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Hungarian Constitutional Court Challenges the Compatibility of the UPCA
In a minor setback for the Unitary Patent Court Agreement (UPCA), the Hungarian Constitutional Court published a decision on 29 June 2018 that the UPCA is incompatible with Fundamental Hungarian Law. While this decision is not catastrophic to the UPC system, since it is not necessary for Hungary to ratify the agreement in order for it to be put into practice, it is rather ominous given a similar pending challenge in Germany. Germany are one of three signatories (France and the UK are the other two) who must ratify the agreement for it to come into effect.
In summary, the Hungarian case, which began in 2017, considered whether the ratification and entry into force of the UPCA would be compatible with the Fundamental Law. The outcome was a 12 to 2 majority confirming that ratification of the UPCA would not be compatible with Hungarian Fundamental Law as it would not be subject to constitutional review within Hungary. This is because the UPCA would form an international institution not explicitly considered by EU treaties, and yet still be able to settle domestic patent disputes.
The reasoning given by the Constitutional Court pointed to the UPCA’s predecessor, the European and Community Patent Court, which was previously abandoned following the CJEU’s decision C-1/09. The Court considered that such an agreement between member states would constitute “enhanced cooperation”, as set out in Art. 326-334 TFEU and Art. 20 TEU. The question was then asked whether such an agreement between member states, such as the UPCA, would constitute EU Law or whether such a treaty would form an international institution outside of EU Law.
The important distinction made by the Court on this point was that such an agreement between member states forms part of EU Law only if it facilitates the implementation of an aspect of the EU treaties. If such an agreement creates an international institution that was not defined by the founding EU treaties, then it is not considered as EU Law by the Hungarian Constitutional Court and thus is considered a “non-EU” international treaty. In coming to this conclusion the Court referenced the CJEU decision C-146/13where the CJEU stated that it, “does not have jurisdiction to rule on the Lawfulness of an international agreement concluded by Member States”. A further key consideration during the decision was that UPC decisions based on Hungarian Law would not be able to be appealed at the Constitutional Court and thus could not be reviewed domestically in order to ensure they comply with the Fundamental Law.
Article 25 of Hungarian Fundamental Law (translated to English here) states that the courts shall decide on civil disputes including lawsuits related to patents. In this context the Constitutional Court interpreted “Courts” to mean domestic courts. Of course, while some Hungarian domestic law is subject to decisions made at the ECHR, CJEU and ICJ these decisions are generally not directed towards private persons and generally pertain to broader rulings. As such the court concluded that, should the UPCA be ratified, it would effectively hand power of domestic patent lawsuits to the UPC which would conflict with the Fundamental Hungarian Law.
In summary, although the decision of the Hungarian Constitutional Court on the compatibility of the UPCA with domestic law and EU law will not prevent the enactment of the UPC, it may be a sign of things to come with respect to the pending German Federal Constitutional Court (FCC) decision. Hungary may yet choose to amend their Fundamental Law in order to ratify the UPC however this is yet to be seen. The most interesting and key point raised during this decision, for the member states who ratify the UPCA, was the consideration that an international forum would adjudicate domestic civil disputes without the possibility of domestic constitutional review. This will undoubtably need to be considered by all member states, preferably prior to any UPC decisions, to ensure that there will be no conflict with national laws.
If you have any questions on this topic, please contact Andy Cloughley at email@example.com.