On 13 May 2026, Bence Rajkai delivered a presentation at the conference entitled “Arbitration in a Changing World – The Hungarian Arbitration Act in Light of the 40th Anniversary of the UNCITRAL Model Law”, held at the Faculty of Law of the Károli Gáspár University of the Reformed Church in Hungary. A transcript of the presentation is published in Bulletin 2026/2.The English version of the manuscript is available to read below:
The Role of, and Potential for, Adjudication
– with Special Emphasis on FIDIC Dispute Resolution Mechanisms
by Bence Rajkai[1]
The meaning of alternative dispute resolution cannot be restricted to arbitration. There are many other types of out-of-court procedures that can help parties resolve their disputes. One of the most important of these are dispute adjudication boards, with DAAB (“Dispute Avoidance Adjudication Board) being the most familiar from FIDIC contracts.
An analysis of the role of, and the potential for, adjudication, i.e. dispute resolution by dispute boards, is a timely issue at present for several reasons. Firstly, the purpose of this conference is to examine changes in arbitration in the light of the UNCITRAL Model Law more than 40 years after its adoption; and the relationship between arbitration procedures and other alternative dispute resolution mechanisms, including the UNCITRAL’s model adjudication clause, certainly merits attention from this perspective. Secondly, the changes that are expected in the approach to legislative policy might also create an opportunity for the approximation of Hungarian construction law to Western European standards, with the wider application of FIDIC contracts and the complex dispute resolution mechanisms regulated by them playing an important role in that process.
All this has more than just theoretical significance. According to a survey taken by King’s College in 2024, dispute boards can significantly reduce the length and cost of disputes in construction projects. In cases where a DAAB actively contributed to the amicable resolution of a dispute, 45% of the disputes were completely resolved, and the scope of the dispute remained the same in only 14% of the cases; in all other cases, the dispute was resolved to some degree.[2] Respondents to the survey also reported that where the dispute adjudication procedure was concluded with a DAAB decision, the dispute was finally resolved in the overwhelming majority of the cases.[3]
It is highly likely that the same figures would also see an improvement in Hungary if construction disputes, which usually involve several complex issues, were resolved at least in part before they reach a court or arbitration procedure, and therefore these procedures could focus on the really contentious issues. However, before the potential benefits of FIDIC procedural rules and DAAB procedures can be realised in Hungary, several issues that are surrounded by legal uncertainties at present will have to be addressed.
One of the uncertain issues concerns the nature of FIDIC time limits. According to the FIDIC contracts, the failure to meet the time limit (28 days) for giving a notice of claim or a notice of dissatisfaction (NOD) with a decision by the Engineer or the DAAB may result in the forfeiture of the claim or the related rights.[4] Hungarian courts had to answer the question of whether these provisions can really be understood to result in a forfeiture of rights, and, if so understood, whether they can be considered valid. There have been several contradicting decisions in the matter.
In its judgment Gf. 20.288/2018/6, the Győr Board of Appeals ruled that the parties had the autonomy and were free to set a specific extra condition for the enforcement of a claim and to agree that the failure to meet that condition would result in a forfeiture of rights. Therefore, in the interpretation of the Győr Board of Appeals, the FIDIC time limits for making and enforcing claims are preclusive deadlines and are validly so under Hungarian law as well. On the other hand, the Arbitration Court expressly stated in case VB 14019 that it did not consider the 28-day FIDIC time limit a preclusive deadline. The arbitral judgment argued that if a contractual provision that excluded the application of a prescriptive period or set an unreasonably long one (e.g. 100 years) with effectively same consequence was invalid, then a time limit that was impossible to meet had to be invalid as well. It also argued that the failure to meet the time limit also could not result in forfeiture because the forfeiture of a claim would also render filing a lawsuit impossible, which in turn could not be validly excluded.[5] The arguments of the Arbitration Courts are certainly peculiar in the sense that by making them, the Court implied that the 28-day FIDIC deadline was impossible to meet in Hungary even though it is widely used in Europe and elsewhere across the world. Additionally, the legal consequence of forfeiture is, by definition, that the relevant right or claim will not be successfully enforceable in court. In my opinion, if this punitive sanction was deemed invalid under the Civil Code, it would not be expressly regulated in it.
My position is that the question of the legal nature of time limits will have to be definitively resolved before the FIDIC contracts can be applied with confidence in Hungary. My own interpretation is closer to that of the Győr Board of Appeals. If the parties believe that the 28-day time limit is too short to comply with or that forfeiture is too severe as a legal consequence, they can override these when they draft their contract.
Another key issue pertaining to the FIDIC regime concerns the nature and enforceability of DAAB decisions. To what extent arbitration courts can overrule DAAB decisions used to be contentious issue internationally as well. However, since Persero[6], both case law[7] and the legal literature have been mostly consistent in arguing that if the parties are dissatisfied with a DAAB decision, an arbitration court will have the power to review it in its entirety. On the other hand, if no NOD is given, the arbitration court will essentially only make a ruling on whether the DAAB decision was complied with (“compliance arbitration”), and if the court finds that it was not, this will make the decision indirectly enforceable as part of the arbitral judgment.
If a NOD is filed with respect to a DAAB decision, another question is whether the decision is enforceable before the arbitral award is made, in line with the FIDIC principle of “pay now, argue later”. There are marked differences in how this issue is seen in international case law and legal literature: some argue that DAAB decisions are enforceable in arbitration procedures as a kind of interim award or interim measure, while others believe that compliance arbitration is the adequate solution.[8]
My position is that the second option appears to be the most viable under Hungarian law. The 2024 UNCITRAL adjudication and compliance arbitration model clause can also serve as a guideline in this respect. Under the model clause, a separate procedure is launched to enforce a dispute board’s decision, where the arbitration court only examines compliance with such decision and if it finds non-compliance, it orders the relevant party to act in line with the decision. After, or even simultaneously with, such procedure, another arbitration procedure can be conducted to examine the merits of the case, where the arbitration court will not be bound by the dispute board’s decision.
In my view, FIDIC contracts and their sophisticated dispute resolution mechanisms can be deployed in the Hungarian regulatory environment without any problem. The uncertainties that still exist today in connection with certain issues will hopefully be resolved in the legal literature and by court practice. Until then, parties will have to create clear situations to avoid such dilemmas by the thoughtful drafting of their contracts.
[1] Attorney and a partner in CERHA HEMPEL Dezső & Partners, whose areas of specialisation include dispute resolution and construction law.
[2] Professor Renato Nazzini & Raquel Macedo Moreira, 2024 Dispute Boards International Survey: A Study on the Worldwide Use of Dispute Boards over the Past Six Years, King’s College, London, 2024, p. 50
[3] Ibid., p. 55
[4] See: FIDIC contracts, Sub-Clauses 3.7.5, 20.2.1 and 21.4.4.
[5] For a detailed discussion, see: Tamás Varga: A FIDIC 20.1. alcikkely szerinti igénybejelentési határidő jogi jellegének és a jogvitában lefolytatandó bizonyítási eljárás tárgyi hatókörének meghatározása a Választottbíróság ítélkezési gyakorlatában (Determination of the legal nature of the time limit for giving notices of claim under FIDIC Sub-Clause 20.1 and the scope of presenting evidence in a dispute in the light of the case law of the Arbitration Court), GJ, 2021/1, pp. 18-23
[6] PT Perusahaan Gas Negara (Persero) TBK v. CRW Joint Operation [2010] SGHC 202, and the Court of Appeal decision CRW Joint Operation v. PT Perusahaan Gas Negara (Persero) TBK [2011] SGCA 33
[7] In Hungary, see: judgment 1/2/2021 of the Arbitration Court of the Hungarian Chamber of Commerce and Industry.
[8] Professor Renato Nazzini & Raquel Macedo Moreira, ibid. p. 57
Author: dr. Rajkai Bence
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