Challenging arbitral awards in the Netherlands
Adria's challenge of arbitral award
Judicial review

The District Court of The Hague recently rejected a claim to annul an arbitral award rendered in favour of the Republic of Croatia against Austrian casino company Adria Beteiligungs GmbH.(1) After its earlier ruling in the Chevron case,(2) where the same court upheld an arbitral award rendered in proceedings against Ecuador in favour of US energy company Chevron, the court again showed that Dutch courts are arbitration friendly and reluctant to quash arbitral awards.


In 1989 and 1990 Adria entered into two joint venture agreements with the state-owned Croatian Lottery(3) in order to exploit gaming arcades and casinos in Croatia, which at the time was still part of Yugoslavia. Following the start of the war of independence in 1991, the ventures suffered a downturn. In 1994 the Croatian Lottery terminated the joint venture agreements, due to poor commercial performance and a management deadlock. Adria commenced legal proceedings in Croatia against the company, claiming compensation for its investment. In 2002 the Croatian courts ordered the company to pay €4.5 million to Adria, which it paid in full.


Adria was not content with the outcome of the legal proceedings and in 2007 commenced United Nations Commission on International Trade Law arbitral proceedings in The Hague against Croatia. Adria claimed compensation of $64 million. Adria asserted that it had made significant investments in the gambling industry in Croatia by participating in the joint ventures. Adria alleged that funds from these ventures were used by Croatia to fund the war, and that Adria's problems stemmed from Croatia's effort to rid its economy of Austrian capital. According to Adria, Croatia's actions constituted an unlawful expropriation and a violation of the fair and equitable treatment obligation under the bilateral investment treaty concluded between Austria and Yugoslavia in 1989 and the 1997 bilateral investment treaty between Austria and Croatia.

In its final award of June 21 2010 the tribunal rejected Adria's claims. The tribunal held that the dispute between Adria and the Croatian Lottery was of a purely commercial nature and that Croatia had not violated its obligations under international law. The tribunal found that Adria had been given a full and fair hearing of its claims before the Croatian courts, and had received compensation for the loss of its investments.

In its final award, the tribunal re-examined its jurisdiction. Contrary to its interim award, when the tribunal held that it had jurisdiction regarding the claims submitted by Adria, the tribunal ruled in its final award that it had no jurisdiction in relation to claims that had been assigned by Adria to a different company within the group. During the preparation of its rejoinder, Croatia had become aware of the assignment and requested the tribunal to re-examine the issue of jurisdiction. Adria argued that Croatia's objections should be disregarded, as these were not raised in a timely manner. The tribunal rejected Adria's argument, because even though Adria itself was aware of the assignment, it had not expressly revealed this information. As both Adria and Croatia were given the opportunity to plead and file submissions on the issue of jurisdiction at the merits stage, the tribunal held that none of the parties would be prejudiced by allowing and ruling on Croatia's objections.

Adria did not agree with the arbitral award and, in September 2010, commenced proceedings challenging the arbitral award before the district court of The Hague.

Challenging arbitral awards in the Netherlands

Pursuant to Article 1065 of the Code of Civil Procedure, arbitral awards can be annulled only on the basis of the following limited grounds:

  • There was no valid arbitration agreement;
  • The composition of the tribunal was constituted in violation of the applicable rules;
  • The tribunal did not comply with its mandate;
  • The arbitral award was not signed by the tribunal or the arbitral award lacks any reasons; or
  • The arbitral award is contrary to public policy or good morals.

This list is largely based on Article V of the New York Convention,(4) which sets out the grounds for refusal of the recognition and enforcement of arbitral awards. The following grounds set forth in Article V of the New York Convention are not found in Article 1065 of the Code of Civil Procedure:

  • The subject matter of the dispute was not capable of settlement by arbitration (Article V(2)(a));
  • The party against which the arbitral award has been issued was unable to present its case before the tribunal (Article V(1)(b)); and
  • The arbitral award has not yet become binding (Article V(1)(e)).

Under the Code of Civil Procedure, if the subject matter of the dispute was incapable of settlement by arbitration, the party challenging the arbitral award can claim that there was no valid arbitration agreement. If a party was unable to present its case to the tribunal, it can challenge the arbitral award, claiming that the tribunal acted in violation of its mandate or that the arbitral award is contrary to public policy. Finally, Article 1064 (not Article 1065) stipulates that arbitral awards can be challenged only if they are binding.

Adria's challenge of arbitral award

Adria challenged the arbitral award on several grounds set out in Article 1065 of the Code of Civil Procedure. Where the tribunal reconsidered its position on jurisdiction over the assigned claims, Adria argued that the tribunal:

  • had violated the principle of res juridicata (ie, the matter has already been judged);
  • had provided inadequate reasons for this re-examination; and
  • had not complied with its mandate by refusing to rule on the assigned claims.

The Dutch court found that the tribunal – in light of the new evidence in relation to the assignment – was not bound by its interim award. The interim award had been based on incorrect facts. Not allowing the tribunal to reconsider its position on jurisdiction would mean that the final award would be based on the same incorrect facts. This would have been an "incongruity". The court also rejected the other grounds.

Judicial review

In its judgment, the District Court of The Hague reiterated that restraint should be exercised when assessing grounds to challenge arbitral awards, and that the grounds for such challenge - with a few exceptions - are subject to only a limited judicial review.

Arbitral awards cannot be set aside as a result of the absence of adequate reasons – as also argued by Adria. Only arbitral awards lacking any reasons can be set aside by courts under Article 1065 of the Code of Civil Procedure. A situation in which reasons are given, but no convincing explanation for the relevant decision can be found among these reasons, must be equated to the absence of any reasons. An incorrect interpretation of applicable legal rules is insufficient to quash an arbitral award on this ground.

If the tribunal fails to address an essential argument, the arbitral award can be set aside because the tribunal has not complied with its mandate. Pursuant to Dutch case law, essential arguments and defences should be explicitly addressed and reasoned by a tribunal in its award.

If the substance of an arbitral award or the manner in which it came about is contrary to public policy, it can be set aside. However, only violations of fundamental rights of a substantial or procedural nature can result in such an annulment. The courts will exercise restraint when assessing this ground. Nevertheless, where a tribunal has allegedly neglected to hear both sides, the courts will apply a full judicial review. This principle of equality of arms is a fundamental procedural right in both arbitration and court proceedings. Other violations of due process are subject to a limited judicial review.

Another example of a full judicial review is the validity of an arbitration agreement. This was at issue in the Chevron case. Ecuador initiated annulment proceedings before the court of The Hague against Chevron and its subsidiary Texaco in an attempt to challenge three arbitral awards rendered in favour of Chevron and Texaco. Ecuador argued that there was no valid arbitration agreement. The Dutch court held that the settlement of disputes by national courts is a fundamental right pursuant to Article 17 of the Constitution(5) and Article 6 of the European Convention on Human Rights.(6) To protect this fundamental right, the question of whether a valid arbitration agreement exists should be subject to a full judicial review. However, this full judicial review is limited to the questions of whether a valid arbitration agreement exists and whether, as a consequence, parties are prevented against their will from being heard by the courts to which they are entitled to apply under the law.


In Adria the District Court of The Hague again showed its reluctance to set aside arbitral awards. This judgment is in line with the earlier judgment by the same court in Chevron.

In both judgments, the court reiterated the test for review of the annulment grounds as developed in Dutch case law. Only claims that there was no arbitration agreement or that the tribunal neglected to hear both parties during the arbitration will be subject to a full judicial review. Otherwise, only a limited review will take place.

Both Chevron and Adria reconfirm the reluctance of Dutch courts to set aside arbitral awards. These cases reiterate the Supreme Court's ruling in IMS/Iran(7) that annulment proceedings should not be used to appeal arbitral awards, and that the general interest to have effectively functioning arbitral proceedings entails that the civil courts should intervene only in apparent cases.

For further information on this topic please contact Juliette Luycks or Stana Maric at Clifford Chance LLP by telephone (+31 20 711 9000), fax (+31 20 711 9024) or e-mail (juliette.luycks@cliffordchance.com or stana.maric@cliffordchance.com).


(1) District court of The Hague, August 15 2012, LJN: BX6825.

(2) District court of The Hague, May 2 2012, LJN: BW5493.

(3) The Croatian Lottery was changed to a limited liability company in 1992.

(4) The Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958. Article V of the New York Convention does not list the non-singing of the arbitral award or the absence of any reasoning in the arbitral award as a ground to refuse the recognition or enforcement of arbitral awards.

(5) No one may be prevented against his or her will from being heard by the courts to which he or she is entitled to apply under the law.

(6) In the determination of his or her civil rights and obligations or of any criminal charge against him or her, everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law.

(7) Decision of the Hoge Raad, January 17 2003, NJ 2004, 384.