A. LEGISLATION AND RULES
A.1 Legislation
There are no developments with respect to the Dutch laws on international arbitration.
A.2 Institutions, rules and infrastructure
The Netherlands Arbitration Institute (NAI) is the largest arbitration institute in the Netherlands. The NAI has its own arbitration rules, which can be found on its website (https://nai.nl/nai-arbitration-rules-and-explanation/). The NAI was expected to introduce new NAI Arbitration Rules in 2023. The rules are not yet in force but do contain some interesting provisions for international arbitration practice that will most likely take effect in 2024, as follows:
- The creation of an NAI Court to take over tasks currently assigned to the NAI administrators. For example, this NAI Court could be involved in the appointment of an arbitrator. This aims to further ensure the objectivity of the appointment procedure.
- An expedited procedure will apply to disputes whose amount does not exceed EUR 2 million, with the possibility to opt out.
- The possibility of virtual hearings is more prominently underlined in the new Arbitration Rules.
- Parties who agree to arbitrate a dispute may designate the Netherlands Commercial Court (NCC) District Court or NCC Court of Appeal, as the case may be,[1] as the appropriate chamber for any court litigation needed before, during or after the arbitral proceedings. The NAI and the NCC see added value in offering parties the option to combine NAI arbitration and NCC court litigation, both to be dealt with in English. This empowers parties to make their proceedings more cost-efficient and expeditious. For example, the parties, once an award has been rendered, would be able to file a setting-aside claim with the NCC Court of Appeal in English.
- The 2015 NAI Arbitration Rules already provided for the shift from paper communication to electronic communication. The new rules build on this and provide for the possibility of e-awards.[2]
B. CASES
B.1 Applicability of res judicata in arbitration; avoidance of an award[3]
This Supreme Court judgment deals with res judicata in arbitration and the avoidance of an arbitral award due to a breach of mandate. In testing whether the tribunal has sufficiently adhered to its mandate (S. 1065(1)(c) DCCP) with regard to the res judicata of a previous decision, the annulment court must assess whether the tribunal applied the standard set out in S. 1059 DCCP. The assessment of the annulment court, however, cannot move beyond a (cursory) test confirming that the correct standard was applied. It may not (substantively) assess the manner in which the tribunal applied the standard or its result, as it would then move to a substantive assessment of the case, which is the purview of the tribunal.
The Regions and Municipalities of North Brabant (“North Brabant“) and Attero had conducted two arbitrations. The first ended in favor of North Brabant. During the second arbitration, the question arose whether the tribunal had room to give an opinion on how a certain provision of the parties’ agreements should be interpreted. Referencing the first award, the second tribunal ruled that the decision in the first arbitration did not include a substantive ruling on the interpretation of that provision. In its assessment, therefore, S. 1059 DCCP did not prevent the second tribunal from ruling on the provision. Subsequently, and to North Brabant’s dismay, the tribunal ruled in favor of Attero.
North Brabant then initiated annulment proceedings. Its position was that the second award went against the res judicata of the first and, thus, that the tribunal had breached its mandate. The court annulled the decision, ruling that res judicata had indeed been breached. The annulment court examined whether the second tribunal was reasonably able to “arrive at its interpretation of the judgment” and “could have judged” as it had. It determined that the second arbitral tribunal’s reasoning on the scope of the first award was “unintelligible” and that its ruling was “unmistakably erroneous.”
Attero appealed the decision before the Supreme Court. Attero complained that the annulment court’s judgment went beyond the caution required for its review. It stated that the annulment court had performed a substantive assessment of the standard for res judicata in S. 1059 DCCP, while the court was only allowed a cursory check.
The Supreme Court ruled in favor of Attero and set aside the annulment court’s judgment. The Supreme Court underlined that the annulment court should apply restraint when assessing the annulment of an award. By assessing whether the second tribunal’s interpretation of the first award was “unintelligible” and “unmistakably erroneous,” the court lost sight of the fact that it is held to test whether the standard set in S. 1059 DCCP was applied, but not to test the way it was applied or the result thereof.
B.2 Setting aside an arbitral award denying jurisdiction[4]
This judgment of the Supreme Court focuses on the issue of whether negative decisions on jurisdiction by an arbitral tribunal are capable of being set aside. The claimants were natural persons with both Spanish and Venezuelan nationality. In 2010, Venezuela expropriated all assets of the claimants without providing compensation. In response, the claimants commenced arbitration proceedings against Venezuela in The Hague. The possibility of arbitration was provided for in the Spanish-Venezuelan BIT of 1995.
The arbitral tribunal denied jurisdiction, holding that dual citizens had no right to seek protection under the BIT. The claimants then initiated annulment proceedings. This claim was rejected by the Hague Court of Appeal, which held that an arbitral award declaring the arbitral tribunal incompetent for lack of a valid arbitration agreement could not be set aside under S. 1065 of the DCCP.
The Supreme Court upheld the decision of the Court of Appeal on the grounds that (1) the DCCP does not provide for the setting aside of negative decisions on jurisdiction; (2) a negative decision on jurisdiction by an arbitral tribunal immediately revives the jurisdiction of the state courts; and (3) there is no rule of Dutch law providing for the reversal of the reviving jurisdiction.
The Supreme Court thus sets a strict precedent, leaving no room for exceptions or derogations. Negative decisions on jurisdiction cannot be set aside on any of the grounds for setting aside arbitral awards available under Dutch law.
B.3 Fraudulent withholding of evidence during the arbitration[5]
In these avoidance proceedings, the Supreme Court rules on revocation and setting aside an arbitral award in case of withholding evidence or (more general) fraud, leading to an award that would potentially run counter to public policy and is open to avoidance under S. 1065(1)(e) DCCP. While this case concerns the withholding of evidence specifically, the ruling of the Supreme Court has broader implications, providing that “fraud” runs counter to public policy, including all instances where a party, through a dishonest adopted course of action during the proceedings, prevents that relevant fact and circumstances from coming to light. This corresponds with the case law and doctrine surrounding the repeal of a decision in S. 382 and S. 1068 DCCP.
This case concerns a matter of purported fraud during a construction arbitration. It was alleged that one of the parties intentionally withheld a letter relevant to the proceedings. The other party found out when it had already (unsuccessfully) appealed an interim judgment to which it deemed the letter to be relevant. Upon finding out that its opposition had withheld evidence, it filed a motion with the arbitral tribunal to repeal its decision. The tribunal denied that repeal. The aggrieved party brought avoidance proceedings against that decision before the annulment court. The annulment court subsequently ruled that while it was possible to repeal the decision based on S. 1068 DCCP, withholding evidence did not provide grounds for avoidance under S. 1065 DCCP. This decision was appealed to the Supreme Court.
The Supreme Court ruled that the annulment court erred when determining that repealing the decision in accordance with S. 1068 DCCP would provide a remedy. As this case did not concern withholding evidence discovered after the arbitral proceedings, it was not open to repeal. Moreover, if an award by a tribunal would fail to sufficiently remedy a fraud within the procedure, it would be open to avoidance based on S. 1065(1)(e) DCCP as the award would then breach public policy.
However, despite these successful grounds for appeal, the Supreme Court upheld the decision of the Court of Appeal not to void the judgment. The Supreme Court reiterated that in the event that fraud is discovered during the arbitral proceedings at a stage where it can still (reasonably) be remedied within the arbitral proceedings, a party has the duty to attempt to remedy that fraud within those proceedings. This obligation applies if the fraud is discovered after an (unsuccessful) interim appeal because this does not negate the possibility of a remedy within the arbitral proceedings. If, upon consideration of the evidence, the arbitrators reject that fraud has been committed, the subsequent award is not open to avoidance based on S. 1065(1)(e) DCCP, as such an award does not contravene public policy.
B.4 Partial annulment of arbitral awards[6]
In this case, the Supreme Court determined that a partial annulment of an arbitral award is only possible if the award contains several decisions that are not so inextricably linked that they are suitable for separate annulment and that the annulled part can be removed without the rest of the judgment losing cohesion.
In this case, HCCEEH sought annulment of an arbitral award made between it and Alpha, citing a breach of mandate (S. 1065(1)(c) DCCP). During the arbitration, the tribunal had first ruled that HCCEEH should pay some remaining installments of a purchase price under an SPA to Alpha, plus 5% interest per annum. At Alpha’s request, the arbitral tribunal later issued a remedial judgment awarding 10.5% interest. In response, HCCEEH requested the civil court to set aside the award to the extent that it had awarded an interest rate higher than 5% and, alternatively, to set aside the arbitral award in its entirety. The annulment court, in the end, ruled that the decision could not be partially annulled and voided the award in its entirety. Both parties appealed this decision before the Supreme Court.
The Supreme Court held that HCCEH’s appeal was meritorious. It ruled that it could not understand why the award could not be partially annulled, as the annulment court had ruled. It cited that partial annulment of an arbitral award is only possible if the award contains several decisions that are not so inextricably linked that they are suitable for separate annulment and that the annulled part can be removed without the rest of the judgment losing cohesion. It then ruled that it could not understand why the repealed award containing the modified higher percentage could not be partially annulled in such a way that it would leave that interest percentage unmodified.
[1] For more information, including a model clause, please refer to https://www.rechtspraak.nl/English/NCC/Pages/Model-clause-arbitration.aspx
[2] B. Hoebeke and G. Fasfalis, NAI en NAI Jong Oranje Webinar: “The Future of International Arbitration: The Road to Greener Arbitration and Reflections on the upcoming 2022 NAI Arbitration Rules and Recently Revised Arbitration Rules,” TvA 2021/108.
[3] Supreme Court 17 March 2023, ECLI:NL:HR:2023:422.
[4] Supreme Court 21 April 2023, ECLI:NL:HR:2023:636.
[5] Supreme Court 30 September 2022, ECLI:NL:HR:2022:1332.
[6] Supreme Court 24 March 2023, ECLI:NL:HR:2023:438.
