New Act on Private International Law

New Act on Private International Law

A new act on private international law was adopted by the Hungarian Parliament recently, which will replace the old regime as of 1 January 2018.

Although the new law is based on the old rules, there are some significant changes that could be relevant in all legal relationships having international elements. The examples below focus on questions relating to property and contracts:

• The applicable law relating to property will be defined based in accordance with the lex rei sitae rule, i.e. the applicable law is the law where the property is situated. The new law provides for the change of applicable law. If the property is transferred to a different country, the rights acquired earlier could be recognised in accordance with the law of this country.
• The law introduces new rules on the law applicable to in rem securities. If the proprietary security is created by registration, the law applicable to the security will be the law of the state where the registry is maintained. If no such registry exists, the applicable law will be law of the debtor. In case of reservation of title, as a general rule, the law applicable to the legal effects of such reservation is the law where the property is located. However, the parties are provided with a limited right to deviate from this rule. In case of payment accounts, bank deposits and securities on dematerialised securities, the applicable law is the law of the state where the registry or the account is maintained, or where the central depositor is found.
• The law further makes a choice of law possible in case of transfer of movables and transfer of businesses. In case of transfer of movables the parties may choose the lex rei sitae or the place of destination. In case of transfer of business the parties may choose the law of the seller for the proprietary effects of the transaction.

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