Clifford Chance

Dutch Court declines jurisdiction in light of valid arbitration agreement in unsigned underlying contract

In a recent case, the claimant found an anchor defendant domiciled in the Netherlands and argued that jurisdiction over foreign defendants could be based on article 8(1) of the Brussels I-bis Regulation and article 7(1) of the Dutch Code of Civil Procedure (DCCP). The Amsterdam District Court ruled that it did not have jurisdiction over the Dutch company due to the existence of what it considered to be a valid arbitration agreement in an unsigned underlying contract. The Dutch company, as the anchor defendant, was the basis for bringing the foreign (non-Dutch) defendants before the Dutch court. As there were no other applicable grounds for jurisdiction, the Court declined jurisdiction to hear the claim against the foreign defendants.

Background

Article 8(1) of the Brussels I-bis Regulation provides that a claimant can bring claims against a number of defendants in the courts of the place where any one of them is domiciled, provided the claims are connected such that it is expedient to hear and determine the claims together to avoid the risk of irreconcilable judgments resulting from separate proceedings. This enables a claimant to bring one action against defendants from different member states in the member state where one of them (the anchor defendant) is domiciled. A similar provision can be found in article 7 of the DCCP, which applies to actions brought in the Netherlands against defendants to whom Brussels I-bis Regulation does not apply.

Article 1074 DCCP governs the consequences of an arbitration seated abroad for the jurisdiction of the Dutch courts. This article demonstrates that a Dutch court will declare that it has no jurisdiction if a party invokes the existence of such an arbitration agreement before submitting a defence, unless the agreement is invalid under the law applicable to said agreement.

Facts

A dispute arose over various loans in relation to an intended joint venture between the parties, following which the claimant brought a tort claim against various defendants who it held jointly and severally liable for the loss suffered. Among the defendants was a Dutch company and its two former Dutch directors, who served as anchor defendant for the other defendants in Cyprus, Ukraine and the British Virgin Islands.

The defendants challenged the jurisdiction of the Dutch court, as the agreement underlying the dispute between the parties provided for arbitration under the London Court of International Arbitration (LCIA) Rules. The claimant argued in response that the arbitration clause was not valid, as the Dutch company did not sign the underlying contract. The question as to whether there was a valid agreement between the parties with an arbitration clause was governed by English law. The claimant submitted expert evidence from a King's Counsel to support its position and the defendant submitted relevant literature about English arbitration law.

Decision

It followed from the submitted (expert) evidence that under English law, an arbitration clause, even when it is contained in an underlying contract that was not signed and concluded, can be binding on the parties when there is objective evidence relating specifically to the parties' mutual intention to nevertheless be bound by that arbitration clause. In light of this, the Amsterdam District Court concluded that it needed to assess whether the claimant and the Dutch company (as anchor defendant) had the common intention of having their disputes settled through arbitration under the LCIA Rules.

The Court considered correspondence exchanged between the parties during the negotiation phase and the exchange of other documents containing an LCIA arbitration clause to be relevant. These documents did not qualify as "drafts" and confirmed that the parties intended to have their disputes settled in accordance with the arbitration rules of the LCIA. The Court ruled that the parties were bound by the arbitration clause, even though the underlying contract was not signed by the Dutch company.

Moreover, the Court found that the claimant's tort claim was closely connected to the underlying contract and related to the same facts as other contractual claims falling within the scope of the arbitration clause. Although the arbitration clause did not refer specifically to tort claims, it contained the words "arising out of" and "in connection with". The Court held that the tort dispute between the claimant and the Dutch company fell within the scope of the LCIA arbitration clause and must be referred to arbitration. The Court upheld the jurisdictional challenge because of the arbitration clause in the underlying contract and declined jurisdiction.

Consequently, the Dutch company could not serve as an anchor defendant. This resulted in the conclusion that the Court also had to decline jurisdiction over the foreign defendants. Moreover, the Court ruled that based on the available evidence it could not conclude that the two Dutch directors of the company had contributed to the alleged unlawful act. As the position of the Dutch directors differed from the other defendants' positions, there was no risk of irreconcilable judgments if those claims were determined separately. As the directors could not serve as anchor defendant either, the Court could not accept jurisdiction over the foreign defendants on this basis.

Comment

The decision serves as a reminder that parties are, in general, bound by their choice to refer their disputes to arbitration, even when the underlying contract is not signed by all parties. Also, the strategic use of an anchor defendant in combination with a tort claim is insufficient to set aside an arbitration clause. This case reiterates the high threshold needed to deny being bound by an arbitration agreement.

The Amsterdam District Court's approach in this case is consistent with the Dutch court's reluctance to interfere with arbitration clauses and reasserts the primacy of arbitration. More generally, it highlights that the Dutch courts will not lightly depart from the terms of international commercial agreements and will take the principles of commercial certainty underlying such contracts seriously.

In reaching its decision, the Amsterdam District Court applied English law. This judgment demonstrates that Dutch courts can efficiently assess their jurisdiction based on expert evidence setting out the relevant foreign law.

(Amsterdam District Court, 13 September 2023, ECLI:NL:RBAMS:2023:5798)

This article has been reproduced with permission from the International Law Office, and was first published on 16 November 2023.