Notwithstanding an (international) arbitration clause agreed between the parties, the preliminary relief court may still consider that it has jurisdiction to consider the dispute. This is very remarkable given that the parties have already excluded this possibility by an agreement for arbitration.
Based on a recent decision by the Amsterdam District Court, procedural lawyer Martijn Kesler explains how this works.
Arbitration agreement (in principle) leads to lack of jurisdiction for the court
The parties may rule out resorting to the ordinary courts by including an arbitration clause in a contract. The arbitration clause also determines the arbitration institution to which future disputes must be submitted.
Arbitration is an alternative form of dispute resolution where an arbitral tribunal (often composed of real specialists) adjudicates on the dispute. The ordinary court has (in principle) no jurisdiction.
The advantages and disadvantages of arbitration
There are several advantages to choosing arbitration over legal proceedings:
- the arbitrators are specialists in the nature of the case;
- arbitration is confidential;
- the procedure is faster;
- an arbitral award is easier to enforce internationally than a court decision.
The disadvantages are limited:
- the arbitration procedure is more expensive than a regular procedure before the ordinary courts.
Various types of arbitration
There are different types of arbitration:
- Institutional Arbitration; this is mainly used in construction disputes and trade disputes between entrepreneurs. In institutional arbitration, the dispute is submitted to an institute such as, for example, the Netherlands Arbitration Institute or the Council of the Arbitration for Construction, or perhaps to an international organisation such as the ICC, LCIA or SIAC;
- Ad-hoc arbitration; the parties themselves make agreements about the composition of the tribunal, without involving an arbitration institute.
The courts still have jurisdiction in certain cases
Importantly, the arbitral tribunal must be able to offer a timely and fully-fledged alternative in urgent cases. If the requested decision cannot be obtained in arbitration or not in time, the Dutch courts can nevertheless accept that they have jurisdiction under Article 1022c DCCP and 1074d DCCP.
Article 1022a also provides that an arbitration agreement does not prevent a party from applying to the ordinary court for a preliminary injunction in summary proceedings. The same standard also applies when arbitration outside the Netherlands has been agreed. If an arbitration institution also offers the option of a preliminary injunction, the parties should also seek arbitration in urgent cases.
Enforcement of an arbitral award through exequatur proceedings
If a party has obtained an arbitral award, it may ask the court to grant leave to enforce that award. With what is called an exequatur, the arbitral award is given an enforceable title.
The dispute does therefore not need to be brought before the Dutch courts again.
Refusal of enforcement in exceptional cases
Article 1063 paragraph 1 Rv provides that the preliminary relief judge can only refuse the leave for enforcement under certain circumstances
Annulment of the arbitral award can, for example, take place if there is no valid arbitration agreement or if the award, or the way in which it was reached, is contrary to public order or morality. This is therefore a brief investigation.
The Dutch court checks whether the judgment meets the elementary requirements of Dutch law, such as, for example, stating the names of the parties.
Preliminary relief judge accepts jurisdiction despite an arbitration agreement
In a recent dispute before the Amsterdam District Court, the Claimant demanded that Defendants 1 and 2 should perform their obligations under the contract.
Notwithstanding the arbitration agreement concluded between the parties, in terms of which the ICC in Paris had jurisdiction, one of the parties had submitted the dispute to the preliminary relief judge. This was remarkable, given that the parties had ruled out resorting to the courts and the ICC also dealt with ’emergency measures’. The fact that the ICC also provided an interim relief sanction in arbitral proceedings was, understandably, the basis for one of the defences.
The award of the claim in the interim relief proceedings was of crucial importance to the claimant, as it did not have sufficient liquidity to meet its obligations. The claimant argued that an arbitral injunction would be too complex and expensive.
The arbitration agreement is set aside for urgent reasons
The preliminary relief judge ruled that even though the decision of the ICC Arbitration Court could have been obtained in time, it must also be possible to obtain an exequatur for an order from an emergency arbitrator.
It is true that an order can be obtained in time, but an order for the collection of a claim does not qualify for (peremptory) enforcement.
As a result, an exequatur procedure has to be followed. This is also the reason why the emergency arbitrator at the ICC arbitration in Paris suddenly cannot be seen as a fast enough, fully-fledged alternative. To that extent, the interim relief judge considered that even in arbitral injunction situations (however the arbitration institution might describe them), the courts still had jurisdiction.
Public disposal in court detracts from the desired confidentiality
Confidentiality is seen as one of the major benefits of an arbitration agreement. Nevertheless, the ruling summarised above would detract from this principle.
In that ruling, the emergency arbitrator’s order was not seen as a fast enough and fully-fledged alternative. The procedure to be followed before the Dutch preliminary relief court therefore no longer takes place behind closed doors.
For many parties, an important reason for agreeing to arbitration has now disappeared.
For many parties, an arbitration agreement offers many advantages compared to ordinary case law. The lawyers at VIOTTA are often asked to act as arbitrators and comment on complex international disputes. These lawyers can see the situation from both sides and VIOTTA is therefore happy to advise you on arbitration agreements.