Following a landmark decision of the Hungarian Supreme Court (our article about the decision can be found here), the Hungarian legislator adopted a new decree, applicable from February 2025, on the attorney fees applicable in court proceedings. The main aim of the new regulation is to limit the unreasonable reductions of attorneys’ fees. What changes will the new decree bring to the attorney’s fees? 

Smartlegal Schmidt&Partners reports from Hungary:

1.Previous Decree

In Hungary, the determination of attorney’s fees awarded by the court holds significant importance, as the winning party’s legal costs are typically reimbursed by the losing party.

The previous regulation[1] (“Previous Decree”), adopted in 2003, outlines two methods for establishing attorney’s fees in litigation:

a. Contract-based fees: If the attorney and his client have agreed upon the fees in their contract, the court will take these stipulated amounts into account.

b. Decree-based fees: In the absence of a contractual agreement, fees, in general, are calculated based on the value of the claim, as defined by the Previous Decree.

To prevent excessive attorney’s fees, the Previous Decree authorizes courts to reduce both the contract-based and decree-based fees if they are deemed disproportionate to the services rendered. The Previous Decree lays down that the court shall give reasons for the reduction of the attorney’s fees.

Despite this safeguard, courts frequently reduce attorney’s fees, often providing only general justifications for their decisions.

2. The landmark decision[2] of the Hungarian Supreme Court on attorney’s fees

In its decision, the Hungarian Supreme Court defined the limits of the right to reduction which changed the previous judicial trend.

It laid down that the reduction of the attorney’s fees agreed in the contract is exceptional and must be interpreted narrowly. The amount of the hourly rate fee can only be reduced if it is obviously contrary to market conditions and common sense and is grossly exaggerated.

Furthermore, the court shall provide a detailed explanation of the circumstances justifying the disproportionateness of the requested attorney’s fee compared to the work performed. The explanation must be specific, therefore vague, general findings are not sufficient.

3. New Decree

The new regulation[3] (“New Decree”), which will enter into force in February 2025, in line with the Supreme Court’s decision, already includes in its preamble, that the reduction of the attorney’s fees shall be made only on the basis of the grounds laid down in the New Decree and on the basis of reasons specific to the circumstances of the case.

3.1. Decision on the attorney’s fees

According to the New Decree, the court may, based on only the request of one of the parties, reduce the amount of unnecessary or disproportionate attorney’s fees charged which are not related to the right asserted.

The court shall give detailed reasons for its decision, supported by a detailed analysis of the reasons why the fees charged are disproportionate to the work actually carried out by the attorney, taking into account the general costs included in the fees and the volume and specific characteristics of the work performed.

Moreover, the court may reduce the amount of contract-based attorney’s fees by more than 50% only if it is grossly excessive and contrary to market conditions or common sense.

Furthermore, the court shall not reduce the amount of the decree-based attorney’s fees to be awarded in litigation with a case value of less than HUF 10 million.

The court may, upon request and in justified cases, determine a higher amount for the decree-based fees. The court shall also give detailed reasons for its decision.

In addition, special rules apply to litigations over HUF 10 and 100 million. In these cases, the attorney’s fees may not be reduced to an amount less than half of the attorney’s fees that may be awarded, moreover, the awarded attorney’s fees shall reach the highest fee in the preceding category (e.g.: in case of a litigation over HUF 10 million, the attorney’s fees shall reach the highest fee in litigation under HUF 10 million).

3.2. Other changes

In comparison to the Previous Decree, the New Decree deletes the rule that in case of an appeal or judicial review procedure, only 50% of the first instance attorney’s fees can be awarded.

Finally, it is also important that the attorney’s fees shall be indicated in Hungarian forints.

4. Summary

Based on the above, the New Decree codifies the previous Hungarian Supreme Court decision and requires the court to give detailed reasons for any reduction of attorney’ fees.

In addition, a number of technical details have been set out which may impose limits on disproportionate restrictions on attorney’s fees.

Consequently, the legislator has put an end to the practice according to which the courts reduced the attorney’s fees on the basis of general grounds.

The New Decree is clearly a positive direction that may encourage disputing parties who are now afraid to litigate because of their concerns about the recovery of attorneys’ fees.

The article was written by dr. Péter Korózs.

SMARTLEGAL is a team of agile business & litigation lawyers in Budapest, Hungary, helping international corporate clients and individual entrepreneurs doing business in Hungary. For more information please visit our website at Smartlegal.hu

[1] IM Decree 32/2003 (VIII. 22.) on Attorney’s Fees in Judicial Proceedings
[2] Judicial decision published under No. Pfv.II.20.887/2023/6
[3] IM Decree 17/2024. (XII. 9.) on Attorney’s and Legal Counsels Fees in Judicial Proceedings