HUNGARIAN REPORT
QUESTIONNAIRE OF THE INTERNATIONAL REPORTER - LIDC
Should private enforcement (actions for damages) of competition law be encouraged, and if so, through what concrete measures?
This questionnaire aims at providing national reporters with some guidance as well as with an harmonised framework for the analysis, therefore facilitating the drafting of the final report.
However this questionnaire is not unchangeable, and all relevant questions not addressed hereinafter should be added and analysed in the national report.
The international reporter is at your disposal to answer any question you may have on the questionnaire as well as on the drafting of the national reports. Moreover, your are kindly invited to forward any comment you may have on the questionnaire to the international reporter.
National reporters shall, to the extent possible, limit their national report to 20 pages. Furthermore, they are kindly asked to keep in mind, while drafting, that the report aims at identifying concrete measures in order to facilitate actions for damages in the field of competition law.
1. general context
The national reporter is invited to provide a description of the general context of actions for damages:
· Description of the applicable legal provisions
· Recent or foreseen changes in these provisions
· Description of competent courts
· Current debate and issues currently being considered regarding actions for damages
The national reporter may refer to the study already conducted in Europe, available on the website of the European Commission[1], and update it should this be necessary for the purpose of the questionnaire.
Hungarian Act LVII of 1996 on the Prohibition of Unfair and Restrictive Market Practices (hereinafter referred to as the "Competition Act") covers unfair competition and antitrust law and contains the relevant procedural rules as well. The competence for these matters is clearly separated as unfair competition cases belong to the competence of regular civil courts and antitrust cases to the competence of the Competition Office.[2] However, Act LXVIII of 2005 on the Amendment of Unfair and Restrictive Market Practices, which entered into effect on 1 November 2005, incorporated a new provision into the Competition Act according to which the competence of the Competition Office for antitrust cases does not exclude the enforcement of civil law sanctions directly before courts on the basis of a breach of the competition law rules on cartels and abuse of dominant position.[3] Thus, the amendment of the Competition Act in 2005 has opened the possibility of civil law actions for damages on the basis of a breach of the competition law provisions on cartels and abuse of dominant position. The possibility of private enforcement on the basis of a breach of Article 81 and 82 EC has been ensured by an amendmenttof the Competition Act in 2003, which entered into effect on 1 May 2004.[4]
Thus, we can state that Hungarian law recognizes the possibility of both stand alone as well as follow-on private actions for damages but there are currently many open questions in the Hungarian jurisdiction pertaining thereto.
In a civil procedure, based on a breach of the Hungarian or EC competition law rules on cartels and abuse of dominant position, damages may be awarded in accordance with the general rules of civil law.[5]
Although Hungarian law distinguishes between "damage caused outside of contractual relations" (i.e. torts) and "damage caused by breach of contract". It currently applies the same rules to both types of damage and considers damages as a unified regime with only minor differences.[6] However, a fundamental change is foreseen in the Draft of the new Civil Code, according to which these two institutions will be subject to different criteria. According to the Draft of the new Civil Code, the criteria of "damage caused outside of contractual relations" will remain mostly unchanged, while the new rules on "damage caused by breach of contract" will limit the amount of indemnification for foreseeable damage. Nevertheless, we are of the opinion that damage claims based on the breach of the competition law rules on cartels and abuse of dominant position are for "damage caused outside of contractual relations" (even if the behaviour is related to some contractual relationship between the parties and/or some third parties), and there may be only a few theoretical cases where they could result from breach of contract. This means that the foreseen change in Hungarian legislation on indemnification, however significant, is not of great importance concerning the present subject.
According to the currently applicable provisions on damages "a person who causes damage to another person in violation of the law shall be liable for such damage. He shall be exempted from liability if he is able to prove that he has acted in a manner that can generally be expected in the given situation."[7]
Thus, in Hungarian law, the liability for damage shall be established only if the following criteria are met: (i) an unlawful active or passive behaviour, (ii) damage (injury), (iii) a causal link between the active or passive behaviour and the damage, and (iv) fault (culpability).
According to the rules on the burden of proof, the person who suffered damage must prove the conditions listed from (i) to (iii) and if this is successful then the person who caused the damage may exculpate himself by proving that he acted in a manner that can be generally expected in the given situation.
According to Hungarian law "behaviour" may be any kind of act or omission that leads to damage.
"Damage" involves pecuniary damage, consisting of actual damage, loss of profit and costs in connection with reducing or diminishing damage, as well as non-pecuniary damage.[8] Damages shall be assessed on the basis of the injury suffered by the plaintiff. In principle, all pecuniary and non-pecuniary damage suffered by the person shall be compensated.
The "causal link" between the unlawful behaviour and the damage involves both direct and indirect causation. The causality shall be adequate, which is judged by the courts in each and every case.
"Violation of law" is also a precondition to a successful action for damages. In the present case, this would mean that the court has to establish that the defendant breached the competition law rules on cartels or abuse of dominant position. As the violation of competition law rules is generally a highly complex question, the Hungarian legislator has attempted to ensure the necessary expertise of the Competition Office is utilised in civil cases. According to the Competition Act, a court shall immediately notify the Competition Office if the application of the competition law rules on cartels or abuse of dominant position arises in a civil action before the court. The Competition Office may submit observations or set forth its standpoint orally before the closing of the hearings. Upon a request of the court, the Competition Office shall inform the court about its legal standpoint concerning the application of the competition law rules in the given case. Thus, the Competition Office acts as an "amicus curiae" to the courts. Furthermore, if the Competition Office decides to initiate proceedings in a matter that is pending before the court, then the court shall stay its own proceeding until the Competition Office issues its final and legally binding decision, and the court is also bound by the final and legally binding decision of the Office concerning the finding of breach of the competition law rules or the lack thereof.[9]
In Hungarian law "fault" means that the person who caused damage did not act in a manner that can be generally expected in the given situation. Thus, the concept of fault is somewhat generalized, which means that the test is not subjective, but rather it is independent from the person who causes damage, which leads to a kind of objectiveness. The courts decide on whether this condition is satisfied in each an every case. Generally speaking, it is rather difficult for the person who caused damage to exempt himself from civil law liability once all the other criteria of liability are proven by the plaintiff.
Hungarian law provides the following basic rules on the forms of compensation. The person responsible for the damage shall be liable for restoring the original state, or if this is not possible or if the aggrieved party refuses restoration for a justified reason, he shall indemnify the aggrieved party for material and non-material damage. Damage shall be indemnified for in cash, unless compensation in kind is justified by the circumstances. An annuity can also be awarded as indemnification. As a general principle, an annuity shall be awarded if indemnification is designed to support or assist in the support of the aggrieved person or those of his relatives entitled to be supported by him.[10] If the amount of damage cannot be precisely calculated, even if only in part, the person responsible for causing the damage can be compelled by a court to pay a general indemnification that would be sufficient for providing the aggrieved person with full financial compensation.[11]
There are no specific procedural rules on the competence of the civil law courts hearing actions for damages let alone on the competence of civil law courts to hear actions for damages on the basis of violation of the competition law rules on cartels and abuse of dominant position.
Furthermore, there are no specialized courts or sections of courts to hear actions for damages on the basis of a breach of the competition law rules on cartels and abuse of dominant position. These cases are heard by the regular civil courts.
The competence of the regular civil courts to hear actions for damages depends on the case-value of the damage suffered by the plaintiff. Actions for damages having a case-value up to five million HUF (one euro buys 260 HUF) fall within the competence of the local courts, while actions having a case-value over five million HUF fall within the competence of county courts or the Metropolitan Court. Appeals against judgments of the local courts are heard by the county courts or the Metropolitan Court, while appeals from the county courts or the Metropolitan Court are heard by the courts of appeal. The only available legal remedy against final and legally binding judgments of the second instance courts is an extraordinary judicial review, which is only available for a violation of law. Extraordinary judicial review cases are heard exclusively by the Supreme Court of the Republic of Hungary. Actions for damages shall be launched before the court that has jurisdiction over the registered seat of the defendant. Alternatively, actions for damages may be started by the plaintiff before the court that has jurisdiction over the place where the damage was caused or the place where the damage occurred.[12]
It should be noted in the outset that, according to our information, there has been no private action for the enforcement of antitrust rules in Hungary, neither as a stand-alone, nor as a follow-on action. Therefore, although the legal possibility of such actions is given, any assessment of the current situation in Hungary is rather theoretical in the absence of any practical experience.[13]
2. legal system
2.1 Access to courts
· What are the legal requirements for bringing an action for damages?
An action for damages in connection with the breach of competition rules can be brought pursuant to the general rules of civil procedure.[14] Any natural or legal person of full capacity can sue or be sued in court.[15] A foreign natural or legal person may also initiate a lawsuit before a Hungarian court (see Point 4 below). However, a plaintiff can only enforce its claim in a lawsuit if it has standing. A plaintiff has standing if (i) its rights or interests are affected by the legal dispute that is the subject-matter of the lawsuit; or (ii) it is authorized to bring an action by law (e.g. a public prosecutor). Accordingly, a claim for damages can be brought by the person who suffered damage.
· Are collective actions available in your jurisdiction? Is the current system satisfactory? Should the possibility to bring class actions be introduced/developed? What about other types of collective actions (consumer associations, other)? Are you in favour of an "opt-in" system (action brought on behalf of identified victims) or an "opt-out" system (actions brought on behalf of non individually identified victims)?
Certain types of collective actions[16] are available in Hungary. However, only one of them, the joint action, may end in the awarding of damages in an antitrust case. Two or more plaintiffs may initiate a joint action if (i) the subject-matter of the lawsuit is a joint right or obligation that can be judged only uniformly, or if the judgment would affect the joint plaintiffs irrespective of one of the plaintiffs' absence from the procedure; (ii) the plaintiffs' claims are based on the same legal relationship; or (iii) the plaintiffs' claims have similar legal and factual bases and the same court has jurisdiction for all defendants.[17]
There is one type of public interest action that can be used, inter alia, in connection with the breach of competition laws. Pursuant to Section 92 of the Competition Act, a consumer protection organization, the Competition Office or an economic chamber may bring a civil law claim on behalf of consumers against anyone who harms a large number of consumers or causes significant harm to consumers as a result of an activity violating an act of parliament. The Competition Office may bring such an action only if the case falls within its competence and it has already established a breach of the Competition Act which, in our view, can be a cartel or dominant position case. This action can be brought on behalf of both identified and unidentified consumers. The statutory limitation period is one year from the date of the breach. The court can oblige the infringing person to lower the price, to repair or replace the product, or to refund the price. Further, the court can empower the plaintiff to publish the court's judgment in a national daily newspaper at the infringer's cost. The infringing person shall perform its court-ordered obligations vis-á-vis each consumer in accordance with the terms of the judgment. The consumers can assert related civil law claims (e.g. claim for damages) in a separate lawsuit. We must note that, to date, the Competition Office has not brought an action under these rules.