

3. The adoption of these rules in 2011 should concern only contracts made after the 1st of January 2012 i.e. the entry into force of the Act on National Wealth. That’s why the Constitutional Court ruled that all the arbitration clauses of whatever contract related to national wealth made prior to the 1st of January 2012 and in force to this day, preserve their entire legal validity till their expiration date as stipulated in the given contracts. This is the constitutional interpretation of article 17(3) taken together with article 17(1), which stipulates the observation of rights and obligations acquired legally and in good faith prior to the entry into force of the Act on National Wealth. This interpretation was pronounced as a constitutional requirement which is binding upon all private and legal persons, state organs and courts in Hungary. Acting so, the Constitutional Court excluded whatever retroactive effect of the above mentioned articles of the Act on National Wealth and the Act on Arbitration.

4. The eventual modification of these contracts is possible but require the partner’s consent.

5. Since the Constitutional Court pronounced as a „constitutional requirement” the scrupulous observation of the arbitration clauses of the contracts made prior to the 1st of January 2012, it arrived to the conclusion that contrary to the applicant’s opinion, neither the bilateral investments treaties, nor the three main multilateral conventions (Convention on the Recognition and Enforcement of Foreign Arbitral Awards [the 1958 New York Convention],  the Convention on the Settlement of Investment Disputes between States and Nationals of Other States [ICSID Convention or the 1965 Washington Convention] and the European Convention on International Commercial Arbitration [the 1961 Geneva Convention] were violated by the legislator.

6. Nevertheless the necessary notifications should be sent to the ICSID (see art 25(§§ 3-4) of the Washington Convention[1]) and the government may decide whether it is proper to denounce the Geneva Convention or to denounce it and to acceed to it again but with  the special declaration according to art. II (§2) of the Geneva  Convention[2]. All these actions should produce their legal effect according to terms and dates of these conventions.

7. The Constitutional Court pointed out that in the annex of the Act on National Wealth excludes any eventual ambiguity as far as it contains a very detailed and individualized list of items, geographic points, rivers,lakes, buildings, palaces, historical ruins, monuments and other properties belonging under National Wealth.

8. Finally, the Constitutional Court emphasized that its competences embrace only the control of compliance with the basic law (i.e. the constitution) and international legal commitments. The examination of the economic context of a law, the ponderation of economic advantages and disadvantages or consequences are out of the competence of the Constitutional Court.


(This document in only a summary and it does not bind the Court.)


[1] Article 25

(3) Consent by a constituent subdivision or agency of a Contracting State shall require the approval of that State unless that State notifies the Centre that no such approval is required.

(4) Any Contracting State may, at the time of ratification, acceptance or approval of this Convention or at any time thereafter, notify the Centre of the class or classes of disputes which it would or would not consider submitting to the jurisdiction of the Centre. The Secretary-General shall forthwith transmit such notification to all Contracting States. Such notification shall not constitute the consent required by paragraph (1).

[2] Article II – Right of Legal Persons of Public Law to Resort to Arbitration

1. In cases referred to in Article I, paragraph 1, of this Convention, legal persons considered by the law which is applicable to them as “legal persons of public law” have the right to conclude valid arbitration agreements.

2. On signing, ratifying or acceding to this Convention any State shall be entitled to declare that it limits the above faculty to such conditions as may be stated in its declaration.