Amsterdam canal Singel with typical dutch houses and houseboats during morning blue hour, Holland, Netherlands. Used toning

On 24 November 2017, the Netherlands Supreme Court rendered a notable judgment in exequatur proceedings in a case governed by the New York Convention.[1] This judgment has international bearing, as it demonstrates how, according to the highest court in the Netherlands, one aspect of the New York Convention must be interpreted and applied in practice. As per the Vienna Convention on the Law of Treaties,[2] which reflects international custom,[3] such leading views must be taken into account in the interpretation of the New York Convention in other signatory states as well.

This case dealt with an arbitral award that had been rendered in Russia, but was subsequently set aside by the Russian court of first instance, which court judgment had been upheld on appeal and before Russia’s highest federal court. The applicant in the Dutch recognition and enforcement proceedings, Mr. Maximov, however, requested the Dutch courts to essentially bypass the Russian court judgments. He argued that Article V(1)(e) of the New York Convention vested a discretionary power on the Dutch court to do so.

The Netherlands Supreme Court interpreted Article V(1) of the New York Convention and ruled that a national court enjoys a certain margin of appreciation whether or not to recognize and/or grant leave to enforce a foreign award in the event that one (or more) of the grounds for refusal listed in that treaty provision is present. This discretionary power may, however, only be exercised in special cases and alleged facts and circumstances that constitute such special cases must be proven by the applicant.

Focusing on the current situation in which an award had been set aside by the state courts of the seat of the arbitration, the Netherlands Supreme Court mentioned that a special case may exist if the state courts have set aside an award on national legal grounds that (a) do not correspond with the grounds for refusal listed in Article V(1) (a)-(d) of the New York Convention, and (b) are not in accordance with international standards either.[4] Furthermore, a special case may be present if the setting-aside judgment would fail to meet the (minimum) standards that apply in the Netherlands with respect to the potential recognition of a foreign judgment. This exception, according to case law that has been established for about a century,[5] includes the case in which fundamental requirements of due process have been violated in the foreign proceedings.

In the present case, the Court of Appeal had rigorously assessed the Russian court proceedings on the basis of Russian expert evidence furnished by both sides. It found that it was common ground between the experts that under applicable Russian arbitration law at least one valid ground to set aside the award had been present, which related to the obligations on the arbitrators to disclose certain potential conflicts of interest. The Netherlands Supreme Court qualified this ground as a ground within the meaning of Article V(1)(d) of the New York Convention.[6] And even though various curious events had happened along the way in the Russian court proceedings, the Court of Appeal had found that Mr. Maximov had provided insufficient evidence that he had exhausted all national Russian remedies to correct those potential errors. The Netherlands Supreme Court concluded that the Court of Appeal had applied the correct legal tests and, accordingly, denied Mr. Maximov’s appeal.

[1] Netherlands Supreme Court 24 November 2017, ECLI:NL:HR:2017:2992 (Maximov/OJCS Novolipetsky Metallurgichesky Kombinat).

[2] Article 31(3), introduction and sub (b), Vienna Convention on the Law of Treaties.

[3] Netherlands Supreme Court 29 June 1990, ECLI:NL:HR:1990:AD1191 (Nillsen & Noll/Delta Lloyd) and Netherlands Supreme Court 15 September 2017, ECLI:NL:HR:2017:2363 (High Point/KPN).

[4] See eg, J. Paulsson, Enforcing arbitral awards notwithstanding a Local Standard Annulment (LSA), The ICC International Court of Arbitration Bulletin 1998, pages 14- 15.

[5] See eg, Netherlands Supreme Court 14 November 1924, NJ 1925, 91 (Bontmantel).

[6] Article V(1)(d) New York Convention: “The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place […].”