Arbitration has always played an important role as a dispute settlement method in the Netherlands, and has a two-century history in the country.
As far as the modern Dutch arbitral scene is concerned, the new arbitration act that was adopted in 2014 (2014 Arbitration Act) forms the current framework for arbitral proceedings in the Netherlands. The 2014 Arbitration Act (which entered into force on 1 January 2015) replaced the former Arbitration Act of 1986 (1986 Arbitration Act), which had been in force for almost 30 years.2 The 2014 Arbitration Act is to a large extent included in Book IV of the Dutch Code of Civil Procedure (DCCP),3 and it is divided into two titles. Rather than making a distinction between domestic and international arbitration, Title 1 pertains to arbitration seated in the Netherlands,4 whereas Title 2 relates to arbitral proceedings seated outside the Netherlands.5
The adoption of this approach has the advantage of allowing the courts and parties to avoid disputes that relate to questions of whether cases are domestic or international.6 Moreover, according to some commentators, a sound legal framework for international arbitration can be suitable for domestic arbitration as well.7
The only difference in the treatment of domestic and international arbitrations seated in the Netherlands that could be found in the 1986 Arbitration Act was that it provided parties residing or domiciled outside the Netherlands with different time limits (especially with regards to the appointment and the challenge of arbitrators). Such difference in treatment has been eliminated in the 2014 Arbitration Act.
The 2014 Arbitration Act provides for the assistance of the Dutch judiciary, if necessary, by delegating powers to the president of the district court by, for example, allowing him or her to choose the number of arbitrators in cases where the parties cannot reach an agreement on that issue,8 or giving him or her the power to appoint the delegated judge before whom examination of witnesses can take place.9 Moreover, the court of appeal has the power to set aside awards.10
Over the years, arbitral proceedings have frequently been initiated in the Netherlands, with an increase in the number of users of arbitration, although precise statistics are not available.11 Some commentators suggest that the rising number of arbitral institutions that address the needs of specific industries has contributed to the amount of arbitrations taking place in the Netherlands.12 Around 100 arbitral institutions exist in the Netherlands, with the Netherlands Arbitration Institute (NAI) and the Arbitration Institute for the Construction Industry being the most important arbitral institutions in the country. Other important institutions include PRIME Finance, which deals with financial disputes, and TAMARA, pertaining to maritime and transport arbitration. Other arbitral institutions deal with various areas of trade in commodities (e.g., potatoes, flower bulbs, grain and feed, metal, dried semi-tropical fruits and spices). In addition, the Netherlands is home to the prominent Permanent Court of Arbitration (PCA), which is located in The Hague, and its mandate includes the administration of interstate and investor-state arbitration.
The Netherlands has also signed and ratified the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention).13 The Netherlands made no reservations when ratifying the Convention on 14 October 1963, except for the reciprocity reservation. The Netherlands is also party to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, which was ratified in 1966,14 as well as to almost 100 bilateral investment treaties (BITs)15 and the Energy Charter Treaty (ECT), which is one of the most important multilateral investment treaties.16 EU law has also been a source of influence for the 2014 Arbitration Act.17
II THE YEAR IN REVIEW
i Developments affecting international arbitration
Adoption of the 2014 Arbitration Act
The most notable development pertaining to arbitration in the past few years is, without doubt, the adoption of the 2014 Arbitration Act. Although the 1986 Arbitration Act was perceived to be successful,18 legal practice shed light on specific disadvantages of the system,19 making practitioners support an amendment of the law.20 While the most important UNCITRAL Model Law principles had already been introduced through the 1986 Arbitration Act,21 it was thought that further alignment with the UNCITRAL Model Law would make the Netherlands even more attractive as a place for international arbitration.22 Moreover, the changes made in the laws pertaining to arbitration in various other countries,23 as well as the ones made by institutions in their arbitration rules,24 show that there is an ongoing need for states to keep up with the constantly changing environment of international arbitration.25
For these reasons, several changes have been introduced by the 2014 Arbitration Act.26
The philosophy of the 2014 Arbitration Act is guided by the principle of granting parties procedural freedom and flexibility. For instance, the 2014 Arbitration Act grants the arbitral tribunal power to hold hearings at any place other than the seat of the arbitration, within or outside the Netherlands, and to designate one of its members to hold a hearing, both unless agreed otherwise by the parties.27 It also allows for information and documents to be exchanged electronically, provided the arbitral tribunal has approved the use of such electronic means and unless one or more of the parties to the arbitration have opted out of the use of such means (and provided that the parties have agreed to such opt-out possibility).28
As far as the challenge of arbitrators is concerned, the 2014 Arbitration Act provides that parties to an arbitration may agree that an independent third party, such as an arbitral institution, can also decide on a challenge of an arbitrator, instead of the previously mandatory provision that granted such power exclusively to the president of the district court.29 Similarly, the parties may jointly decide that a third party, and not only the president of the district court, can decide on a party's request to consolidate arbitral proceedings that are either both seated in the Netherlands, or where one is seated in the Netherlands and the other is seated outside the Netherlands.30
Additionally, parties are able to request assistance from the Dutch courts in matters pertaining to arbitral proceedings seated outside the Netherlands, such as interim measures or preliminary witness examinations.31 It is interesting to note that if a party claims before a court that there is a valid arbitration agreement between the parties before submitting a defence, assistance by the Dutch courts can only be granted if the requested measure cannot be obtained, or cannot be obtained in a timely manner, from the arbitral tribunal. The courts do not have to determine whether the invoked arbitration agreement is valid.32
Furthermore, the 2014 Arbitration Act aims to reduce the length of setting-aside proceedings before the Dutch courts by referring such proceedings to the court of appeal (rather than the district court) and by reducing the maximum instances of judicial review from three to two.33 It also allows parties to opt out of the possibility of appeal in cassation against a judgment rendered by the court of appeal, except if a party to the arbitration is a natural person not acting in his or her professional practice.34
In addition, the time period for the application to set aside an arbitral award is three months and starts to run, according to the 2014 Arbitration Act, when the award is sent to the parties or, if the parties have so agreed, when the award is deposited with the registry of the district court. Alternatively, the three-month period may start to run from the day of the service of the award together with a leave for enforcement on a party, irrespective of whether the other two above-mentioned deadlines have lapsed.35
Finally, the 2014 Arbitration Act also provides that if a state, any other legal entity covered by public law or a state-owned company is a party to an arbitration agreement, it may not rely upon its national legislation or regulations for the purpose of contesting its capacity or power to enter into the arbitration agreement, or the susceptibility to submit the dispute to arbitration against counterparties that were not familiar with such limitations.36
Adoption of the 2015 NAI Arbitration Rules
The other notable development pertaining to arbitration in the Netherlands in the past few years is the adoption of the 2015 NAI Arbitration Rules (2015 NAI Rules). These entered into force on 1 January 2015, together with the 2014 Arbitration Act.37 Several changes have been introduced in the 2015 NAI Rules in an effort to adapt them to modern arbitral practice and to bring them in line with the 2014 Arbitration Act.38
Under the 2015 NAI Rules, all requests to and communications with the NAI must be made electronically via e-mail. Moreover, unless the tribunal decides otherwise, all requests, communications or other instruments in writing between the parties and the tribunal shall be made via e-mail if the parties have agreed that they can be reached for such purposes by such means.39
Under the 2010 NAI Arbitration Rules, the default procedure for the appointment of arbitrators was the ‘list procedure'.40 Under the 2015 NAI Rules, parties can now freely select the arbitrators themselves.41 The list procedure remains available as an alternative option.42 Parties can also agree on another procedure for the appointment of arbitrators.43
In addition, the 2015 NAI Rules give parties the opportunity to challenge arbitrators before a third party. That third party shall be a committee appointed by the NAI Executive Board that will decide on requests for challenges against arbitrators.44
Apart from the above-mentioned amendments, the 2015 NAI Rules also contain a new provision on the consolidation of arbitral proceedings. Parties to an arbitration may request the NAI administrator to appoint a third person that will order the consolidation of the arbitral proceedings with other arbitral proceedings pending in the Netherlands or abroad, provided that the NAI Rules apply to both arbitrations, unless the parties agree otherwise.45
The Netherlands Commercial Court
Another notable development is the scheduled introduction of the Netherlands Commercial Court and the Netherlands Commercial Court of Appeal (together: NCC). The legislative proposal, including an explanatory memorandum, was published on 16 December 2016 and was open for consultation until 1 February 2017.46
The NCC are placed as chambers within the Amsterdam District Court and the Amsterdam Court of Appeal, respectively. The NCC will specialise in complex (international) commercial cases, and are meant to offer an alternative to international arbitration, and more costly fora to litigate international disputes such as London, Dubai, Delaware or Singapore.
The most distinctive feature of the NCC is that all proceedings will be conducted in English by specialised judges. Judgments of the NCC will also be rendered in English. The jurisdiction of the NCC is based on party consent. Parties to an ‘international dispute' that is subject to the jurisdiction of the Amsterdam District Court or the Amsterdam Court of Appeals must agree to submit their dispute to the competence of the NCC. Once the choice of the NCC as a forum is established, separate NCC procedural rules - which are yet to be drawn up - will apply alongside Dutch statutory rules of civil procedure. These procedural rules are expected to borrow elements from international arbitration practice, such as case management hearings and the application of principles from the IBA rules on the taking of evidence.47
The NCC will remain within the regular court system, and as such Dutch rules of civil procedure continue to apply. Proceedings will in principle not be confidential. The applicable private international rules on jurisdiction also remain unaffected. Furthermore, the NCC system does not provide for English-language cassation proceedings. Cassation against rulings of the Netherlands Commercial Court of Appeal is only possibly in (regular) Dutch language proceedings with the Dutch Supreme Court (Supreme Court).
The legislative proposal has not yet been submitted to Parliament and is currently being finalised. At the time of writing, the NCC are scheduled to come into force on 1 January 2018.
The 2017 NAI Mediation Rules
A final development is the entry into force of the NAI Mediation Rules as of 1 January 2017. The NAI Mediation Rules provide an opportunity for parties to file a request for (confidential) mediation with the NAI in accordance with the NAI Mediation Rules. The appointment of a mediator follows the same procedure as the appointment of an arbitrator under the NAI Rules. Parties jointly appoint the mediator (or through another agreed process), failing which the NAI secretariat offers the parties a list of eligible mediators to choose a mediator from. If parties are unable to choose a mediator from such list, the NAI secretariat will appoint a mediator from the list itself. The following process then consists of drawing up a mediation agreement and procedural rules.
ii Arbitration developments in local courts
In 2016, the Supreme Court rendered three judgments on the scope of immunity from enforcement in the Netherlands of assets owned by foreign states.48 Based on the UN Convention on Jurisdictional Immunities of States and their Property (UN Convention) and existing case law of the Supreme Court, it has further crystallised its doctrine of a broad presumption of state immunity from enforcement that is subject to limited exceptions.
The first case is the judgment of 30 September 2016 (MSI/Gabon) concerning the conservatory attachment by the Californian company Morning Star International (MSI) of assets owned by the Republic of Gabon.49 The Dutch provisional relief judge granted the conservatory attachment and the bailiff notified the Dutch Minister of Security and Justice thereof pursuant to the applicable provisions of the DCCP. However, upon such notification, the Minister used his statutory power to order the court bailiff to lift the conservatory attachment because it would contravene the state's obligations under international law. The Minister argued that the assets that were placed under attachment fell within the scope of the presumption of state immunity. Since it had not been established that these assets served non-governmental purposes, the Minister argued, this presumption was not rebutted.
Subsequently, the court bailiff initiated provisional relief proceedings between MSI, Gabon and the state to annul the legal consequences of the Minister's order to lift the conservatory attachment. Such annulment, if granted, would have as effect that the court bailiff would no longer be obligated to ensure that the conservatory attachment is lifted. The provisional relief judge raised prejudicial questions to the Supreme Court on, broadly, the following topics:
- a the scope of the presumption of state immunity from enforcement;
- b the burden of proof on the party relying on an exception to state immunity from enforcement;
- c the relevance of the distinction between conservatory and executory attachment; and
- d the compatibility of the presumption of state immunity from enforcement with Article 6 of the European Convention on Human Rights (ECHR) and Dutch law on attachments and execution.
The Supreme Court stated that Dutch law referred to principles of customary rules of international law since there was no treaty in place between the Netherlands and Gabon on the enforcement of judgments and arbitral awards. The legal basis for state immunity from enforcement follows from Article 13a of the General Provisions Act of 1829, which incorporates standards of customary international law into the Dutch legal system of enforcement measures. The Supreme Court stated that part - although not necessarily all - of the UN Convention is to be considered a codification of customary international law, notwithstanding the fact that at the time of writing the UN Convention is not yet in force.50 The relevant provisions from the UN Convention in this context are Articles 18 and 19, which, respectively, relate to sovereign immunity of foreign state property from conservatory and executory attachment.
Relying on its earlier judgments in Azeta/JCR and the Dutch State and Ahmad/The Dutch State,51 and in line with the ICJ judgment in Jurisdictional Immunities of the State,52 the Supreme Court ruled that Article 19 of the UN Convention is a codification of customary international law and is, consequently, applicable under Dutch law. Pursuant to Article 19 of the UN Convention, a foreign state's assets are immune from executory attachment except with the express consent of the state if the state has allocated or earmarked property for the satisfaction of the claim, or where it has been established that the property is specifically in use or intended for use by the state for purposes other than government non-commercial purposes.
The third exception to state immunity (i.e., state property used for non-governmental purposes) is notably absent from Article 18 of the UN Convention, which provision applies specifically to conservatory attachments. However, the Supreme Court decided that this distinctive feature is not a codification of customary international law, and that the exceptions to state immunity from executory attachments contained in Article 19 of the UN Convention apply equally to conservatory attachments. To support this conclusion, the Supreme Court points to the fact that many states provide that the permissibility and non-permissibility of conservatory and executory attachments on a foreign state's assets is equal in scope.
The Supreme Court also held that the presumption of state immunity from enforcement entails that the burden of proof with respect to the capability of certain assets being attached lies with the creditor seeking the attachment. Furthermore, the debtor state is under no obligation to disclose information regarding its assets upon the creditor's request. This means that a creditor that wishes to rely on one of the exceptions to state immunity from enforcement has to furnish the facts supporting such an exception without any reliance on the debtor state.
Finally, the Supreme Court held that the presumption of state immunity from enforcement does not contravene Article 6 ECHR or Dutch law on attachments and executions.
The MSI/Gabon judgment was followed shortly thereafter by two more judgments of the Supreme Court, NN/Dutch State and Dutch State/Servaas,53 in which it confirmed the general presumption of state immunity from enforcement in the Netherlands. Both cases concern the enforcement of arbitral awards by way of the attachment of assets owned by foreign states in the Netherlands. In NN/Dutch State, a creditor sought to enforce an arbitral award against an unnamed foreign state, consisting of a payment for damages for a violation under the ECT. In Dutch State/Servaas, Servaas, an Indiana-incorporated company, sought to enforce a judgment by the French Commercial Court against Iraq.
In both cases, the Dutch provisional relief judge had (conditionally) granted the attachment on certain claims (Dutch State/Servaas) and bank accounts and securities (NN/Dutch State) of the foreign state in question. Both attachments were followed by an order by the Minister for the court bailiff to lift the attachment because it contravened the state's obligations under international law. Both disputes revolved around which party bears the burden of proof regarding the (rebuttal of the) presumption of state immunity from enforcement; and both creditors argued that the attached claims and monies were (at least partly) used for commercial rather than governmental purposes.
In both cases, the Supreme Court confirmed its position in MSI/Gabon. The creditor invoking the exception to state immunity from enforcement, in this case the use or intention of the attached assets for commercial non-governmental purposes, bears the burden of proof of the facts pertaining to that exception. The same applies for claims or monies that are used for both governmental and non-governmental purposes, ‘mixed funds'. To attach mixed funds, a creditor will need to demonstrate the extent to which the funds are intended to be used for a non-governmental purpose. Again, it was confirmed that the debtor state is under no obligation to assist the creditor in this respect or to disclose information regarding its assets for the creditor to meet his or her burden of proof.
Additionally, in NN/Dutch State, the Supreme Court addressed the creditor's argument that the debtor state had implicitly waived its right to immunity from enforcement by being party to the ECT. It argued that this implied waiver follows from, inter alia, Article 26(8) of the ECT, which obliges each party to provide for the effective enforcement of awards under the ECT. The Supreme Court held, however, that the ECT cannot be construed as an implied waiver of immunity from enforcement. Instead, explicit consent from the state is required for a waiver of immunity to be effective. Following the advice of the Advocate General, the Supreme Court also found that the obligations under the ECT can in this case only be invoked against the foreign state against which enforcement was sought, and not the Dutch state, as it was not a party to the arbitration.
On 30 September 2016, the Supreme Court ruled in Qnow/Respondent on the scope of an arbitrator's personal liability for the effects of an annulled arbitral award.54 The Supreme Court expanded upon the Greenworld standard for personal liability of an arbitrator by ruling that the scope of such liability extended to damages resulting from the annulment of an award on procedural grounds.
An arbitral tribunal consisting of three arbitrators had rendered an award in a dispute regarding the price for acquired shares. However, the award was signed only by the chair of the tribunal, not the two co-arbitrators. Pursuant to Article 1057(2) DCCP, it is a formal requirement that all arbitrators sign the arbitral award. The refusal of a minority of the arbitrators to sign the arbitral award is permitted, provided the award makes mention of this. At the request of one of the parties to the arbitration, the District Court of Amsterdam annulled the arbitral award as it was not signed by two (i.e., the majority) of the three arbitrators. Qnow, whose claim had been partially awarded by the arbitral tribunal, attempted to recover its original claim in the regular courts. Its claim, however, had at that point for a large part become time-barred, and was subsequently dismissed.
Qnow initiated separate proceedings against the chair of the arbitral tribunal for failing to procure the signatures of its two co-arbitrators. It claimed compensation for damages resulting from the fact that it could no longer recover most its original claim in the regular courts. Qnow argued that the chair's failure to procure the signatures of the other arbitrators met the Greenworld standard, and that the chair was therefore personally liable for the damages caused by such failure.
Pursuant to Greenworld, an arbitrator may only be held personally liable for the results of the annulment of an arbitral award if the arbitrator, with respect to that award, either acted intentionally or wilfully recklessly, or acted with a manifestly gross misjudgement of the proper performance of his or her duties.55
The Greenworld standard was originally applied in a case where the award was annulled on substantive grounds. In Qnow/Respondent, the Supreme Court ruled that the Greenworld standard applied equally to annulments based on procedural grounds, including those pertaining to the handling of the arbitration. However, whatever the ground for annulment, there must be sufficiently serious personal blame on the part of the arbitrator for the Greenworld standard to be met. Whether this, to an extent objectified, blame is justified will depend on the circumstances of the case.
Applied to the case at hand, the Supreme Court ruled that it is an essential part of the chair's duties that he or she ensures that all arbitrators sign the arbitral award, particularly given that non-fulfilment of this requirement is a ground for annulment. The case was subsequently referred to the Appeals Court of Arnhem-Leeuwarden.
In Nelux cs/Respondents, the Supreme Court ruled on whether the exclusion of appeal against the recognition of foreign awards is in violation of the prohibition on discrimination under Article III of the New York Convention, and, if so, whether such an exclusion of appeal is in violation of Article 6 ECHR.56
Nelux cs had been the respondent in an arbitration seated in the State of New York.57 The claimant later sought to enforce the arbitral award against Nelux cs in the Netherlands. The Dutch provisional relief judge granted the claimant's application for recognition of the arbitral award, but denied the application for a leave for enforcement of the arbitral award.58 Nelux cs appealed the provisional relief judge's decision to grant the application for recognition of the arbitral award, but the Amsterdam Court of Appeals ruled that Dutch law does not provide for the possibility of appeal proceedings against the recognition or non-recognition of foreign or domestic arbitral awards.
Regarding compatibility with Article III of the New York Convention, the Supreme Court ruled that with respect to the enforcement of arbitral awards, Dutch law already provides that a leave for enforcement of domestic arbitral awards is subject to annulment or revocation, but not to appeal.59 In Rosneft/Yukos, the Supreme Court had ruled that the prohibition of discrimination enshrined in Article III of the New York Convention entailed that leave for enforcement of foreign arbitral awards is not subject to appeal either.60 It held that the enforcement of foreign awards would otherwise be subject to ‘substantially more onerous conditions' (within the meaning of Article III of the New York Convention) than the enforcement of domestic awards, which would be in breach of Article III of the New York Convention.
Dutch law does not have a similar provision with respect to the recognition of arbitral awards. Domestic awards that have not been made subject to appeal already become final by operation of law as of the day of the award (i.e., without a court order to that effect).61 Nelux cs argued that, regarding appealability against the recognition of awards, this meant that there can be no ‘substantially more onerous conditions' with respect to the recognition of foreign awards compared to domestic awards. The prohibition of discrimination under the New York Convention would therefore not apply.
The Supreme Court rejected this argument. It ruled that Article III of the New York Convention explicitly relates to both the recognition and enforcement of arbitral awards. The fact that a domestic award becomes final by operation of law, whereas a foreign award is recognised following an order by the court of appeals to that effect, does not mean that the prohibition of discrimination under the New York Convention no longer applies. The Supreme Court affirmed that the recognition of a foreign arbitral award is therefore not subject to appeal.
With respect to Article 6 ECHR, the Supreme Court recalled its ruling in Rosneft/Yukos that the non-appealability of the recognition or leave for enforcement of an arbitral award breaches Article 6 ECHR if, as a result, the party against whom enforcement is sought can no longer benefit from the conducting of a fair trial. This may be the case if there are no legal remedies available against the arbitral award within the regular courts of the country of the seat of arbitration.
Nelux cs argued that this was the case since the period within which annulment of the arbitral award in New York had to be requested had already lapsed. Furthermore, even if Nelux cs had timely lodged such a request in New York, it would have been dismissed since New York law precludes such a request from being granted for a period of three months following the service of the award. The Supreme Court dismissed these arguments. It ruled that the ability to request the annulment of the award in the country of the seat of arbitration in itself establishes that legal remedies were available to Nelux cs. The fact that these remedies were time-barred and limited during a period following the service of the award is the direct result of the parties' choice of the State of New York as the seat of arbitration,62 and do not result in a breach of Article 6 ECHR.
To conclude, the Supreme Court clarified that orders pertaining to both the recognition and the enforcement of foreign arbitral awards are not subject to appeal. Furthermore, it ruled that as long as there are, or at some point were, legal remedies available against the arbitral award within the regular courts of the country of the seat of arbitration, this non-appealability does not amount to a violation of Article 6 ECHR.
In Minera Santa Fe/Qisheng, the Court of Appeals of The Hague ruled on the scope of its standard of review concerning the right to a fair trial in arbitral proceedings.63 The claimant, Minera Santa Fe (MSF), had requested the District Court of The Hague to annul an arbitral award rendered in The Hague, inter alia, on the ground that the award breached public order. The reason, MSF argued, was that the (sole) arbitrator had breached MSF's right to a fair trial by admitting a number of affidavits and an expert report submitted by Qisheng at a late stage in the proceedings without granting MSF sufficient opportunity to adequately address the new evidence.
The request was dismissed, and MSF appealed the decision on multiple grounds, most of which related to whether the arbitrator had breached the right to a fair trial and, in particular, whether the District Court had applied the correct standard of review in this respect. Qisheng argued that the question of whether there had been a breach of the right to a fair trial should be subject to marginal review.
The Court of Appeals conceded that it is indeed established case law that a violation of fundamental principles of due process, including the right to a fair trial, may amount to a breach of public order. It also conceded that it should marginally review whether there has been such a violation to prevent a request for annulment from being a de facto appeal against the arbitral award.64 However, the Court of Appeals ruled that, in line with the earlier Supreme Court ruling in Anova,65 the fundamental nature of the right to a fair trial entails that it should be subject to a full review rather than a marginal review. The Court of Appeals found that the right to a fair trial is no less important in arbitration than it is in regular courts.
On 25 April 2017, the Amsterdam Court of Appeal66 overturned a decision by the Amsterdam District Court67 to set aside an arbitral award in favour of Swiss watchmaker Swatch against US jeweller Tiffany. Instead, the Amsterdam Court of Appeal ruled that there had been no grounds for annulment of the arbitral award.
The arbitration followed the break up of the companies' joint venture in 2011. Swatch had terminated the joint venture agreement, alleging that Tiffany had failed to meet its obligations with respect to its distribution and sales targets as set out in the joint venture's business plan. Although the agreement itself did not contain an express obligation on Tiffany's part to reach those targets, a majority of the three-member tribunal found that such obligation implicitly followed from a reasonable efforts provision contained in the joint venture agreement and ordered Tiffany to pay US$450 million in damages to Swatch.
Swatch argued that, contrary to the findings of the Amsterdam District Court, the tribunal had overstepped its authority, which was expressly limited by the arbitration clause contained in the joint venture agreement. Specifically, the arbitration agreement stated that the tribunal may not ‘change, modify or alter' the terms of the agreement. After having applied Dutch law principles of contract interpretation to frame the scope of the tribunal's authority based on this wording (the joint venture agreement was Dutch law-governed), the Amsterdam Court of Appeal went on to determine whether the tribunal had respected the limits of its authority and acted within the scope of the arbitration agreement. The Amsterdam Court of Appeal analysed the tribunal's contentious decisions, although it acknowledged that it should be mindful not to rule on the merits of the case. It considered - contrary to the Amsterdam District Court - that the tribunal had not gone beyond establishing the meaning of the expressly worded obligations of Tiffany pursuant to the joint venture agreement, and had therefore not exceeded its powers.
iii Investor-state disputes
Yukos: the highest-value arbitration award of all time set aside by a Dutch court
On 18 July 2014, and following three interim awards of 30 November 2009 on jurisdiction and admissibility,68 an investment treaty tribunal seated in The Hague under the 1976 UNCITRAL Rules found in three final awards that certain former shareholders of the defunct oil group Yukos should be compensated for the expropriation of their investment in Russia.69 The tribunal awarded US$50 billion-worth of damages to the claimants, a record-breaking sum in the history of arbitration. The PCA-administered arbitration proceedings were brought under the ECT.
The interim and final awards were challenged by Russia before The Hague District Court, which was competent to hear Russia's claim in the setting aside proceedings as The Hague was the place of arbitration. Among other grounds for setting aside the award, the Russian Federation argued that the tribunal did not have jurisdiction to hear the dispute.
In a judgment of 20 April 2016, The Hague District Court set aside all interim and final awards rendered against Russia. The Hague District Court reached its decision on the ground that the arbitral tribunal that had rendered the awards lacked jurisdiction.70 Accordingly, The Hague District Court annulled the three interim awards of 30 November 2009, as well as the three final awards of 18 July 2014.
In assessing the competence of the tribunal, The Hague District Court examined whether the ECT was provisionally applicable pursuant to Article 45 ECT, and whether the arbitration clause of Article 26 ECT was consistent with Russian law.
With respect to the provisional applicability of the ECT, The Hague District Court found that the wording of Article 45(1) ECT necessitated an examination of each separate article of the ECT to determine whether the provisions contained therein were contrary to the Constitution or other legislation or regulations of the state concerned. The Hague District Court held that the Russian Federation, which never ratified the ECT, was only bound by those provisions of the ECT reconcilable with Russian law, including the 1993 Russian Constitution.
The Hague District Court then considered whether the arbitration clause contained in Article 26 ECT (from which the Tribunal derived its competence) was ‘not inconsistent' with the Russian Constitution, laws or other regulations. Based on the analyses contained in the experts' reports relied on by the Russian Federation, The Hague District Court found that the arbitration clause of Article 26 ECT did not have a legal basis in Russian law and was incompatible with the principles laid down therein. Specifically, The Hague District Court was satisfied that Russian law confines the option of arbitration to civil law disputes, and does not provide a basis for the arbitration of disputes arising from legal relations between foreign investors and the Russian Federation of a predominantly public law nature.
Finally, on the basis of Article 45(1) ECT, The Hague District Court held that the Russian Federation was not bound by the provisional application of (the arbitration clause of) Article 26 ECT based on its signature of the ECT alone. The Court found that the Russian Federation therefore had never made an unconditional offer to arbitrate disputes within the meaning of Article 26 ECT. As a result, the former Yukos shareholders' notice of arbitration served on the Russian Federation did not constitute a valid arbitration agreement, and the tribunal was not competent to hear the case.
The Russian Federation had raised additional grounds for setting aside the awards, including that the tribunal violated its mandate and failed to give reasons for its decision, and that the awards were contrary to public policy. However, in view of the finding that the tribunal lacked jurisdiction, The Hague District Court deemed it unnecessary to consider the other grounds for setting aside the awards that had been invoked by the Russian Federation.
The former Yukos shareholders have lodged an appeal against this decision with The Hague Court of Appeal. They also submitted a bifurcation request to hear arguments regarding the tribunal's jurisdiction first, but this request was denied on 23 January 2017 by The Hague Court of Appeal. At the time of writing, the appeal proceedings are still pending.
A new judgment in the dispute between Chevron and Ecuador
On 20 January 2016, The Hague District Court rendered a decision in annulment proceedings initiated by the Ecuadorian government against interim and partial arbitral awards issued in favour of US petroleum company Chevron.71 In 1964, the Ecuadorian government had awarded TexPet, a subsidiary of Chevron since 2001, with concessions to explore and exploit oil in the Ecuadorian Amazon. This concession agreement was terminated on 6 June 1992. A new agreement between Ecuador, PetroEcuador and TexPet was signed on 30 September 1998. This agreement conditionally released TexPet from the government's and PetroEcuador's claims in relation to the environmental impact of TexPet's exploration and exploitation activities in the area. Furthermore, on 11 May 1997 the US-Ecuador BIT entered into force.
Although TexPet had been released from the government's claims, a group of citizens brought a claim against Chevron before the Court of Lago Agrio for environmental pollution allegedly caused by TexPet's activities in Ecuador. The claim was granted, and TexPet was ordered to pay damages. Chevron and TexPet initiated arbitration proceedings to prevent the enforcement of the above-mentioned decision of the Court of Lago Agrio, requesting a declaration from the tribunal that Ecuador was solely liable for the pollution, and that the court proceedings in Ecuador violated the protections granted by Ecuador to investors under the BIT. The tribunal issued several interim and partial awards.
In the annulment proceedings initiated before The Hague District Court against the interim and partial awards, Ecuador asserted on the basis of Article 1065 DCCP that there was no valid arbitration agreement, that the awards were contrary to public policy and that the arbitrators had exceeded their mandate.
The Hague District Court examined the question of the existence of a valid arbitration agreement, which according to it depended on the qualification of the settlement agreement and the 1998 final release as an ‘investment' under the BIT. The Hague District Court found that the term ‘investment' should be interpreted broadly, and concluded that the dispute between TexPet and Chevron and Ecuador qualified as an ‘investment dispute' within the meaning of the BIT, and that therefore there was a valid arbitration agreement between TexPet, Chevron and Ecuador under Article VI of the BIT. The Hague District Court also rejected Ecuador's argument based on public policy, finding that the fact that the claimants in the Lago Agrio proceedings were left without relief due to the imposition of interim measures was justifiable because the tribunal had sufficiently substantiated suspicions of fraudulent conduct surrounding the Lago Agrio proceedings.
Finally, The Hague District Court rejected Ecuador's assertion that in the fourth interim award, which established a violation of the first and second interim awards, the tribunal had exceeded its mandate due to a lack of substantiation. At the time of writing, the PCA-administered arbitration proceedings are still pending.
PRIME Finance, based in the Netherlands and the first institution in the world to provide arbitration rules for the resolution of financial disputes, signed an agreement with the PCA on 7 December 2015. Under this agreement, the PCA will administer financial market arbitrations under the PRIME Finance Arbitration Rules.
In June 2015, the European Commission initiated infringement proceedings against the Netherlands, Austria, Romania, Slovakia and Sweden due to an alleged failure to terminate their intra-EU BITs. The European Commission argues that it, and not the individual Member States, is competent to conclude intra-EU BITs. On 29 September 2016, the European Commission sent a formal request to the aforementioned countries to terminate their intra-EU BITs.
Finally, the municipality of The Hague is planning to set up The Hague Hearing Centre, a dedicated venue located across from the Peace Palace tailored to, inter alia, hosting hearings in international arbitrations.
III OUTLOOK AND CONCLUSIONS
The Netherlands always strives to stay ahead of developments in arbitration, and the adoption of the 2015 Arbitration Act and the 2015 NAI Rules, inter alia, demonstrates that fact. Moreover, the effective management and adjudication by the Dutch courts of cases relating to arbitration shows the generally pro-arbitration stance of the country. These factors, along with the many bilateral and multilateral investment treaties that the Netherlands has entered into, as well as the presence of prominent arbitral institutions, promise a bright future for arbitration the Netherlands.
1 Marc Krestin is a senior associate and Marc Noldus is an associate at Linklaters LLP.
2 The 2014 Arbitration Act applies to arbitrations initiated on or after 1 January 2015. The former Arbitration Act of 1986 remains applicable to arbitrations initiated before this date.
3 Articles 1020-1076 DCCP.
4 Articles 1020-1073 DCCP.
5 Articles 1074-1076 DCCP.
6 ‘Memorie van Toelichting', (1984) Tijdschrift voor Arbitrage (TvA) 19; HJ Snijders, Nederlands Arbitragerecht (Kluwer, Deventer 2011) 49; W Hugenholtz, Hoofdlijnen van Nederlands burgerlijk procesrecht (Convoy, Dordrecht 2015 24th Edition) 212; AJ van den Berg, R van Delden and HJ Snijders, Netherlands Arbitration Law (Kluwer Law and Taxation, Deventer/Boston 1993) 120.
7 G Meijer and M Paulsson, ‘National Report for the Netherlands', in J Paulsson (ed) International Handbook on Commercial Arbitration (Kluwer Law International 2012) 1; A J van den Berg, R van Delden and H J Snijders (n 6) 120; A J van den Berg, ‘Hoe gastvrij is Nederland voor internationale arbitrage', Lecture given at the Erasmus University Rotterdam - 11 April 1990 (Kluwer, Deventer, 1990) 4.
8 Article 1026(2) DCCP.
9 Article 1041a (1) DCCP.
10 Article 1064a (1) DCCP.
11 HJ Snijders (footnote 6) 45.
12 G Meijer and M Paulsson (footnote 7) 3.
13 Rijkswet 14 October 1963 (Stb 417). The instrument of ratification was deposited with the Secretary-General of the United Nations on 24 April 1964, in accordance with Article VIII(2) of the Convention, and the Convention entered into force on 23 July 1964, pursuant to Article XII(2) of the same Convention.
14 Rijkswet 21 July 1966 (Stb 339). The instrument of ratification was deposited with the World Bank on 14 September 1966, in accordance with Articles 68(2) and 73 of the Convention, and the Convention entered into force on 14 October 1966, pursuant to Article 68(2) of the same Convention.
15 For a list of the bilateral investment treaties signed by the Netherlands, see investmentpolicyhub.unctad.org/IIA.
16 Rijkswet 15 May 1996 (Stb 282). The instrument of ratification was deposited with the Government of the Portuguese Republic on 16 December 1997, in accordance with Articles 39 and 49 of the Treaty, and the Treaty entered into force on 16 April 1998, pursuant to Article 44(1) of the same Treaty.
17 G Meijer, ‘Netherlands' in K Nairn and P Heneghan (eds), Arbitration World (4th edition, Thomson Reuters 2012) 595.
18 A J van den Berg (footnote 7).
19 ‘Toelichting op voorstel tot wijziging van Arbitragewet' (2005) TvA 126.
20 The necessity for an amendment to the 1986 Arbitration Act was expressed while amendments to Book I of the Dutch Code of Civil Procedure were under consideration. See Nota naar aanleiding van het Eindverslag, kamerstukken II 1999/00, 26 855, No. 5, 3, referred to in Toelichting (footnote 19) 126.
21 V Lazic, ‘Arbitration Law Reform in the Netherlands: Formal and Substantive Validity of an Arbitration Agreement', (2007) 11(1) Electronic Journal of Comparative Law 2.
22 Toelichting (footnote 19) 27.
23 Recent examples of new arbitration laws are the new Arbitration Law of Belgium. On 16 May 2013, the House of Representatives of Belgium adopted Bill No. 53-2743, which amends the Sixth Part of the Belgian Code of Civil Procedure; the new Arbitration Law of France, which was adopted on 13 January 2011 (Decree No. 2011-48 of 13 January 2011), and which is embodied in Articles 1442 to 1527 of the French Code of Civil Procedure; and the new Arbitration Law of Saudi Arabia with the enactment of its new Arbitration Law 1433H (2012G). On 9 April 2012, the Council of Ministers approved the New Arbitration Law, and a royal decree on the law was issued on 16 April 2012.
24 Rules that have changed recently include the 2013 arbitration rules of the Belgian Centre for Arbitration and Mediation, the 2014 arbitration rules of the London Court of International Arbitration and the 2012 arbitration rules of the International Chamber of Commerce.
25 E R Meerdink, ‘Symposium herziening arbitragerecht' (2005) TvA 75.
26 Note that the changes commented on in this chapter are based on a selection by the authors and are not limitative or exhaustive.
27 Article 1037(3) DCCP.
28 Article 1072b DCCP.
29 Article 1035(7) DCCP.
30 Article 1046 DCCP.
31 Articles 1074a-1074b DCCP.
32 Article 1074d DCCP.
33 Article 1064a(1) DCCP.
34 Article 1064a(5) DCCP.
35 Article 1064a(2) DCCP.
36 Article 167 Dutch Civil Code (DCC).
37 The 2015 NAI Rules shall apply in the form they have at the time at which the arbitration is initiated (Article 62(2) 2015 NAI Rules).
38 See footnote 26.
39 Article 3 2015 NAI Rules.
40 Article 14 of the 2010 NAI Arbitration Rules.
41 Article 13 2015 NAI Rules.
42 Article 14 2015 NAI Rules
43 Article 13(6) 2015 NAI Rules.
44 Article 19 2015 NAI Rules.
45 Article 39 2015 NAI Rules.
46 The draft legislative proposal and accompanying explanatory memorandum were published online: www.internetconsultatie.nl/ncc. See also C H van Rhee, ‘The Netherlands Commercial Court in an International Context', TvCR 2016/4, pp. 120, 121; D J Oranje ‘The coming into being of the Netherlands Commercial Court', TvCR 2016/4, pp. 122-6; P E Ernste and F E Vermeulen ‘The Netherlands Commercial Court - an attractive venue for international commercial disputes?', TvCR 2016/4, pp. 127-37.
47 DJ Oranje ‘The coming into being of the Netherlands Commercial Court', TvCR 2016/4, p. 125.
48 See S Barten and M Krestin, ‘State Immunity from Enforcement in ‘The Netherlands: Will Creditors be Left Empty-Handed?', Kluwer Arbitration Blog, 25 April 2017.
49 Supreme Court 30 September 2016, ECLI:NL:HR:2016:2236, JOR 2016/353 (MSI/Gabon).
50 The UN Convention will enter into force 30 days after the 30th instrument of ratification, acceptance, approval or accession with the UN Secretary-General. At the time of writing, there are 28 signatories.
51 Supreme Court 11 July 2008, ECLI:NL:HR:2008:BD1387, NJ 2010/525 (Azeta/JCR and the Dutch State) and Supreme Court 28 June 2013, ECLI:NL:HR:2013:45, NJ 2014/453 (Ahmad/The Dutch State).
52 Jurisdictional Immunities of the State (Germany v. Italy: Greece intervening), Judgment, ICJ Reports 2012, p. 99.
53 Supreme Court 14 October 2016, ECLI:NL:HR:2016:2371, JWB 2016/369 (NN/Dutch State) and Supreme Court 14 October 2016, ECLI:NL:HR:2016:2354, JIN 2016/226 (Dutch State/Servaas).
54 Supreme Court 30 September 2016, ECLI:NL:HR:2016:2215, JOR 2016/324 (Qnow/Respondent).
55 Supreme Court 4 December 2009, ECLI:NL:HR:2009:BJ7834, NJ 2011/31 (Greenworld).
56 Supreme Court 31 March 2017, ECLI:NL:HR:2017:555, NJB 2017/857 (Nelux cs/Respondents).
57 Nelux cs had lodged concurrent proceedings with the District Court of Amsterdam arguing that the seat of arbitration was Amsterdam, not New York, and requested annulment of the arbitral award (District Court of Amsterdam 25 May 2016, ECLI:NL:HR:2016:2793, RBP 2016/66 (Nelux cs/Defendants)). The District Court of Amsterdam found, inter alia, that the factual circumstances showed that the seat of arbitration was New York (the parties had not included the seat of arbitration in the arbitration agreement) and that consequently its request for annulment was inadmissible.
58 Under the new arbitration rules, such an application is lodged with the court of appeals, not the provisional relief judge (Article 1075(2) DCCP).
59 Article 1062(3) in connection with Article 1064(1) DCCP.
60 Supreme Court 25 June 2010, ECLI:NL:HR:2010:BM1679, NJ 2012/55 (Rosneft/Yukos).
61 Article 1059(1) DCCP.
62 See also Supreme Court 1 May 2015, ECLI:NL:HR:1194, NJ 2015/454 (Cukurova/Sonera), legal consideration 3.3.5.
63 Court of Appeals of The Hague 10 May 2016, ECLI:NL:GHDHA:2016:3324, NTHR 2016/1 (Minera Santa Fe/Qisheng).
64 Supreme Court 17 January 2003, NJ 2004/384 (IMS/Modsaf-IR).
65 Supreme Court 25 May 2007, NJ 2007/294 (Anova).
66 Amsterdam Court of Appeal 25 April 2017, ECLI:NL:GHAMS:2017:1496.
67 Amsterdam District Court, 4 March 2015, ECLI:NL:RBAMS:2015:1181. For a summary of the decision of the Amsterdam District Court, see our 2015 contribution (Chapter 31) in J H Carter (ed), The International Arbitration Review, Law Business Research Ltd, London, 2015.
68 Hulley Enterprises Limited v. The Russian Federation, UNCITRAL, PCA Case No. AA 226, interim award on jurisdiction and admissibility; Yukos Universal Limited v. The Russian Federation, UNCITRAL, PCA Case No. AA 227, interim award on jurisdiction and admissibility; Veteran Petroleum Limited v. The Russian Federation, UNCITRAL, PCA Case No. AA 228, interim award on jurisdiction and admissibility.
69 Hulley Enterprises Limited v. The Russian Federation, UNCITRAL, PCA Case No. AA 226, final award; Yukos Universal Limited v. The Russian Federation, UNCITRAL, PCA Case No. AA 227, final award; Veteran Petroleum Limited v. The Russian Federation, UNCITRAL, PCA Case No. AA 228, final award.
70 The Hague District Court, 20 April 2016, ECLI:NL:RBDHA:2016:4230.
71 The Hague District Court, 20 January 2016, ECLI:NL:RBDHA:2016:385.