Parties active in international trade and transport regularly get involved in arbitration. The final piece of an arbitral procedure is the arbitral award. This award determines which party is in the right, and often the amount of money the losing party needs to pay to the successful party. The successful party will then wonder: how do I ensure that I actually receive my claim?
This is a question we get asked a lot in practice. With the arbitral award alone, no money is effectively transferred to your bank account yet. In this article, we will explain how to have an arbitral award recognized and enforced in the Netherlands.
When to enforce in the Netherlands
First of all, you need to assess if it is worth considering to enforce an award in the Netherlands at all. Even if the opposing party has its place of business in the Netherlands, this does not automatically mean that it has any assets in the Netherlands. Recognition and enforcement of an arbitral award is only useful if there are actually any assets to enforce against. In terms of assets, you can for example think about bank accounts, real estate, shares, etc.
Further, and perhaps stating the obvious: formal recognition and enforcement of an arbitral award is only necessary if the opposing party does not voluntarily comply with the arbitral award. The first step would of course be to request the opposing party to pay voluntarily.
Both Dutch and foreign arbitral awards can be recognized and enforced in the Netherlands. These two situations will be explained separately below.
The ‘Dutch’ award
An arbitral award is ‘Dutch’ if the seat (or: place of arbitration) is located in the Netherlands. The request to enforce an arbitral award must be submitted with the preliminary relief judge of the district court in whose jurisdiction the arbitration takes place. This can all happen very quickly: since the opposing party is usually not heard on the enforcement request, a preliminary relief judge can, in some cases, grant leave to enforce the arbitral award (‘exequatur’) within a matter of hours or days.
It is important to note that the preliminary relief judge will not review or assess the merits of the case. The preliminary relief judge will only briefly examine whether it is plausible that the arbitral award will be set aside or revoked on one of the grounds listed in Article 1065 or Article 1068 of the Dutch Code of Civil Procedure. However, setting aside an arbitral award is not easily accomplished. This can only be done in the following cases:
- There is no valid arbitration agreement;
- The arbitral tribunal is constituted in violation of the parties’ agreement or applicable rules;
- The arbitral award is not properly signed;
- The arbitral award is not reasoned;
- The arbitral award is contrary to public policy.
To annul or revoke an arbitral award, an even higher threshold must be met. This can only occur if the arbitral award is based on fraud, forgery or if certain documents have been withheld.
The ‘foreign’ award
If it concerns a foreign arbitral award to be enforced in the Netherlands, a different procedure applies. Recognition and enforcement of the award will usually be based on the New York Convention on Recognition and Enforcement of Foreign Arbitral Awards (1958). This convention makes it simpler for arbitral awards to be recognized and enforced in other jurisdictions that are party to the convention, without having to re-assess the merits of the case. The vast majority of the Netherlands’ major trading partners are also a party to this convention, such as China, India, the United States and virtually all European countries. In our previous article, we explained why this can be a significant advantage of arbitration compared to ‘normal’ court proceedings before the state courts, especially when business is conducted outside of the European Union.
For the recognition and enforcement of a foreign arbitral award, an application must be filed at the court of appeal in the district where the opposing party is domiciled, or in the district where enforcement is sought. In this situation, the court of appeal will not re-examine the merits of the case either. It will only assess the case against the grounds for refusal under the New York Convention, namely:
- Is there an invalid arbitration agreement?
- Have both parties had enough opportunity to be heard?
- Did the arbitral tribunal violate its mandate in the arbitral award?
- Is the arbitral award not binding yet, or has it been set aside or annulled in the country of origin?
- Is the arbitral award contrary to public policy?
If all the above questions can be answered with ‘no’, the court will recognize the foreign award and grant leave for enforcement (exequatur).
It should be noted that in these enforcement proceedings for foreign awards, the opposing party often does get the opportunity to file a defence. The court of appeal usually orders that the application for recognition and enforcement must be served on the opposing party. The opposing party can then submit a statement of defence, and a hearing may take place. The discussion will only relate to the aforementioned limited grounds of refusal based on the New York Convention.
Attachments
Once the exequatur is obtained, actual enforcement can take place. With the assistance of a bailiff, the claim can be enforced against the opposing party’s assets.
Oftentimes it is advisable to already levy a conservatory attachment at an earlier stage, in order to secure certain assets. This can be done before or during the main proceedings (the arbitration itself), or prior to filing the application for recognition and enforcement in the Netherlands. This way, you can avoid the opposing party quickly dissipating assets to avoid recovery. With a conservatory attachment, you ensure these assets are frozen, preventing your opposing party from freely disposing thereof. After obtaining an exequatur, a conservatory attachment becomes enforceable.
More information
Do you want to know if arbitration could be interesting for you, whether a valid arbitration agreement was concluded with your counterparty, or do you wish to receive advice on agreeing on an arbitration clause? You can contact our specialist Céline Goedhart.
