More and more businesses in the Netherlands opt for arbitration to resolve disputes. Statistics of the Netherlands Arbitration Institute (“NAI”) show a 45% increase of new cases since 2018 up to 133 cases in 2022. For general counsel, considering arbitration as an alternative to traditional proceedings before the regular courts is worthwhile for several reasons.
Arbitrators
Perhaps the main characteristic of arbitration is that the parties can decide to which experts they present their dispute. The expert may be an arbitrator to be appointed jointly, or each party may choose one arbitrator. In the latter case, the two arbitrators will jointly appoint a third one, who is also the chairman. Parties can select arbitrators by the specialism needed to resolve a specific dispute. In other words, this is customized work.
Control
An important difference between arbitration and dispute resolution before a regular court is the control parties have over the extension or limitation of procedural acts. For example, the possibility to appeal is often excluded in arbitration. ‘Discovery’ is a good example of an extension. This concept, which originated in the US, means that parties are obliged to submit certain documents. Another favourable development is that the Dutch regular courts more often involve parties in the control over the proceedings nowadays.
Language
Language is another important customized element of arbitration. In arbitration the parties are free to determine the language of the proceedings. Before regular courts, Dutch is the official language. At the Netherlands Commercial Court it is possible since 01 January 2019 to litigate in English on international commercial disputes before the regular courts. This makes the NCC an important forum for international disputes and a competitor to arbitration.
Confidentiality
Confidentiality is another consideration for businesses to choose arbitration. However, this confidentiality is not absolute, given the competence of the regular courts in disputes that may arise from an arbitration. For example, the Dutch Supreme Court recently judged in a protracted dispute between a waste disposal company and several municipalities and regions. The waste disposal company claimed a large retrospective levy on several years, because too little waste had allegedly been supplied. The cause for this was that households had become better at separating waste. Two arbitration proceedings were conducted. The two outcomes were presented for review to the regular court in set-aside proceedings. This has brought the dispute (largely) out into the open.
Hearings and judgments of the regular courts are public and the press often keeps a close eye on the schedule of court hearings. The potential publicity involved in litigation before the regular courts often influences the decision of parties to go to court. The NCC and the Enterprise Section tend to give even more publicity to proceedings by publishing their schedules of hearings online. Usually there is no such ‘undesirable visibility’ in arbitration.
Speed
Speed is another advantage of arbitration frequently mentioned, but this depends on how you look at it. To start with, the speed of arbitration proceedings depends strongly on the choice of procedural acts. Other decisive factors are the type of dispute and proceedings, but also the arbitrators themselves and the arbitration institute handling the case. For example, some institutes urge arbitrators to arrive at a judgment quickly, sometimes even on pain of a cutback on their fees.
As far as speed is concerned, experiences before regular courts also differ. The regular courts often remain the preferred option for quick (preliminary) relief. Some forms of preliminary relief are also available in arbitration proceedings – prejudgment attachment is not one of those – and some institutes are able to appoint a tribunal quickly. However, on average the hearing of an urgent matter is quicker before the regular courts, also because arbitration awards cannot be executed at once. An exequatur from a regular court is required before a bailiff can start his job.
The effective speed of arbitration proceedings can be slowed down if they are followed by set-aside or revocation proceedings before the regular courts. Possible reasons for this may be a flaw in the arbitration tribunal, or a party having committed fraud. The many Yukos actions between the Russian Federation and former shareholders of the bankrupted Yukos are a good example of this.
Costs
Another important difference between arbitration and the regular courts are the costs. Parties have to pay court registry fees to be allowed to bring a dispute before the Dutch regular courts; at the NCC these fees are a little higher than at the ‘ordinary’ regular courts. For arbitration these costs are higher, because the parties have to pay the wages of the arbitration tribunal as well as administration costs. At the regular courts, the losing party is ordered to pay only part of the attorney's fees to the winner. In arbitration proceedings, the loser is in principle ordered to pay the full attorney's fees of the winner.
Conclusion
It is very understandable that arbitration is gaining popularity in the Netherlands, especially if you look at the choice of language, control, and confidentiality. However, taking your matter to court may still be preferable. It is worthwhile for general counsel to consider the pros and cons of each case. When concluding agreements or when disputes arise (in which there is still room for negotiations), the things to consider properly are the type of agreement, the nature of the (expected) dispute, and the degree to which parties will want to go public should it come to proceedings.
