Bilateral Judicial Cooperation and Cross-Border Legal Disputes

Introduction

In an increasingly globalised economic environment, disputes arising from cross-border transactions, multinational corporate structures, and international family or succession matters require legal practitioners to navigate a complex web of bilateral and multilateral judicial cooperation instruments. Hungary, by virtue of its EU membership and its extensive network of bilateral treaties, occupies a distinctive position within this framework. This article examines the principal mechanisms of bilateral judicial cooperation—both criminal and civil—with a focus on practical implications for litigants, businesses, and legal advisers operating across borders.

The key legal instruments discussed include the relevant Mutual Legal Assistance (MLA) treaties to which Hungary is a party, the Brussels I bis Regulation (Regulation (EU) No 1215/2012) for civil and commercial matters within the EU, the Lugano Convention for EFTA states, and various bilateral agreements on judicial cooperation in criminal matters that Hungary has concluded with non-EU countries.

Bilateral Mutual Legal Assistance Treaties

The MLA Framework

Hungary is party to a substantial number of bilateral Mutual Legal Assistance treaties in criminal matters. These treaties govern the mechanisms by which one state may request the assistance of another in connection with criminal investigations and proceedings. The scope of MLA typically encompasses:

• Service of judicial documents abroad;
• Taking of witness statements and depositions;
• Search and seizure of evidence located in the requested state;
• Transfer of criminal proceedings in cases where the requesting state considers that prosecution would be more appropriately conducted by the requested state;
• Interception of communications and other investigative measures, subject to the constitutional and statutory limitations of the requested state;
• Confiscation and forfeiture of proceeds of crime.

Hungary’s MLA treaties with non-EU states—such as the agreements with the United States, the Republic of Korea, China, and various successor states of the former Soviet Union—each contain their own procedural rules, grounds for refusal, and dual-criminality requirements. Practitioners must therefore consult the specific treaty applicable to the relevant bilateral relationship rather than relying on generalised assumptions.

Cross-Border Evidence Gathering

One of the most frequently invoked aspects of bilateral judicial cooperation is cross-border evidence gathering. In criminal matters, the requesting state submits a formal letter rogatory (jogsegélykérelem) through diplomatic channels or, where the treaty so provides, directly between central authorities (in Hungary, typically the Ministry of Justice or the Prosecutor General’s office).

For civil and commercial matters within the EU, evidence gathering is governed by Regulation (EU) 2020/1783 on cooperation between the courts of the Member States in the taking of evidence in civil or commercial matters (the recast Evidence Regulation). This regulation facilitates direct communication between courts and provides for the use of videoconferencing for the taking of witness testimony.

Key practical considerations include:

• Language requirements: MLA requests must typically be accompanied by certified translations into the language of the requested state. Failure to comply with linguistic requirements is a frequent cause of delay;
• Admissibility of foreign evidence: Evidence obtained through MLA may be subject to admissibility challenges in the requesting state’s courts, particularly where the procedural rules of the requested state differ significantly from those of the requesting state;
• Data protection: The transfer of personal data in the context of MLA is subject to the General Data Protection Regulation (GDPR) for EU Member States and to the data protection provisions of the applicable bilateral treaty for non-EU states. Compliance with these provisions is particularly important where electronic evidence or digital communications data is involved.

Recognition and Enforcement of Foreign Judgments

Within the EU: Brussels I bis

Within the European Union, the recognition and enforcement of judgments in civil and commercial matters is governed by the Brussels I bis Regulation (Regulation (EU) No 1215/2012). Under this Regulation, a judgment rendered in one Member State is recognised in all other Member States without any special procedure being required (Article 36). Enforcement is equally straightforward: the judgment creditor must apply to the competent court in the Member State of enforcement and provide a copy of the judgment and the certificate issued pursuant to Article 53.

Grounds for non-recognition are narrowly defined and include:

• Manifest contravention of public policy (ordre public) of the Member State addressed;
• Default judgments where the defendant was not served in sufficient time to arrange for a defence;
• Irreconcilability with a judgment given in a dispute between the same parties in the Member State addressed;
• Violations of the exclusive jurisdiction rules of the Regulation or of the insurance, consumer, or employment jurisdiction rules.

Outside the EU: Bilateral Treaties and Reciprocity

The recognition and enforcement of judgments from non-EU states is considerably more complex. Hungary relies on a combination of bilateral treaties on legal assistance in civil matters and, where no treaty exists, on the principle of reciprocity as codified in Act XXVIII of 2017 on Private International Law (a nemzetközi magánjogról szóló 2017. évi XXVIII. törvény, “Nmjt.”).

Under the Nmjt., a foreign civil judgment may be recognised and enforced in Hungary if:

1. The court that rendered the judgment had jurisdiction under the rules applicable in the state of origin;
2. The judgment is final and enforceable under the law of the state of origin;
3. Recognition does not contravene Hungarian public policy;
4. Reciprocity exists between Hungary and the state of origin, or the applicable bilateral treaty provides for recognition.

Practitioners should note that the reciprocity requirement can be a significant obstacle, as Hungary does not maintain reciprocity with all states. Where recognition is refused, the only recourse may be to commence fresh proceedings in Hungary.

Asset Recovery and Confiscation

The Legal Framework

Asset recovery in cross-border cases involves a combination of criminal confiscation, civil forfeiture, and private enforcement mechanisms. Within the EU, the legal framework is provided by Directive 2014/42/EU on the freezing and confiscation of instrumentalities and proceeds of crime and by the relevant provisions of bilateral MLA treaties for non-EU states.

In Hungary, the Criminal Code (Büntető Törvénykönyv, Act C of 2012) provides for the confiscation of proceeds of crime (vagyonelkobzás) as a punitive measure. In addition, Act LIII of 2017 on the Prevention and Combating of Money Laundering and Terrorist Financing (Pmt.) establishes obligations on financial institutions and designated non-financial businesses and professions (DNFBPs) to report suspicious transactions, which may trigger asset-freezing measures.

Cross-Border Asset Tracing

Effective asset recovery requires the tracing of assets across multiple jurisdictions, which in turn depends on functioning judicial cooperation. Key tools include:

• Freezing orders issued by the requesting state and transmitted through MLA channels for execution in the requested state;
• European Investigation Orders (EIOs) within the EU, which provide a streamlined mechanism for the freezing and transfer of evidence, including financial records;
• Requests for banking information under bilateral MLA treaties, subject to the bank secrecy laws of the requested state;
• Asset declarations ordered by courts in the context of civil enforcement proceedings.

In practice, the effectiveness of cross-border asset recovery is often limited by the speed (or lack thereof) of MLA processing, the complexity of corporate structures used to obscure beneficial ownership, and the differing legal standards for freezing and confiscation in the requesting and requested states.

Defence Against Extradition

Where criminal charges are accompanied by an extradition request, the defence must act swiftly. Under Hungarian law, extradition to non-EU states is governed by Act XXXVIII of 1996 on International Legal Assistance in Criminal Matters (a nemzetközi bűnügyi jogsegélyről szóló 1996. évi XXXVIII. törvény) and by the applicable bilateral extradition treaty.

Grounds for refusing extradition include:

• The offence for which extradition is requested is a political offence or is connected with a political offence;
• There are substantial grounds for believing that the person would face a real risk of torture, inhuman or degrading treatment in the requesting state (in accordance with Article 3 ECHR);
• The offence is subject to a statute of limitations under Hungarian law;
• Double jeopardy (ne bis in idem): the person has already been finally convicted or acquitted of the same offence in Hungary or in another state;
• The person is a Hungarian citizen and Hungary is willing and able to prosecute the offence domestically.

AML Compliance for International Capital Transfers

Regulatory Framework

The fight against money laundering and terrorist financing has become a central pillar of international judicial cooperation. In Hungary, the principal legislation is Act LIII of 2017 on the Prevention and Combating of Money Laundering and Terrorist Financing (Pmt.), which transposes Directive (EU) 2015/849 (the Fourth Anti-Money Laundering Directive) and its subsequent amendments.

For large international capital transfers—whether in the context of investment, real estate transactions, or corporate restructurings—compliance with AML requirements is not merely a regulatory formality but a substantive condition for the lawful completion of the transaction. Key obligations include:

• Customer due diligence (CDD) by financial institutions, real estate agents, lawyers, and accountants involved in the transaction;
• Enhanced due diligence (EDD) for transactions involving politically exposed persons (PEPs), high-risk third countries, or unusually large or complex transactions;
• Suspicious transaction reporting (STR) to the Hungarian Financial Intelligence Unit (Pénzmosás és Terrorizmusfinanszírozás Elleni Iroda, “PEI”);
• Record-keeping obligations extending for a minimum of eight years after the termination of the business relationship.

Practical Implications for Cross-Border Transactions

In practice, AML compliance intersects with bilateral judicial cooperation in several ways. Financial institutions in Hungary may receive requests from foreign counterparts—or from foreign judicial authorities—for information relating to account holders or transaction histories. Responding to such requests requires careful consideration of:

• The legal basis for the disclosure (bilateral MLA treaty, EU regulation, or domestic law);
• The bank secrecy obligations under Hungarian law, which are not absolute but require a valid legal basis for disclosure;
• Data protection obligations under the GDPR, particularly where personal data of third parties is involved;
• The potential for tipping-off restrictions that prohibit the financial institution from informing the customer that a suspicious activity report has been filed or that an external request for information has been received.

Failure to comply with AML obligations can result in substantial administrative fines imposed by the Hungarian National Bank (Magyar Nemzeti Bank, “MNB”) as the competent supervisory authority, as well as criminal liability for individuals involved in facilitating money laundering.

Strategic Considerations for Practitioners

Choosing the Correct Forum

In cross-border civil disputes, the choice of forum can have a decisive impact on the outcome of the case. Practitioners should conduct a thorough jurisdictional analysis at the outset, considering the Brussels I bis Regulation (for intra-EU disputes), applicable bilateral treaties (for disputes involving non-EU states), and the Nmjt. (for residual cases not covered by treaties or EU instruments).

Parallel Proceedings and Lis Pendens

The risk of parallel proceedings in multiple jurisdictions is a recurring challenge in cross-border litigation. Within the EU, the lis pendens rules of the Brussels I bis Regulation (Articles 29–34) provide a mechanism for resolving conflicts, generally giving priority to the court first seised. Outside the EU, the absence of a uniform lis pendens regime requires careful case-by-case analysis.

Proactive Compliance

For businesses engaged in international trade and investment, proactive compliance with AML requirements and awareness of bilateral judicial cooperation mechanisms can significantly reduce legal risk. Regular compliance audits, staff training, and the appointment of a qualified compliance officer are essential components of a robust risk management framework.

Arbitration and Alternative Dispute Resolution

In many cross-border commercial disputes, the parties have agreed to resolve their differences through arbitration rather than litigation in national courts. Hungary is a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958), and Hungarian courts routinely recognise and enforce foreign arbitral awards subject to the limited grounds for refusal set out in Article V of the Convention.

The Hungarian Commercial Arbitration Court (Magyar Kereskedelmi és Iparkamara mellett szervezett Választottbíróság), attached to the Hungarian Chamber of Commerce and Industry, is the principal institutional arbitration body in Hungary. It administers both domestic and international arbitration proceedings under its own rules of procedure.

Where arbitration is not available, mediation is increasingly used in cross-border disputes, particularly in family law matters (under Regulation (EU) 2019/1111 on jurisdiction, recognition, and enforcement in matrimonial matters and parental responsibility) and in consumer disputes (under Directive 2013/11/EU on alternative dispute resolution for consumer disputes).

Service of Documents Abroad

The effective service of judicial or extrajudicial documents across borders is a foundational element of international civil procedure. Within the EU, service is governed by Regulation (EU) 2020/1784 on the service of documents (the recast Service Regulation), which provides for direct transmission between designated transmitting and receiving agencies in each Member State, with strict timelines and acknowledgement procedures.

For non-EU states, the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters (1965) provides the primary framework. Hungary is a party to this Convention and has designated the Ministry of Justice as the central authority for receiving requests for service from other Contracting States. In practice, service under the Hague Convention can be significantly slower than under the EU Service Regulation, and practitioners should factor this into their litigation timetables.

Conclusion

Bilateral judicial cooperation is the backbone of effective cross-border dispute resolution and law enforcement. Hungary’s extensive treaty network, combined with the EU’s harmonised frameworks for civil and criminal judicial cooperation, provides a comprehensive—if complex—set of tools for practitioners and their clients. Navigating this landscape requires specialised knowledge, meticulous attention to procedural detail, and an awareness of the practical limitations inherent in any system that depends on the cooperation of sovereign states.

Dr. Ildikó Nagy advises clients on cross-border litigation, international judicial cooperation, and AML compliance. For a consultation, please contact our office.