Earlier this year, district and appellate courts in the Netherlands have delivered first judgments in the context of a high-stakes contractual dispute between three fuel companies and Supreme Headquarters Allied Powers Europe (SHAPE) – the headquarters of one of the two NATO strategic commands. A customary immunity from jurisdiction has been recognized to SHAPE, yet has been set aside based on the individual’s right of access to a court. On the other hand, SHAPE’s treaty-based immunity from execution has been upheld, notwithstanding such right of access to a court.

Background

In August 2003, NATO took the command of the International Security Assistance Force (ISAF) in Afghanistan, which had been set up on the basis of UN Security Council Resolution 1386 (2001). The operational command over ISAF was entrusted to Allied Joint Force Command Brunssum (JFCBS) in the Netherlands, a NATO international military headquarters subordinate to SHAPE.

Against that backdrop, JFCBS, acting on behalf of SHAPE, concluded contracts with fuel companies for the supply of aviation and ground fuels and associated products to ISAF. Three of the fuel companies (“the plaintiffs”) also signed an escrow agreement, whereby an escrow account was created for the handling of certain reciprocal payments upon expiry of the contracts. In 2013, the plaintiffs transferred around USD 122 mio on the escrow account as a refund of amounts that had been overcharged to NATO authorities.

In 2016, after expiry of the contracts, the plaintiffs obtained a judicial authorization in the Netherlands to attach sums deposited on the escrow account, in order to secure a claim of over USD 217 mio for unpaid amounts. In the wake of this pre-judgment seizure, they indeed instituted proceedings on the merits against JFCBS and SHAPE before the Limburg District Court. For its part, SHAPE filed an appeal before the same Court against the authorization for attachment.

Immunity from Jurisdiction

In the proceedings on the merits, JFCBS and SHAPE invoked immunity from jurisdiction. In this respect, it is traditionally considered that Article XI(1) of the Protocol of 28 August 1952 on the Status of International Military Headquarters set up pursuant to the North Atlantic Treaty (“the 1952 Protocol”), providing that “a Supreme Headquarters may engage in legal proceedings as claimant or defendant”, points to the absence of immunity from jurisdiction. In its judgment delivered on 8 February 2017, however, the Limburg District Court was more cautious and stated that this provision, interpreted in light of the travaux préparatoires, cannot be read either way, whether as laying down an immunity (as was claimed by JFCBS and SHAPE) or as indicating that there is no immunity (as was alleged by the plaintiffs).

On the other hand, the Court found that both JFCBS and SHAPE enjoy immunity from jurisdiction under customary international law. The Court relied on the well-known 1985 Spaans judgment of the Dutch Supreme Court, in which it was ruled that pursuant to current unwritten international law an international organization is in principle not subjected to the jurisdiction of the courts of the host State in respect of all disputes which have an immediate connection with the performance of the tasks entrusted to the organization – an immediate connection that was found by the Limburg District Court to be present in the case of the conclusion of contracts for the supply of fuel to ISAF. It should be stressed, however, that this Dutch case-law is commonly regarded as relatively isolated and not corresponding to the main position in international jurisprudence, namely that international organizations do not have immunities under customary international law.

Eventually the Limburg District Court nevertheless set aside the customary immunity from jurisdiction recognized to the defendants. Referring to the decision of the European Court of Human Rights in Waite and Kennedy, it considered that the immunity renders the plaintiffs’ right of access to a court, guaranteed under Article 6 of the European Convention on Human Rights, illusory, hence held that it has jurisdiction to hear the case. In this regard, the Court emphasized the lack of reasonable alternative means to protect effectively the rights of the plaintiffs, in particular the absence of genuine dispute settlement mechanisms in the fuel contracts concluded with the plaintiffs – in contrast with a similar contract concluded with a third-party company, which provided for the jurisdiction of the International Chamber of Commerce. Under the contracts signed with the plaintiffs, the only mechanism available was a body set up according to the escrow agreement and composed of persons linked to JFCBS and SHAPE, which the Court did not consider as meeting the Waite and Kennedy requirements to be characterized as a reasonable alternative remedy.

Immunity from Execution

In its appeal against the authorization for attachment, SHAPE relied on its immunity from execution pursuant to Article XI(2) of the 1952 Protocol. Such immunity was upheld by the Limburg District Court in a judgment dated 12 June 2017, and the latter was confirmed in a decision handed down by the Court of Appeals of ‘s-Hertogenbosch on 27 June 2017.

The Court of Appeals first held that, contrary to the plaintiffs’ contention, SHAPE had not waived its immunity from execution through the conclusion of the escrow agreement and the creation of the escrow account. Such a waiver, according to the Court, must be express and decided upon by an organ that has authority to do so, which was not the case here. The judgment is not entirely clear, however, on whether the Court went as far as saying that SHAPE was not allowed to waive the immunity altogether as a result of Article XI(2) failing to provide an explicit basis for such a waiver.

Second, the Court of Appeals rejected the argument that the immunity from execution would entail a disproportionate restriction on the plaintiffs’ right of access to a court. In this connection, the Court primarily relied on the fact that the immunity is consistent with public international law. No explicit reference was made to a possible impact of the availability or not of reasonable alternative remedies, although the Court also briefly alluded to the possibility, for creditors who have chosen to deal with a public international law entity, to take measures to secure the enforcement of the latter’s obligations. This approach echoes the European Court of Human Rights’ case-law pertaining to State immunity rather than that relating to immunities of international organizations (whilst SHAPE was, rightly or wrongly, depicted as an international organization by the Court of Appeals itself). It is true, however, that in Stichting Mothers of Srebrenica and Others v. the Netherlands in 2013 – a case concerning the immunity from jurisdiction of the United Nations – the European Court also mentioned the criterion of the conformity of the immunity with international law.