Arbitration clauses in the statutes of companies

According to both the new Civil Code and the old Act on Business Associations, arbitration clauses can be stipulated for corporate law disputes both in corporate statutes and in agreements of the parties involved in a dispute. It is worth examining whether these two different types of arbitration clauses are treated differently in the Hungarian and international court practice or not.

1. Arbitration clauses in corporate statutes

According to both the new Civil Code and the old Act on Business Associations, arbitration clauses can be stipulated for corporate law disputes in corporate statutes and in agreements of the parties involved in the dispute. Consequently, the legislator differentiates between arbitration clauses stipulated in corporate statutes and in the agreement of the parties concluded outside the scope of the statute.

Similarly to the Hungarian regime, the Austrian Code of Civil Procedure differentiates between the arbitration agreements in the classical sense and arbitration clauses stipulated in corporate statutes. The governing German practice differentiates between the classical arbitration agreements and the arbitration clauses stipulated in corporate statutes on the basis that the latter is considered as non-contractual.

2. Requirement of written form

In accordance with the above, the respective international legal commentary differentiates between the arbitration agreement and the arbitration clause stipulated in corporate statutes (“statutory arbitration clause”). The practical importance of the differentiation lays in the requirement of written form.

Both the Austrian and the majority German standpoint is that the corporate statute is a normative document which is governed by corporate law, in connection with which the basic principles of civil contract law do not apply. Therefore the arbitration clauses stipulated in corporate statutes do not qualify as the ordinary agreement of the parties in the classical sense. It is sufficient to refer to the scenario in which the supreme body of a company modifies its statute with a majority of the votes. If the modification is lawful, it does bind the shareholder who voted to the contrary. It might be the logical consequence of this standpoint that the arbitration clause stipulated in the statute is valid even if it is not signed by each member.

This means in practice that, if a new member acquires ownership in the company, then the arbitration clause stipulated in the statute will apply even if the new member does not sign the statute. This is an important question, because the corporate law does not require the new member to sign the statute and so therefore such a scenario happens fairly often.

Nowadays, national courts should more often face this question of whether the arbitration clause stipulated in a statute binds such a member of the company who in a certain way necessarily accepted the terms of the statute, but did not sign it. The latter can happen either because the signing of the statute was not a precondition of acquiring ownership in the company, or because as a minority member they were not willing to accept the modification containing the arbitration clause which would now form a part of the statute.

The German, Swiss and Austrian – not necessarily united – court practice tends to accept that, while in the case of company types where the company unites capital (such as limited liability companies or companies limited by shares), the entering member, by accepting the statute – irrespective of the fact of whether they sign the statute or not – also accepts the arbitration clause, in the case of company types which unite partners – where the basic corporate principles, such as the principal of consensus, apply – the arbitration clause should be accepted in writing.

3. The Hungarian court practice

In Hungarian court practice the Metropolitan Court had to decide the above matter in the case No. 11.G.42.110/2010/21.

In its decision the Metropolitan Court adopted the standpoint that, although the Companies Act and the Company Registration Act provides the possibility that not all of the members of a company actual need to sign the statute or the modified statute of a company, such a regulation does not apply to the arbitration clause stipulated in a statute because it is a separate agreement in connection with which the Act on Arbitration and the Civil Code provides for specific formal requirements. Pursuant to the above, according to the standpoint of the Metropolitan Court an arbitration clause is only valid among the members of a company if there is a document – typically containing the arbitration clause – which is signed by each member. Consequently, in those cases where the member does not sign the statute, the arbitration agreement will not be valid, irrespective of the fact that – even in the lack of signing – all other provisions of the statute will bind the member.

The dual nature of arbitration clauses, namely that arbitration agreements and arbitration clauses stipulated in statutes need to be differentiated, as provided for in both the current wording of the New Civil Code and the wording of the old Companies Act. is therefore not mirrored in the decision of the Metropolitan Court.

4. Criticism of the decision

In our view, in the case of both limited liability companies and companies limited by shares, the member acquiring shares in the company acknowledges that the statute of the given company is binding, either by giving a written declaration in the course of the company registration procedure or by requesting to be registered into the share registry in order to be able to exercise shareholder rights.

Hungarian courts – as opposed to the more open approach of Austrian, German and Swiss courts – require the signature of the arbitration clause stipulated in a corporate statute in each and every case, irrespective of the fact of whether the member acknowledged the binding nature of the statute or not. We hope that in the course of the currently ongoing codification of the Hungarian Civil Procedure Code, the legislator will grant the necessary attention to solve this matter as well.

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