The Ombudsman on the strict liability of lawyers

Press Release:

The Ombudsman on the strict liability of lawyers

Access to defence and representation by lawyers, the equality of procedural legal instruments and the operation of lawyers without fear and outside influence are of primary importance from the point of view of the protection of the fundamental rights of individuals. These requirements were put at risk by the amendments to Act V of 2006 on Public Company Information, Company Registration and Winding-up Proceedings which entered into force on 1 March 2012, therefore the Ombudsman started an ex officio inquiry in the course of which he requested information from the Minister of Public Administration and Justice and the President of the Hungarian Bar Association.

In the inquiry it was established that certain amendments to the Act on Public Company Information, Company Registration and Winding-up Proceedings may put at risk access to defence and representation by lawyers, the equality of procedural legal instruments and the work of lawyers without fear and outside influence. In addition, the Act does not allow for the consideration of the circumstances of complaints against the activities of lawyers, it does however provide for automatic fines.

Pursuant to the new regulation the court of registry may levy a fine between HUF 50.000 and 900.000 upon persons who fail to comply with the time limit for the notification of requests for company registration or for the registration of changes. The court of registry levies a fine on the legal representative if certain submitted documents of a company registered under simplified registration procedure do not comply with the provisions of the relevant rules of law. According to the amendment there is no possibility of discretion, the penalty is automatic. The report pointed out that in simplified company proceedings the legal practice of courts of registry is not uniform, mistakes and deficiencies triggering fines are in general decided on by court clerks who do not have a university degree in law.

In the course of the inquiry the Ombudsman has established that the amendment prescribes essentially objective sanctions for conducts not defined on the basis of fully objective criteria. This can also provide a disincentive for the utilisation of simplified company proceedings since the risk, i.e. the amount of the possible fine, is not proportionate to applicable lawyers' fees.

The inquiry has established that the amendment to the Act does not comply with the requirements of legal certainty, with the rights to due process and to property, and the requirement of the prohibition of discrimination. 

In order to remedy the improprieties related to fundamental rights revealed in the report and to prevent their occurrence in the future, the Ombudsman has proposed that the Minister of Public Administration and Justice should initiate an amendment to the contested provisions of the Act, taking in consideration the points raised in the report.