Arbitration International, 2016, 32, 287–295

doi: 10.1093/arbint/aiv052
Advance Access Publication Date: 21 October 2015
Recent Developments

Arbitration in standardized consumer

contracts: a Hungarian perspective in a
European context
Csongor István Nagy*
ABSTRACT
This article analyses, through the prism of the Hungarian Supreme Court’s recent deci-
sion, the treatment of arbitration clauses in standardized consumer contracts under
European unfair terms legislation. After examining the focal points of the Unfair
Terms Directive and the national models of implementation, Hungarian law and the
Hungarian Supreme Court’s decision is presented and examined. The article ends with
the assessment of the decision.

1. INTRODUCTION
The compliance of arbitration clauses with Directive 93/13/EEC on unfair terms in con-
sumer contracts (Unfair Terms Directive) has been controversial long since.
Nonetheless, courts have normally been hostile towards such standard terms.1 Although,
legally speaking, the unfairness of the standard term does not make consumer matters
non-arbitrable (since the foregoing regime applies to contractual terms that have ‘not
been individually negotiated’2), as a matter-of-practice, such an approach significantly
abates the feasibility of this dispute settlement mechanism, taking into account the
widespread use of standardized consumer contracts. The Hungarian Supreme Court’s
decision3 adopted in October 2013 enters this row of rather hostile jurisprudence.

* Csongor István Nagy, PhD, LLM, SJD, dr juris, Associate Professor and Head of the Department of
Private International Law at the University of Szeged, leader of the Federal Markets ‘Momentum’
(‘Lendület’) Research Group at the Centre for Social Sciences of the Hungarian Academy of Sciences, at-
torney-at-law admitted to the Budapest Bar, visiting professor at the Sapientia University of Transylvania
and at the Riga Graduate School of Law. Email: nagycs@juris.u-szeged.hu
The author is indebted to Professor Tibor Várady, university professor at the Central European University
in Budapest/New York and professor emeritus at the Emory University in Atlanta, for his invaluable help
and comments on the earlier draft of this article. Of course, all views and any errors remain the author’s
own. This article was written with the generous support of the Hungarian Scientific Research Fund, within
the frame of the OTKA PD-101612 research program.
1 See, eg, the Spanish court’s approach in Case C-168/05 Elisa Maria Mostaza Claro v Centro Movil
Milenium SL [2006] ECR I-10421, para 21; Mylcrist Builders Ltd v Mrs G Buck [2008] EWHC 2172.
2 Art 3 of the Unfair Terms Directive.
3 Civil law unification decision no 3/2013 on the unfairness of arbitration clauses based on a general con-
tractual term or individually not negotiated term in consumer contracts.

C The Author 2015. Published by Oxford University Press on behalf of the London Court of International Arbitration.
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288  Arbitration in standardized consumer contracts

In the following, after a brief analysis of the focal points of the European (EU and
national) and Hungarian regulatory background of arbitration clauses in standard
terms, the Hungarian Supreme Court’s decision will be presented and examined. It
will be demonstrated that the Supreme Court has taken a particularly restrictive
stance, when it considered stipulations of arbitration in standard terms of consumer
contracts to be automatically invalid; it has to be added, however, that this nullity is
limping: only the consumer can refer to the invalidity of the arbitration clause. Albeit
that the Supreme Court’s decision may appear to be robust and to have counter-
productive effects through thwarting the effective use of binding consumer-friendly
dispute resolution mechanisms as well, the concept of limping invalidity may some-
what soften this concern. It is argued that under the Unfair Terms Directive (and its
implementing national legislation) only compulsory (exclusive) arbitration should be
treated as unfair, covenants stipulating non-exclusive arbitral jurisdiction should qual-
ify as fair; and this is, in fact, what the Supreme Court and the subsequently adopted
new Civil Code did: they regard exclusive arbitration as invalid, provided the con-
sumer so wishes.

2 . A R B I T R A T I O N CL A U S E S I N S T A N D A R D I Z E D CO NS U ME R
C O N T R A C T S I N EU R O P E: H A R M O N I Z A T I O N WI T H D I VE R SE
I M PL EM EN TAT IO NS
The Unfair Terms Directive pronounces all standard terms (ie contractual terms
which have not been individually negotiated) to be unfair ‘if, contrary to the require-
ment of good faith, [they cause] [ . . . ] a significant imbalance in the parties’ rights
and obligations arising under the contract, to the detriment of the consumer’.4
Section 1 of the Directive’s Annex contains an illustrative list of unfair terms.
This, in Section 1(q), contains a specific provision on arbitration, regarding the fol-
lowing as unfair: ‘excluding or hindering the consumer’s right to take legal action or
exercise any other legal remedy, particularly by requiring the consumer to take dis-
putes exclusively to arbitration not covered by legal provisions.’
It is to be stressed that while the general prohibition of unfair terms (embedded
in Article 3) is evidently binding on Member States, the illustrative list is only indica-
tive; according to Article 3(3) of the Unfair Terms Directive, Section 1 of the Annex
‘contain[s] an indicative and non-exhaustive list of the terms which may be regarded
as unfair’ (emphasis added).
This was confirmed by the CJEU in Sebestyén, where the CJEU held that it is for
the national court concerned to establish whether an exclusive arbitration clause is,
having regard to all circumstances of the conclusion of the contract, to be regarded
as unfair under Articles 3(1) and 3(3) of the Unfair Terms Directive and Section
1(q) of its Annex. Accordingly, exclusive arbitration is not outright prohibited by
Section 1(q) of the Annex.5
If having a closer look at Section 1(q) of the Annex, it can be seen that while it
does pronounce one type of arbitration (‘arbitration not covered by legal provisions’)
to be unfair, this is done through the use of the term ‘particularly’, so national law is

4 art 3.
5 Case C-342/13 Katalin Sebestyén v Zsolt Csaba Ko†vári and Others, not yet published.
 Arbitration in standardized consumer contracts  289

completely free to pronounce also other modalities of arbitration to be unfair, if they

have the object or effect of ‘excluding or hindering the consumer’s right to take legal
action or exercise any other legal remedy’. Accordingly, Section 1(q) of the Annex
does not restrict national legislators (and courts) in treating also arbitration covered
by legal provisions as unfair.
It is submitted that the phrase ‘arbitration not covered by legal provisions’ appears
to be clearly referring to ex aequo et bono arbitration, where arbitrators are em-
powered to step out of the sphere of law and to decide the case arbitrarily, free from
the strings of the law. Namely, other types of arbitration are ‘covered by legal provi-
sions’ both in terms of substantive law and procedure.6 According to this interpreta-
tion, ‘ordinary’ arbitration would not be regarded as particularly unfair; however, the
stipulation of arbitration may still qualify as ‘excluding or hindering the consumer’s
right to take legal action or exercise any other legal remedy’ under Section 1(q) of
the Annex or as unfair under the general rule embedded in Article 3 of the Directive.
It is to be noted that the interpretation of ‘arbitration not covered by legal provi-
sions’ has remained highly uncertain. By way of example, the English High Court of
Justice, in Mylcrist Builders Ltd v Mrs G Buck,7 established, as to English implement-
ing provisions, that this ‘phrase would apply to a case where, for instance, there is a
statutory arbitration requirement. It does not apply to arbitration generally’.8 In
other words: in the absence of specific provisions, standard arbitration is, in itself, ‘ar-
bitration not covered by legal provisions’.9 An alternative interpretation could be the
disapproval of ad hoc arbitration10 or of cases where the parties excluded judicial
control.11
The spectrum of national implementation patterns as to the (un)fairness of the
stipulation of arbitration in standard consumer contracts is wide.
On the one edge of the spectrum are Member States that outright prohibit exclu-
sive arbitration in standard consumer contracts. These Member States overstepped
the anomaly of what ‘arbitration not covered by legal provisions’ may mean and
black-listed all exclusive arbitration not only ‘arbitration not covered by legal provi-
sions’. This is the case in Austria12 and in Hungary after the entry into force of the

6 See Lajos Wallacher, ‘A választottbı́rósági kikötés tisztességtelensége fogyasztói szerzo†désekben’ (2014)

14(3) Európai Jog 10, 12.
7 [2008] EWHC 2172.
8 Para 54. Citing Zealander & Zealander v. Laing Homes [2000] TCLR 724, at 729.
9 See Richard G Lawson (ed), Exclusion Clauses and Unfair Contract Terms (Sweet & Maxwell, London
2011) 307.
10 Arnold Vahrenweld, Out-of-Court Dispute Settlement Systems for E-commerce, Report on Legal Issues, Part
IV: Arbitration, 31 October 2000, <https://tbplaw.com/data/part4.pdf>, 105 (‘The enforceability of ad
hoc consumer arbitration clauses appears thus doubtful, unless the arbitration agreement provided for the
application of adequate procedural rules.’)
11 Guenter Treitel, The Law of Contract (11th edn, Sweet & Maxwell, London 2003) 274; David Collins,
‘Compulsory Arbitration Clauses in Domestic and International Consumer Contracts’ (2008) 19(2)
King’s Law Journal 335, 342–343.
12 s 6(2)(7) of Bundesgesetz vom 8. März 1979, mit dem Bestimmungen zum Schutz der Verbraucher
getroffen werden (Konsumentenschutzgesetz—KSchG) (‘Sofern der Unternehmer nicht beweist, daß sie
im einzelnen ausgehandelt worden sind, gilt das gleiche auch für Vertragsbestimmungen, nach denen ein
Rechtsstreit zwischen dem Unternehmer und dem Verbraucher durch einen oder mehrere Schiedsrichter
entschieden werden soll.’)
290  Arbitration in standardized consumer contracts

new Civil Code.13 As demonstrated below, the Hungarian judicial practice tops this
with the notion that all arbitration is exclusive. This stricter approach seems not to
be contrary to the Unfair Terms Directive, since the latter envisages merely mini-
mum harmonization and Member States are free to adopt more protective rules for
the interest of the consumers.14 Furthermore, it is to be noted that in Hungarian law
the invalidity due to unfairness is limping: only the consumer can refer to the invalid-
ity of the standard term.
The middle of the spectrum accommodates the case-by-case approach, peculiar to
English and French law. Under the English Arbitration Act, the stipulation of arbitra-
tion is unfair ‘so far as it relates to a claim for a pecuniary remedy which does not ex-
ceed’ GBP 5000.15 Beyond this sum, English courts examine on a case-by-case basis
whether the stipulation of arbitration is unfair.16 Under French law, exclusive arbitra-
tion clauses are presumed to be unfair; however, this presumption is rebuttable.17
The other edge of the spectrum could be considered to be the German approach.
The German Supreme Court (Bundesgerichtshof) has consistently held that the stipu-
lation of arbitration in a consumer contract is, as such, not an unfair term and is, in
itself, not invalid, since it entails no disproportionate detriment to the consumer.18
Nonetheless, German jurisprudence is much more protective for consumers than it
may appear at first sight. Namely, German law contains very stringent formal rules,
ensuring that arbitration agreements do not go unnoticed in consumer contracts.
Section 1031(3) of the German Code on Civil Procedure (Zivilprozessordnung) pro-
vides that for an arbitration agreement to be valid, the deed carrying the agreement
must be signed by both parties and can contain solely terms related to arbitration.19
The presence of the foregoing formal requirement may have had a considerable im-
pact on the way the Bundesgerichtshof interpreted unfairness.
Section 1(q) of the Annex black-lists only compulsory arbitration, that is, all sorts
of arbitration fall out of the scope of the black-list, if the consumer fully retains his
right to submit his case to the court and arbitration remains parallel to judicial pro-
ceedings. Of course, as noted above, an arbitration clause not caught in the net of
Section 1(q) of the Annex may still fall foul of Article 3 of the Unfair Terms
Directive.

13 Act V of 2013 on the Civil Code.

14 art 8 (‘Member States may adopt or retain the most stringent provisions compatible with the Treaty in
the area covered by this Directive, to ensure a maximum degree of protection for the consumer.’)
15 s 91 of the (English) Arbitration Act 1996; The Unfair Arbitration Agreements (Specified Amount)
Order 1999.
16 Mylcrist Builders Ltd v Mrs G Buck [2008] EWHC 2172.
17 art L132-1 and art R132-2 of the Consumer Code (Code de la Consommation) (‘Dans les contrats conclus
entre des professionnels et des non-professionnels ou des consommateurs, sont présumées abusives au
sens des dispositions du premier et du deuxième alinéas de l’article L. 132-1, sauf au professionnel à rap-
porter la preuve contraire, les clauses ayant pour objet ou pour effet de : 10 Supprimer ou entraver l’ex-
ercice d’actions en justice ou des voies de recours par le consommateur, notamment en obligeant le
consommateur à saisir exclusivement une juridiction d’arbitrage non couverte par des dispositions légales
ou à passer exclusivement par un mode alternatif de règlement des litiges.’)
18 BGH, Urteil vom 01.03.2007, Az III ZR 164/06; BGH, Urteil vom 13.01.2005, Az III ZR 265/03.
19 See Jean-François Poudret and Sébastien Besson, Comparative Law of International Arbitration (Sweet &
Maxwell, London 2007) 106.
 Arbitration in standardized consumer contracts  291

Under Hungarian law, in line with the Unfair Terms Directive, a general contrac-
tual term and, in consumer contracts, an individually not negotiated term20 qualifies
as unfair if, contrary to the requirement of good faith and fairness, it establishes the
parties’ rights and obligations arising under the contract unilaterally and unjustifiedly
to the detriment of the other person.21
At the relevant time, Section 1(q) of the Annex was implemented in Section
1(1)(i) of Regulation 18/1999 on the terms qualifying as unfair in contracts con-
cluded with consumers, which provided that those terms that exclude or restrict the
consumer’s possibilities to enforce his claims are based on law or the parties’ agree-
ment have to be regarded as unfair, except, this possibility is, at the same time,
replaced with another dispute settlement mechanism established by the law. The
new Civil Code, effective as from 15 March 2014 (that is, after the adoption of the
Supreme Court’s decision), in Section 6:104(1)(i) maintained this provision but
with a slightly different language, providing that in contracts between a consumer
and an enterprise, the term qualifies as unfair if it excludes or restricts the consumer’s
possibilities to enforce his claims through a judicial or other legal way, in particular if,
unless this is provided by the law, it compels the consumer to use solely arbitration.
While the law effective at the time the Supreme Court’s ‘law unification decision’
was adopted was uncertain as to arbitration, the currently effective new Civil Code,
adopting the Supreme Court’s decision, expressly pronounces compulsory arbitration
to be unfair.

3 . T H E S U P R E M E C O U R T ’ S ‘L A W- UN I F IC A T I O N D E CI S IO N’
‘Law-unification decisions’ are an idiosyncratic institution of Hungarian procedural
law. This is one of the four statutorily regulated tools of the Supreme Court to ensure
the uniformity of the judicial practice. The Supreme Court may adopt ‘law-unification
decisions’ (jogegységi határozat), conduct an analysis on the judicial practice in conclu-
sively settled matters, publish rulings of principle (elvi bı́rósági határozat),22 and deci-
sions of principle (elvi bı́rósági döntés).23 Colleges may also opine on debated
questions of law-application; however, these college opinions are not binding.24
The ‘law-unification procedure’ (in Hungarian: jogegységi eljárás) is a special
mechanism aimed at ensuring the consistency and uniformity of the judicial practice;

20 The reason of this distinction is that under Hungarian law the prohibition of unfair terms, contrary to the
Unfair Terms Directive, covers all contracts, not only consumer contracts. The use of unfair general con-
tractual terms (standard terms) is generally prohibited, while the prohibition of unfair pre-determined
and individually not negotiated terms (which is a wider prohibition) applies only to consumer contracts.
Furthermore, as to specific issues, the law is more protective in respect of consumer contracts: while un-
fair terms in consumer contracts are automatically invalid (though one may refer to this invalidity only
for the interest of the consumer), unfair terms in non-consumer contracts are voidable.
21 s 6:102(1) of the new Civil Code, at the relevant time s 209(1) of the old Civil Code. See art 3(1) of the
Unfair Terms Directive.
22 Rulings of principle are Supreme Court judgments that are rendered in a matter that has a great social sig-
nificance or an outstanding significance from the perspective of the public interest and concern questions
of principle. Decisions of principle are lower court judgments that meet the foregoing requirements. s 31
of Act CLXI of 2011 on the organization and administration of courts.
23 s 25 of Act CLXI of 2011 on the organization and administration of courts.
24 s 27(1) of Act CLXI of 2011 on the organization and administration of courts.
292  Arbitration in standardized consumer contracts

at the end of the procedure a ‘law-unification decision’ (in Hungarian: ‘jogegységi

határozat’) is adopted.25 It is very important to note that these decisions are not
judgments in the sense that they do not adjudicate a particular matter; but they de-
cide on questions of legal interpretation. ‘Law-unification decisions’ are binding on
courts,26 albeit their scope does not cover the parties of the individual case that may
have given rise to the institution of the ‘law-unification procedure’.27
The ‘law-unification procedure’ on the unfairness of arbitration clauses in con-
sumer contracts was launched because the Supreme Court perceived that the judicial
practice of the high courts was contradictory.28 It is to be noted that, for procedural
reasons, these cases had never reached the Supreme Court: the Supreme Court de-
cides in a case if a plea for supervision (an extraordinary appeal limited to points of
law) is submitted, while in cases where the statement of claim is rejected without the
issuance of a summons or the proceeding is terminated because of the arbitration
clause, as required by Section 8(1) of the Arbitration Act, this extraordinary appeal is
not available.29
After a rather truncated analysis, the Hungarian Supreme Court held that arbitra-
tion clauses based on a general contractual term or individually not negotiated term
in consumer contracts are unfair and, hence, automatically invalid; the court has to
perceive the term’s invalidity ex officio; however, it can establish invalidity only if the
consumer, upon the court’s call, refers to this.
Due to the uncertain language of the then-effective Civil Code,30 the Supreme Court
relied on the Unfair Terms Directive and specifically on Section 1(q) of the Annex.
The Supreme Court held that the phrase ‘arbitration not covered by legal provi-
sions’ applies to arbitration in general;31 it can be inferred that to prove that the dis-
pute settlement mechanism is not covered by Section 1(q) of the Annex, special
circumstances have to be demonstrated, showing that the arbitration procedure is
subject to stringent legal strings. This construction was adopted32 and even amplified
by Section 6:104(1)(i) of the new Civil Code:33 the black-listing of compulsory arbi-
tration was maintained; however, the scope of the exception to this was highly nar-
rowed; while Section 1(q) of the Annex pulls arbitration ‘covered by legal provisions’
(whatever this phrase may mean) out of the black-list, 6:104(1)(i) of the new Civil
Code reserves this exception expressly to ‘arbitration prescribed by the law’ (that is,
to cases where the law confers mandatory jurisdiction on arbitrators).
So far so good: compulsory (exclusive) arbitration, in principle, qualifies as unfair,
though it can be demonstrated that the particular binding dispute settlement mecha-
nism is truly prescribed by the law.

25 ss 32–41 of Act CLXI of 2011 on the organization and administration of courts.

26 s 41 of Act CLXI of 2011 on the organization and administration of courts.
27 s 42(1) of Act CLXI of 2011 on the organization and administration of courts.
28 See Case published under no ÍH 2012.67. (Budapest Court of Appeal); Case Pf.I.20.398/2012/2 (Szeged
Court of Appeal); Case 57.Pf.637.436/2012/3 (Budapest Court).
29 s 270(2)-(3) of Act III of 1952 on Code on Civil Procedure. See Case published under no BH2012.97.
30 Act IV of 1959 on the Civil Code.
31 Similarly to the English High Court in Mylcrist Builders Ltd v Mrs G Buck [2008] EWHC 2172.
32 See Wallacher (n 6) 13.
33 See György Wellmann, ‘VI. Cı́m: Érvénytelenség’ in György Wellmann (ed), Az új Ptk. magyarázata V/
VI. Kötelmi jog – Elso† és Második Rész (HVG-Orac, Budapest 2013) 161–63.
 Arbitration in standardized consumer contracts  293

Nonetheless, the Supreme Court went further and established that all arbitration
agreements confer exclusive jurisdiction on arbitrators, that is, arbitration is necessar-
ily and inevitably exclusive. According to the Supreme Court’s interpretation: arbitra-
tion is, by virtue of Hungarian law, compulsorily exclusive, since, according to
Section 3(1) of the Hungarian Arbitration Act,34 arbitration replaces courts (‘Instead
of the court of law, disputes may be settled by way of arbitration’) and excludes the
ordinary judicial route by definition.
Although, at first glance, one might argue that the Court used a highly literal in-
terpretation, a closer look at Section 3(1) of the Hungarian Arbitration Act reveals
that the statutory language does not imply that arbitration agreements necessarily ex-
clude the judicial route; in other words: it is submitted that it is not the arbitration
agreement but the arbitration proceeding that replaces the judicial procedure. As a
corollary, the conclusion of the arbitration agreement does not exclude the judicial
route ex lege and in a mandatory manner, albeit it is obviously presumed that once
the parties agreed to arbitration, they also ousted courts from their jurisdiction.
However, the parties, by agreement, may consent to non-exclusive arbitration,
making arbitration and court procedures parallelly available (of course, under the
‘fork-in-the-road’ principle, grasped in legal language as lis pendens). This alternative
interpretation, submitted here, is in accord with the Brussels I Regulation’s35 rules
on choice-of-court agreements: although the chosen court’s jurisdiction is, in princi-
ple, exclusive, the parties are free to agree otherwise.36
The consequence of the above ruling is, as the Supreme Court summarized it,
that in consumer contracts arbitration can be stipulated only on the basis of individ-
ual negotiation and, in line with the CJEU’s judicial practice,37 courts have to inquire
ex officio whether a term is unfair or not. However, it is to be noted that the invalidity
entailed by the unfairness of the term is limping: only the consumer can refer to it;
hence, if arbitration is in the consumer’s interest (ie the consumer considers it not to
be contrary to its interest), the arbitrator’s (arbitral tribunal’s) jurisdiction persists.

4. ASSESSMENT
The European landscape has been rather hostile to the use of arbitrations clauses in
standardized consumer contracts. In its ‘law-unification decision’ no 13/2013, the
Hungarian Supreme Court took a fairly stringent approach as to the (un)fairness of
arbitration clauses in standard consumer contracts; this jurisprudence was codified in
the new Civil Code.
First, the Hungarian Supreme Court held that all exclusive arbitration falls foul
of the Hungarian implementing provisions of the Unfair Terms Directive. This
approach was codified in the new Civil Code and, for the time being, this is the
statutory rule. Until this point, the Hungarian approach is neither unique, nor

34 Act LXXI of 1994 on arbitration.

35 Reg 44/2001 on jurisdiction and the recognition and enforcement of judgments in civil and commercial
matters
36 art 23.
37 Case C-168/05 Elisa Marı́a Mostaza Claro v Centro Móvil Milenium SL [2006] ECR I-10421, para 38; C-
243/08 Pannon GSM Zrt kontra Erzsébet Sustikné Gyo†rfi [2009] ECR I-4713, paras 31–32; C-137/08 VB
Pénzügyi Lı́zing Zrt kontra Ferenc Schneider [2010] ECR I-10847, para 49.
294  Arbitration in standardized consumer contracts

idiosyncratic (comparable, for instance, to Austrian law), although it is obviously

more restrictive than the French approach, which uses a presumption of unfair-
ness instead of a firm rule, and the English approach, which uses a case-by-case
approach.
Taking into account that consumer contracts are normally of a small pecuniary
value, the categorical exclusion appears to be preferable to the case-by-case approach.
In case of the enforcement of a claim, an important deterrence is that the creditor
does not want to throw good money after bad: the plaintiff’s investment in terms of
money and time may prove to be futile and lost. In case of small claims, this is even
more important, since here legal costs are comparably higher than in case of huge
claims.
Secondly, the Hungarian Supreme Court also held that all arbitration is, by defini-
tion, exclusive, thus extending the prohibition of ‘exclusive arbitration’ to all types of
arbitration (including cases where the consumer is entitled to have resort to arbitra-
tion in addition to the judicial route).
With this more stringent approach, Hungarian law goes farther than the Unfair
Terms Directive. Although a more stringent national approach is, in principle, not
contrary to the Directive (since, under Article 8, ‘Member States may adopt or retain
the most stringent provisions compatible with the Treaty in the area covered by this
Directive, to ensure a maximum degree of protection for the consumer’), the ‘over-
protection’ of consumers could entail counter-productive effects, because it may cast
a shadow also over consumer-friendly dispute settlement mechanisms.
Fortunately, this danger is, in a certain sense, counter-balanced by Hungarian
law’s rule that the (automatic) invalidity of the unfair term can be referred to only
for the interest of the consumer. The Supreme Court held that this implies that only
the consumer can refer to the (automatic) invalidity of the unfair term. This means
that if a dispute emerges the consumer will have the choice either to have resort to
courts, referring to the invalidity of the arbitration clause, or to submit the case to ar-
bitration, over-stepping the invalidity of the arbitration clause. In other words: the
flawed position that all arbitration is exclusive is counter-balanced by Hungarian
law’s concept of limping invalidity.
Nowadays, there are plentiful alternative dispute resolution mechanisms, which
are meant to create a more efficient and more expedient way for solving consumer
disputes. These normally include mediation services; however, in case of the parties’
acquiescence, the decision will be binding on the parties. In some industries, enter-
prises display the availability of alternative dispute resolution as a sign of reliability
and it seems that consumers prefer companies who are ready to settle their disputes
through an alternative mechanism, which is cheaper, faster, and less formal.
Conceptually, when enterprises acquiesce in such a binding alternative dispute
resolution mechanism, they stipulate arbitration. According to the Hungarian
Supreme Court’s ‘law-unification decision’ no 13/2013 and the subsequently
adopted provisions of the new Civil Code, the stipulation of such consumer-friendly
binding dispute settlement (that is, arbitration) mechanisms is unfair. The cause of
this rule is the Supreme Court’s flawed interpretation of the Hungarian Arbitration
Act, according to which arbitration is exclusive by definition, the parties cannot agree
to arbitration without fully excluding the jurisdiction of courts. It is submitted that
 Arbitration in standardized consumer contracts  295

the statutory language is far from compelling such an interpretation, and taking into
account that arbitration is based on party autonomy, it would have been a more rea-
sonable interpretation to leave to the parties’ discretion whether arbitration is exclu-
sive or facultative (of course, in the absence of a contrary agreement, it is to be
presumed that the parties agreed to the arbitrator’s or arbitral tribunal’s exclusive
jurisdiction).
As noted above, the flawed notion that all arbitration is exclusive (compulsory) is
somewhat counter-balanced by the concept of limping invalidity (that is, only the
consumer can refer to the unfair term’s nullity), so consumers are not prevented
from using consumer-friendly arbitration, if they please so.
Unfortunately, the concept of limping invalidity is not susceptible of fully correct-
ing the flaw of the notion that all arbitration is exclusive. On the one hand, in cases
where the consumer submits a claim against the enterprise, the concept of limping
invalidity seems to be a real panacea: although all arbitration agreements are invalid,
the consumer can avoid this nullity, if not referring to it. On the other hand, this rule
may open the door to abusive tactics, especially in cases where the enterprise submits
a claim against the consumer: the invalidity of the arbitration agreement is a usual
ground of setting aside the arbitration award; and the consumer, as established by
the CJEU in Elisa Marı́a Mostaza Claro v Centro Móvil Milenium,38 can refer to the
arbitration agreement’s invalidity due to unfairness also in case he failed to refer to
this during the arbitration proceeding. It is not easy to imagine a more perverse situa-
tion where the consumer can await the arbitral award with his decision on whether
he is willing to accept the arbitrator’s (arbitral tribunal’s) jurisdiction. And why
should enterprises be inclined to offer consumer-friendly arbitration, if through this
they expose themselves to the risk of such abusive tactics? This anomaly would be
mitigated, if the Supreme Court would not have regarded all arbitration as exclusive
(and, thus, as unfair) and would have held that although in case of an arbitration
agreement the derogation of the jurisdiction of state courts is presumed, the parties
can agree otherwise.

38 Case C-168/05 Elisa Marı́a Mostaza Claro v Centro Móvil Milenium SL [2006] ECR I-10421.
Copyright © 2016 The London Court of International Arbitration.