Hungary to make major changes to legal costs in Hungary: what you need to know

Starting in 2025, Hungary will implement comprehensive reforms to its legal cost structure, reshaping both court fees and lawyers’ fees in significant ways. These changes, set out in two separate pieces of legislation, will modernise the legal framework, ensure fairness, and better reflect the complexity of legal proceedings. The following article breakdowns the relevant changes and their implications for litigants and businesses.

New Rules for lawyers’ Fees

A recently promulgated ministerial decree that comes into effect on 8 February 2025 will replace the obsolete legislation currently regulating the reimbursement of legal costs and introduce revised guidelines for calculating lawyers’ fees in civil and administrative litigation, while also limiting the courts’ authority to depart form client-attorney fee arrangements and reduce excessive charges.

Under the new decree, lawyers’ fees will continue to be determined either through contractual agreements or by applying a flat-rate scale based on the value of the case or the attorney’s time investment when no exact case value may be determined. The decree establishes the following tiered system for determining fees:

For cases where the claimed value cannot be determined, fees will be calculated on an hourly basis, with at least twice the hourly rate set by the Act on the Central Budget. This change doubles the current hourly rate under the old regime. 

An important new provision of the decree requires courts to calculate lawyers’ fees separately for each stage of the procedure, such as appeals or extraordinary reviews. For appeals and extraordinary review cases, the fees will be based on the contested amount as specified in the appeal or in the in the motion for review. Notably, the new regulation eliminates the earlier rule that halved fees for appeal cases, recognising that these cases often demand greater legal effort and time investment.

The decree also introduces stricter rules for reducing attorney fees. While under the present rules courts have broad authority to reduce the lawyer fees to be paid by the losing party, the new legislation aims at restricting this authority. As of February 2025, courts may lower fees only if the other party raises an objection and proves that the fees are unnecessary, disproportionate, or unrelated to the enforced right. Fee reductions are capped at 50% unless the charges are deemed grossly excessive. Additionally, any reduction must be accompanied by detailed reasoning from the court. For fee arrangements involving foreign currency, fees must now be claimed in local currency (i.e. Hungarian forint or HUF).

These legislative measures aim to balance fair compensation for clients seeking legal assistance with protections against exorbitant costs, ensuring a more transparent and reasonable fee structure. This new legislative development seems to endorse the principles recently laid out by the Supreme Court that the winning party's legal fees must be paid in full by the losing party.

Revised Court Fees for First-Instance Proceedings

Changes to court fees in Hungary will take effect on 28 January 2025, before the decree comes into force on 8 February, under a separate set of reforms. These updates remove the cap on court fees in first-instance proceedings and introduce a progressive structure that scales fees according to the value of the claim.

Under the new rules, for claims between HUF 300,000 and HUF 10 million, fees will be reduced slightly relative to the old regime. Claims exceeding HUF 50 million, however, will incur significantly higher costs as demonstrated in the below table.

While this increase also impacts claims between HUF 250 million and HUF 500 million, its real effects can be felt in cases where the claim is valued above this threshold, which is typical for Hungarian commercial cases. The following table summarises the court fees owed for cases with significant values at stake.

The changes do not impact fees for appellate proceedings. Court fees for appeal proceedings remain capped at HUF 2.5 million while fees for review proceedings remain capped at HUF 3.5 million.

Arbitration becomes more viable and cost-effective

When contrasting court fees for litigating before the Hungarian courts with the slightly increased arbitration and registration fees of the Permanent Arbitration Court attached to the Hungarian Chamber of Commerce and Industry (applicable from 15 September 2024), real competition emerges between the fees applicable to the two types of dispute resolution.

For the purpose of comparison, the following table lists the arbitration fees applicable for proceedings before the Permanent Arbitration Court for identically valued claims.

As the table shows, arbitration before the Permanent Arbitration Court becomes a viable alternative to court litigation not just in terms of quality of service but also in terms of payable fees. This will only change if the Permanent Arbitration Court opts to increase its arbitration fees in response to increasing court fees.

Modifications of fees to proceedings should have five major ramifications.

1. Those seeking to litigate should submit their claims prior to 28 January 2025 to avoid increased court fees. This, however, may result in the judiciary becoming overwhelmed. It is worth noting that the early stages of court proceedings may take longer than previously.
2. The winner-take-all principle will apply: winning litigants may expect full reimbursement of their legal expenditures, while losing parties will need to put their hands deep in their pockets to cover the legal cost of their opponents.    
3. Arbitration will now become a realistic alternative to court litigation in terms of fees as well as other considerations such as quality of service.
4. In the long run, increased court fees will decrease the willingness of parties to litigate and open them to alternative dispute resolution mechanisms, such as mediation or negotiation. In the future, parties will likely be more reserved when quantifying the value of their claims, as the former cap on court fees often resulted in overly optimistic quantifications, which had no ramifications until the end of the proceedings when litigation fees had to be paid. Frivolously quantified claim valuations will now have an immediate cost at the beginning of the proceedings.   
5. Uncapped court fees could increase the volume of experimental cases, which are cases where the claimant initiates proceedings claiming an insignificant amount and only submits the real value of its claim once the court has acknowledged its legal title in a decision on a case’s merits. 

For more information on the changes to court fees and their potential impact on your business, reach out to your CMS client partner or contact these CMS experts.