The Influence of Harmonisation of Private Law on the the Development of the Civil Law in Hungary

Author:András Kisfaludi
Position:Professor, Eötvös Loránd University

András Kisfaludi

Professor, Eötvös Loránd University

The Influence of Harmonisation of Private Law on the the Development of the Civil Law in Hungary

If we want to obtain an accurate picture of the present status of civil law in Hungary as a relatively new member state of the European Union, we should start with the history of the civil law. The historical background can explain to what extent civil law was adaptive at the time of the great economic and social changes of the end of the 1980s and into the early 1990s. The more adaptive a civil law regime was, the less urgent need for instant changes in the law occurred. From this point of view, Hungary was in quite a lucky situation: the old rules, with some modifications, could handle the market economy relationships. However, an overall reform of civil law became inevitable. The reasons for, and the process of, such a reform are described in Section 1.

In 2004, Hungary joined the European Union. As a part of the accession process, the Hungarian legal system was harmonised with the legislation of the EU, and as a member state Hungary develops its law in accordance with the European requirements. The footprints of the acquis communautaire are observable in the national private law legislation. In Section 2, a general overview of the impact of the European legislation on Hungarian civil law will be given, describing the role of the acquis communautaire in the process of private law reform.

Since the fall of the socialist regime, Hungary has had an open market economy whose legal infrastructure should have been adapted to the general trends in the legal developments of international trade. These trends are more or less reflected in those instruments aiming to harmonise, first of all, contract law. Section 3 of this paper deals with the impact of the Principles of European Contract Law (PECL), UNIDROIT Principles of International Commercial Contracts (UNIDROIT Principles), and Common Frame of Reference (CFR) on Hungarian private law legislation.

The main conclusions of the study will be summarised in Section 4.

1. The status of civil law reform

The basic source of private law in Hungary is Act IV of 1959. This act became the first civil code in the country, and until now it has been the only one. Before the civil code was developed, Hungarian civil law was judge-made law strongly influenced by legal customs, traditions, Austrian law, and various drafts of a civil code that were elaborated on from the middle of the 19th century onward. In 1848, the year of the Hungarian bourgeois revolution, the parliament ordered the government to prepare a draft civil code. It could not be a mere coincidence that a revolution aiming to replace a feudalistic regime with a more or less capitalistic social and economic order prompted the question of a civil code that could provide stable, uniform, and safe regulation of relationships under private law. It was an elementary interest of the bourgeois class to have a code that is applicable to everybody, irrespective of the origin of the parties, and to all types and pieces of property. Such a code was deemed to be a prerequisite for the safe turnover of goods and services, as well as for the development of flow of capital through credit institutions.

After the failure of the 1848 revolution, the independent Hungarian codification was struck off the agenda. However, as a consequence of the Hungarian compromise with Austria in 1867, the movement for the codification of Hungarian private law was resumed. From 1871, some partial drafts for a proposed civil code were prepared. Since it turned out that preparing an overall code comprising rules on commercial and non-commercial private law relationships takes a long time, it was decided that a separate commercial code is necessary for responding adequately to the needs of commercial life. The Hungarian Commercial Code was enacted in 1875. It contained regulations on commercial transactions and concerning merchants - including commercial companies - as subjects of such transactions.

However, non-commercial relationships remained unregulated. After the release of some partial drafts, the first consolidated draft for a civil code was completed by 1900. It was developed through a series of professional and political discussions, and new drafts were proposed. The last draft before World War II was dated 1928. Though this draft, too, was never adopted, it served almost as an effective code: the courts used it as a point of reference, and the scholarly literature analysed it thoroughly as a major source of Hungarian private law. This effect can be explained by the fact that the 1928 draft could reflect legal traditions and practice as broadly accepted and followed.

After World War II, Hungary became a part of the political zone influenced by the Soviet Union, and a political, economic, and social regime quite different from a political democracy based on the market economy began to be built. It could be deemed a contradiction that in such circumstances the preparation of a civil code came up again. What is such a code about if the goods are basically in state ownership, if the exchange of goods and services is administered by state agencies, and if state enterprises fulfil only state orders? In spite of the fact that under such conditions a civil code could play only a limited role, it was still needed for regulation of classical civil law institutions - such as property and contracts - which served as a formal framework for the state-organised economy. In addition, a civil code could have been applied also in those relationships where the property rights of individuals or organisations remained in their classical form. However, the domain of such relationships was highly restricted.

It is not a surprise that a civil code whose background is not a classical market economy cannot meet all of the requirements and show all of the typical features of classical codes. What is more surprising is that such a code could survive in the climate of the great economic and social changes that took place in Hungary from the end of the 1980s. How could it happen that a civil code that was in force under the socialist regime remained workable in market economy relationships as well? I think that the flexibility and adaptability of the code came as a compound result of the following factors. As a matter of course, the preparation of the civil code was influenced mainly by legal scholars who had been educated in the previous regime. They respected classical institutions and principles of civil law and tried to preserve them. In strong connection with this, the code was strongly influenced by the pre-WWII drafts, mainly by the 1928 draft. Since these earlier drafts were designed for a market economy, the main elements of such regulation permeated the new code. Finally, the Hungarian Civil Code was viable in spite of the fundamental economic and social changes because such changes did not come to Hungary in a vacuum, without any prior events, and these antecedents were reflected also in legal regulation. The most important factor was that the late 1970s saw a reform of the socialist economic system commence. While the old-fashioned socialist economic system was based on the direct and general decision-making power of state organs, the essence of the reform was to replace the state orders with limited market mechanisms. The state enterprises gained a certain level of independence; they were acknowledged as quasi-owners of the properties handled by them; consequently, they had some freedom and flexibility to enter into contractual relationships with each other. Instead of using direct orders to influence the economic sphere, the state relied on normative rules construing incentives for the enterprises. In order to reflect these changes in the Civil Code, the regulation went through an overall modification in 1977. As a result, Hungarian civil law reflected some characteristics of a market economy without the country having a real market. Later, when the state's planned economy was transformed into a market economy, the legal concepts and basic rules of the private law regulation were ready to handle the new relationships properly. Naturally, introduction of extensive amendments was inevitable, but in principle the Civil Code was able to accommodate such modifications. Therefore, it was not necessary to replace it instantly with a new code. Thus, Hungary could avoid such emergency solutions as reactivation of old laws from the pre-war era or transplantation of a foreign civil code.

Although the above-mentioned factors freed Hungary from the pressure of introducing a new civil code...

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