Arbitration is an alternative to traditional litigation. Instead of a judge or panel of judges, one or more independent neutral third parties are appointed as an Arbitral Tribunal to resolve the parties’ disputes. By choosing arbitration, the parties designate an Arbitral Tribunal in place of the courts.
2.How does arbitration differ from court litigation?
The proceedings are less formal and usually do not follow the stricter procedures and evidencing rules applied in court litigation. There is typically no court reporter, procés verbal, other record of hearings. Unless otherwise agreed, the arbitral award is binding and not subject to appeal. The award is enforceable by the civil courts and is generally easier to enforce internationally than a national court judgement.
3.Why does (international) business prefer arbitration over court litigation?
Speed/Costs: Arbitration is often quicker than the courts, particularly when no possibility for appeals (as is usually the case). This can also result in lower costs. Confidentiality: The proceedings are not public. The existence of the arbitration, the parties submissions, and the hearings can thus all remain confidential. Expertise: For highly technical or industry-specific disputes, the parties can agree to and appoint arbitrators with the desired background, experience and (technical) expertise for their industry or international context. Lingua Franca: Arbitration allows parties to present and argue their dispute in a (neutral) language (such as English) rather than having to translate documents and use interpreters before the national courts of one of the parties. (International arbitrators are sometimes perceived to have greater impartiality than national judges in some points of the world.) Enforceability: Most importantly when there is no treaty between the countries of two parties in dispute, the United Nations Convention on Recognized Enforcement of Arbitral Awards offers a mechanism between the more than 120 signatory countries worldwide to readily recognize and enforce arbitral awards from each others’ countries. This is a major advantage over court litigation in such circumstances.
4.How does one agree to arbitration?
The parties to a contract can place an arbitration clause in their agreement which will come into effect in the event a dispute later arises. However, even if there is no contractual clause, ones a dispute arise between 2 or more parties, they can agree to have it resolved by arbitration through a simple submission agreement. Under either approach, the agreement to arbitrate must generally be in writing and signed.
5.If parties have agreed to arbitrate, can a party still bring dispute before a civil court?
By agreeing to arbitrate, a party consent to replacing the ordinary court’s jurisdiction with the private forum of arbitration. The court’s should recognize this and not accept jurisdiction over the dispute if the other party involves the existence of the agreement to arbitrate. The courts at the place of arbitration do supervisory jurisdiction” to handle matters (other than resolving the merits of the dispute), such as enforcing the agreement to arbitrate, appoint (an) arbitrator(s) if needed, deciding challenges to arbitrators, supporting the Arbitral Tribunal with the court’s compulsory powers (e.q. ordering the appearance of recalcitrant witnesses), and enforcing the Arbitral Tribunal’s award.
6.Once an award has been rendered, what are the possibilities for enforcement and execution in the Netherlands?
Article 1062 of the Dutch Code of Civil Procedure (“DCCP”) provides for a relatively simple and reliable procedure to enforce and execute final arbitral awards in the Netherlands. The Dutch courts conduct a review of the face (but not the contents of the decision) in the award. Grounds for refusing enforcement or setting aside an award are quite limited.
7.What are the possibilities for enforcement and execution outside the Netherlands?
The New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards and other treaties allow for the recognition and enforcement of arbitral awards from the Netherlands in over 120 countries in all parts of the world, including most industrialized nations. The New York Convention requires national courts to recognize and enforce commercial arbitral awards rendered in other countries that have been signed to this treaty. There are limited grounds for refusing the enforcement of an arbitral award. As a result, the enforceability of an arbitral award is in most cases much wider and easier than that of a judgment rendered by a national court. Especially when dealing with parties outside the European Union, an arbitration clause is preferable in terms of enforceability.
8.What is the difference between institutional arbitration and ad hoc arbitration?
Ad hoc arbitration: Administrative Ad hoc arbitration is arbitration that is not administered by others and requires the parties to make their own arrangements for selection of arbitrator(s), and the arbitrator(s) to defernance the applicable procedures and make administrative arrangements. Provided that parties are prepared to cooperate after the dispute arises, ad hoc proceedings can be more flexible, somewhat more economical and faster than an administered proceeding. However, failure of one or both of the parties to cooperate in facilitating the arbitration can result in an undue expenditure of time in resolving administrative issues. The UNICITRAL arbitration rules have been developed by the United Nations specifically for ad hoc arbitrations and provide a good framework for such non-administered cases.
Institutional arbitration: Institutional arbitration is arbitration that is administered by an arbitration service provider of international arbitrations. In the Netherlands, the Netherlands Arbitration Institute (NAI) is such an institute active in both domestic and international arbitrations. Internationally, the International Chamber of Commerce in Paris (ICC) Court of Arbitration enjoys wide recognitions throughout the world and is often chosen for the administration of international arbitrations, although numerous other institutes provide comparable services (such as the London Court of Independent Arbitration, and the Stockholm Chamber of Commerce). Both the ICC and the NAI offer standard rules and procedures, administrative assistance, pools of qualified arbitrators, selected by field of (technical and/ or legal) expertise, appointment of arbitrators and facilities to hold and conduct the proceedings. For these services, an administration fee will apply, which varies, depending among other on the amount in dispute.
Arbitration practice and customs vary from jurisdiction to jurisdiction. The contents of this FAQ is intended to provide general information on the subject matter. Specialist advice from a properly qualified advisor should be sought before relying on any of the foregoing information.
For a more detailed summary of litigation/ADR in the Netherlands, please download the 2008 Litigation/ADR guide chapter for the Netherlands.