The Role of the Netherlands in International Arbitration

Transcript:

Daniel: Welcome back to the latest episode of Arbitral Insights. I'm your host today, Daniel Avila. I am part of the international arbitration team here at Reed Smith. I was the former international law section chair of the Houston Bar and currently on the international law section of the Texas Bar Association, as well as part of the Institute for Transnational Arbitration America's initiative. As part of my practice in international arbitration and treaty arbitration, our team deals a lot with bilateral investment treaties where one of the parties is the Netherlands. So of course, that was the inspiration of this podcast, the role of the Netherlands in international arbitration. And with me today, I have two fantastic speakers from the Netherlands, one now based in Texas. We have Gerard Meijer and Marieke Witkamp. Marieke, do you mind giving a little background on yourself?

Marieke: Yeah, thanks, Daniel, for having me on the podcast. It's really an honor to have this conversation with you. Yeah, a little bit about me. I am a retired Dutch commercial judge and I'm now based in Houston as a full-time arbitrator. I mainly deal with international commercial disputes. I also worked as an in-house counsel and as arbitration attorney for a few years in Qatar. As you said, licensed in Texas and in the Netherlands. I'm a fellow of the Chartered Institute of Arbitrators. Happy to talk about the Netherlands today.

Daniel: Awesome. Well, thank you very much. And we also have Gerard, do you mind giving a little background on yourself as well?

Gerard: Yeah, happy to do so. And it's great to be on your podcast, your show, so to speak. I first did my PhD on arbitration and my PhD supervisor was Albert-Jan Vandenberg, one of the renowned arbitration specialists nowadays. Later on, I joined a law firm, now its Linklaters, and I fully focus on arbitration and I also teach arbitration. I hold the chair in Rotterdam, Erasmus University Rotterdam, and teach arbitration.

Daniel: Awesome. Thank you very much for making the time to be on this podcast today. So I want to kick things off with kind of getting an understanding of the importance of the Netherlands international arbitration. So let's start kind of big picture as far as why do we see more cases under BITs with the Netherlands? And that question leads more towards why are companies incorporating in the Netherlands where we see this? So I don't know if Marieke, if you want to give a little background on that, why are companies rushing to the Netherlands for incorporation?

Marieke: I'm happy to start with just painting a little bit of a broader picture. So to start off, the Netherlands is a very small country, but it has a big footprint in the world of global commerce. Last year, I think it was ranked as the 17th biggest economy worldwide. So that's a reason in itself that companies come to the Netherlands to at least an office there. Another reason that you often hear is the advantageous tax climate for international corporations, which is a reason why you see many international companies. I think there was even a time that 55 of the 100 biggest international companies, including many American companies, were based in the Netherlands. Another important reason is that we have the PCA, the Permanent Court of Arbitration is seated in the Netherlands. So that attracts a lot of arbitration activity. And I think you could say that we are an enforcement friendly and in any case, an arbitration friendly jurisdiction. So the courts are really well known, have a good reputation and have really approached the enforcement of awards in an expedient way. And we have the prejudgment assessment as well, but we can talk about that later.

Daniel: Awesome. Thank you. Going into the kind of the business reasons, I don't know if you can expand on kind of the tax or other implications. Like what, why is it that a lot of companies have shell or have operations aside from all these reasons that Marieke just mentioned?

Gerard: I think it's important to mention that indeed our tax climate used to be very corporate friendly. It's changing a bit also European wise, but still some advantages. We have many tax treaties, of course, in place. I would also refer to a stable corporate climate. I think that's more and more we see that corporates would like to be in the Netherlands because of the stable corporate climate. And also our corporate law is quite flexible. So for example, if you wish to set up a joint venture through a BV, flexibility is important. And then we see that our corporate laws, they offer this flexibility.

Daniel: Interesting, interesting. And for American companies, is the language ever an issue? In other words, are the Dutch courts ever in English or are the laws in English? Or is it that Americans, I guess, feel comfortable to going to the Netherlands on the language aspect?

Marieke: I would say the language is never, at least in the language, language is English, never an issue. Well, our laws are in Dutch and our official court language is Dutch. I think generally people from the Netherlands are known for their English language skills, even though we keep our accent, but I think we are quite proficient in English. And I've always had that with the court. So as a judge, I had quite a few exchanges in English at the court. We've had pleadings in English. And even though it's not the formal language, if you discuss this beforehand with parties, like what do you prefer, is it okay if we discuss things in English without a translator? It's usually the case that it's not a problem. And we do have even a Netherlands commercial court. So it's based in Amsterdam and that has its official language, even English. So that also renders judgment in English. So that's really founded for the reasons of promoting commerce in the Netherlands and keeping that language English, because that's usually the language of the contracts. But in all other districts and appeal courts, English is a language that is accepted without any translation.

Daniel: Interesting, interesting. And what about the, I know this is a very broad question, but what would you describe is the Dutch court system's role or the Dutch courts, what is their role in international arbitrations and how can Dutch courts support or oversee the proceedings?

Marieke: I think I would say, of course, a supportive role when it comes to supporting an arbitration procedure, when it comes to challenges or employment of arbitrators. But I have to say, I have to say there's not that many case law about that particular role. The institutes that are based in the Netherlands, the Netherlands Arbitration Institute and some other more specific ones, are taking care of those issues usually themselves. So that part of the supportive role is not so active. But when it comes to enforcement and prejudgment seizures, that's where the courts get much more active. And while the legislator really chose a pro-arbitration stance, that really is the spirit of the Dutch Arbitration Act. And that's also the spirit of the Dutch court. So I would say we have a very arbitration friendly jurisdiction.

Daniel: And Gerard, getting into, I guess, the more specifics of that, let's start with prejudgment proceedings, for example. Is a party in a pending international arbitration able to petition a court for seizure of assets or other prejudgment efforts to try to kind of preserve the award that they feel is coming or that may come? What are, from your experience, how do courts treat these? Are they successful? Do they have to really have a high likelihood of prevailing or can it just simply be that there's a pending arbitration? What would you provide in that aspect?

Gerard: I think that in this respect, the cooperation between the courts and arbitration is optimal because the direct attachment of assets in the Netherlands can indeed be obtained through court proceedings. And the courts would indeed grant leave for attachments, even though the proceedings are before arbitrators. So it doesn't matter whether it's court proceedings or arbitration. So the courts would indeed grant leave for attachments in relation to assets in the Netherlands. And one could even say that the Netherlands is an attachment paradise, as we sometimes refer to it, because it's ex parte proceedings. So the debtor will not be called to the proceedings. Of course, as a creditor, you need to tell the truth. You need to tell the whole story. And then if your claim is plausible, because there's some test, but if your claim is plausible, then the court would grant leave for enforcements. And then the question of whether you actually have a claim will be decided by the arbitrators. So arbitration is considered to be the main case as to which first leave for attachments can be obtained by the courts.

Daniel: That's very interesting. So you do feel like it's a very free attachment friendly jurisdiction. And you've seen, would you say that you've seen these be successful in international arbitrations and from what you've seen, either in experience or in reports?

Gerard: Yeah, I really, we do this, in fact, on a daily basis. And this is no exaggeration. Really on a daily basis, we approach courts to get leave for attachments. And so the provisions in the Code of Civil Procedure, they provide that once the leave for attachment is granted and you make the attachment, then you need to start main proceedings or a main case, a case on the merits, in order to have the claim in relation to which you make the attachment is going to be decided. And that can be arbitration. So the courts absolutely, simply accept that arbitration is the case on the merits and they would simply grant leave for attachments. Leave for enforcement is something else, of course, that we will discuss later on, but that this happens on a daily basis. Of course, you need to have a plausible claim. If you don't, you may be liable having made the attachment if the main claim by the arbitrators is rejected. So that is important. But if you have a plausible claim, then indeed you can make the attachment and you would make it after getting the leave for attachment in ex parte proceedings. So that's very important that debtor is not called and would be able, but this is important, would be able if it really thinks that the attachment is made unlawfully, approach the court then to have it lifted. So there's some protection for the debtor too, because the debtor may knock on the court's door after the attachment is made, in fact, in order to have it lifted.

Daniel: Very interesting. And Marieke, you were a judge in the Netherlands and now you're a full-time international arbitration and domestic arbitration arbitrator in the US. What have been the main, I guess, differences, if any, that you've seen how US courts have treated arbitration awards and prejudgment compared to, say, in the Netherlands?

Marieke: I'm based in the Fifth Circuit, this area, and I think the Fifth Circuit is really, well, has a pro-arbitration stance as well. So in that sense, I don't think it is very different from the Netherlands, but I think from, and of course, there's sometimes a split of circuits and just the US is so much bigger than the Netherlands. So it's, in a way, much easier in the Netherlands to be aligned than in the US. So that's a difference. But where I am based, Houston, I don't think there's much of a difference in arbitration perspective, but that's prejudgments, attachments, that I can say from my judging experience that it's, yeah, much easier. I've signed off sometimes on the leave for attachments as well. You just look at the papers and see if there's a prima facie case and if all the formal requirements have been met for that leave, and then you sign off and that's the end of it in a way. And then, so as a judge, I've seen much more of that enforcement and the attachments part of it than what I've seen in Texas. I think it's just very common in the Netherlands.

Daniel: Interesting, interesting. And Gerard, going back to prejudgments and any actions by a court in the Netherlands, how does this analysis change, if any, when there's a sovereign on the other side? For example, if you're enforcing an award or you are looking to seek prejudgment, how does the analysis change, if any, if it's a country on the other side?

Gerard: Then it changes because we indeed also have our immunity jurisprudence. The Netherlands, we have ratified the 2004 UN Immunity Convention recently, but it's not in force because it needs 30 states to be a party and it's 25 only now. But the Supreme Court ruled, in fact, that most of the provisions of the UN Convention are considered to be customary international law. So in fact, where it's a state on the other side, then indeed you see that the states would normally invoke immunity, but also in relation to the conservatory attachment, as we call it, so the prejudgment attachments, the court would test against immunity rules. And I must say that commercial assets may be attached, but assets held for public purposes may not be attached. And it makes it more difficult. But of course, if you, in your attachment request, elaborate on the commercial nature of the assets, then indeed you may make the attachments, but the court would need to attach also ex officio in this regard. And I must say, we have a case in relation to the Stati case against Kazakhstan, and the Supreme Court ruled that the burden of proof as to whether the assets are held for commercial purposes is on the creditor. And that rule is applied rather strictly. So it doesn't make it easier. Although I see a trend also in light of the political circumstances, Russian Federation, Ukraine, other cases, that it's shifting a bit. And we see that in the legal community, parties do challenge the Supreme Court case law in relation to immunity, and in particular the burden of proof rule. And of course, and that's the good news still, the burden of proof is on the creditor. But if you fill it in, in an actual case, then still, of course, it really depends on what the debtor says. And so there's, the judges know how to apply it, but it is making it more difficult. So you would need to focus on the commercial assets held by states in the Netherlands to really successfully attach the assets.

Daniel: Thank you, Gerard. And I guess going back to the fundamentals of enforcing an arbitration award, Gerard or Marieke, what would you say are the requirements under Dutch law to enforce an award? I assume that they are a signatory to the New York Convention. So you have kind of those requirements that are out there. But are there, similar to the Federal Arbitration Act, are there similar other requirements or other basis for vacature that are under Dutch law? And can you give us a little background on that?

Gerard: Yes, certainly. Maybe good to mention that we, so our Arbitration Act applies both to national arbitration, domestic arbitration, and international arbitration. For example, if you take a case, even investment arbitration before the Permanent Court of Arbitration, really important, as mentioned by Marieke, an investment arbitration conducted under the rules of the Permanent Court of Arbitration or the UNCITRAL Rules. And that would lead, if the seat of arbitration is in the Netherlands, to a domestic arbitral award. But the arbitration is international because it could be a foreign investor against a foreign state. Those domestic awards or national awards, awards rendered in the Netherlands, but in fact the case is international, would be an award that would be confirmed so you get leave for enforcement through ex parte proceedings again. So that's important to mention because we have many international arbitrations, also investment arbitrations, where the award is in fact a domestic award, foreign parties, but still the seat is in the Netherlands. And then for the leave for enforcement in the Netherlands, you simply also need to have a rubber stamp by the court in ex parte proceedings. The award debtor will not be called. And in fact, in I would say 99% of the cases, you will get your leave for enforcement in the Netherlands. It's different where you wish to enforce a foreign arbitral award in the Netherlands. So the seat is in France or in Colombia or wherever and you want to have it enforced in the Netherlands. That can be done too. Then we have quite an arbitration-friendly system. So we, of course, we are a party to the New York Convention, but we would also recognize foreign arbitral awards from countries that are not a party to the New York Convention. Hardly any, but still possible because our Dutch Arbitration Act says it doesn't matter. In fact, we would simply also allow for the enforcement of non-convention awards. But you could, so you could choose the convention as your route or simply the Dutch Arbitration Act for foreign arbitral awards. That is, those proceedings are inter-parties. So you can, you should call the other party. And this is the reason why we also would make a conservatory attachment, a prejudgment attachment in this regard, because you would first wish to freeze the assets, and then you would get your leave for enforcement in inter-parties proceedings later on. I would say that in 90% or more than 90% of the cases, the courts would also grant leave for enforcement in relation to these foreign arbitral awards. So in that regard, the test, there's no De novo review, no review of the merits. The New York Convention grounds and the similar grounds in the Dutch Arbitration Act, they are interpreted narrowly. So that is really important to mention. Maybe also good to mention that the immunity issue as such will not be tested in these enforcement proceedings. So immunity issues may be tested in the conservatory attachments phase where the judge is going to grant leave for attachment. But in the, because you don't need, and that's different, I think, in the United States, there is no strong personal jurisdiction ground or whatever you have. So you can even get leave for enforcement in relation to your foreign arbitral awards for enforcement in the Netherlands where there are no assets in the Netherlands. Because the courts reason that where assets may come to the Netherlands in the future, you would need your leave for enforcement in your drawer, so to speak, on your desk, so as to be able to immediately seize or attach these goods as soon as they arrive in the Netherlands. So in that regard, I think the regime is quite arbitration-friendly, creditor-friendly also.

Marieke: Just a very recent publication by another professor and counsel, Bas van Zylst, was published last month or in October in the Journal of International Arbitration. And he and his team reviewed the setting-aside applications under the Dutch Arbitration Act, the first Arbitration Act 1986 and the new 2015. So over a period of about 40 years and the current, well, setting-aside success rate, so it's only 6.8%. It used to be a little bit higher, around 20%, but the current setting-aside success rate is 6.8%. So I think that number really shows that, yeah, almost 95% of the domestic awards are being enforced and accepted.

Gerard: Upheld. Yeah, so this is, of course, the challenge, the setting-aside of Dutch awards, because the courts only have jurisdiction in relation to Dutch awards. Could be international arbitration again, because you see it, for example, the famous Chevron-Ecuador case was a PCA investment arbitration, but then Ecuador tried to challenge the awards, indeed, as Marieke says, through the setting-aside proceedings. And there, the recent numbers show that indeed, let's say, five to 6% of the challenges succeed. And I think rightly so, because sometimes it goes wrong, but there should be a good test also in order to protect arbitration against real malpractice, so to speak. But indeed, most of the setting-aside claims are rejected. The numbers, that's interesting, and we should also conduct another research in relation to the enforcement of foreign arbitral awards in the Netherlands, because there we don't have numbers, but I must honestly say that I think that the numbers may be equal or even better, because I can imagine that where a foreign award is imported in the Netherlands, the success rate of a challenge, so to speak, so the refusal of the enforcement is a bit lower even, but that's difficult to say, because we don't have numbers. Maybe good to mention that what we also have is that where an award is set aside in the country of origin, it would not necessarily lead to the refusal of enforcement in the Netherlands. So that's the famous chromalloy jurisprudence that you have, and that really our court looked at U.S. case law in this regard in order to also have that rule. It's not easy because something needs to be wrong in the place of arbitration, the sort of before the court, the challenge court or the setting aside court. But for example, if the setting aside court is not considered to be impartial, then indeed the setting aside would not be recognized in the Netherlands. And it was recently in the Defos India case, for example, Antwerp's India case, where the courts indeed held that the decisions of the Indian courts were not considered to be rendered on the basis of due process proceedings. And then indeed leave for enforcement was granted. Well, notwithstanding the setting aside of the award in India.

Daniel: Interesting, very, very interesting. Well, I guess to wrap it up, I'd love to hear about what you all think about the future of international arbitration in Netherlands. Maybe some parting words on, do you see any trends coming out of international arbitration or arbitration in general in Netherlands? And what do you, or any policy changes that you anticipate that we should look out for? I'll start off with you Marieke.

Marieke: Yeah, I think from a procedural perspective, we've had quite a few innovations in our arbitration act in the past. I'm not sure how many other big ones are, well, should be expected. But I think one of the things that we didn't touch upon, but what I really like about the Netherlands arbitration scene and litigation scene is our quite liberal approach to interim measures and emergency procedures. So I think it's good to know that in the Netherlands, if you have an emergency arbitration matter, you can initiate those proceedings. And that's been the case in the Netherlands for almost 40 years. We've been very early with that and you don't need to proceed necessarily with a case on the merits. So it's similar as in the courts and an emergency procedure can be the end of the disputes. And I think that's what we really, that makes the Netherlands arbitration scene quite special. I've been an emergency arbitrator myself. And for me, it feels like a very good solution to disputes that require quick attention and decisiveness. And I just hope that that will be, we'll be spreading the word around the world in that area as well.

Daniel: Thank you very much. What about you Gerard?

Gerard: Yeah, maybe good to mention because I think it's nice to mention if you speak of the Netherlands. I would like to also refer to our culture and tradition because it started with a good group of people. For example, Peter Sanders, he was a Dutch professor. He became a hundred years old. So some people say that arbitration can be very healthy, a healthy business. But Peter Sanders, he drafted the New Year Convention with some others. He was really one of the drafters of the most important provisions of the New Year Convention. Then later on, he passed on the tradition to Albert-Jan van den Berg. And I was very happy to work with Albert-Jan also. I also worked with Peter Sanders even. But the good news is indeed that they took a very pragmatic approach. So the interim relief or emergency arbitration, you saw that all these institutes, they introduced it later on, but we already introduced emergency arbitration in 1986. Same with the consolidation of arbitral proceedings. So it's a very open mind. And I think the pragmatic open mind approach that also Marika refers to was established, I think by Peter Sanders and Albert-Jan van den Berg passing on this tradition to many others. So I think we have a very good group of petitioners, law firms really focusing on arbitration, arbitration institutes. The judiciary is really important. I think our judiciary, but Marieke can tell better, is ranked extremely high in relation to impartiality and independence worldwide even. And they are supportive of arbitration. So that's not unimportant. What I also like is that in the Netherlands, judges may sit as arbitrators and they're very popular arbitrators because of the fact that they know how to decide. They know how to draft awards. I think I don't see this often in other countries. I don't know whether Marieke wishes to commence in that respect from a US perspective. And then for the future, I think indeed, as Marieke says, I think our 2015 revision of the Arbitration Act was one of the first acts to incorporate provisions on e-arbitration. And that's completely in. So virtual hearings, e-communication was in since 2015. So when we faced COVID problems, we already were ready in fact to simply apply it. It was not often applied, but then the instrument was there. So what I would say for the future, now maybe one other point is the Netherlands Commercial Court that there's a provision in the rules on the Netherlands Commercial Court that tell the parties that the setting aside action and also other claims in relation to arbitration before the courts may be conducted in English if the parties so agreed in their arbitration agreements. So that's also, I think those are developments that are important and I would not be surprised if our legislator simply follows necessary trends and would indeed incorporate important provisions for the future in relation to arbitration. So the legislator is also arbitration friendly. And we with the working group in 2015, together with the legislator, in fact, we were involved in the drafting process. So what does the legislator do? They really ask the community what they would think is necessary in order to adopt or to change. So I think those are important elements for the future of arbitration. And I think, and Marieke may wish to add a bit, but I think that we should not be afraid that the future of arbitration is secured in the Netherlands, is safe in the Netherlands, also for the long run.

Marieke: Yeah, just thanks for the shout out to the Dutch judiciary, Gerard. I also wanted to mention that as my last note, we've been consistently ranked in the top five of the World Justice Index. And I think we've given examples to show that it's a very pro-arbitration approach we have in the Dutch courts. Yeah, and there's also in that sense, an interplay between sometimes judges in an arbitration world. I was one of a few judges who was able to do arbitrations. And I think that was quite unique. And when I speak with other people, other colleagues around the world. So I also, in short, feel like we have a very strong ecosystem, arbitration-friendly ecosystem in the Netherlands. And I, yeah, I look forward to what the future will bring for us.

Daniel: Awesome, well, excellent. Well, thank you both so much for joining us and taking time to give us more insight on the Netherlands and international arbitration related to the Netherlands. And that's it from my end. So thank you all for joining and listening, and please keep a lookout for the next episode of Arbitral Insights. Thank you so much.

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