Choice of forum: regular courts (including NCC) vs arbitration

June 16, 2021

Introduction

Although you always want to avoid this wherever possible, when doing business there is always the risk that a dispute arises that cannot be settled amicably. Consequently, it is worthwhile considering what is the best way of resolving any disputes that may arise from your agreement. This blog will provide you with some guidance in respect of the options you have in the Netherlands.

Choose a forum in your agreement

If parties have not agreed in advance who will have jurisdiction in case of a dispute, this will be determined by the conflict of forum rules. If companies from different jurisdictions are involved, this could be a complex assessment. Regulation (EU) No 1215/2012 of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters contains jurisdiction rules for the European Union. However, the result could be far from desirable. Having to litigate at a different place than expected or before a court that is not familiar with the applicable law - the question of jurisdiction and applicable law are two different questions - may come as an unwelcome surprise. Agreeing on a forum with the other party when a dispute exists may be impossible. We therefore recommend to agree beforehand which forum will have exclusive jurisdiction to settle any disputes.

Options in the Netherlands

The most common options when Dutch law applies for a forum selection clause are the regular Dutch courts and arbitration. A foreign court is possible, but this could unnecessarily complicate matters as foreign courts lack knowledge of Dutch law. A relatively new alternative is the Netherlands Commercial Court (the 'NCC'). We could dedicate whole articles about each of the foregoing options, but for now we will briefly touch upon what we believe are their respective main advantages and disadvantages.

Regular Dutch court

There are 11 district courts in the Netherlands. It is possible in commercial agreements to choose which court has jurisdiction. We normally opt for the courts of Amsterdam as it is familiar with complex international commercial agreements and related disputes and due to the closeness of Schiphol Airport.

The advantages of using regular Dutch courts are that they are deemed to be among the best in the world. The World Justice Project ranked the Netherlands third worldwide in respect to civil justice¹. Procedures in the Netherlands are also relatively cost-effective and procedural costs are (with some limited exceptions) only awarded to a limited extent, which makes it also accessible to smaller parties as they do not have to fear large procedural costs claims following a lost case. Dutch judges are highly qualified and independent.

The disadvantages are that proceedings are open for everyone to join, therefore lack confidentiality, and judgements may be published on the website of the Dutch courts or in legal journals. Judges may lack specific expertise in highly specialized matters (although that may be mitigated by the court appointing experts to advise them). The proceedings will be in Dutch (although evidence in English is accepted and some judges will accept English during oral hearings), which necessitates the use of translators. This has to be arranged by the party itself. Proceedings may be further deemed old-fashioned as for most procedures parties are still obliged to submit multiple copies of their documents in hard copy at the court.

NCC

The NCC is part of the Amsterdam district court (and court of appeal) and was founded on January 1, 2019, following Amsterdam's growing role as a prime location for business and a gateway to Europe. The NCC handles international commercial litigation cases by expert judges. The judgements are enforceable in the same manner as judgments of the Dutch courts. Proceedings before the NCC are by default in English and are tailored to handle complex cases the most efficient way. The judges are specialized in large and complex commercial cases. The costs are somewhat higher than regular Dutch courts, but the NCC could be regarded a less costly alternative than arbitration. As with arbitration, the unsuccessful party will in principle bear the costs of the proceedings. In view of this, the NCC has the same advantages as the regular courts, with the additional benefits of the proceedings being conducted in English and the judges being experienced in international matters. The higher costs could be seen as a disadvantage, although they are still significantly below what you may see in some other jurisdictions.

Arbitration

Arbitration is an alternative to regular court proceedings. We see that international companies frequently chose arbitration as a way to resolve disputes.

Some of the advantages are that parties may opt for the proceedings to be confidential. In addition, parties can choose the arbiters, who are generally experts on the subject of the dispute and the language of the proceedings. Arbitration further allows for more flexibility and modern communication. Under the New York Arbitration Convention², arbitral awards are enforceable in a large number of countries.

Some disadvantages are that arbitration is relatively expensive, as in addition to the administrative costs the salary of the arbiters must be paid and full procedural costs could be awarded, which will be borne by the unsuccessful party. The upside of having to pick the arbiters could also be one of the disadvantages, as it may be difficult to agree upon the arbiters. When opting for arbitration, the applicable arbitration rules also are relevant. This is also because it may have a big impact on the costs of arbitration proceedings.

Conclusion

Parties can in general choose which court or arbitration has jurisdiction to settle their dispute. Not making such a choice could lead to the unwelcome surprise of having to litigate in foreign jurisdiction or under other laws than you had anticipated. Therefore, we recommend to give this appropriate attention when preparing an agreement and to make an informed choice. The Netherlands offers parties one of the best and most efficient court systems in the world. A relatively new, additional option is the NCC which also offers expert judges and proceedings in English. Outside of state court litigation, the Netherlands Arbitration Institute gives contracting parties a high-quality alternative if arbitration is the preferred option. Please feel free to reach out to us to discuss which option is best suited for your specific situation. Our IT contracting and litigation teams have negotiated and litigated hundreds of contracts, so can help you reach a well-considered decision.

1. The ranking is based on the measurement whether ordinary people can resolve their grievances peacefully and effectively through the civil justice system. It measures whether civil justice systems are accessible and affordable as well as free of discrimination, corruption, and improper influence by public officials. It examines whether court proceedings are conducted without unreasonable delays and whether decisions are enforced effectively. See the report for 2020 here.
2. The Convention on the Recognition and Enforcement of Foreign Arbitral Awards. The New York Arbitration Convention's website provides a list of states that are a party to the convention and where arbitral awards from other countries are in principle enforceable.

Public link

Please use the above public link if you want to share this noodl on another website.