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The European Arbitration Review 2018

Netherlands

In the Netherlands, arbitration has traditionally been the most important form of dispute resolution along with court litigation, particularly for the resolution of construction or trade disputes. Such disputes are usually brought before the Netherlands Arbitration Institute (NAI) or the Arbitration Board for the Building Industry. The Netherlands is also renowned for the arbitration of international disputes. There are many reasons why the Netherlands is an attractive seat for international arbitrations: as the host state of many international courts and tribunals – including the International Court of Justice, the Permanent Court of Arbitration and the International Criminal Court, as well as many specialised arbitration institutions – the Netherlands offers a favourable legal and logistical environment for accommodating, administering and conducting international arbitral proceedings. Recently, The Hague Hearing Centre opened its doors at short distance from the Peace Palace. This dedicated hearing centre offers state-of-the art hearing facilities and is meant to serve various purposes including (i) the further facilitation of international arbitration in the Netherlands while meeting the undercapacity of the Peace Palace, (ii) the accommodation of the Dutch local division of the Unified Patent Court, and (iii) the accommodation of the Netherlands Commercial Court. A much-welcomed added benefit of seating arbitral proceedings in the Netherlands is that it has cost advantages over more expensive venues such as Paris, Geneva or London.

Another important factor is that the Dutch legislature and the judiciary have a favourable attitude towards arbitration. Dutch arbitration law affords the parties considerable freedom to determine the rules of procedure, and the state courts take a liberal approach to arbitration. The state courts act as a safety net if issues arise that parties or arbitrators are unable to resolve, without interfering excessively in the arbitral process. They will decline jurisdiction if a party invokes a valid arbitration agreement that is applicable to the subject matter in dispute before all other defences.

On 1 January 2015, the revised Arbitration Act entered into force in the Netherlands. The revision aimed at further enhancing the efficiency and flexibility of the arbitral process by avoiding delays through state court proceedings, reducing the administrative burden and maximising party autonomy. The main features of the legal framework for arbitration in the Netherlands under the revised Dutch Arbitration Act will be discussed below. Subsequently, the most recent arbitration developments in the Netherlands will be addressed.

Legal framework for arbitration in the Netherlands

Each arbitration taking place in the Netherlands, regardless of the nationality of the parties or the subject matter of the arbitration, is subject to Book 4 of the Dutch Code of Civil Procedure (DCCP), also referred to as the Dutch Arbitration Act.1 Most provisions are of a regulatory, non-mandatory nature. The Dutch Arbitration Act contains common provisions on the arbitration agreement, the appointment of arbitrators, the disclosure and challenge of arbitrators, procedure, witness and expert hearings, joinder and consolidation, competence- competence, the content of the award, correction and addition of the award and recognition and enforcement.

No restrictive requirements for the arbitration agreement

All disputes are capable of being decided by arbitration, unless the subject matter would lead to legal consequences of which the parties cannot freely dispose.2 Strictly speaking, the Dutch Arbitration Act does not impose special requirements on arbitration agreements beyond the general rules applicable to the formation of contracts. However, if an arbitration agreement is contested, its existence must be proven by an instrument in writing (or by electronic data fulfilling certain requirements). For this purpose, an instrument in writing that provides for arbitration or that refers to standard conditions providing for arbitration is sufficient, provided that this instrument is expressly or impliedly accepted by or on behalf of the other party.3

An arbitration agreement is considered and decided upon as a separate agreement. The arbitral tribunal has the power to decide on the existence and validity of the contract in which the arbitration agreement is incorporated or to which the arbitration agreement is related.4

Remedies

The Dutch Arbitration Act distinguishes between three legal remedies that may be available to challenge an arbitral award: arbitral appeal, setting aside and revocation.

Appeal of the arbitral award to a second arbitral tribunal is possible only if the parties have agreed thereto. Parties usually do not provide for the remedy of an arbitral appeal in their arbitration agreement and neither do the rules of recognised arbitration institutes. A noteworthy exception in this respect are the rules of the Arbitration Board for the Building Industry, which do provide for the possibility of arbitral appeal.

Recourse to a court against a final or partial final arbitral award that is not open to appeal in arbitration, or a final or partial final award rendered on arbitral appeal, may be made only by an application for setting aside or revocation.5

The setting aside of arbitral awards is considered an extraordinary and restricted legal remedy. The available grounds for setting aside closely resemble those laid down in the New York Convention. The court may set aside the award only if:

  • a valid arbitration agreement is lacking;
  • the arbitral tribunal was constituted in violation of the applicable rules;
  • the arbitral tribunal has manifestly not complied with its mandate;
  • the award is not signed or does not contain any reasons whatsoever; or
  • the award, or the manner in which it was made, violates public policy.

The setting aside proceedings of arbitral awards are limited to a maximum of two instances. The application for setting aside must be addressed to the Court of Appeal of the district of the seat of arbitration. After the Court of Appeal has rendered a decision on the application for setting aside, the parties can appeal in cassation to the Supreme Court. The parties may, however, agree to exclude the possibility of cassation, and by doing so, limit the review by state courts’ review to one instance.

Revocation can be sought in case of fraud, forgery or withheld documents. However, granting this remedy is exceptional in practice.

Partial setting aside

Under the Dutch Arbitration Act, it is possible to have an arbitral award set aside only in part, provided that the remainder of the award is not inextricably linked to the part of the award that is to be set aside. In the event that the arbitral tribunal has awarded in excess of, or differently from, what was claimed, the arbitral award shall be partially set aside to the extent that the part of the award that is in excess of, or different from, the claim can be separated from the remainder of the award.6 The Supreme Court has ruled that an application for the setting aside of an arbitral award implicitly entails an alternative application for a partial setting aside.7 This means that, in practice, an award may be set aside in part even where the applicant has not explicitly requested the court to partially set aside the award.

Remission

The jurisdiction of the state courts revives only if the arbitral award is set aside due to the absence of a valid arbitration agreement.8 In the event the award is set aside for another reason, the court will refer the case back to the arbitral tribunal.

The Dutch Arbitration Act also provides for the possibility for the Court of Appeal to suspend the setting aside proceedings to allow the arbitral tribunal to correct a wrong by resuming the arbitral proceedings or by taking another measure that the arbitral tribunal deems appropriate. Such a decision of the Court of Appeal cannot be appealed.

Recognition and enforcement

The Netherlands has signed and ratified the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, in respect of which it has elected to enforce only awards from other contracting states – the ‘reciprocity’ reservation.

If no treaty concerning recognition and enforcement is applicable, or if an applicable treaty allows a party to rely upon the law of the country in which recognition or enforcement is sought, recognition and enforcement may be sought on the basis of the Dutch Arbitration Act. The grounds for refusal resemble those in the New York Convention. Leave for enforcement may be denied, if:

  • the party against whom recognition or enforcement is sought asserts and proves that a valid arbitration agreement under the law applicable thereto is lacking;
  • the arbitral tribunal is constituted in violation of the rules applicable thereto;
  • the arbitral tribunal has manifestly not complied with its mandate;
  • the arbitral award is still open to an appeal to a second arbitral tribunal or to a court in the country in which the award is made;
  • the arbitral award has been set aside by a competent authority of the country in which that award is made; or
  • the court finds that the recognition or enforcement would be contrary to public policy.

The Dutch Arbitration Act provides for an asymmetric system of appeal regarding enforcement decisions. Only decisions denying leave for enforcement can be appealed. Consequently, the decision to grant leave for enforcement cannot be appealed. The rational is that the remedy of setting aside is considered an adequate safeguard for the party opposing recognition and enforcement. On the basis of article 3 of the New York Convention, which provides that ‘[t]here shall not be imposed substantially more onerous conditions or higher fees or charges on the recognition or enforcement of arbitral awards to which this Treaty applies than are imposed on the recognition or enforcement of domestic arbitral awards’, the Supreme Court has held that the asymmetric system of appeal also applies in case of enforcement of foreign arbitral awards in the Netherlands pursuant to the New York Convention.9

Interim measures

The Dutch Arbitration Act contains quite distinctive provisions relating to interim measures. There are three ways for parties to obtain interim relief under the Dutch Arbitration Act. First, parties are allowed to request that an arbitral tribunal that has already been constituted takes interim measures at any stage of the proceedings on the merits.10 The interim measures should relate to the claim or counterclaim in the pending arbitral proceedings, and shall only apply for the duration of the proceedings. Second, parties to an arbitration agreement may agree that a separate arbitral tribunal may be appointed, irrespective of the arbitral proceedings on the merits being pending, with the power to award interim relief at the request of one of the parties.11 Third, interim measures can be obtained through state court proceedings if the requested measure cannot be obtained, or cannot be obtained in a timely manner, in arbitration.12 Only state courts can provide for pre-judgment attachment or precautionary seizure. In the context of the ICC Arbitration Rules, the Amsterdam District Court held in a January 2017 decision (not published) that if interim measures can be obtained pursuant to the Emergency Arbitrator Rules, the Dutch state courts in principle do not have jurisdiction to order such measures.

The provisions in the Dutch Arbitration Act regarding interim measures in arbitration are based on the strong and long- standing Dutch tradition of kort geding, which can be characterised as provisional or preliminary relief proceedings before the state courts. Through these proceedings, which can be initiated prior to the proceedings on the merits, a party can obtain provisional relief for the preservation of rights or a status quo. The interim measures that are obtainable through a kort geding are generally much broader than those typically available in other jurisdictions. They can include, for instance, enforcement of a contract, specific performance, freezing of assets, blocking of a share transfer, payment into escrow accounts or providing a bank guarantee. Courts provide for speedy and easy access, and generally show little hesitation in granting interim measures. When the requesting party can show that the requested interim measure is of a provisional nature and that, taking the interests of the parties into consideration, an immediate interim measure is required, the court is likely to award such measure.13 Once awarded, the requesting party is not required to initiate proceedings on the merits. The interim measure is enforceable regardless of whether further proceedings are initiated.

The stand-alone arbitral summary proceedings are a fairly unique and successful feature of NAI arbitration that has been incorporated in the revised Dutch Arbitration Act. Similar provisions were introduced in the 2012 ICC Arbitration Rules (the so-called Emergency Arbitrator provisions). However, there are a number of significant differences. The 2012 ICC Arbitration Rules enable parties to seek ‘urgent interim or conservatory measures that cannot await the constitution of an arbitral tribunal’ (article 29 of and appendix V to the 2012 ICC Arbitration Rules). By contrast, the Dutch Arbitration Act merely requires that the interim measure requested is urgent. An advantage of the Dutch Arbitration Act, therefore, is that the parties do not need to demonstrate that the relief sought ‘cannot await constitution’ of the arbitral tribunal. Furthermore, the ICC emergency arbitrator can only issue an order, which is not an arbitral award and for that reason arguably not enforceable under the New York Convention. The Dutch Arbitration Act, however, allows the tribunal in summary proceedings to render an arbitral award, which can be declared enforceable simply by leave of enforcement granted by the competent state court. Finally, under the 2012 ICC Arbitration Rules, the ICC emergency arbitrator’s order must be followed by arbitral proceedings on the merits at all times. Under the Dutch Arbitration Act this follow-up is not compulsory. The party seeking urgent interim relief is not required to initiate arbitral proceedings on the merits. The parties may therefore use stand-alone arbitral summary proceedings as their only means of dispute resolution, and in fact do so in practice on a regular basis.

It should be noted that summary arbitral proceedings are only available when the seat of the arbitration is in the Netherlands. In contrast, interim measures can be obtained through the Dutch state courts if parties are bound by an arbitration agreement, regardless of the seat of the arbitration.

Maximised party autonomy

Parties choosing the Netherlands as a forum for the resolution of their arbitral disputes enjoy broad freedom in determining the procedural rules to be followed by the arbitral tribunal in conducting the proceedings. Examples are the parties’ right to exclude the authority of the arbitral tribunal to order the disclosure of documents or to order the appearance of a witness or expert.

Reduced administrative burden

The compulsory filing of arbitral awards with the District Court has been abolished by the 2015 revision of the Dutch Arbitration Act; such filing is only required if the parties agreed to it. The possibility for parties to use electronic means where the law requires a written form has also been introduced with the revised Dutch Arbitration Act. These features help reduce the costs involved in arbitration, and further enhance the competitive position of the Netherlands as a venue for both domestic and international arbitration.

Confidentiality

Although confidentiality is a generally accepted principle in arbitration, there is no specific provision for it in the Dutch Arbitration Act. The minister of justice, in response to questions posed by parliament on the revision of the Dutch Arbitration Act, reiterated that confidentiality is the rule and public access the exception. It nevertheless remains for the parties to decide whether to include a confidentiality provision in their arbitration agreement, to opt for a set of arbitration rules that includes such provision or request the arbitral tribunal to impose confidentiality obligations on the parties.

Challenging arbitrators

The Dutch Arbitration Act provides for the District Court to decide on the merits of any challenge to an arbitrator.14 In accordance with international best practices, parties can agree on an alternative procedure such as authorising the arbitration institute administering the dispute rule on such challenge.15

Noteworthy recent developments

The enforcement of annulled arbitral awards

As follows from our contributions to previous editions of The European and Middle Eastern Arbitration Review,16 there is a significant amount of recent case law where state courts have recognised foreign awards annulled at the seat of arbitration.

Article V of the New York Convention lists the exclusive grounds for refusing recognition and enforcement of an arbitral award. Recognition and enforcement ‘may be refused’, among others, if the arbitral award ‘has been set aside [.. .] by a competent authority of the country in which [.. .] that award was made.’17 The ambiguous ‘may be refused’ in article V – similar language is included in articles 1075 and 1076 DCCP – has prompted the question as to whether a court may nevertheless decide to enforce an annulled award.18

In the current academic debate over the enforcement of annulled arbitral awards, the Yukos Capital v Rosneft case is often mentioned as an example of the enforcement of a foreign arbitral award that has been set aside in the place of the seat. In that case the Amsterdam Court of Appeal granted leave for enforcement of arbitral awards that had been set aside by the Russian state courts.19 Since the Dutch Arbitration Act provides for an asymmetric system of appeal pursuant to which only decisions denying leave for enforcement can be appealed in cassation, the decision of the Amsterdam Court of Appeal to grant leave for enforcement was not tested by the Supreme Court.

Currently, the Supreme Court is reviewing the cassation appeal in Maximov v NMLK, which gives the Supreme Court an opportunity to provide guidance as to the possibilities to grant leave for enforcement of an annulled arbitral award. The case concerns the attempts of Maximov to enforce an arbitral award against NMLK, which arbitral award has been set aside by the competent courts of the seat of the arbitration in Moscow. Notwithstanding the annulment of the arbitral award, Maximov seeks enforcement of the arbitral award in several jurisdictions including the Netherlands. The Amsterdam Court of Appeal held that an arbitral award that has been set aside in the place of the seat of the arbitration can only in exceptional circumstances be enforced under the New York Convention as well as Dutch arbitration law.20 The Court subsequently held that there were no such exceptional circumstances present and denied Maximov leave for enforcement of the arbitral award. Maximov has filed an appeal in cassation against this decision, arguing that article V of the New York Convention does not limit the enforcement of an annulled arbitral award to exceptional situations, but instead gives the competent state courts wide discretion to grant leave for the enforcement of an annulled award.

Ecuador v Chevron and TexPet

A case worth mentioning is Ecuador v Chevron and TexPet. From the 1970s until the early 1990s TexPet operated a consortium for the exploration and extraction of oil in Ecuador. Following its withdrawal from Ecuador, a group of indigenous people claimed to have suffered damages resulting from severe environmental pollution. The indigenous people first lodged proceedings in New York, but after TexPet had successfully sought the dismissal of those proceedings on forum non conveniens grounds, the claimants refiled their action in the Lago Agrio Court in Ecuador. In 2009, Chevron and TexPet started an arbitration seated in The Hague under the US-Ecuador Bilateral Investment Treaty claiming that the Lago Agrio proceedings breached Chevron’s and TexPet’s rights under a settlement agreement with Ecuador. Later, Chevron and TexPet added a due process complaint, alleging that the indigenous people were supported by Ecuador, and that the Lago Agrio proceedings were tainted by fraud. Until now, the arbitral tribunal has declined to make any substantive decision on these due process allegations.

In February 2011, by way of a procedural order, the arbitral tribunal ordered Ecuador to take all measures at its disposal to suspend or cause to be suspended the enforcement or recognition within and without Ecuador of any judgment against Chevron in the Lago Agrio case. Later that month, the Lago Agrio Court awarded a multibillion-dollar judgment against Chevron. That judgment became enforceable when Chevron’s appeal was rejected by an Ecuadorian court of appeal. On Chevron’s request, the Tribunal subsequently converted its procedural orders into two interim awards, and made it explicit that its orders were also directed to the Ecuadorian judiciary. After the indigenous people had sought to enforce the Lago Agrio judgment in Argentina, Brazil and Canada, the arbitral tribunal declared that Ecuador had violated these two interim awards because Ecuador, including its judicial branch, had not prevented the enforcement of the Lago Agrio judgment by the indigenous people.

In January 2014, Ecuador requested the setting aside of four interim awards and the first partial award. For the arbitration community, two of Ecuador’s grounds for setting aside are particularly interesting. Ecuador argued that, even if a valid arbitration agreement existed, the power under the BIT to adjudicate on the state liability of Ecuador does not bring with it the power to give binding instructions on how to resolve civil proceedings between private parties pending in its courts. Ecuador also argued that the Tribunal cannot lawfully decide on the right of the indigenous people to enforce the Lago Agrio judgment, without them being a party to the arbitration.

The The Hague District Court largely overstepped these legal issues and justified any adverse effects of the interim awards on the rights of the indigenous people on the basis of special circumstances. The District Court considered that the arbitral tribunal must have had serious indications that Chevron’s and TexPet’s fraud allegations were true. According to the District Court, the arbitral tribunal did therefore not exceed its mandate, nor do the awards violate public policy within the meaning of article 1065 DCCP.

The decision of the The Hague District Court was upheld by the The Hague Court of Appeal in its decision of 18 July 2017.21 The Court of Appeal held that the arbitral tribunal’s interim measures did not violate public order, because the interim measures did not require Ecuador to exert any influence over the Ecuadorian courts in respect of the outcome of any legal proceedings or on the content of any judgment rendered. An order directed at a State to (merely) suspend or to have suspended a judgment in itself does not violate public order in the Court of Appeal’s view. Although the Court of Appeal acknowledged that the interim relief measures imposed by the arbitral tribunal may well have adversely affected the Ecuadorian citizens who have an interest in execution of the Lago Agrio judgment and who may have suffered losses as a consequence of the suspended execution, this, according to the Court of Appeal, does not imply that the arbitral tribunal should have refrained from the contested interim relief measures. According to the Court of Appeal the arbitral tribunal’s interim measures imposed the (implicit) obligation on Ecuador to take the rights and interests of the Ecuadorian citizens into account in the execution of the interim measures.

The decision of the The Hague Court of Appeal is currently under cassation appeal.

Arbitrators’ liability towards the parties in the arbitration

A recent Supreme Court case serves as a reminder to (potential) arbitrators presiding over an arbitral tribunal to ensure that the arbitral award is signed in accordance with the legal requirements. Dutch arbitration law prescribes that an arbitral award must be signed by all members of the tribunal.22 If a minority number of arbitrators refuses to sign the arbitral award, the other members of the tribunal should state so on the award when they sign it.23 A failure to properly sign the arbitral award is a ground for setting aside the arbitral award.24

Recently, the Dutch Supreme Court was confronted with a situation where the president of a tribunal had failed to check whether the arbitral award had been signed by all members of the tribunal before dispatching the award to the parties. In fact, the arbitral award was sent to the parties with two signatures missing, eventually resulting in the arbitral award being set aside. The claimant who had been awarded several million euros in the arbitration subsequently initiated court proceedings against the president of the arbitral tribunal, holding him personally liable for the resulting damage.

Under Dutch law an arbitrator can only be held personally liable towards the parties in the arbitration in the following extraordinary circumstances: (i) the arbitrator breached the mandate intentionally, (ii) the arbitrator breached the mandate through grossly negligent conduct, or (iii) where there has been ‘an evident gross failure to recognise the requirements of a proper fulfilment of duties’.25 The claimant who had initiated court proceedings against the president of the tribunal argued that the president’s failure to ensure signing of the arbitral award in accordance with the legal requirements qualifies as ‘an evident gross failure in the fulfilment of his duties’. The Amsterdam Court of Appeal had held that although it was highly unfortunate that the president had failed to notice the missing signatures, this failure could in any event not be considered ‘an evident gross failure’. In appeal in cassation, the Supreme Court reversed this decision.26 It held that the president’s failure to adequately perform the essential task of ensuring compliance of the arbitral award with the law could, depending on the facts of the case, qualify as ‘an evident gross failure’.

Notes

  1. For an extensive commentary on important elements of arbitration law in the Netherlands, see B van der Bend, M Leijten and M Ynzonides (eds), A Guide to the NAI Arbitration Rules: Including a Commentary on Dutch Arbitration Law, Kluwer Law International, 2009. A new edition, incorporating the revision of the Dutch Arbitration Act, is forthcoming.
  2. Article 1020 DCCP. Restrictions may apply in cases concerning, eg, intellectual property rights, bankruptcy law and company law.
  3. Article 1021 DCCP.
  4. Article 1053 DCCP.
  5. Article 1064 DCCP.
  6. Article 1065(5) DCCP.
  7. Dutch Supreme Court, 25 April 2009 (International Military Services/Iran II), NJ 2010/171, ECLI:NL:HR:2009:BH3137.
  8. Article 1067 DCCP.
  9. Dutch Supreme Court, 25 June 2010, case No. 09/02566, ECLI:NL:HR:2010:BM1679, NJ 2012/55 and Dutch Supreme Court, 31 March 2017, case No. 16/02825, ECLI:NL:HR:2017:555.
  10. Article 1043b(1) DCCP.
  11. Article 1043b(2) DCCP.
  12. Article 1022a DCCP.
  13. An award may be rendered within a matter of days after submission of the request.
  14. Article 1035(2) DCCP.
  15. Article 1035(7) DCCP.
  16. The European and Middle Eastern Arbitration Review, 2011–2017 editions.
  17. Article V paragraph 1 sub e of the New York Convention.
  18. See also B Van der Bend, M Leijten and M Ynzonides (eds), A Guide to the NAI Arbitration Rules: Including a Commentary on Dutch Arbitration Law, Kluwer Law International 2009, p. 312.
  19. Amsterdam Court of Appeal, 28 April 2009, case No. 200.005.269/01, LJN BI2451, JOR 2009/208, TvA 2010/5.
  20. Amsterdam Court of Appeal, 27 September 2016, ECLI:NL:GHAMS:2016:3911.
  21. The Hague Court of Appeal, 18 July 2017, ECLI:NL:GHDHA:2017:2009.
  22. Article 1057(2) DCCP.
  23. Article 1057(3) DCCP.
  24. Article 1065(1) sub d DCCP.
  25. Supreme Court, 4 December 2009, ECLI:NL:HR:2009:BJ7834, NJ 2011/131 I.
  26. Supreme Court, 30 September 2016, ECLI:NL:HR:2016:2215.