Brexit strengthens Netherlands commercial court as forum for international disputes

Brexit has increased the appeal of the specialised Netherlands Commercial Court (NCC) as forum for international commercial disputes, particularly in the areas of judicial cooperation in civil and commercial cases, which is not mentioned in the EU-UK Trade and Cooperation Agreement. As for enforcement of judgments, the Brussels Ibis Regulation on jurisdiction and enforcement on judgments no longer applies to the UK. In comparison, the NCC does not have jurisdiction and enforcement issues, which is considered one of its strongest characteristics.

In this article we will describe the unique selling points of the NCC in combination with the consequences of Brexit on litigation.

NCC

The Netherlands Commercial Court (NCC) was created by legislation effective 1 January 2019 and opened its door at the Palace of Justice in Amsterdam on 6 February 2019. The NCC is a specialised multiple commercial chamber of the Amsterdam District Court and the Amsterdam Court of Appeal with the mandate of conducting international trade disputes for parties that have expressly agreed to litigate in English.

The Minister of Justice and the Council for the Judiciary felt the NCC was not only necessary for improving Dutch competitiveness, but would be an asset to entrepreneurs and the business climate in the Netherlands.

The minister stated that "the NCC will contribute to lowering costs for Dutch companies who will no longer feel it necessary to litigate in other, mostly expensive Anglo Saxon countries, faster economic suits as a result of shorter lead times, and greater turnover for the high-quality Dutch legal profession."

The Dutch judiciary is ranked among the most efficient, reliable and transparent worldwide. (It is in the top three over all). The Dutch courts are in the top five of the fastest courts in the EU with an average of 130 days from a notice to appear to a final judgment, according to the EU Justice Scoreboard. The Netherlands is also an ideal forum for litigation in which the defendant or its assets are not located in the country. Dutch court judgments are among the most widely enforceable judgments worldwide. This is the result of instruments such as the Brussels Regulation, the Lugano Convention and the Hague Convention on the recognition and enforcement of foreign judgments in civil and commercial matters. Dutch court judgments are easily enforceable in over 30 other jurisdictions, including five outside the EU. In addition, Dutch decisions are generally also enforceable in most US states, Canada, Singapore, Hong Kong, Australia and New Zealand. This makes Dutch judgments enforceable and valuable well beyond the borders of the Netherlands.

This feature among others makes the NCC stand out against the commercial courts in other countries.

Characteristics

The following distinguishing features of the NCC proceedings can be extracted from the NCC rules for proceedings (NCCR):

• Each case will be litigated by multiple judges with experience in complex international commercial disputes.
• The court process will be held entirely in English.
• The procedure may be customised, such as with evidence.
• In order to facilitate international legal practice, the NCC uses efficient and modern ways of communication.
• Execution is possible without consent from the EU.

Below is a list of the NCC's unique selling points.

Experienced judges

A special pool of judges with extensive experience in complex international disputes will be selected for the NCC in order to guarantee quality. The NCC will always operate with multiple judges. The NCC judges are chosen from existing personnel in the judiciary. At the moment, six part-time judges have been selected for the NCC and four counsellors have been chosen for the initial phase of the Netherlands Commercial Court of Appeals (NCCA).

The authority of the NCC is directed by draft law amendment article 30r of the Dutch Code of Civil Procedure (DCCP) and 1.3 NCCR. Also, the NCC can only hear an international dispute. In short, an international dispute has links with more than one legal system. If everything indicates that only one country is involved, the dispute is seen as an internal dispute. Ultimately, the judges will make this determination.

English

English is the main language in international commercial practice for both large and small companies. For this reason, disputes are preferably solved in English. At present, if parties wish to litigate in English, they must choose arbitration or a foreign court judge. Costs in he Netherlands for lawyers and experts are relatively low compared to countries such as the UK or US. The legislator believes that the possibility to litigate in English will move parties to choose the NCC.

At the NCC, the entire litigation process is in English: documents, hearing and verdict. Documents in Dutch, English and German are not translated, except if the judge decides otherwise. If parties wish to appeal, the hearing will not be in English.

Customised

The NCC advocates customisation of procedures. This means that every individual case is examined to see what is needed to ensure a correct procedure. There will often be a pre-trial review in which the procedural claims and further steps in the proceedings are determined. This will be done in consultation with the parties.

Dutch civil procedural law was chosen as the starting point for the design of the NCCR. A number of principles have been adopted in part or in full for a 'correct understanding' of Dutch procedural law. The NCCR is an addition and not a replacement of the valid rules of procedure.

The NCCR has implemented various options that allow parties to tailor the best dispute resolution mechanism to suit their needs. In doing so, attention is paid to international legal practice. The options are structured in such a way to meet the customisation requested by the parties as much as possible when the legal relationship is established (i.e. through the dispute settlement clause).

The NCCR offers the following possibilities:

• video and audio recordings of hearings (article 7.7.2 NCCR);
• hearing documented by a court reporter (article 7.7.3 NCCR);
• a chamber that documents the confidentiality of the documents (article 8.4.2 NCCR);
• choice of a different law of evidence than Dutch law (article 8.3 NCCR); and
• request for written declaration before deposition (article 8.5.2 NCCR).

As stated, Dutch civil procedural law, including the law of evidence, is the starting point for the NCCR. Fishing expeditions will not be considered.

According to the Council, options for obtaining evidence and information are embedded in effective safeguards, such as with the preliminary witness examination and the article 843a DCCP claim.

In regard to evidence, however, Dutch law differs from prevailing international rules as set down in the IBA Rules on Taking of Evidence in International Arbitration. The IBA Rules can be applied if parties agree and can be noted in the choice of court agreements when choosing the NCC.

Access

Article 30r DCCP and article 1.3 NCCR prescribe that the choice of forum for the NCC must be done "in writing", and "explicitly". Parties must regulate the applicability of the NCC in a choice of court agreement. Tacit acceptance of an NCC clause is not sufficient (e.g. in the general terms and conditions). Parties must also explicitly choose the English language. Choosing the NCC can also be agreed upon after the dispute has arisen. The NCC may also be chosen in cases where the preliminary rulings judge has authorised, such as in interim proceedings, a request for account preservation or a request for a cross-border European procedure for the attachment of bank accounts. Even the elimination of a settlement by arbitration can take place at the NCCA, provided that Amsterdam has been chosen as the place of arbitration.

Parties also need to take into account the higher court fees and possible higher court costs for access to the NCC in comparison to standard court cases in the Netherlands. Court fees for interim proceedings are EUR 7,500; parties must count on EUR 15,000 in court fees in main proceedings, and EUR 20,000 for appeals. In principle, the agreement between the parties follows the legal costs order (article 10.2 NCCR). If no agreement is made, higher NCC liquidation costs are charged (EUR 1,000 to EUR 12,000 per point). The reason behind these increased court fees is that the NCC procedure should cover costs as much as possible and not weigh on mainstream case law.

The interests of internationally operating Dutch companies can also be served by choosing the NCC since the procedure is reliable, innovative and efficient. For those who already want to advise the NCC, a model for the NCC clause is included in the NCCR on page 23 in both Dutch and English.

Brexit

In recent decades, the Commercial Court in London has held the leading position as the most popular jurisdiction for resolving commercial disputes. However, this might change due Brexit's effect on the enforceability of judgments by the London Commercial Court within the EU.

As stated in the introduction, Brexit has had an effect on litigation since the Brussels Ibis Regulation on jurisdiction and enforcement of judgments no longer applies to the UK. Pursuant to the Withdrawal Agreement, transitional provisions provide for continued application to proceedings (including judgments) started prior to 31 December 2020. Judgments issued on the basis of a jurisdiction clause governed by the 2005 Hague Choice of Court Convention will be mutually recognised by the UK and EU. The Hague Convention regime is not comparable with the Brussels Ibis Regulation since it is more limited in its scope.

One of the Brussels Ibis Regulation objectives is to make cross-border recognition and enforcement of judgments by courts in other EU member states less time consuming and costly. To that extent, the Brussels Ibis Regulation establishes a framework that enables a party to enforce a judgment rendered by the courts of a EU member state against assets located in another EU member state (i.e. as if the judgment had been rendered in the EU member state where enforcement is sought). This can quite easily be achieved by taking immediate enforcement measures instead of applying for a 'declaration of enforceability' before the relevant local court.

In summary, proceedings in the UK commenced before the end of the Brexit transition period will still benefit from the flexible provisions of the Brussels Ibis Regulation. Proceedings in the UK commencing from 1 January 2021 will not. This could be to the advantage of other commercial courts such as the NCC. The Netherlands joined the Brussels Ibis Regulation, as well as many other EU regulations. Dutch court judgments are enforceable in the EU, Switzerland, Norway, Iceland and the Kingdom of the Netherlands (the Netherlands, Aruba, Bonaire, Curacao, St Martin, St Eustace and Saba) without any declaration of enforceability being required. This means that a judgment is immediately enforceable by the competent enforcement authority. The enforcement of Dutch court judgments outside the EU is governed by conventions to which the Netherlands is a party and by general private international law in the jurisdiction where enforcement is sought. In general, these conventions require a declaration of enforceability by the court in that jurisdiction. (These are often simplified proceedings whereby a judgment on the application is usually given within a few weeks).

Conclusion

The effect of Brexit on litigation strengthens the position of the NCC as an ad hoc forum for international disputes. Although plans for the establishment of the NCC were initiated long before any discussion commenced about a Brexit referendum, the judiciary and the establishment of the NCC is ready.

For more information on the NCC and arbitration in the Netherlands, contact your CMS partner or local CMS experts: Brigitta Jakic and Bart-Adriaan de Ruijter, corporate litigation and commercial law experts, CMS Amsterdam.