The precedent system makes a comeback in Hungary

One of the main distinctions usually drawn between existing legal systems is whether they belong to the civil or common law traditions. Still, a growing convergence between the two approaches has been noticed. Legal theorists point to the increasing role of case law in civil law systems on the one hand and the growing importance of statutes in common law jurisdictions on the other. Now Hungary is implementing a so-called "limited precedent system" – but how does this fit into the broader picture?

In civil law systems, the main source of law is statutory legislation. When deciding a case, the judge basically asks whether the situation before them falls under the abstract legal norm provided for in the statute. Particular problems are resolved by citing general rules, in a principally deductive fashion. Common law systems, by contrast, follow a basically inductive method: earlier judicial decisions function as primary authorities. In practice, the judge tries to discern the general idea of earlier case law to determine whether it can similarly be applied in the dispute before them If it can, the judge is principally bound to follow it. If, however, there is no controlling authority – because the earlier cases can be distinguished from the current one – the judge is free to "find" the law in the particular case themselves.

Still, the distinction between the two systems is less clear-cut than this general picture would suggest. For example, case law plays a huge role in German judicial practice, despite its civil code. By contrast, in the US, judge-made law is regularly summarised in systematic "Restatements", which can then function as authoritative (if unofficial) codifications of the law.

For its part, Hungarian jurisprudence, relied heavily on judge-made customary law up until the mid-20th century. The highest court, the Hungarian Royal Curia, was recognised as having limited legislative powers, as it could determine the direction of this case law. It was not until the Civil Code entered into force in 1960 that statute became the primary source of Hungarian civil court decisions.

In short: the idea of precedents is not entirely new to the Hungarian legal tradition.

The limited precedent system in Hungary

The core of the newly introduced limited precedent system is an apparently modest provision: It requires Hungarian courts to expressly consider in their judgments not only statutes but also the interpretation thereof adopted in published decisions by the country’s highest court, the Curia. The exact scope of these published decisions is defined by reference to the official database called Collection of Court Decisions, without specifying a time limit. However, considering that the highest court was renamed Curia in 2012, most commentators agree that only Curia decisions published since 2012 will have this authoritative force. These decisions will be precedents in the sense that lower courts will only be allowed to deviate from them if they expressly justify their reasons for doing so.

According to the official commentary to the legislation, reasons justifying deviation from precedents may include instances when "a new circumstance ... arises in the course of the assessment of the particular case which raises doubts about the applicability of the previous rule" or "new economic and political conditions come to light which make it impossible to apply the existing rule unchanged".

As noted by some commentators, these two grounds correspond to the two main rationales of departing from precedents known in common law jurisdictions: distinguishing based on different facts in the underlying cases, and overruling by virtue of socio-economic changes that have occurred since the precedent was established.

New source of law, new grounds for appeal

Under the new legislation, precedents can also serve as independent grounds for appellate review. Previously, the only permitted ground for appeal to the Curia against a binding second-instance judgment was the allegation of a "violation of statute". Now, parties may also cite deviation from a published decision of the Curia in their review application to the same Court.

If, as a result of its review, the Curia finds that the lower courts did indeed deviate from one of its precedents on a question of law, it can do two things. If it determines that there was no valid reason for the deviation, it may overturn the judgment to comply with the precedent. However, if it deems that the deviation was justified, it may initiate a "legal-unity review" procedure, in which an extended panel of the Curia determines "the binding interpretation" of the law.

What can an applicant do if their review application is dismissed by the Curia because the court does not find the precedent they believe should control to be applicable? Conversely, what can the respondent party in situations where the review application is granted and the lower judgment is overturned based on a precedent that they don't think is applicable? In these scenarios, the new legislation grants the parties standing to initiate a legal-unity review procedure themselves. This legal-unity review application is always decided by an extended panel of the Curia, which can dismiss it if it finds no deviation from an applicable precedent, or make a substantive ruling on it determining the binding interpretation of the law if it does.

Critical assessment

Critics say that the new legislation will lead to uncertainty in everyday practice. 

It's true that the scope of the new precedent system may appear sweeping rather than limited. The Collection of Court Decisions contains all final judgments that the Curia (and other Hungarian higher courts) have made on the merits of cases brought before them. The vast majority of these decisions (even if made by the Curia) have never been reported in edited form.  Although the reported ones may be presumed to constitute "leading" cases, the legislation does not assign them a higher degree of authority than unreported ones (indeed, one of the primary aims of the legislation was to abolish the difference in authority between reported and unreported cases).

This will make navigation in the sea of suddenly important precedents rather difficult – and the results often unpredictable. Theoretically, even a decision conforming to a well-known reported case may be challenged based on the holding of an obscure precedent dug up from the database if the facts of this latter case more closely match those of the matter before the court.

The other aspect of the criticism that seems warranted concerns the general availability of the legal-unity review procedure. Unhappy litigants will now have an additional avenue of appeal at their disposal, which can be filed against decisions of the country's highest court.

Although appeals such as these to an extended panel of the Curia may be justified in cases which turn on the interpretation of a precedent that divides the courts, the availability of this form of appeal is not restricted to such difficult cases. In practice, the legal-unity review application could also be used as a fourth attempt to re-argue a legal position that was rejected at all previous instances. Worse still, it could arguably be used to challenge a decision by the Curia granting a review application based on a precedent, on the ground that it contradicted another precedent raised for the first time in the legal-unity review application. In our view, such guerrilla tactics could hardly be reconciled with the principles of Hungarian Civil Procedure, which generally prohibit raising new legal arguments on appeal, but its possibility is left open by the text of the legislation.

Overall, however, the limited precedent system is not expected to pose an insoluble problem to Hungarian courts. According to recent studies, authoritative decisions of the Curia have already made up almost third of all judicial references. This means there has been a common practice among lower courts to cite Curia decisions in their judgments. The legal unity review is not a new instrument either, even though it was not directly available to private litigants. With some refinements – made either by the legislator or the legal practice – the limited precedent system could fit into the Hungarian judicial framework.

Moreover, the limited precedent system can be regarded as a welcome development in one important respect. The Hungarian courts' quality of reasoning has unfortunately not been on the same level as that of their common law counterparts. As Hungarian courts principally were bound only by statute and not by case law, they could dismiss arguments based on earlier similar cases with the simple justification that they "do not agree" and "the facts of the case are different" – without explaining  the difference and why it was significant. Under the new legislation, they will be forced to engage in a meaningful analysis of earlier cases cited by the parties – at least if they were made by the Curia. In light of this change, we expect Hungarian courts to provide more thorough and detailed reasoning, and an altogether higher degree of unity to Hungarian jurisprudence.