“A new Civil Procedure Act concerning litigation processes is keeping lawyers wired right now in Hungary,” reports Kinga Hetenyi, Managing Partner at Schoenherr Budapest.
The new act, which entered into force at the beginning of this year, has already caused a lot of turmoil among lawyers, Hetenyi reports. “Although it was adopted in order to speed up the proceedings and adapt them to the digital 21st century, it has caused a bit of a panic that it actually will make proceedings more formalistic. The truth is, we can’t really assess the length of the proceedings just now, because it is a new system and we have already had very mixed experiences with the new law. A lot of lawyers are reluctant about it, so right now they are just waiting to see how the first cases will work out, and what experiences others will have. This certainly decreases the number of law suits temporarily.”
Hetenyi says that the act changes procedures by dividing them into two phases. “In the first one, you have to state what your legal question is, clearly defining the claim, your arguments and what kind of evidence you will use to back up your statement. Then, in the second phase, you are not allowed anymore to change your claims, nor your strategy; you can only bring the evidence.”
The act was created, Hetenyi reports, partly in response to accusations that the litigating parties were changing directions too often during proceedings, and coming up with new aspects and strategies, often extending procedures interminably. In Hetenyi’s opinion, the new act means that lawyers and their clients will have to do more work before initiating claims. “They will have to be better prepared at the beginning of the court hearing, and think carefully which course of action they will want to follow, for it won’t be possible to think that we will have several months to identify the best strategy.”
Hetenyi says that, all things considered, the act should have a positive effect on business. “Litigating is always a risk,” she says, “and the outcome is unclear. As far as I can see, if you spend time on litigating, you don’t spend time on your own business. So generally, if there is less litigation-time, it’s better for business." Still, she's not expecting a revolutionary change. "This will only last until the court practice under the new law crystallizes; business – and the willingness to litigate – will thereafter most likely be back to the 'normal' level.”
Turning to the subject of foreign investment, Hetenyi points out while election years usually slow down businesses — "during this period politicians are occupied with the campaign and not with law making, and businesses await to see the result and any potential new courses of action of the government” — the recent Hungarian elections seem not to have had that effect. “This year I don’t see a slowdown in business, maybe because the elections did not bring anything new." Instead, she says, "I would say that M&A is really blooming, the biotech and automotive sectors are strong, and I definitely see an increase from Asian investors coming to Europe — and to Hungary, as many Asian companies are pursuing Hungarian targets, or are targeting bigger European groups that have Hungarian subsidiaries.”
According to Hetenyi, the Hungarian legal market is changing, as for several years now legal services have been becoming more business-focused, with lawyers no longer being simply technicians, tied to purely legal questions. She says, “digitalization also has a big influence on the legal industry. Now we have digitalized quite a big part of the work processes, starting with archiving, dictating to machines, and creating data bases.” She claims, with pride, that her own firm is progressive in its outlook. “Schoenherr is very open to these tools,” she says. "For example we have a Record Center only for project references – it is often demanded by clients that before awarding a mandate, we can show them that we have the expertise in that specific area. This data base of references helps a lot and saves us a lot of time.”
But it’s not just law firms that are faced with technological changes. In Hetenyi’s opinion, digitalization can be seen in all kinds of proceedings in Hungary. “We are experiencing important improvements in court proceedings, administrative proceedings, and so on. It is a big step forward that we can file applications and petitions everywhere electronically and inspect documents in the courts' and the authorities' files online.”