The BREXIT and the international ambitions of the Dutch judiciary

brexit-1462470589paaEddy Bauw

Earlier this year, the Council for the Judiciary released a plan to establish a Netherlands Commercial Court (NCC). In the plan it was stated that the NCC would start on the 1st of January 2017. By now, a starting date of July 1st, 2017 seems more realistic. The upcoming Brexit makes this, in itself already stimulating, plan even more interesting. Will this boost the chances for this special provision for international commercial cases in Amsterdam? In this blog I will discuss the reasons for this initiative, the innovative aspects of it and its chances of success in light of the Brexit.

In short, the plans are that under the name ‘Netherlands Commercial Court’ (NCC) a special judicial divisions will be created at the Amsterdam District Court and Court of Appeals, composed of judges specialised in disputes relating to international commercial contracts and business law. Already now these disputes can be litigated at the Dutch courts. Decisive therefore is primarily whether parties made a choice for a Dutch court in their contract. The innovative aspect of the NCC is that cases in which a foreign party is involved will be heard in English and are dealt with in a manner which is specifically tailored to these types of cases. The expectation is that it will then be more attractive for business entering into a contract to opt for this new Dutch court. In recent decades, parties to international trade contracts seem to increasingly opt for specialised commercial courts, in which the London Commercial Court takes a leading position. To reverse this trend, the Council considers it necessary to also set up a commercial court in the Netherlands.

In a letter to the House of Representatives last November, the Minister of Security and Justice wrote that the NCC will be ‘an asset for the Dutch trading infrastructure’ and that with its establishment ‘economic interests are involved for the Netherlands’. According to the Minister a NCC will be able ‘to contribute to lower costs for Dutch companies who will then be less frequently forced to litigate in other –especially expensive Anglo-Saxon – countries, to faster economic processes as a result of shorter proceedings, to more business for the high-quality Dutch legal procession.’ Let us further examine these benefits.

Firstly, there is the broad economic interest involved in the creation of a NCC. This concerns the value of the activities that the creation of a NCC brings with it and the incentives it offers for the (internationally operating) legal sector in the Netherlands. In this respect, the figures show that the fact that London has succeeded in becoming ‘a centre for global litigation’, has not done the United Kingdom any harm. In the last decades the size of the legal sector has more than doubled. The contribution of this sector to the British economy has grown from 10.6 billion pounds in 2001 to 22.6 billion pounds in 2013. Obviously this cannot be entirely attributed to the presence of the London Commercial Court, but it does appear to play a pivotal role. Even if a NCC can only realize a fraction of this impact it seems worthwhile.

Secondly, there are the lower costs for Dutch companies. As mentioned above, the trend in international commercial contracts that Dutch companies conclude with foreign companies is increasingly not to agree on a choice for the Dutch court if a dispute arises about the contract, but instead to choose the court in London. The result is that Dutch companies are forced to litigate there. However, the costs in London are five times higher than in the Netherlands. The costs of the English law firms with rates that are much higher than in the Netherlands are the main cause thereof, but also the costs of taking of evidence are higher. This is due to the fact that English law has more possibilities to compel the opposing party to disclose information with which a claim can be substantiated in a proceeding (‘disclosure’). Obtaining and processing this information takes a lot of time and time is money, and thus the costs of the procedure further increase while it remains to be seen whether it helps the parties in proving their case. Dutch law is more reserved on this point, which makes the proceedings, in combination with the lower lawyer’s rates, in Amsterdam cheaper than in London. The idea is that a NCC could be a good alternative for cases in which Dutch companies are involved and that these are no longer compelled to accept the choice for London. But also for foreign companies a NCC can be attractive, perhaps not in the largest cases in which money does not play a role, but in the cases just below that cut-off.

It is not realistic to expect that a NCC will very quickly gain popularity. Parties will first want to see how what the procedure will look like. To date the following is known about the procedure. The prime consideration is that in principle English will be the language of the proceedings, unless both parties are Dutch and opt for a trial in Dutch. A division of the court specialised in international commercial cases will hear the cases. The intention is that the new procedure will be able to benefit from the speed and digitalisation that the ongoing operation Quality and Innovation should create, so that compared to other countries, including the United Kingdom, a modern way of litigation will be offered. The required legislation for that operation was approved by the Senate just before the summer and the new procedure will also apply to commercial cases next year. The cases will, unlike in London, be heard at the Court of first instance by a chamber of three judges and there will be, as mentioned, a reserved system of taking of evidence. This will contribute towards a faster course of proceedings and also keeps the costs of taking of evidence within reasonable limits. Besides this distinctive element, some valued elements of the English system will be adopted. For example, having a casemanagement conference early-on in the proceedings, which can ensure an expeditious course of the proceedings, and the recording of the hearings of witnesses and experts.

The success of the NCC will be determined by whether enough parties can be moved to make the choice for this court. Of primary importance from the side of the NCC will be the (proven) specialism of the judges, including the use of English as the language of the proceedings, and the operational excellence when it comes to the course of the proceedings (case management, speed) and the provisions (digital files). From the outset this must all be up to standard, after all, ‘you never get a second chance to make a first impression’. Negative experiences of parties and lawyers will quickly spread and that can be highly detrimental. In addition, how parties perceive a choice for Dutch law will be determinative. After all, when making the choice for English law, the choosing for the NCC is less logical. Currently we see a strong preference for English law, as it would allow for more freedom of contract and would provide more assurance that the contract will be applied accurately. However, the difference between the two legal systems seem to be getting smaller and therefore, this does not have to be an insurmountable obstacle to the success of the NCC.

Now that the Brexit is set in stone, other factors also come into play, which at first sight appear to positively influence the chances of the NCC. A lot has already been written about the chances of Amsterdam being an attractive place of business for companies who want to swap London for a location within the EU. If this indeed would lead to Amsterdam gaining a prominent position in international business markets, then that would have a beneficial effect on the choice for the NCC. The dominant position that London still has in this regard is due largely to the fact that the city is home to many international business markets and that a large part of the international contracts are concluded there. The choice of jurisdiction for the commercial court is then obvious. If Amsterdam has an internationally oriented court, where litigation can occur in English, the choice of that forum is equally obvious. In addition, with the choice of the NCC it is ensured that the verdict can be enforced in all EU Member States. It is still uncertain what the impact of the Brexit will be in this respect for the judgments of the commercial court. It seems likely that an arrangement will be made with the UK as is currently in place for the non-EU countries such as Norway, Iceland and Switzerland, which allows for the enforcement in EU member states is largely insured, but even then it is not implausible that companies from EU Member States will give priority to a court of an EU Member State.

Be that as it may, the timing of a NCC could hardly have been better. The Brexit will also lead to shifts in the legal field and that offers better opportunities to break trends, such as the almost automatic choice for London in international contracts. An indication that there are good prospects for the NCC also comes from London itself, where an eye is being kept on the competition. In a study from 2015 commissioned by the British Ministry of Justice into the factors that determine the choice of the London court by parties, can be read:

‘The most seriously competing European jurisdictions were said to be Germany and the Netherlands, and it was noted that both have improved their marketing. (..) The Dutch courts were perceived by respondents as efficient in hearing complex high value claims and as providing for convenient collective settlement mechanisms.’

And that was before the outcome of the Brexit referendum and the establishment of a Netherlands Commercial Court.

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Eddy Bauw

About Eddy Bauw

The law must be studied in the context of it's social function. Eddy Bauw therefore is primarily interested in the question of what liability law and administration of justice contribute or could contribute to society. It speaks for itself that in this approach legal insights are combined with those from other scientific disciplines. This is also the approach of the research centres to which he is connected : UCALL the Utrecht Centre for Accountability and Liability Law and the Montaigne Centre for Judicial Administration and Conflict Resolution.