In a May 25 2016 decision the Amsterdam District Court found that it had no jurisdiction over setting-aside proceedings challenging an arbitral award. According to Article 1074 of the Code of Civil Procedure, a Dutch court cannot exercise jurisdiction when the arbitration agreement determines that the place of arbitration is outside the Netherlands. This may be different when proceedings are initiated to enforce an award or receive recognition of an award issued abroad. In this case, the place of arbitration had not been determined in the agreement and the arbitrator had not included the place of arbitration in the text of the award. The court therefore had to engage in an interpretative exercise.
The claimants and respondents had been in a legal relationship since 1992, when Nelux Holdings International NV and Lawton Corporation NV (the claimants) provided loans of tens of millions of US dollars to several entities (the respondents). When the respondents failed to pay off the loans and interest, the parties entered into a forbearance and settlement agreement in 2001, which also included an arbitration agreement. When the obligations were still not met, the respondents' lawyer suggested an alternative payment method. Instead of concluding a new agreement, the respondents' lawyer requested that the suggested transactions be arranged through arbitration.
An arbitral tribunal consisting of one arbitrator found that the respondents Nelux and Lawton (claimants in the Dutch court proceedings) were "not entitled to any further payments under the Settlement Agreement". In the case before the court, the claimants contested the validity of the award and requested that it be set aside.
Dutch procedural law not applicable
For a Dutch court to be competent in setting aside proceedings, the Netherlands must be the place of arbitration.(1) The place of arbitration is determined according to the criteria set out in Article 1037 of the Code of Civil Procedure. The arbitration agreement should be examined first. When the agreement is silent on the seat, the place where the award was issued can be used as an alternative (Sub-section 2). In the case at hand, neither the arbitration agreement nor the award mentioned the place of arbitration.
When an arbitral award fails to mention the place of arbitration, Articles 1058 and 1060 of the Code of Civil Procedure can rectify this mistake by including the place of arbitration in the award within 30 days after 'depositing' (ie, when the award is officially filed with the court registry in the same place as the seat of arbitration). However, this is a remedy under Dutch law and therefore available only when the final award is issued in the Netherlands, which was disputed by the parties in this case.
The court found that the use of language in the 2001 forbearance and settlement agreement (eg, "entering of a judgment") and the use of a different deadline than that prescribed in the Code of Civil Procedure resembled the US Federal Arbitration Act, rather than the Dutch Code of Civil Procedure. Although the award had been filed at the Amsterdam District Court, this had been done unilaterally and without the arbitrator's knowledge. This action did not qualify as 'depositing' under Article 1058 of the code and there was therefore no reason to assume that the parties had intended Articles 1058 and 1060 of the code, or Dutch procedural law in general, to be applicable.
Alternative approach in line with New York Convention
Dutch procedural law offered no solution to the court's jurisdiction problem and it therefore had to resort to an alternative approach. The court first found that the place of arbitration would most likely correspond with where the award had actually been drafted. The court subsequently considered that, given the fact that the arbitrator held his office in New York – where he also had the decision drawn up by notarial deed – it was unlikely that the award had been compiled in the Netherlands. The arbitrator's witness statement confirmed the presumption that the arbitrator had been in New York at the time of drafting.
Although the parties had appointed the Dutch courts by choice of forum in the 2001 forbearance and settlement agreement, the court held that the parties were not free to appoint the competent authority when it came to setting-aside proceedings.(2) With reference to the New York Convention – to which the Netherlands is a party – the court found that the setting aside of an arbitral award is open only to the court of:
- the country of origin; or
- the country whose procedural laws applied to the decision.(3)
The court had earlier established that New York was the place of the arbitral seat. As it was unlikely that the arbitrator had applied Dutch procedural law (which was not prescribed by the agreement), there were no connecting factors between the award and the Netherlands. The court therefore declared that it lacked jurisdiction.
The Amsterdam District Court's decision is a good example of Dutch contractual interpretation, underlining a focus on the parties' intentions. The 2001 forbearance and settlement agreement contained typical US legal procedural terms such as "entering a judgment" and "evidence by affidavit". The use of these terms gave the court sufficient reason to believe that the agreement had been tailored to US rather than Dutch procedural law. However, the parties' intentions and contractual freedoms did not prevail on all points. The decision illustrates an unwillingness to extend jurisdiction to matters usually reserved for the courts in the award's country of origin. In line with the New York Convention, the court ignored the parties' explicit choice of forum as included in the agreement and left the setting aside to the New York courts.
For further information on this topic please contact Carlijn van Rest or Alfred Hoogveld at Hogan Lovells International by telephone (+31 20 55 33 600) or email (firstname.lastname@example.org or email@example.com). The Hogan Lovells International website can be accessed at www.hoganlovells.com.
(1) Articles 1064 and 1073 of the Code of Civil Procedure. For arbitrations outside the Netherlands, Dutch courts may have jurisdiction if one of the exceptions formulated in Articles 1074 onwards applies.
(2) Articles 1074 onwards of the Code of Civil Procedure apply when the place of arbitration is outside the Netherlands. However, these articles are silent on the setting aside of a foreign award by a Dutch court.
(3) Article V(1)(e) of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958).
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