A. LEGISLATION AND RULES
A.1 Legislation
International arbitration in the Netherlands continues to be governed by the Wet van 2 juni 2014 tot wijziging van Boek 3, Boek 6 en Boek 10 van het Burgerlijk Wetboek en het Vierde Boek van het Wetboek van Burgerlijke Rechtsvordering in verband met de modernisering van het Arbitragerecht (“Arbitration Act“), to which there have been no legislative amendments.
A.2 Institutions, rules and infrastructure
It is expected that the Netherlands Arbitration Institute will introduce new NAI Arbitration Rules in 2022. The final version of the new rules is expected to be published on 1 May 2022 and enter into force on 1 July 2022.
B. CASES
Four notable Supreme Court judgments will be summarized in this section. Two of these judgments relate to the important topic of setting-aside an award.
The first of these two 2021 annulment cases relates to three arbitral awards between Russia and three shareholders of the Russian former oil company named Yukos Oil Company (“Yukos“). For ease of reference, we will include some background information on two previous (2020) related judgments of the Netherlands Supreme Court re Yukos.
The other annulment case is rendered against Bariven, the Venezuelan state-owned oil and gas company.
Judgments three and four relate to revocation of an award (herroeping) and the prohibition to appeal a judgment in which an award is recognized by a Dutch court (rechtsmiddelenverbod) respectively.
B.1 Background information in relation to the two 2020 Supreme Court cases re Yukos
In 2020, the Netherlands Supreme Court rendered two notable judgments on the suspension of arbitral awards. Both judgments were delivered in proceedings between the Russian State and three shareholders of Yukos. Russia sought to annul a series of arbitral awards that had been rendered by the Permanent Court of Arbitration[1] under the Energy Charter Treaty in 2014. These awards oblige Russia to pay over USD 50 billion in damages to the former majority shareholders of Yukos.
We note that only two types of proceedings are available when a party wishes to oppose an arbitral award under the Dutch Code of Civil Procedure: setting-aside proceedings (vernietigingsprocedure) and revocation proceedings (herroeping)[2].
Awards can only be set aside on the grounds specified in article 1065 DCCP. Awards can be revoked only on the basis of the grounds set out in article 1068 DCCP (e.g., fraud committed by the other party in the course of the arbitration proceedings).
Russia elected to initiate setting-aside proceedings against the relevant awards. Russia initially succeeded in having the awards set aside. However, the judgment of the Court of First Instance was then overturned by the Court of Appeal[3], as a result of which the awards were then legally binding again. Russia made a further appeal before the Netherlands Supreme Court. As such, this did not suspend the binding force of the awards.[4] However, a debtor of an award may file a motion to the court that has jurisdiction in the setting-aside proceedings and ask it to suspend the creditor’s possibility to execute the award.[5] This is what Russia also did before the Netherlands Supreme Court.
Under the Arbitration Act, setting-aside proceedings are brought directly before the Court of Appeal.[6] Therefore, the Supreme Court is the second and final stop. Generally speaking, when the Court of Appeal dismisses a debtor’s claim to set an arbitral award aside, chances seem to be slim that the Supreme Court will grant a motion to suspend the arbitral award’s effect. In its first 2020 judgment, the Supreme Court decided that it has jurisdiction to decide on a motion to suspend an arbitral award’s effect.[7] In its second 2020 judgment, the Supreme Court rejected the Russian State’s motion to suspend the arbitral award’s effect[8]. The new 2021 judgment of the Netherlands Supreme Court is the final judgment in the setting-aside proceedings against the awards.
B.2 The Netherlands Supreme Court’s 2021 Yukos judgment on setting-aside an award
As set out above under B.1, Russia initially sought to have the awards set aside before the Court of First Instance and was successful in its attempt. Subsequently, the Court of Appeal[9] annulled the judgment of the Court of First Instance. So, after the appeal proceedings, the awards were valid and binding again. Russia then initiated proceedings before the Netherlands Supreme Court to once again seek to get the awards set aside.
The four most important arguments that Russia made before the Netherlands Supreme Court are[10]: (i) the way the Court of Appeal had responded to Russia’s allegations of fraud by the shareholders of Yukos in the arbitration case (these allegations were not taken into account by the Court of Appeal, as the Court of Appeal held these should have been brought in revocation proceedings instead of the setting-aside proceedings that it was then deciding on – i.e., it held that it was the wrong forum), (ii) the Court of Appeal (and the Permanent Court that had rendered the awards) allegedly misinterpreted the Energy Charter Treaty’s sections that formed the legal basis for the jurisdiction of the Permanent Court, (iii) the Permanent Court allegedly acted beyond the scope of the submission to arbitration (by failing to consult the Russian Tax Authorities), and (iv) the awards allegedly are contrary to Dutch public policy.
The Netherlands Supreme Court rejected all arguments but one. The Netherlands Supreme Court accepted Russia’s argument that the Court of Appeal should have reviewed the admissibility of the claims that there was sufficient evidence that the Yukos shareholders had committed fraud during the arbitration proceedings. The Netherlands Supreme Court clarified that the allegations of fraud committed by the shareholders of the former company Yukos could also qualify as a ground for annulment under (old) article 1065 DCCP, as the awards could then be considered to be contrary to public policy (whilst the Court of Appeal had incorrectly decided that such allegations could be brought only in revocation proceedings). Therefore, the Court quashed part of the judgments of the Court of Appeal and referred the matter back to the Appeal Court of Amsterdam.
The current status of the awards is unclear. Russia appears to have taken the position that they can no longer be enforced.
B.3 The Netherlands Supreme Court’s Bariven judgment on setting-aside an award
Petróleos de Venzuela SA (PDVSA) is the state-owned oil and gas company of Venezuela. Its subsidiary Bariven SA (“Bariven“) must procure certain equipment for PDVSA’s business. Hence, Bariven entered into a Dutch law-governed purchase agreement with Wells Ultimate Service LLC (“Wells“) for the sale and delivery by Wells of two large top drive motors (that are used on drilling platforms) for a purchase price of USD 11,732,456.14. The purchase agreement was governed by Dutch law. Wells delivered the top drive motors to Bariven, but Bariven subsequently failed to pay the purchase price for the motors to Wells.
Wells then initiated arbitration proceedings against Bariven. In the arbitration proceedings, Bariven argued that the purchase agreement was entered into under the influence of corruption on Wells’ side (implying that the purchase agreement was contrary to public policy, which renders the contract void under Dutch law[11]). Moreover, Bariven argued that on the basis of the same facts – alleged corruption that impacted the entering into the purchase agreement – the purchase agreement could either be voidable under Dutch law[12], or it could be annulled based on the Dutch legal concept of error[13]. The arbitral tribunal held that Bariven did not meet the burden of proof in relation to the arguments that were all based on alleged fraud committed by Wells. It also held that Bariven should pay the purchase price for the goods delivered to it (notwithstanding possible fraud committed by Wells) and allowed the claim of Wells for the payment of USD 11,732,456.14. By way of an obiter dictum, the arbitral tribunal held that if the purchase agreement would be void or voidable under Dutch law, Bariven would be still obliged to pay the purchase price (as the motors would either have to be returned to Wells, or Bariven would have to pay the purchase price by way of substitute instead).
Subsequently, Bariven lodged setting-aside proceedings before the Court of Appeal on the ground that the award was contrary to public policy[14]. Bariven argued that the underlying purchase agreement had been entered into as a result of fraud committed by Wells and such a purchase agreement should not be given any legal effect. Giving it any legal effect would be contrary to public policy in the Netherlands (which is one of the grounds for setting aside an award[15]). The Court of Appeal agreed with Bariven and set the arbitral award aside[16].
Wells lodged an appeal before the Netherlands Supreme Court. Wells reminded the Netherlands Supreme Court that the arbitral tribunal allowed the claim primarily on the basis of the purchase agreement, but also – by way of an obiter dictum – on the basis that if the purchase agreement would be void or voidable under Dutch law, Bariven would be still obliged to pay the purchase price. Wells argued that Bariven had only addressed the first of these two grounds in the setting-aside proceedings and that the Court of Appeal had failed to consider the other ground. Wells was correct: Bariven’s argument in the setting-aside proceedings was directed only against the decision of the arbitral tribunal that the purchase agreement is not null and void (and not against the obiter dictum). Wells argued that by allowing the claim of Bariven for annulment, the Court of Appeal had failed to recognize that an arbitral award based on two independent supporting grounds may only be annulled if the grounds for annulment have been directed successfully against both grounds. The Netherlands Supreme Court agreed with Wells and decided to dismiss Bariven’s setting-aside claim and reinstated the arbitration award[17].
B.4 The Netherlands Supreme Court’s judgment on revocation proceedings against an award
In this matter, a hospital (as employer) and a former employee entered into a settlement agreement when the employment contract was terminated. A dispute arose regarding the execution of the settlement agreement. The hospital then started summary arbitration proceedings against the former employee to obtain certain documents. Moreover, the hospital initiated arbitration proceedings against its former employee to seek repayment of amounts it paid to its former employee under the settlement agreement. The reason for the hospital to seek to such repayment is that it believed the employee to have found other sources of income that it did not report to the hospital (in violation of the settlement agreement) and that would lower the amounts payable by the hospital to its former employee. The hospitals’ attempts in arbitral summary proceedings (in 2011) to obtain documents from the former employee were rejected in an award in the arbitral summary proceedings. The hospital’s claims for repayment by its former employee in ordinary arbitration proceedings (in 2012) were for the biggest part rejected in an award as well.
The hospital then initiated revocation proceedings against both awards. The hospital argued that both awards are based on deceit by the former employee and false documents produced by him, whilst the former employee also kept certain documents to himself that only came into possession of the hospital after the awards were issued and that would have impacted the awards. The deceit is essentially the making of incorrect statements and the withholding of information by the former employee on his relation with certain companies and the income he could generate from those sources. The information that was kept out of the arbitration proceedings by the former employee relates to the same. The former employee argued that the revocation proceedings were time-barred on the basis of article 1068 (2) DCCP. Article 1068(2) DCCP stipulates that revocation proceedings must be initiated within three months after the claimant became aware of the deceit, or the forgery (of documents), or after it received the new documents. The Court of Appeal rejected these arguments of the former employee and set aside the awards. The Court of Appeal considered that the Public Prosecutor already initiated investigations against the former employee in 2012, but only shared the results thereof (the criminal law file relating to the former employee) in 2017 with the hospital (that then initiated the revocation proceedings within a very short timeframe).
The Netherlands Supreme Court clarified in its judgment[18] that if various grounds under article 1068 DCCP are invoked, for each of them a different moment may trigger the start of the three-month period (before they become time-barred). In this case, the Court of Appeal had held that the starting point of the three-month period was the same for all grounds, i.e., when the hospital received the criminal law file on the former employee from the Public Prosecutor. The Supreme Court confirmed that this approach is not incomprehensible. So the setting-aside of the awards was upheld.
B.5 The Netherlands Supreme Court’s judgment on transitional law rules in the current Arbitration Act
Two awards were issued in 2013 and 2014 by the Arbitration Institute of the Stockholm Chamber of Commerce in relation to the exploitation of oil fields in Kazakhstan. Setting-aside proceedings against the awards were subsequently initiated in Sweden by the party that lost the arbitration, but the awards were upheld by the Supreme Court of Sweden. The other party then (in 2017) wanted to enforce the awards in The Netherlands. It initiated court proceedings in the Netherlands to obtain enforcement leave (an exequatur).
A relevant legal question was which court was competent to decide on the matter: under the old Arbitration Act, the judge that decides in summary proceedings (voorzieningenrechter) was competent to hear such a case, whereas under the current Arbitration Act (that entered into force on 1 January 2015) the Court of Appeal would be competent to hear the case. Since the awards were issued before the entry into force of the current Arbitration Act, but enforcement leave was sought after it entered into force, the issue of competence has to be decided on the basis of the transitional law rules included in the current Arbitration Act.
The party that sought to obtain leave to enforce the awards initiated proceedings before the Court of Appeal (i.e., thereby applying the current Arbitration Act rather than the old regime). The other party contested that the Court of Appeal was competent to hear the case (i.e., the other party argued that the old regime had to be applied instead). The Court of Appeal held it was competent to hear the case and recognized the awards and granted enforcement leave[19].
Under Dutch law, there is no possibility to appeal a decision where enforcement leave is granted. However, the case was brought before the Netherlands Supreme Court and it was allowed because the relevant legal issue was not the enforcement leave itself but rather to determine if the court that had issued it was competent to hear the case.
The Netherlands Supreme Court considered that article IV of the current Arbitration Act applies to arbitration cases regardless of whether the place of arbitration is inside or outside the Netherlands. The aim of article IV of the current Arbitration Act is to ensure that an arbitration case – and related cases before state courts – are dealt with under a single regime. This implies that the original arbitration case – where awards had been issued in 2013 and 2014 – was governed by the old regime (the regime predating the current Arbitration Act) and the subsequent cases before the Dutch state courts should also be governed by the old regime. This implies that the the judge that decides in summary proceedings (as per old articles 1075 and 1076 DCCP) was competent to hear the request to obtain enforcement leave. The Netherlands Supreme Court, therefore, quashed the decisions of the Court of Appeal and referred the case to the judge of the District Court in Amsterdam that decides in summary proceedings. That court is to decide on the request to grant enforcement leave.
B.6 Concluding remarks on the Supreme Court’s judgments
The two cases of the Netherlands Supreme courts on setting-aside proceedings clarify (i) that awards can be set aside if a party acted fraudulently during the arbitration proceedings on the basis that they would be contrary to Dutch public policy, and (ii) that if a decision in an award is based on more than one independent ground, setting-aside arguments must be made against each individual ground for the setting-aside proceedings to be successful (even if one of the grounds is stated to be a mere obiter dictum).
The revocation judgment is relevant since it clarifies when the statutory three-month term is triggered that must be met in order to avoid that revocation becoming time-barred. Last but not least, the judgment on the transitional law rules in the current Arbitration Act teaches us that in state court proceedings relating to awards predating 1 January 2015, the old arbitration regime applies rather than the current Arbitration Act. The arbitration and related state court proceedings should be dealt with under one regime.
These judgments demonstrate that the Netherlands Supreme Court actively contributes to the development of the (international) arbitration practice in the Netherlands and plays an important role therein.
[1] The Permanent Court of Arbitration administers international arbitrations. It is seated in The Hague.
[2] Article 1068 DCCP.
[3] The Hague District Court, 20 April 2016, ECLI:NL:RBDHA:2016:4229 and the Hague Court of Appeal, 25 September 2018, ECLI:NL:GHDHA:2018:2476 and 18 February 2020, ECLI:NL:GHDHA:2020:234.
[4] Article 1041(3) DCCP
[5] https://www.cafa.world/arbitration/.
[6] Article 1064a(1) DCCP
[7] Netherlands Supreme Court, 25 September 2020, ECLI:NL:HR:2020:1511.
[8] Netherlands Supreme Court, 4 December 2020, ECLI:NL:HR:2020:1952.
[9] The Hague Court of Appeal, 25 September 2018, ECLI:NL:GHDHA:2018:2476 and 18 February 2020, ECLI:NL:GHDHA:2020:234
[10] On the basis of article 1065 DCCP (the old version that was in force prior to 2015).
[11] Article 3:40 of the Dutch Civil Code (DCC).
[12] Article 3:44 DCC allows annulment on the basis of deceit.
[13] Article 6:228 DCC.
[14] As per article 1065 DCCP.
[15] As per article 1065 DCCP.
[16] https://uitspraken.rechtspraak.nl/inziendocument?id=ECLI:NL:GHDHA:2019:2677
[17] https://uitspraken.rechtspraak.nl/inziendocument?id=ECLI:NL:HR:2021:1171
[18] Hoge Raad 28 mei 2021, ECLI:NL:HR:2021:784.
[19] Amsterdam Court of Appeal 14 July 2020, ECLI:NL:GHAMS:2020:2032.
