Reinier advises national and international companies
reinier.russell@russell.nl +31 20 301 55 55In principle, the enforcement of foreign judgments is a national matter. But what if a dispute has already been dealt with by a foreign court? Can such a foreign judgment be enforced in the Netherlands or not?
A Dutch company and a US company have a dispute. This dispute was litigated in the United States. The US court ordered the Dutch company to pay damages and, on top, ‘punitive damages’. However, the Dutch company has all its assets in the Netherlands. So the US company has to collect money in the Netherlands. Can a US company simply enforce the judgment in the Netherlands?
The enforcement of judgments is a national matter. This means that, in principle, a foreign judgment cannot be enforced in the Netherlands. However, there are exceptions to this rule, namely:
In practice, the main basis for the recognition of foreign judgments is not a treaty but the Brussels I bis Regulation that applies to all countries within the European Union. The Regulation provides that European judgments can be enforced throughout the European Union. The recognition and enforcement of judgments from another member state does not require a recognition procedure in the Netherlands. Thus, such judgments can be directly enforced in the Netherlands. Although Great Britain has left the European Union, British judgments can be recognized in the Netherlands based on a treaty Great Britain has concluded with the Netherlands.
Recognition of judgments may also be based on an international treaty, which provides that the treaty states recognize and enforce each other’s judgments without proceedings. The parties need not first apply to a Dutch court to request recognition. Only a few countries outside the EU have joined such a treaty. Treaties include, for example, the Lugano Convention (2007), to which Switzerland, Norway and Iceland, among others, are parties, and the Hague Recognition Convention (2019) signed by Russia and the United States, among others. However, these countries have not yet ratified the Convention.
In our example, treaty-based recognition is not possible. Although the US has signed the Hague Recognition Convention, it is not yet valid because it has not been ratified yet. So the US company has to use the other option, i.e. the recognition procedure.
If a foreign judgment cannot be recognized on the basis of a treaty, the party seeking to enforce the judgment must apply to a Dutch court for recognition. The main rule for these proceedings is that a Dutch court conducts a full and independent assessment of the dispute. This means, in effect, the proceedings must be repeated. However, the Dutch court may decide to adopt the foreign judgment.
However, there are requirements for adopting foreign judgments, namely:
If all four conditions are met, the Dutch court can adopt the foreign decision.
For our example, this means that the US proceedings must meet the above requirements. The first requirement can be met simply if the contract contains a choice of forum clause. If it states that a US court has jurisdiction, the first requirement is met. Also, the safeguards in the proceedings will usually not be a problem in cases from the United States.
In our example, the Dutch company had been ordered by the US court to pay ‘punitive damages’. This is contrary to Dutch public policy because Dutch courts may only reward a compensation for actual damages. As a result, the US judgment is not eligible for recognition and enforcement and, in principle, the proceedings must be repeated in full. However, the court may pragmatically decide to take a foreign judgment as a starting point for its own judgement, except for punitive damages, as the Den Bosch Court of Appeal and the Oost-Brabant District Court did recently.
It is therefore wise, if it is foreseeable that you will have to enforce your judgment in the Netherlands, to seek advice of a Dutch lawyer prior to the proceedings. Even if you are not litigating in the Netherlands. This reduces the chance that you will have to conduct two lawsuits about the same claim. Or that you might go to great lengths to have punitive damages awarded for nothing, while it later turns out that you cannot collect them. It is also good to know that in the Netherlands full lawyer’s fees will only be awarded in exceptional cases.
It is also important to include a choice of forum in your contracts so that it is immediately clear which court is competent. In doing so, it is convenient to declare the law of that country applicable to the contract. Otherwise, a situation may arise where, for example, you have appointed a Dutch court that has to adjudicate the case under US law. Dutch courts are not familiar with this law and will therefore often have to call in an expert in this field. This can lead to considerably longer proceedings and higher costs.
Another possibility is litigation at the Netherlands Commercial Court (NCC) and by means of arbitration. The NCC is a special division of the Amsterdam District Court for international commercial matters, where proceedings can be conducted in English. Enforcement of a judgement in the NCC is still subject to the above rules. As regards arbitration, it is easier to enforce an arbitral award. Many more countries are party to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards than to the conventions for the enforcement of court rulings.
Do you have any questions about drafting an agreement or contract or including a choice of forum? Do you have questions about legal proceedings in another country for the purpose of enforcing a foreign judgment? We will be happy to give advice. You can also contact us for other questions regarding contract and litigation law. Please contact us:
Wednesday 25 September 2024, Reinier Russell will discuss cybersecurity and data protection in litigation at the European meeting of the World Litigation Forum in Barcelona.
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