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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-Fa Arbitration seminar 15 October 2013. Table of contents. First stages of Dispute Resolution Follow-up in Dispute Resolution: Arbitration or Litigation?

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Evelyn Tjon-En-Fa Arbitration seminar 15 October 2013

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  1. Arbitration versus litigation: an assessment of pros and cons against the proposed new Dutch arbitration law Evelyn Tjon-En-Fa Arbitration seminar 15 October 2013

  2. Table of contents • First stages of Dispute Resolution • Follow-up in Dispute Resolution: Arbitration or Litigation? • Will there be a shift of balance between Arbitration and Litigation under the legislative proposal on the modernisation of Dutch arbitration law? • Closing remarks

  3. First stages of Dispute Resolution

  4. 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

  5. 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 ("notariëleakte"): execution possible

  6. 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)

  7. Follow-up stage of Dispute Resolution: Arbitration or Litigation ?

  8. 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: • isthemajorityalwaysright, andhowwouldtheoutcomeof a survey in theNetherlandslooklike? • Will theproposednewDutcharbitrationlawmakearbitration (even) morepopular?

  9. 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 tochoose/select arbitrators, oftenwitha specific expertise • Procedural flexibility • International: enforceability under New York Convention (countries such as China and the US)

  10. 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

  11. Will there be a shift of balance between Arbitration and Litigation? A comparison with a view to the proposed new Dutch Arbitration law

  12. Background andmain goals • Current Dutch arbitrationlawstemsfrom 1986 • Codification of most important case law at the time • Looselybased on UNCITRAL Model Law 1985 • Reasonforproposed new ArbitrationLaw • General goal: make Arbitrationa more attractivealternativetoLitigation(international: leadingarbitrationcountry); lean more heavily on UNCITRAL • Specific goals: • modernisation (e.g. introduction of contemporary means of communication) • codification of best practices • reduce financial burdento the parties • simplifyannulmentproceedings • increaseconfidence of consumers in arbitration

  13. Important proposedamendments • More directory law, more modern means of communication • Limitation of the length of annulmentproceedings • Option forremission ("terugverwijzing") in annulmentproceedings • Introduction of provisionalmeasures in pendingarbitrationproceedings ("voorlopige voorzieningen") • B2C arbitrationclauses • Miscellaneous

  14. 1. More directory law & modern means (I) • More options toderogatefromlegalprovisionsby contract or bychoosinganarbitrationinstitutewithcorrespondingrules • Examples: • Number of written briefs tobesubmitted? (art. 1038a CCP) • Oralpresentation? (art. 1038b CCP) • Arrangements on the submission of evidence? (art. 1039-1042a CCP) • Appeal in cassation in annulmentproceedings? (art. 1064a CCP) • Facilitateelectroniccommunication, if the partiesagree (art. 1072b CCP) • Video conferencing, electronicarbitral award

  15. 1. More directory law & modern means (II) • How willLitigationcompareto these new features? • No equivalent to art. 1038a CCP (number of writtenbriefstobesubmitted) and art. 1038b CCP (oralpresentation) 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

  16. 2. Limitation of duration annulment proceedings (I) • Amendments in annulmentproceedingsbefore the State Courts • Current:twofact-findinginstancesand no explicit option toexclude appeal in cassation at the Hoge Raad • New: Court of Appeal insteadof District Court (article 1064a CCP) as: • first andonlyfact-findinginstance ('feitelijke instantie') instead of 2 (savesboth time and money, but some are critical) • option for appeal in cassation at the Hoge Raad, unlessexcludedby the parties

  17. 2. Limitation of the length of annulment proceedings (II) • How do these new rules compare to the length of Litigation? • Current number of instances: • Arbitration: 1 (or 2, if appeal is agreed upon) plus 3 instances (annulment proceedings; option of 'prorogatie'/'sprongcassatie': art. 96 and 329 CCP) • Litigation: 3 instances (option of 'prorogatie'/'sprongcassatie' • New number of instances: • Arbitration; 1 (or 2) plus 1 or 2 (annulment proceedings; option of 'prorogatie'/'sprongcassatie') • Litigation: no changes

  18. 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

  19. 3. Remission in annulment proceedings • Current: no remission ('terugverwijzing') option in annulmentproceedings • New: Court of Appeal maysuspendannulmentproceedingsforremissionof the case toarbitraltribunal (art. 1065a CCP) • At the request of a party / on the Court of Appeal'sown motion • decissiontoremit is notsubject to appeal) • Arbitraltribunalcannullify ("ongedaanmaken") the groundforannulment / take anyothermeasureitdeemsappropriate • Obviously no equivalent in Litigation, but: • Cf. ground for cassation in single-instance proceedings (e.g. 'ontbindingsprocedures'; art. 7:685 CCP) • Cf. issue of remission or 'evocatie' to the court of first instance in interim appeals

  20. 4. Provisional measures in pending arbitration proceedings (I) • Current: • authorityforemergencyarbitratorsto order provisionalmeasures in separate proceedings ("arbitraal kort geding"), ifagreedupon(art. 1051 CCP) • New: • authorityforarbitraltribunalto order certainprovisionalmeasures in pendingarbitralproceedings on the merits, unlessotherwiseagreedbyparties (art. 1043b CCP) • onlyfor the duration of the arbitralproceedings • Conservatorymeasures (e.g. conservatoir beslag) are stillnotincluded: state court • Award willbequalitied as anarbitral award, but itremainstobeseenhowforeign courts willseethisunder the New York Convention

  21. 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 (kortgeding) (art. 254-260 CCP) • Cfarbitraalkortgeding • Authority for judge to order certain provisional measures (including conservatory measures) in pending proceedings on the merits (art. 223 CCP); provisionelevoorziening • Cfvoorlopigevoorziening in arbitraalgeding

  22. 5. Arbitration in B2C contracts (I) • Current: Hoge Raad: ECJ case lawand "alle relevante omstandigheden van het geval" (art. 6:233 DCC) • Consumer protection (cf EU Directive 93/13EEG) • New: art. 6:236 subsection n DCC willbeamended: • as a rule: onreasonablyonerous ("onredelijk bezwarend"/ zwarte lijst) • Arbitration in B2C: • after a dispute has arisen: by separate arbitration agreement • generalconditions: 30 day-periodforconsumertooptfor the competent state court instead of arbitration

  23. 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?

  24. 6. Miscellaneousamendments (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

  25. 6. Miscellaneous (II) • Annulment proceedings (art. 1065 CCP): • 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; • Requirement of a 'reasonable interest' (Memorie van Toelichting, p. 39); and • 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 ernstigeaard')

  26. Some closing remarks

  27. Closingremarks • 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: • Electronic communication means • International disputes: Annet van Hooft • Choice for Arbitration or Litigation will still largely depend on: • Litigation venue / enforceability • Importance of privacy /publicity/ precedents • Subject matter (specific expertise required)

  28. Thank you Evelyn Tjon-En-Fa Evelyn.tjon-en-fa@twobirds.com 00-31-70-3538858 Bird & Bird is an international legal practice comprising Bird & Bird LLP and its affiliated and associated businesses. Bird & Bird LLP is a limited liability partnership, registered in England and Wales with registered number OC340318 and is authorised and regulated by the Solicitors Regulation Authority. Its registered office and principal place of business is at 15 Fetter Lane, London EC4A 1JP. A list of members of Bird & Bird LLP and of any non-members who are designated as partners, and of their respective professional qualifications, is open to inspection at that address. twobirds.com

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