On 11 July, the Government submitted to Parliament Hungary’s first Civil Code created in a democratic environment by a team of highly reputable experts. The Government submitted the text created by the Civil Law Codification Committee to Parliament effectively without change.

The Code will be of great symbolic significance also from a legislative point of view as it has finally reviewed the unclear and unsettled legal relationships under civil law that have been left unchanged since the change of regime and will replace the Civil Code that has been in force for more than 60 years. The political debate on the new Code may begin in the autumn session of Parliament, in the wake of which the draft now presented to Parliament may undergo several changes. The new Civil Code will enter into force one year after its promulgation.

Why do we need a new Civil Code?

The changes that have occurred in society, in particular, in the scenarios of family law, the development of the market economy based on private ownership and the resulting increased demand for the greater protection of consumers have induced changes of such significance in the area of relationships under private law that can only be effectively addressed via a comprehensive reform and the conception of a new Civil Code.

The Civil Code currently in force was created during the toughest years of communist dictatorship, between 1953 and 1959, entered into force in May 1960 and has undergone hundreds of amendments.

The new Civil Code will be able to provide valid and genuine answers to the economic and social changes that have occurred since the change of regime in 1989-1990.

The need for creating a new Civil Code was also recognised during former cycles of government; however, the legislative process came to a halt, while the draft approved in 2009 did not enter into force, based on the decision of the Constitutional Court, on account of the brevity of the available preparatory period. In 1998, the socialist Horn Government decided on the establishment of a codification committee chaired by academician Lajos Vékás, and a wide-ranging professional debate started in 2006 after half a decade of legislative wording. Shortly after this, however, a hasty process was induced that sacrificed professional criteria for short-term political benefits, and Lajos Vékás resigned his office. At the same time, the end-result was a bill, in conjunction with which the then governing majority submitted hundreds of proposed amendments, which would have been followed by a gradual entry into force; the first two volumes of the Civil Code would have entered into force sooner than the other three. Fortunately, the Constitutional Court barred this solution with reference to the principle of legal security.

The Government currently in office decided to create a new Civil Code shortly after its establishment, on 10 June 2011, requested the Civil Law Codification Editorial Committee headed by Professor Lajos Vékás to prepare the draft of the new Civil Code, and then appointed László Székely as ministerial commissioner for the coordination of this legislative work. By virtue of these measures, the Government closed a process that had been ongoing for 14 years as the government in office at the time adopted a decision on the necessity of codifying a new set of rules for civil law.

The committees and editorial boards creating the new code were comprised of the most reputable members of the legal profession; the Chair of the Civil Law Section of the Supreme Court, presidents of courts of appeal and prominent theoretical experts. The draft created by them was presented to a series of social consultations in February 2012. As a result of these, amendments were made to the text, however, these were not conceptual changes, while all comments made in the process were fully used. It was after these consultations that the Government placed the new Code on the agenda; the Government did not change the draft created by the team of reputable professionals and presented the bill to Parliament unchanged on 11 July.

The bill that has undergone high-level professional debates and social consultations in the past two years is based on wide-ranging comparative legal research and makes use of the theoretical experiences of judicial practice. It thereby lays the foundations for a code that is free from contradictions and provides assistance with the practical application of the rules of law.

Social model of the new Code

The social objectives pursued in Hungary since 1990 and the constitutional guarantees approved for their implementation are based on the social model widely approved in today’s advanced Europe, in particular, in the Member States of the European Union; in other words, on the model of the social market economy. The proposed bill itself intends to serve this very objective. It is based on the premise that, as part of the Civil Code, we must create the private law conditions for the market economy that is protected by the Constitution but features elements of social sensitivity. The bill primarily lays down a legal framework for proprietary relationships; at the same time, it is designed to provide adequate legal protection for the individual as well, and lays ample emphasis on the protection of personality, personal relations within the family and the personal rights of organisational entities.

After four decades of dictatorship and a dead-end-street economic and social regime, Hungary introduced the social model of the market economy based on the foundations of private property and free enterprise in 1990. Hungary’s Fundamental Law, too, reinforces this path of social development. The new social model demands the full acceptance of the private autonomy of proprietors and, above all, the full recognition and protection of private property. This guiding principle shines through the entire bill, including the detailed regulations (for instance, the norms for the acquisition of property). Naturally, this is accompanied by social commitments that necessarily lie with private property.

Another fundamental consequence of private autonomy is the acceptance of the principle of contractual freedom. The restriction of this pillar of private law is only justified inasmuch as and where it is essential in the interest of the requirement of social justness and is possible under the conditions of the freedom of competition on the market. The third pillar of private autonomy is the freedom of association. The proposed bill intends to serve the requirements of this pillar by virtue of the institutions of associations and corporations, based on the well-established models of rules under private law.

Integration of judicial practice and international experiences

One of the most important fundamental principles of codification was that what has proved to work should not be changed. In other words, legislators were not driven by the desire to implement reforms at any cost. In the last phase of the process of codification that went on for almost fifteen years, efforts were made to ensure that only justified changes should be implemented and that the new legislation should be based on solutions that have been tried and tested in real life and have been polished to perfection in decades of judicial practice.

The bill incorporates the results achieved in senior judicial practice in the application of the Civil Code currently in force that convey long-term, endurable messages, require itemised legal regulation and have ripened to the stage of codification, takes account of the fact that the reform of our civil law and our legislation are, in a number of areas, directly affected by EU legislation, and intends to integrate the endurable core of EU directives under private law, for instance, in contract law for consumer protection or company law. At the same time, it consciously does not attempt to incorporate the entire body of EU private law into the Code. The reason being that the regulations of EU Directives are overly articulated, casuistic and frequently changing in their nature and are not suitable in all their details for the attainment of the goals of codification planned for the long term. Therefore, the legislator has opted for the principle of discussing the detailed rules of the Directives in separate laws.

The bill does not favour a particular foreign model but makes ample use of the codification practices of other countries. The drafts prepared at the beginning of the 20th century mainly drew on the solutions of the Austrian and German codes, while the Private Law Bill of 1928 also relied on patterns from the Swiss ZGB (Zivilgesetzbuch). Hungarian private law has already made good use of the conclusions of these classical codes. Beyond any doubt, from among the more recent national codes, the Dutch code (Burgerlijk Wetboek) and the private law code of the Québec Province of Canada may be regarded as the most modern. For a number of reasons (in particular, the relationships to be regulated and the structure of the code itself), these codes may also have served as models for the Hungarian reform; however, they were not taken into consideration as regulatory models as regards the whole process of codification.

In addition to national codes, the Bill also draws on the results of international legislation. Above all, the Vienna Convention on International Sales Law, the UNIDROIT Principles (Principles of International Commercial Contracts, 2004), the European Principles (The Principles of European Contract Law, 1999, 2002) and the European model regulations created on the foundations of these (Draft Common Frame of Reference – hereinafter referred to as DCFR) offered examples that may, on occasion, have been worth embracing for the regulation of contract law. These sophisticated model proposals have earned professional acclaim world-wide and have a major impact on legislation and legal practice.

Reinforces legal security

The new Code reinforces legal security with more life-like rules, settles private law relationships between private individuals, business players and consumers and, thanks to the integration of the experiences of judicial practice, will be able to facilitate orientation for those applying the law and those who seek to find the applicable rules.

In harmony with the Chapter Freedom and Responsibility of the new Fundamental Law, the new Code provides a modern framework, in line with Hungary’s commitments towards the EU, for the settlement of day-to-day civil law relationships and is able to update the regulation under private law of personal and proprietary relations and issues concerning family law.
The new Civil Code reviews the statutory scheme of private law in force at present in a complex manner, incorporates the endurable achievements of senior judicial practice, conforms to Hungary’s EU and other international commitments and also has regard for the results of local and foreign academic works.

Its very structure is different from the code currently in force
The new Civil Code consists of 8 volumes. It is also different from the Civil Code currently in force in that its structure now also incorporates the provisions of family law and the legal rules governing business associations and legal entities, and consequently it now constitutes a truly comprehensive civil code. One of the greatest changes is the integration of the Companies Act into the code. The new proposed bill on the Civil Code has retained approximately one half of the current code, has updated and adjusted some one quarter and has fundamentally changed the provisions of or has introduced new contents in another quarter.

Scheme of fundamental principles of civil law to change

The introductory provisions cover a set of fundamental principles that govern the entire code. For instance, the principle of acting in good faith and fairness is a general principle, while the protection of the weak only features in family law as a fundamental principle. The revision of the fundamental principles and the adoption of a new approach contribute to the better transparency of the code in themselves.

(Ministry of Public Administration and Justice)