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Increasingly Contentious Hungary: A Buzz Interview with Richard Schmidt of Smartlegal Schmidt & Partners

Increasingly Contentious Hungary: A Buzz Interview with Richard Schmidt of Smartlegal Schmidt & Partners

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A growing number of employment and consumer protection-related disputes are on the horizon in Hungary, while revised arbitration rules promise swift and more efficient alternative dispute resolution mechanisms, according to Smartlegal Schmidt & Partners Managing Partner Richard Schmidt.

"One of the key developments in Hungary is related to the new arbitration rules of the Hungarian Commercial Arbitration Court, which entered into force in January 2023," Schmidt begins. "The main objective of the revised rules is to ensure speedy and effective arbitration proceedings." The key changes, according to him, include a strict 30-day deadline for arbitrators to accept their appointment, more flexible case management conferences, and the possibility to hold remote hearings, among others. He says "the new amendments are quite promising, as there were a number of measures implemented to accelerate court proceedings, and it is natural that arbitration, as an alternative dispute resolution mechanism, should also be brought up to date."

According to Schmidt, "in January 2023, there was a major modification of the Hungarian labor code, partially aimed at implementing the EU Work-Life Balance Directive." The most significant areas of improvement, according to Schmidt, are related to flexible work arrangements. "Employees that are raising a child under eight years of age can now submit a 'modification proposal' to the employer, asking for home office, part-time work, modification of the place of work and the shift” he notes. “The employer has a 15-day deadline to accept or reject the modification and, in case of rejection, the employee can challenge this decision in court. Given that under Hungarian legislation the burden of proof in a lawsuit lies with the employer, it will be difficult for the employer to justify the refusal to work from home, as the COVID-19 pandemic showed that working from home is a feasible alternative." Consequently, he says that a rise in labor disputes is expected soon.

Finally, Schmidt highlights new consumer protection legislation. "Last year, in December, the parliament modified the consumer protection act to align with the EU directive, and the amendments come into effect in June 2023," he says. According to him, "the new law introduces a new type of opt-out class actions, where usually a professional third party, e.g., a public body, like the prosecutor’s office or the consumer protection authority, starts litigation to enforce consumer rights. This opt-out class action mechanism has existed in Hungarian legislation for a while, but it was rarely invoked in practice – as the body entitled to start class action on behalf of consumers was limited to public bodies." According to him, "the new law, on the other hand, establishes that the qualified entity can be either a public party or a private organization within the EU, which can start litigation not only in domestic courts but also in other courts of EU member states." Schmidt believes that, consequently, consumer rights protection will be more efficient, and the number of litigation cases will likely increase in the second half of the year.

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