Evelyn Tjon-En-Fa Arbitration seminar 15 October 2013

Arbitration versus litigation: an assessment of pros and cons against the proposed new

Dutch arbitration law

Evelyn Tjon-En-FaArbitration seminar 15 October

2013

Page 2Arbitrage© Bird & Bird LLP 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

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


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


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)

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?


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)


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

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


Important proposed amendments

1. More directory law, more modern means of communication

2. Limitation of the length of annulment proceedings3. Option for remission ("terugverwijzing") in annulment

proceedings4. Introduction of provisional measures in pending

arbitration proceedings ("voorlopige voorzieningen")5. B2C arbitration clauses6. Miscellaneous


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


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


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


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


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


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


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 proceedingso Conservatory measures (e.g. conservatoir beslag) are still not

included: state courto 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


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


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


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?


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


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')

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 meanso International disputes: Annet van Hooft

• Choice for Arbitration or Litigation will still largely depend on:o Litigation venue / enforceabilityo Importance of privacy /publicity/ precedentso Subject matter (specific expertise required)

Evelyn [email protected]

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Thank you

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Evelyn Tjon-En-Fa Arbitration seminar 15 October 2013

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