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03 November 2020
Since 1 January 2019 it has been possible to bring international, civil and commercial disputes before the Netherlands Commercial Court (NCC) and the Netherlands Commercial Court of Appeal (NCCA). All litigation is conducted in English, which is a huge plus for foreign parties. The NCC will take on a case if certain conditions are met (for further details please see "NCC and NCCA as alternative forums"). A recent ruling by the NCC has provided more clarity on the condition that parties must expressly agree in writing to litigate in English before the NCC or the NCCA.
The claimant, X, was established in New York, and the defendant, Tennor Holding BV, was established in Amsterdam. X and Tennor engaged in extensive talks about a share purchase transaction. Tennor signed a letter of intent (LOI), which was accompanied by the following message from its counsel:
[T]he actual signing and closing would then occur on 18th February 2020. In the light of the above, the Transaction Agreement is now final from our perspective and reflects the content our client is prepared to agree on. Please find, therefore, the executed Cover Letter of Intent as an offer for your countersignature. (Emphasis added.)
The LOI essentially provided that the parties intended to enter into the transaction, but if they chose not to do so or failed to complete the transaction by 18 February 2020 (later extended to 2 March 2020),the relevant party would owe the counterparty a fee. The LOI did not contain a dispute resolution clause, but it did designate Dutch law as the governing law. The LOI also referred to the transaction agreement (setting out the share purchase transaction) and the intention to execute this agreement. The transaction agreement contained an arbitration clause, stating, among other things, that the parties could seek interim measures in the NCC in summary proceedings "pending" dispute resolution in arbitration. X signed the transaction agreement, but Tennor did not.
The Amsterdam District Court first noted that as Tennor had a registered office in Amsterdam, the court's jurisdiction was not in dispute. The only issue in motion was whether a valid NCC clause had been agreed – specifically, whether the condition "expressly agreed", as stated in Article 30r of the Code of Civil Procedure (DCCP), had been met. The court found that the other requirements of Article 30r of the DCCP had been met for the NCC.
The court held that it was sufficient under Article 30r of the DCCP that the parties' consent was:
Further, the court held that Article 30r of the DCCP does not impose any requirement to the effect that an NCC clause is valid only if included in a document signed by the parties. There is no basis in the DCCP, in legislative history or in scholarly commentary to support such a position.
As for an NCC clause, Article 25 of the EU Brussels Regulation (1215/2012) and Article 8 of the DCCP regard these clauses as segregated from the main agreement in which it is included. This means that an analysis of an NCC clause must be distinguished from an analysis of whether the parties have agreed on the main agreement. Further, the court ruled that formal requirements for the transaction agreement do not necessarily follow for the NCC clause and that the entire agreement clause in the transaction agreement is not material in the analysis of whether there is an agreement on the NCC clause. The court further considered that it was relevant that both parties were professionals with major international businesses which used English as their language of communication. Besides, the transaction agreement expressly provided that English would be used in dispute resolution. Ultimately, the court rejected Tennor's plea that it was being withheld access to the court which it was entitled to by law, stating that it was still litigating before the court of Amsterdam (its local court) and even acting in its own language. As a result, the NCC clause's impact was – in this case – limited. The impact was nothing more than the language and the higher court fees.
The court held that the transaction agreement was ready for signature, but the parties wished to reserve their rights regarding the actual conclusion. Given the close connection between the (signed) LOI and the (unsigned) transaction agreement, the court concluded that a reasonable person in the same circumstances as X would have understood the clause to cover disputes in respect of the LOI. Otherwise, it would become difficult to litigate this matter, and that was not the parties' intent. Therefore, the court denied Tennor's motion, ordering that Tennor file its statement of defence within three days of the verdict (as directed a few weeks before this motion).
The verdict reiterates several times that unlike a choice of forum clause, an NCC clause is a procedural agreement. The NCC is not a separate court in the Netherlands; it is part of the Amsterdam District Court. Therefore, the Amsterdam District Court must have jurisdiction before the choice to litigate in English can be made. This also follows from the NCC clause recommended by the NCC:
All disputes arising out of or in connection with this agreement will be resolved by the Amsterdam District Court following proceedings in English before the Chamber for International Commercial Matters ("Netherlands Commercial Court" or "NCC District Court"), to the exclusion of the jurisdiction of any other courts. An action for interim measures, including protective measures, available under Dutch law may be brought in the NCC's Court in Summary Proceedings (CSP) in proceedings in English. Any appeals against NCC or CSP judgments will be submitted to the Amsterdam Court of Appeal's Chamber for International Commercial Matters ("Netherlands Commercial Court of Appeal" or "NCCA"). (Emphasis added.)
The NCC has published an extensive report (in Dutch) about the position of the NCC and the NCCA. Some commentators argue that the NCC and the NCCA are not judicial authorities as described in the EU Brussel Regulation. If this were true, the verdicts of the NCC and the NCCA would not be enforceable under the regulation. Most, commentators, in common with the NCC itself, argue that the NCC is part of the Amsterdam District Court, an already acknowledged judicial authority. This has been anchored in the Dutch judicial system as well. Therefore, verdicts handed down by the NCC are enforceable.
One of the key elements of this case was the condition that the parties "expressly agreed" to litigate in English. In this case, the LOI and transaction agreement were closely related. They were drawn up (nearly) simultaneously. No justice would have been done to the parties' intent if the NCC clause did not extend to disputes arising from the LOI. By this logic, it is useful to agree explicitly on an NCC clause in an LOI as well in order to avoid any confusion. Parties not using the recommended NCC clause should note that a choice of forum for the Amsterdam District Court and a choice to litigate in English (procedural agreement) must be made. Parties must expressly agree to the latter, according to Article 30r of the DCCP. The safest way altogether is to use the clause recommended by the NCC.
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