This article was featured in Jus Mundi‘s 2023 Arbitration Year in Review, in collaboration with VYAPs, a yearly collection of articles from jurisdictions all around the globe updating you on arbitration-related developments from the previous year.
THE AUTHORS:
Eleonora Di Pangrazio, Associate at Freshfields Bruckhaus Deringer
Joey Oetomo, Associate at Linklaters
Case Law Highlights
Review of Negative Jurisdiction Awards Not Possible Under The Dutch Arbitration Act
In its judgment of 21 April 2023 in Manuel García Armas v Venezuela, the Dutch Supreme Court reached an interesting decision about the jurisdiction of arbitral tribunals. The judgment was issued within the set-aside proceedings of investor-state arbitration (with a seat in The Hague), where the arbitral tribunal issued a negative jurisdiction award (i.e., an award declining jurisdiction), finding that the claimants did not qualify as investors under the relevant BIT because they were dual nationals.
It is established Dutch case law that – given the fundamental nature of the right of access to state courts – the courts deciding upon a set-aside application fully reassess a positive jurisdictional award (i.e., an award upholding the jurisdiction of the arbitral tribunal) if a party claims that a valid arbitration agreement was lacking.
In the present case, however, the Supreme Court ruled that Dutch arbitration law does not allow the challenge of negative jurisdiction awards. The Supreme Court referred to the Dutch legislative history and to the UNCITRAL Model law to reach this conclusion.
This judgment creates a novel asymmetry in the Netherlands where, on the one hand, Dutch courts conduct a full de novo review; on the other hand, a review is not possible (depending on whether the award on jurisdiction rendered assumes or denies jurisdiction). Nevertheless, the judgment clarifies the Dutch approach, while it is observed that the (im)possibility to review negative jurisdiction awards differs from jurisdiction to jurisdiction.
State Immunity Remains a Challenge to Overcome
The Netherlands has been known as a jurisdiction with an enforcement-friendly regime, especially regarding the request to (pre)attach assets present in the Netherlands. The procedure to levy attachments in the Netherlands is, in fact, quite simple, and Dutch courts often grant attachment requests.
When it comes to enforcement against states or state-owned entities, however, enforcement gets more complicated due to the availability of state immunity defences and the test applied by Dutch courts in that regard.
State immunity was recently invoked with success by the Republic of Kazakhstan in the proceedings Stati v. Kazakhstan, in which Kazakhstan tried to lift the attachments levied by investors following a successful arbitral award. The courts in the first instance did not accept the state’s submissions relying on state immunity. While in its previous decision in 2020, the Supreme Court had also ruled on the standard to be applied in relation to state immunity defences, in its judgment of 22 September 2023. The Supreme Court found that the investors had failed to sufficiently prove that the attached shares in a Kazakhstan state-owned wealth fund were meant for other than public purposes, even when assuming that the shares are exploited commercially.
In contrast, the Yukos investors’ efforts to enforce their arbitral award against the Russian Federation seem to be more successful. Advocate General P. Vlas presented an Opinion on 22 September 2023 on the attachment by the Yukos investors of trademarks and copyrights held by Russian state-owned FKP. Shortly put, Vlas observed that since the attached rights are meant for purposes other than public (read: commercial), the Russian Federation cannot successfully rely on state immunity protection. It will be interesting to see whether the Dutch Supreme Court will align its judgment with Vlas’ Opinion.
Restraint Application of Setting Aside Grounds Reaffirmed
In its judgment of 17 March 2023, the Dutch Supreme Court once more reaffirmed that the five exhaustive setting aside grounds (which are listed in article 1065 of the Dutch Civil Code of Procedure) have to be applied with restraint by a court considering a set aside application.
This case, in particular, dealt with whether the state court could set aside four arbitral awards due to the tribunal acting in excess of its mandate. In the first instance, the court agreed with the contention that the tribunal had violated its mandate (by not adhering to the principle of res judicata) and, therefore, decided to set aside the arbitral awards. The defendant, in the set aside proceedings, however, complained in cassation that the court had not exercised sufficient restraint in its consideration of the set aside grounds.
The Supreme Court found these complaints to be well-founded. Despite the fact that, in her Opinion of 9 September 2022, Advocate General De Bock advocated for a broader interpretation of the test to be applied by courts considering set aside applications (i.e., applying a less restrictive test), the Supreme Court clearly rejected that plea and reiterated the long-settled framework that courts must exercise restraint when assessing annulment claims.
Intra-EU Investment Arbitration Continues to Stir the Pot
RWE Withdraws its Investment Arbitration against The Netherlands, but Court Litigation Remains
Until recently, the Netherlands was facing two (of its first-ever) adverse investment arbitration cases. These International Centre for Settlement of Investment Disputes (“ICSID”) proceedings on the basis of the ECT were brought separately by Uniper and RWE following the Netherlands’ decision to phase out coal-fired power plants.
Whilst Uniper withdrew its ICSID case in 2022, RWE decided to follow suit on 16 October 2023. Notably, RWE’s withdrawal followed an anti-arbitration injunction that the Netherlands obtained from the German Federal Court of Justice. Despite acknowledging the autonomous (and therefore seatless) nature of ICSID proceedings, the German court ruled that it was not precluded from declaring RWE’s ICSID case inadmissible because of a special provision in its national arbitration law combined with the primacy of EU law.
Thus, the water seemingly cleared for the Netherlands in relation to its adverse investment arbitration cases. However, RWE continues to pursue its court litigation against the Netherlands. It is observed that RWE seeks to rely on the protective provisions of the ECT in these national proceedings. How the Dutch courts will handle this unprecedented approach is yet to be seen.
In Turn, the Dutch Courts Deny Anti-Arbitration Injunction Requests
As the number of anti-arbitration injunction requests globally seems to be rising, the Dutch courts have not escaped this trend. This year, the Dutch courts denied injunctions sought by Poland and Spain in relation to intra-EU investment arbitration cases.
On two separate occasions last year (8 March and 29 August 2023), the Amsterdam District Court and Amsterdam Court of Appeal denied granting an anti-arbitration injunction to thwart an investment arbitration seated in the UK against Poland on the basis of the Netherlands-Poland BIT. The Dutch courts considered that, although it would be barred from giving effect to an award resulting from this investment arbitration on the basis of EU law, it lacked the power to block the investor from pursuing its claim in the UK-based arbitration. In doing so, the court also observed that the English courts are not bound by EU law. Of course, it is to be seen how long English courts can maintain that approach given the recent Opinion of Advocate General Emiliou in the EU infringement proceedings against the UK.
On 6 March 2023, albeit for different reasons, the Amsterdam District Court denied Spain an anti-enforcement injunction in relation to enforcement efforts of an intra-EU ECT award in the US. Spain argued that such enforcement would compel Spain to violate EU state aid laws, but the District Court was not persuaded. Instead, it ruled that it could not entertain Spain’s attempt to open a new (and non-existing) forum to re-argue the invalidity of the adverse ECT award. Importantly, the court reasoned that Spain’s attempt to set aside the award had already been denied at the seat in Switzerland and based on the closed system of the New York Convention (1958), only the court where enforcement is sought has the power to rule on matters thereto.
In sum, the Dutch courts have not been persuaded by attempts to block investors’ right to continue investment arbitration (related)-cases, which confirms the neutral and pragmatic approach adopted by the Dutch courts.
Outlook for 2024
With developments outlined above and brand-new authoritative literature such as the handbook on Arbitrage en bindend advies in the Asser-series being published, 2023 is to be considered a fruitful year for the Dutch arbitration landscape.
Looking forward to 2024, further interesting developments are appearing on the horizon. For example, a judgment by the Supreme Court on the enforceability of mediation clauses (currently deemed unenforceable) is anticipated in the first half of 2024 (after the Advocate General opined in favour of enforceability on 26 January 2024), and the new Arbitration Rules of the Netherlands Arbitration Institute are expected to be published. To be continued!
ABOUT THE AUTHORS:
Eleonora Di Pangrazio is an associate at the Amsterdam office of Freshfields Bruckhaus Deringer. Her practice focuses on commercial litigation as well as commercial and investment arbitration (including post-award proceedings before the Dutch courts).
Joey Oetomo is an associate in the arbitration team of Linklaters Amsterdam. He has experience in relation to both investment and commercial arbitration and is regularly involved in arbitration related court proceedings.
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