THE NETHERLANDS
Mathieu Raas
A. LEGISLATION AND RULES
A.1 Legislation
Arbitrations that are seated in the Netherlands continue to be governed by the arbitration act of 1 January 2015. No amendments were made since. For those who might be interested in the key differences between the current arbitration act and its prior version from 1986, I refer to my contribution to the 2015/2016 edition of the Baker & McKenzie Arbitration Yearbook.[1]
A.2 Institutions, Rules and Infrastructure
In 2020, the Netherlands Arbitration Institute published virtual hearing guidelines for arbitrations that are seated in the Netherlands.[2] The guidelines cover topics such as confidentiality and security, online ‘etiquette’ and the examination of witnesses.[3] The Dutch arbitration act provides a framework for virtual hearings, as arbitrations may be conducted “through electronic means”[4] and hearings of witnesses or experts may take place at the time, place and in the manner decided by the arbitral tribunal.[5]
On 19 November 2020, the Court of Arbitration for Arts (CAfA)[6] had its inaugural session. CAfA’s aim is to have complex art-related disputes resolved by experts, such as specialists on provenance, with the Netherlands Arbitration Institute acting as its administrative body. CAfA is seated in The Hague.
B. CASES
B.1 Introduction
In 2020 the Netherlands Supreme Court rendered two notable judgments on the suspension of arbitral awards. Both judgments were delivered in proceedings between the Russian State and three shareholders of the former oil company Yukos. Russia sought to annul a series of arbitral awards that were rendered by the Permanent Court of Arbitration[7] in 2014 and oblige Russia to pay over USD 50 billion in damages.
Russia initially succeeded in having the awards annulled. The judgment by the Court of First Instance was then overturned by the Court of Appeal,[8] as a result of which currently the awards are legally binding again. Russia has made a further appeal before the Supreme Court. As such, this does not suspend the binding force of the awards.[9] However, a debtor of an award may file a motion to the court that has jurisdiction in the setting-aside proceedings and ask it to suspend the creditor’s possibility to execute the award.[10] This is what Russia did before the Netherlands Supreme Court.
B.2 The Netherlands Supreme Court’s first judgment
In its first of the two judgments with respect to the Russian State’s motion to suspend, the Supreme Court confirmed that it has jurisdiction to decide on this matter.[11] Although the Supreme Court based its decision on the former version of the Dutch arbitration act,[12] which is applicable to the case,[13] it noted in passing that the same is true under the current version. It added that although Russia could have initiated summary proceedings in order to seek to suspend the arbitral awards’ effect, that was an alternative legal route; not the only one.
The Supreme Court rejected arguments that had been brought forward by the Yukos shareholders, who had essentially asserted that in setting-aside proceedings only the lower courts have jurisdiction to suspend the effect of arbitral awards. The Supreme Court pointed at the generic reference to “the court” in the relevant provision in the arbitration act, referenced the fact that not only lower courts but also the Supreme Court decides in setting-aside proceedings (albeit with limited scope for review) and noted that there was no basis in Parliamentary history either to support the point of view that the Yukos shareholders had advocated.
B.3 The Netherlands Supreme Court’s second judgment
In its second judgment, the Supreme Court decided to deny Russia’s motion to suspend.[14] It noted that when deciding whether or not to suspend the effect of an arbitral award, a court must (1) form a provisional view with respect to the motion to set aside the arbitral award and (2) weigh the interests of the parties. It also reminded the parties that under applicable Dutch law grounds for the potential setting-aside of an arbitral award are limited and that an arbitral award may only be set aside in compelling cases. It then added that if a court in the prior instance already dismissed a motion to set aside the arbitral award, the next court that decides on the motion to suspend must exercise even more restraint. Finally, the Supreme Court acknowledged that its scope of review of any judgment rendered by a lower court is always limited.
The Supreme Court then shared its provisional view with respect to the legal grounds that Russia had invoked in order to support its motion to set the arbitral awards aside: the alleged (1) absence of a valid arbitration agreement, (2) violation of the arbitrators’ mandate, (3) unlawful composition of the arbitration panel, (4) lack of reasoning and (5) violation of public order. The Supreme Court came to the provisional assessment that the likelihood that Russia’s complaints will result in the setting aside of the arbitral awards is insufficient to suspend the arbitral awards.
In line with the ‘two-step test’ that it formulated at the outset of its judgment, the Supreme Court also weighed the interests of the parties. It noted that, on the one hand, if Russia prevails in the setting-aside proceedings there is a risk that Russia will not be repaid. On the other hand, it will likely not be easy for the Yukos shareholders to collect the vast awarded amount in the first place — still within the final stage of the Supreme Court proceedings. Further, the Supreme Court noted that in view of the approximately USD 2.2 billion in damages that the European Court of Human Rights already awarded to Yukos in 2014,[15] the Yukos shareholders likely have another substantial claim too.
All in all, the Supreme Court denied Russia’s motion to suspend. On the same grounds, it rejected Russia’s alternative motion to order the Yukos shareholders to furnish security.
B.4 Concluding remarks on the two Supreme Court judgments
As outlined above, the two Supreme Court judgments teach us a few things with respect to motions to suspend the binding force of arbitral awards in setting-aside proceedings, particularly if such motion is brought before the Supreme Court itself. Under the current arbitration act, setting-aside proceedings are brought directly before the Court of Appeal.[16] Therefore the Supreme Court is only the second and final stop. When the Court of Appeal dismissed a debtor’s claim to set an arbitral award aside, chances seem to be slim that the Supreme Court will grant a motion to suspend the arbitral award’s effect.
Both the duration of and the amount at stake in the proceedings between the Yukos shareholders and Russia is unusual. In more common cases, weighing the interests of an award’s debtor and creditor may have a different outcome.
The arbitration world is now looking forward to the final judgment from the Supreme Court in the setting-aside proceedings.
[1] https://www.globalarbitrationnews.com/arbitration-yearbook-2016-netherlands/.
[2] https://www.nai-nl.org/downloads/Virtual%20hearing%20guidelines.pdf.
[3] For example, according to the guidelines the view of the witness must be clear and no virtual background may be used (Articles 3(b)(ii) and 3(f) of the guidelines). For those who work from home, it may be helpful to know that “[i]f so requested, the participants should be prepared to show a 360° view of the room in which they are situated” (Article 2(h) of the guidelines).
[4] Article 1072b Dutch Code of Civil Proceedings (“DCCP”).
[5] Article 1041(3) DCCP.
[6] https://www.cafa.world/arbitration/.
[7] The Permanent Court of Arbitration administers international arbitrations. It is seated in The Hague.
[8] The Hague District Court, 20 April 2016, ECLI:NL:RBDHA:2016:4229 and the Hague Court of Appeal, 25 September 2018, ECLI:NL:GHDHA:2018:2476 and 18 February 2020, ECLI:NL:GHDHA:2020:234.
[9] Article 1066(1) DCCP.
[10] Article 1066(2) DCCP (both in its prior version and in the version that applies since 2015) and Article VI New York Convention.
[11] Netherlands Supreme Court, 25 September 2020, ECLI:NL:HR:2020:1511.
[12] Article 1066(2) (old) DCCP.
[13] The arbitral awards were rendered in 2014, prior to the entry into force on 1 January 2015 of the current arbitration act.
[14] Netherlands Supreme Court, 4 December 2020, ECLI:NL:HR:2020:1952.
[15] European Court of Human Rights, 31 July 2014, application 14902/04, ECLI:NL:XX:2014:376.
[16] Article 1064a(1) DCCP.
