By: Frank Kroes and Mathieu Raas1Frank Kroes is a partner and Mathieu Raas is a senior associate in the Amsterdam office of Baker & McKenzie. They would like to thank Lydia Flinterman, Renée Musters, Joris Oudelaar and Isabelle Spigt for their valuable contributions.
A. Legislation, Trends and Tendencies
A.1 Legislation
On 1 January 2015, a revised Dutch Arbitration Act (the “New Act”) entered into force. It applies to arbitrations with a seat in The Netherlands initiated as from that date and aims to make arbitration more attractive by modernizing and codifying arbitration practice and reducing costs.2The New Act also applies to court litigation with respect to arbitrations commenced as from 1 January 2015. See e.g., District Court Rotterdam September 18, 2015, NJF 2015, 468. The New Act has been incorporated into the Dutch Code of Civil Procedure (the DCCP) and the Dutch Civil Code (the DCC). Reference is made to the previous edition of the Arbitration Yearbook, in which the most notable legislative changes were discussed.
A.2 Trends and Tendencies
The Netherlands features various arbitration institutes. One of the most important institutions is the Netherlands Arbitration Institute (the NAI), founded in 1949 and administering both national and international cases.3Other notable examples of institutes (also) administering international cases are the Court of Arbitration for the Building Industry, PRIME Finance and the Permanent Court of Arbitration seated in the International Peace Palace in The Hague. As a consequence of the New Act, which allows for a large degree of party autonomy, amended arbitration rules of the NAI entered into force on 1 January 2015 (the “NAI Rules”). These revised rules apply to arbitrations commenced on or after 1 January 2015, regardless of the date of conclusion of the arbitration agreement.4A special regime applies with respect to consolidation of proceedings and the decision standard in arbitration, i.e., either: (a) the law; or (b) ex aequo et bono (Articles 39 and 42 NAI Rules 2015, respectively). Below, we discuss some of the most significant amendments reflected in the NAI Rules.
E-Arbitration
The New Act and the NAI Rules create the possibility for arbitration proceedings to be conducted entirely by electronic means.5Article 1072b(1) DCCP and Article 3 NAI Rules 2015. Although the NAI Rules do not expressly stipulate this, on the basis of the New Act, even an arbitral award can be rendered electronically.6Article 1027b(3) DCCP. Cf. Article 43(2) NAI Rules 2015.
Appointment of Arbitrators
The NAI Rules provide for a new default arrangement with respect to the appointment of arbitrators. Previously, a so-called list procedure applied, unless the parties agreed otherwise. The NAI selected from its Panel of Arbitrators candidates suitable for the proceedings at hand and provided both parties with an identical shortlist of at least three times the required amount of arbitrators. Each party could object to certain candidates and rank the remaining candidates in preferential order. Then, the NAI would invite the eligible candidates to act as arbitrators or, in the absence of sufficient remaining candidates, make a direct appointment. The appointed arbitrators chose the presiding arbitrator from among themselves.
Under the revised NAI Rules, should the arbitral tribunal consist of three arbitrators, each party appoints one arbitrator and the two appointed arbitrators appoint the presiding arbitrator. Only if the appointment does not take place within 14 days will the list procedure apply. Should the arbitral tribunal consist of a sole arbitrator, the parties jointly appoint this arbitrator, failing which the list procedure applies.7Article 13(1) and (2) and Article 15(2) NAI Rules 2015. Naturally, the parties are also at liberty to jointly opt in to the list procedure.8Article 14(1) NAI Rules 2015.
Challenge to an Arbitrator
The New Act allows parties to jointly appoint a third party to decide on a challenge to an arbitrator.9Article 1035(7) DCCP. For this purpose, the NAI installed the “NAI Committee,” whose members are appointed by the NAI’s Executive Board.10Article 19 NAI Rules 2015. A party that has reasons to challenge an arbitrator must do so as soon as possible within the arbitration. If it does not, it forfeits its right to do so at a later stage in the arbitration or in court.11Article 19(8) NAI Rules 2015.
Provisional Relief and Summary Arbitration Proceedings
Firstly, pending arbitral proceedings on the merits, a party may request the arbitral tribunal to impose a provisional measure, regardless of whether or not the seat of the arbitration lies in The Netherlands. Secondly, if the seat of the arbitration lies in The Netherlands, in all cases of urgency and regardless of whether or not arbitral proceedings on the merits are pending, a party may request a provisional measure.12Article 35(1) and (2) NAI Rules 2015, respectively. If no proceedings on the merits are pending, the NAI will appoint a sole emergency arbitrator, unless the parties have agreed otherwise with respect to such appointment in summary proceedings.13Article 36(4) NAI Rules 2015. It follows from the New Act that the decision of the arbitral tribunal rendered in main or in summary arbitral proceedings qualifies as an arbitral award, unless the arbitral tribunal decides otherwise.14Article 1043b(4) DCCP. On the basis of the NAI Rules, the arbitral tribunal may qualify its decision as an order.15Article 35(4) NAI Rules 2015.
B. Cases
In this part, we discuss three selected judgments rendered by the Dutch Supreme Court. All three proceedings commenced prior to 1 January 2015 and were governed by the former arbitration act. We note that under the New Act, district courts no longer have jurisdiction to hear setting aside proceedings at first instance. These proceedings are heard directly by the competent court of appeal. Moreover, professional parties may agree to exclude Supreme Court appeals, thereby restricting annulment proceedings to a single court instance.16Article 1064a DCCP.
B.1 International Jurisdiction in Enforcement Proceedings
On 17 April 2015, the Dutch Supreme Court rendered an important judgment on the jurisdiction of the Dutch courts in proceedings regarding the recognition and enforcement of foreign arbitral awards.17Supreme Court 17 April 2015, NJ 2015, 453 (NRSL / Kompas). The formulated rule on jurisdiction was repeated in the judgment Supreme Court 1 May 2015, NJ 2015, 454 (Çukurova / Sonera). It ruled that a Dutch court will always have international jurisdiction with respect to a request for leave for enforcement of an arbitral award rendered abroad. According to the Supreme Court, by nature, enforcement proceedings are sufficiently connected to the Dutch legal sphere to warrant jurisdiction.18Cf. Article 3 sub c DCCP, the forum conveniens provision. Therefore, it is not required that assets on which the requesting party could seek recourse are located in The Netherlands or that such assets will be available in the foreseeable future. Further, the Supreme Court confirmed that the Dutch Courts of Appeal must assess and apply procedural rules on international jurisdiction ex officio, i.e., regardless of whether or not one of the parties raised jurisdictional objections.
On the merits of the case, the Supreme Court noted, among other things, that a prescription or forfeiture of the right to enforce an arbitral award according to the arbitration law of the foreign state in which it was rendered does not constitute a ground for refusal to recognize the arbitral award in The Netherlands.19Article 1076 DCCP.
B.2 Asymmetric Remedies
On 1 May 2015, the Supreme Court rendered a judgment, among other matters, on so-called asymmetric remedies in enforcement proceedings. Dutch procedural law holds that, subject to a few exceptions, no appeal is admissible against the granting of leave for enforcement of an arbitral award.20See Articles 1062(3) and 1064 of the current revised DCCP with respect to domestic arbitral awards. In international cases governed by the New York Convention, the aforementioned provisions apply as a result of Article 1075 DCCP and Article III NYC. In line with this, in the present case, the Court of Appeal declared an appeal against the granting of leave by a District Court for enforcement of a Swiss arbitral award inadmissible.
In an important judgment in one of multiple Yukos v. Rosneft proceedings in The Netherlands,21Supreme Court 25 June 2010, NJ 2012, 55 (Rosneft / Yukos). the Supreme Court had ruled, in brief, that the Dutch asymmetric prohibition of appeal in enforcement proceedings does not violate the principle of equality of arms guaranteed by Article 6 of the European Convention on Human Rights, provided setting aside proceedings are available in the state of the seat of the arbitration. In the present case, the parties had agreed in a jurisdiction clause to waive their rights to commence setting aside proceedings in Switzerland. The Supreme Court ruled, in line with established case law of the European Court of Human Rights, that such an advance waiver does not constitute a breach of Article 6 of the European Convention on Human Rights, provided that it was agreed voluntarily and unequivocally and does not run counter to any important public interest. Therefore, noting that the asymmetric prohibition of appeal did not bring the party that had sought the appeal sufficiently substantive prejudice to conclude that it had been denied a fair trial, the Supreme Court upheld the inadmissibility decision rendered by the Court of Appeal.
B.3 Mandate of the Arbitral Tribunal
In a judgment rendered 22 May 2015, the Supreme Court dismissed a claim for the setting aside of an arbitral award rendered in very lengthy ICC proceedings between a UK producer of military equipment, BAe Systems (BAe) and the Ministry of Defense of Iran (MODSAF) in which no less than five “Final Partial Awards” had been rendered.22Supreme Court 25 May 2015, RvdW 2015, 670 (BAe / Ministry for Defense of Iran). BAe argued before the Dutch courts that the arbitral tribunal had violated its mandate in the Fourth Final Partial Award by allegedly according the status of res judicata to a decision made in the Second Final Partial Award, whereas according to BAe, that decision could and should have been reconsidered.
The Court of Appeal stressed that setting aside proceedings do not serve to reassess potential errors on the merits that an arbitral tribunal may have made. It found that the arbitral tribunal did address the contentions made by the parties. The Court of Appeal understood the arbitral awards in such a way that the party debate prior to the rendering of the Fourth Final Partial Award did not concern the alleged res judicata effect, but, instead, that the parties had sought clarification on various issues. The Supreme Court found that it followed from this factual assessment by the Court of Appeal that the res judicata issue had no longer been a point of debate between the parties in the arbitration. Therefore, the Supreme Court ruled that BAe’s complaint with respect to an alleged violation of the arbitral tribunal’s mandate lacked factual ground.
C. Costs in International Arbitration
Although the DCCP does not expressly vest a power in arbitral tribunals to allocate costs of arbitration, it is widely accepted that arbitral tribunals have an inherent power to do so. The issue of costs is addressed in institutional arbitration rules, such as the NAI Rules 2015.
C.1 Allocation and Recovery of Costs
The NAI Rules provide that costs of arbitration include the costs of administration of the arbitration, fees and disbursements of the arbitrators and costs of legal assistance. However, this list is nonexhaustive, as the relevant provision also refers to “other costs necessarily incurred in the arbitration in the opinion of the arbitral tribunal.”23Article 56 NAI Rules 2015. Hence, costs such as fees of party-appointed experts and witnesses,24Cf. point 8.3 of the Explanatory Memorandum to the NAI Rules 2015. as well as costs of translators and interpreters and logistics, may also be claimed. The arbitral tribunal must test whether or not all costs have been “necessarily” incurred, and this necessity test is said25Costs decisions in NAI arbitral awards are generally not supported by extensive, principled reasoning. With respect to the costs of legal assistance, the test on reasonableness is set out in Article 56 NAI Rules 2015. With respect to other cost items, there is no express basis for (sub) tests on reasonableness and proportionality but these may indeed be implied in the necessity test. to entail a test of the reasonableness and proportionality of the costs claimed.
Under the NAI Rules, costs are generally allocated on the basis of the “loser pays” principle. If each of the parties is only partially successful, the arbitral tribunal may divide all or part of the costs. This may apply, for example, if a claim and/or counterclaim is only granted in part. The NAI Rules allow for a different attribution of costs in special circumstances.26Article 57(2) NAI Rules 2015. In this respect, the arbitral tribunal may take into account the procedural conduct of the parties, such as the causing of unnecessary delay.
With respect to costs of legal assistance, the NAI Rules provide that the arbitral tribunal may order the unsuccessful party to pay reasonable compensation for the successful party’s legal assistance, if and insofar as these costs were necessary in the arbitral tribunal’s opinion.27Article 56 NAI Rules 2015. Cf. NAI Arbitral Award 19 December 2014, TvA 2015, 42. The wording “may” indicates that the arbitral tribunal has considerable discretion in its determination of reasonable compensation for necessarily incurred legal fees.
Legal assistance is generally understood to refer to assistance of outside counsel only. In rare cases, there may be grounds to award costs of in-house counsel (for instance, if a party has not engaged outside counsel).28Such costs may be presented as “other costs” within the meaning of Article 56 NAI Rules, discussed above. If a party contemplates claiming such costs, it is of course advisable to document the time and costs spent on the dispute in sufficient detail.
The arbitral tribunal may provide general guidance for costs submissions in a procedural order or at the hearing. Costs submissions are generally made simultaneously. In light of the necessity and reasonableness tests and the general “loser pays” principle, it is advisable to specify which costs relate to the claim and – if applicable – a counterclaim and/or procedural incidents, such as document requests. As there is no general rule on the required level of detail of costs submissions or on required evidentiary materials, these issues may be approached strategically against the background of, among other factors, costs incurred by the party itself and an educated guess on costs potentially claimed by the opposing party.
On its website, the NAI has published a note addressed to arbitrators with nonbinding guidance as to how their discretion in fixing and allocating costs of legal assistance may be exercised. The NAI notes that application of a cost scale, as applied in Dutch court litigation, is probably not appropriate in international arbitrations, except perhaps in minor cases or in cases with a strong Dutch angle.
C.2 Security for Costs
Under Dutch arbitration law, upon request, an arbitral tribunal may order a party to provide security for the claim or counterclaim and the costs of the arbitral proceedings. Although the New Act does not provide an express basis for security of costs that will be incurred in the main arbitral proceedings, it is argued by reputable authors on the basis of recent history that such should be possible.29Second Chamber, 2012–2013, 33 611, no. 3 (Explanatory Memorandum), p. 30. Indeed, the NAI Rules 2015 provide an express basis to request such security.30Article 35(3) NAI Rules 2015. Whether the same was possible under the NAI Rules 2010 remains subject to debate.31Apparently convinced of such possibility: District Court North-Netherlands 7 October 2015, ECLI:NL:RBNNE:2015:4705.