Arbitration versus litigation:
an assessment of pros and cons against
the proposed new Dutch arbitration law
Evelyn Tjon-En-Fa
Arbitration seminar 15 October 2013
Table of contents
1. First stages of Dispute Resolution
2. Follow-up in Dispute Resolution: Arbitration or Litigation?
3. Will there be a shift of balance between Arbitration and
Litigation under the legislative proposal on the modernisation
of Dutch arbitration law?
4. Closing remarks
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First stages of Dispute Resolution
Typical escalation & dispute resolution
options
● Typical scenario in B2B contracts:
• Stage 1 - Internal escalation by the Parties
• Stage 2 – ADR, usually Mediation
• [Stage 3 –Expert determination]
• Stage 4 – Arbitration or Litigation
● Various combinations and alternatives possible
● Chosen option to be reflected in workable escalation and
dispute resolution clauses.
• When drafting, consider carefully whether cumulating stages
2 and 4 is practical
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Internal escalation – common problems
● Agreed tight timetable can be unworkable in practice
● Parts or even all of the contractual escalation process may
already have been used informally
● Need to brief Managing Directors, CEO's or nominated Senior
Representatives
● Consider recording agreed resolution formally in:
• Settlement Agreement in authentic deed ("notariële akte"):
execution possible
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Mediation/ADR
● Settle disputes with assistance of a neutral third party
(mediator)
● Facilitative mediation is most common type
● Consensual and non-binding (unless settlement is achieved)
● Private, informal and confidential (without prejudice privilege
applies)
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Follow-up stage of Dispute Resolution:
Arbitration or Litigation ?
Arbitration or Litigation?
● PWC 2013 International Arbitration Survey:
•
Arbitration continues to be more popular than any of the other options
available (identical to previous surveys in 2006 and 2009);
•
Arbitration ranked first, more often than any of the other mechanisms
(52% of respondents marked arbitration as most preferred)
● Key questions:
•
is the majority always right, and how would the outcome of a survey in the
Netherlands look like?
•
Will the proposed new Dutch arbitration law make arbitration (even)
more popular?
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Common reasons to favour Arbitration over
Litigation
● Neutrality: generally avoids exposure to (presumed)
‘unfriendly’ courts
● Confidentiality: parties can agree upon total confidentiality
• no longer included in proposed new arbitration law, but
common practice; e.g. NAI rules
● Freedom of choice, complexity: option to choose/select
arbitrators, often with a specific expertise
● Procedural flexibility
● International: enforceability under New York Convention
(countries
such as China and the US)
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Typical drawbacks of Arbitration / possible
reasons for Litigation
● Arbitration (including annulment proceedings) is not necessarily quick
● Interim measures often not easily obtainable
● Arbitration tends to be more costly than Litigation
•
Arbitration can be extra costly if necessary to seek assistance of domestic courts
(annulment proceedings, enforcement, provisional measures)
● "Arbitrators do not take clear-cut decisions, they tend to 'split the baby'"
● Lack of an appeals mechanism (unless agreed upon/institutionalised)
● Lack of publicity and precedents (if desired)
● Enforcement of 'national' arbitration award: exequatur still required
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Will there be a shift of balance between
Arbitration and Litigation?
A comparison with a view to the proposed new Dutch Arbitration law
Background and main goals
• Current Dutch arbitration law stems from 1986
− Codification of most important case law at the time
− Loosely based on UNCITRAL Model Law 1985
• Reason for proposed new Arbitration Law
 General goal: make Arbitration a more attractive alternative to Litigation
(international: leading arbitration country); lean more heavily on
UNCITRAL
 Specific goals:
• modernisation (e.g. introduction of contemporary means of
communication)
• codification of best practices
• reduce financial burden to the parties
• simplify annulment proceedings
• increase confidence of consumers in arbitration
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Important proposed amendments
1. More directory law, more modern means of communication
2. Limitation of the length of annulment proceedings
3. Option for remission ("terugverwijzing") in annulment
proceedings
4. Introduction of provisional measures in pending arbitration
proceedings ("voorlopige voorzieningen")
5. B2C arbitration clauses
6. Miscellaneous
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1. More directory law & modern means (I)
• More options to derogate from legal provisions by contract or
by choosing an arbitration institute with corresponding rules
 Examples:
−
−
−
−
Number of written briefs to be submitted? (art. 1038a CCP)
Oral presentation? (art. 1038b CCP)
Arrangements on the submission of evidence? (art. 1039-1042a CCP)
Appeal in cassation in annulment proceedings? (art. 1064a CCP)
• Facilitate electronic communication, if the parties agree (art.
1072b CCP)
•
Video conferencing, electronic arbitral award
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1. More directory law & modern means (II)
How will Litigation compare to these new features?
•
No equivalent to art. 1038a CCP (number of written briefs to be
submitted) and art. 1038b CCP (oral presentation) in CCP
 Art. 1.4 Landelijk procesreglement: parties are bound by the procedures and
terms of litigation as provided in these regulations, unless the court allows a
deviating manner of conducting a case on their unanimous request that is
made prior to the first docket date
•
Art. 149-207 CCP (evidence); art. 153 CCP: 'bewijsovereenkomsten'
•
Arbitration will definitely be ahead of Litigation regarding electronic
communication
•
Art. 33 CCP provides a limited basis (electronic submission of
documents), but hitherto only used in patent cases;
•
No electronic judgments or hearings via videoconferencing
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2. Limitation of duration annulment
proceedings (I)
Amendments in annulment proceedings before the State Courts
• Current: two fact-finding instances and no explicit option to exclude
appeal in cassation at the Hoge Raad
• New: Court of Appeal instead of District Court (article 1064a CCP) as:
o first and only fact-finding instance ('feitelijke instantie')
instead of 2 (saves both time and money, but some are critical)
o option for appeal in cassation at the Hoge Raad, unless
excluded by the parties
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2. Limitation of the length of annulment
proceedings (II)
How do these new rules compare to the length of Litigation?
• Current number of instances:
o Arbitration: 1 (or 2, if appeal is agreed upon) plus 3 instances (annulment
proceedings; option of 'prorogatie'/'sprongcassatie': art. 96 and 329 CCP)
o Litigation: 3 instances (option of 'prorogatie'/'sprongcassatie'
• New number of instances:
o Arbitration; 1 (or 2) plus 1 or 2 (annulment proceedings; option of
'prorogatie'/'sprongcassatie')
o Litigation: no changes
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2. Limitation of the length of annulment
proceedings (III)
Current
•
Obligation to deposit the arbitral award with the registry ("griffie") of the
District Court (art. 1058 CCP)
•
Date on which the arbitral award is deposited is the trigger for the periods for
annulment proceedings, revocation and enforcement (art. 1060-1062 / 1064
CCP)
New
•
No obligation to deposit the arbitral award with the registry (art. 1058 /1064a
par. 2 CCP), unless parties agree otherwise (in alignment with international
arbitration practice)
•
Date on which the arbitral award is sent will become the trigger for the
periods for setting aside, revocation and enforcement
No equivalent in Litigation
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3. Remission in annulment proceedings
• Current: no remission ('terugverwijzing') option in annulment proceedings
• New: Court of Appeal may suspend annulment proceedings for remission of
the case to arbitral tribunal (art. 1065a CCP)
o At the request of a party / on the Court of Appeal's own motion
• decission to remit is not subject to appeal)
o Arbitral tribunal can nullify ("ongedaanmaken") the ground for
annulment / take any other measure it deems appropriate
• Obviously no equivalent in Litigation, but:
o Cf. ground for cassation in single-instance proceedings (e.g.
'ontbindingsprocedures'; art. 7:685 CCP)
o Cf. issue of remission or 'evocatie' to the court of first instance in interim
appeals
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4. Provisional measures in pending
arbitration proceedings (I)
Current:
•
authority for emergency arbitrators to order provisional measures in
separate proceedings ("arbitraal kort geding"), if agreed upon (art. 1051
CCP)
New:
•
authority for arbitral tribunal to order certain provisional measures in
pending arbitral proceedings on the merits, unless otherwise agreed by
parties (art. 1043b CCP)
o only for the duration of the arbitral proceedings
o Conservatory measures (e.g. conservatoir beslag) are still not included:
state court
o Award will be qualitied as an arbitral award, but it remains to be seen
how foreign courts will see this under the New York Convention
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4. Provisional measures in pending
arbitration proceedings (II)
How will these new rules compare to Litigation?
• More similarity between Arbitration and Litigation
• Authority for judge in interim proceedings
(voorzieningenrechter) to order provisional measures in
separate proceedings (kort geding) (art. 254-260 CCP)
•
Cf arbitraal kort geding
• Authority for judge to order certain provisional measures
(including conservatory measures) in pending proceedings on
the merits (art. 223 CCP); provisionele voorziening
•
Cf voorlopige voorziening in arbitraal geding
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5. Arbitration in B2C contracts (I)
• Current: Hoge Raad: ECJ case law and "alle relevante
omstandigheden van het geval" (art. 6:233 DCC)
o Consumer protection (cf EU Directive 93/13EEG)
• New: art. 6:236 subsection n DCC will be amended:
o as a rule: onreasonably onerous ("onredelijk bezwarend"/
zwarte lijst)
o Arbitration in B2C:
•
•
after a dispute has arisen: by separate arbitration agreement
general conditions: 30 day-period for consumer to opt for the
competent state court instead of arbitration
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5. Arbitration in B2C contracts (II)
Will this proposed amendment have the intended effect?
• Purpose of amendment: increase confidence of consumers in
arbitration.
However:
• Will consumers actually opt for competent state court instead of
arbitration in case of a dispute within a 30 day-period?
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6. Miscellaneous amendments (I)
• Option for institutional challenge proceedings ('wraking') by an
'independent third party' instead of by the judge in interim
proceedings (art. 1035 subsection 7 CCP)
•
State court rules art. 36-41 CCP: three-judge section
• Finality of awards ('gezag van gewijsde': art. 1059 CCP)
•
New act will be in alignment with state court rules and refers to art. 236
CCP);
• Enforcement of arbitral award ('exequatur': art. 1062/1063
CCP)
•
•
New: place of arbitration; also for interim awards
Appeal was and will be excluded
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6. Miscellaneous (II)
• Annulment proceedings (art. 1065 CCP):
o If a ground for annulment only concerns a part of the award,
the remaining part will not be set aside to the extent that it
does not form an integral part of the award;
o Requirement of a 'reasonable interest' (Memorie van
Toelichting, p. 39); and
o The grounds for annulment that the arbitral tribunal has not
complied with the scope of the submission to arbitration
('schending van de opdracht'): not if the non-compliance is
not serious ('niet van ernstige aard')
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Some closing remarks
Closing remarks
• Arbitration proceedings will have options & checks/balances
similar to those in state court proceedings
• Less fundamental procedural drawbacks (e.g. regarding interim
relief)
• Some new advantages over Litigation:
o Electronic communication means
o International disputes: Annet van Hooft
• Choice for Arbitration or Litigation will still largely depend on:
o Litigation venue / enforceability
o Importance of privacy /publicity/ precedents
o Subject matter (specific expertise required)
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Thank you
Evelyn Tjon-En-Fa
Evelyn.tjon-en-fa@twobirds.com
00-31-70-3538858
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