by John B. Tieder, Jr., Senior Partner

In 1956, when I was 10 years old, a young man lived at our house for several weeks while he studied English at a nearby college. My parents explained that he had been forced to leave his home country of Hungary and needed to learn English so that he could go to college in the United States. It was, of course, not until years later that I fully appreciated the 1956 Hungarian uprising, its brutal repression by the Russians and the diaspora of the revolutionaries. What I did understand at the time was that he was a very nice person, extremely cheerful for what seemed to my 10-year old mind (as well as my 60+ year old mind), a terrible thing, i.e., leaving your home, friends and parents forever. He cooked Hungarian meals for us, played Hungarian music, and even demonstrated with some of the other students, Hungarian folk dances. He made Hungary seem a wonderful, exotic place, and I told him I would see it someday. He went on to Columbia University and law school, but eventually we lost contact. Years later, when the “wall came down,” I often thought of him and wondered if he went “home.” I also knew that I could now visit.

It has been 20 years since the wall came down and more than 50 years since I first contemplated visiting Hungary. I finally made it, teaching International Arbitration at Szeged University, a university town in the southeast “great plain” of Hungary. A Little History My childhood impression of Hungary was that of an independent country with a long history until enclosed by the iron curtain. In reality, Hungary like many places in Eastern and Central Europe, has a very complex past, and “Hungarian” is more appropriately used to describe a strong culture and people than an independent, long-recognized, well-defined geographic location. Hungarian history starts with the emergence of the Magyars in the central plains of Europe. Its borders were much larger than at present and included substantial portions of present day Romania, originally to which certain Hungarian nationalists still claim title. Hungary’s peak period was from the 14th to the beginning of the 16th century, when it succumbed to an Ottoman invasion in 1526. It remained a part of the Ottoman Empire until approximately 1700 when the Austrians expelled the Ottomans from the region. For the Hungarians, this was the change of one empire for another, although the Austrians were certainly more palatable.

The Hungarians revolted in 1848 and 1849, but it was not until 1867 that the Austrians accepted a dual monarchy, and the Austrian-Hungarian Empire was born. This eventually led to Hungary being on the losing side of WWI. The result was that Hungary lost almost twothirds of its prewar territory in the Treaty of Versailles and the other territorial settlements of WWI. Hungary recouped some of its lost territory when it sided with the Germans during WWII, but again found itself on the losing side of an international conflict. The Russian/Communist repression that followed was apparently draconian and resulted in the 1956 revolution. The rest you know--Hungary eventually slipped peacefully from communism into democracy with the collapse of the Eastern Bloc and the Soviet Union in 1989.

Present Day Hungary

Hungary is approximately the size of Indiana, with a current, but shrinking population of around 10,000,000. Hungary is bordered by seven other countries, and is literally the “center” of Central Europe. Incidentally, the GDP of Indiana is almost double that of Hungary. The Capital is Budapest (pronounced boo-dah- PEHSHT) which is a conglomeration of the cities of Buda, Pest, and Óbuda. The city is spectacular, and its  churches, castles, and public buildings attest to a richer past than present. We spent one night there and only scratched the surface of the many magnificent sites. Some samples are of the view from our hotel window looking out on the Danube: the Houses of Parliament; and what may be the world’s most elegant McDonald’s in the Eiffel designed Train Station. Hungary’s economy is based on a mix of manufacturing, services and agricultural, including excellent wineries. While I only drink beer, my wife, Rufus, attests to the quality of the wine.

Also, Hungary is apparently a destination in Europe for low cost, high quality healthcare. Szeged , where I taught, had a large medical school  and several other medical facilities. I was left, however, with the feeling I have had in several other of my teaching venues; Hungary, standing alone, does not have a viable economy. Without the European Union, it is not clear how Hungary would work. There simply does not seem to be a critical mass of economic activity. Hungary has not yet qualified for inclusion in the Euro Zone, which is a critical step for full membership in the EU and, therefore, maintains its own currency, the Forint. While we were there, the exchange rate was approximately F220/1 USD. Budapest is a moderately expensive place – hotels, meals, etc., are comparable in cost to those in German cities like Frankfurt or Munich. Szeged, where I taught, was very reasonable. Dinner for two with wine and beer was usually around 40 USD, and my benchmark for value, a good local draft beer, was approximately USD 2.50.

Szeged

As mentioned, Szeged is in the southeast great plain of Hungary, only a few miles from the Serbian border, and about a 2 ½ hour train ride from Budapest. Szeged’s main landmark is its cathedral, visible in the distance from the moment the train pulls into the station and very impressive when one gets a little closer. Szeged was almost totally destroyed by a flood of the river Tisza in 1879. Thus, most of the buildings date from the 1880’s and 1890’s. It is quite reminiscent of Vienna, although on a much smaller scale, and a little tattered. It has been in the process of substantial restoration. Many of the streets have been converted to wide pedestrian ways. It is a delightful and safe city to explore. We usually walked to dinner around 7:30 p.m.; I walked from the hotel to the law school everyday around 3:00; we explored in the morning. There was very little vehicular or pedestrian traffic and what people we did see seemed very serious. Predominantly a university town, Szeged seemed to lack any bustle, any joy, any energy. Nobody was unfriendly, quite the contrary.

The City Center is beautiful with interesting turn-of-the-last century buildings. There also seems to have been a surplus of bronze sculptors at some stage in the City’s recent history. There were statutes everywhere. Every city is famous for something, and Szeged’s claim to fame is Paprika and Salami. It has what is probably the only Paprika and Salami Museum in the world, which unfortunately, was closed the day we visited. We did learn a lot about Paprika, there are many kinds for many different uses. Rufus is always on the lookout for new and exotic dishes and our household is about to go on a Paprika-based diet for a few months.

The Class

While I usually teach a two-three week course entitled, “Introduction to International Business Transactions,” the University of Szeged asked that I teach a course on International Arbitration.  Preparations for the class were relatively easy because International Arbitration is already a portion of the “International Business Transactions” course and ties nicely with a course on Commercial Arbitration that Kathy Barnes, Shelly Ewald and I will be team-teaching at George Mason University Law School in the Spring 2011 semester.

The students were excellent. There were fifteen Hungarians and two students from Latvia studying abroad for the semester. The students were well-prepared in English and, after the usual first day’s reticence, very interactive. An interesting observation was that the only language the Hungarians and the Latvians had in common was English. Since they were already using English in their personal interactions, it seemed to come easier in class.

On the subject of language, Hungarian is unrelated to any language other than perhaps Finnish. Rufus and I both found it difficult to master even the basic civilities. Good morning was phonetically, “Jó reggeltt,” and “Jó” sufficed for a greeting at all times of day. Most other words seemed impossibly long and hard to pronounce. For example, cheers was, “Egészségedre.”

Back to the subject – the class went well, although how well I will only know when I receive their papers. Each student was assigned the preparation of a “Demand for Arbitration” based on the UNCITRAL Rules of Arbitration and a hypothetical set of facts. A particularly wonderful part of our visit was our faculty liaison, Peter Mezei. We got to know Peter this summer because he was a visiting lecturer at the University of  Baltimore, summer session. He was a gracious and caring host and we now consider both Peter and his wife, Francesca, as friends.

Construction Business

There are real opportunities in Hungary, and I believe the financial resources exist to bring these opportunities to fruition. The Budapest subway system is undergoing a major upgrade and expansion. There are meaningful plans to build at least one additional nuclear power station. Roads, bridges and other infrastructure seemed to be undergoing a substantial upgrade. Unfortunately for U.S. contractors, it appears that most of the funding is from the EU and the work will go to EU contractors.

The Legal System

Hungary is part of the Civil Law world, although its laws are in a state of transition. Its Civil Code dates to the early 1960’s and has a distinctively Socialist feel. An entirely new Civil Code has been written and is being enacted on a piecemeal basis. The law of obligations (Contract) portion is still the 1960’s version. For example, unlike virtually all Western Civil Codes and the common law, breach of contract damages are not limited to those “reasonably foreseeable at the time of contracting.” This means that consequential damages, including damages that could not have been mitigated, are an available remedy in every breach of contract situation.

This anomaly and others have been covered by the proposed new Civil Code when Hungary’s Law of Obligations will conform to those of Western Europe. Until that happens, the law of Hungary should be avoided as a “choice-of-law” in any contract. I should point out that the consequential damages issue, as well as other discrepancies between the 1960’s Code and most modern codes, was brought to my attention by one of the students. Hungary is a party to most major international commercial treaties, including the “1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards” and the “Convention on the International Sale of Goods.” Its arbitration law is modern and follows the arbitration friendly, non-court intervention approach of the United Nations Model Law on Arbitration. Hungary has Bilateral-Investment-Treaties with almost all European countries but, strangely, not with the
United States.

One of the issues I like to address in every country I visit professionally is the perception of corruption. In particular, I like to get a sense for whether the court system is fair or corruptible. There are various indices and ratings prepared by a variety of international institutions, but it is always useful for me to hear what students, the law faculty, and local practitioners have to say on the subject of corruption generally and corruption in the court system, in particular. The general feeling from those I spoke to was that corruption was not prevalent, especially in the court system. The students and faculty/practitioners did not perceive Hungary as having a significant corruption problem. This is in stark contrast to every other country in which I have taught except Slovenia. This translated into a willingness on the part of the students and faculty to work in Hungary in both the private and public sectors. This was again in contrast to most other places where the desire seemed to be “get an education and get out.”

This leads to a perplexing issue. Where are all the people, especially the young ones, and why is the population in Hungary shrinking? Is Hungary a proud heritage which is not geographically bound? Are the smaller countries of the EU being absorbed into a bigger whole while trying to maintain a national identity? Is a United States of Europe in the offing in a generation or two? All very interesting questions and, I am sure, the subject of much analysis in the EU. But, I can only dwell on it so long. Since the course in Hungary was only one week, I have agreed to teach an abbreviated one-week course on International Business Transactions this November at the Ukrainian Academy of Customs in Dnipropetrovsk, Ukraine. I love the challenge of going to places the names of which I cannot even pronounce.

My wife did have an encounter on leaving the country, which for her made the whole trip the experience of a lifetime. We both noticed that the  Budapest airport had a very visible high level of security. I had wandered off to spend our last forint on a cup of coffee. When I returned, she was in a state of rapture, “Guess who I just saw?” “No idea, honey.” “The Dali Lama and he waved to me.”

Side-Trip

On the way home, we stopped in Munich for our annual Oktoberfest party co-hosted with our German affiliate, Heiermann, Frank & Knipp. If you are receiving this newsletter, you should also have received an invitation to this event. Many of you have attended. For those who have not, you are missing something! Next year, it will be on Monday, September 19, 2011.

In total contrast to the bacchanalian Oktoberfest, we also attended the decennial production of the Oberammergau Passion Play. Sometime in the 1630’s the people of the town of Oberammergau (a small Alpine village about 80 miles south of Munich) swore to God that if He would protect the town from the plague, they would portray Christ’s Passion every ten years. No one died of the plague for the last 400 years or so, and the town has fulfilled its promise. It is a 6+ hour production with magnificent music. The entire cast (200+) and musicians/singers (100+) are from
the town. It is truly spectacular. Your next opportunity to see it will be 2020.

The information or opinion provided in this article is the author's own and not necessarily that of Watt, Tieder, Hoffar & Fitzgerald, LLP. The author is solely responsible for the information and opinion that he or she has provided. The information contained herein does not replace seeking specific legal counsel to directly address individual client needs.