A Case Law Update of the Netherlands Commercial Court
By Michiel Teekens, TeekensKarstens advocaten notarissen
The Netherlands Commercial Court (NCC), created on 01 January 2019 and part of the Amsterdam court, is a forum choice court that deals with international commercial disputes. Proceedings and judgments are in English, foreign law can apply to the dispute, and foreign counsels can actively participate. The fee structure is in principle lower compared to arbitration and many jurisdictions allow foreign civil judgments to be recognised and enforced. Recent international developments, such as the creation of the Convention of 02 July 2019 on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters, strengthen the concept of extraterritorial enforcement of foreign judgments.
The NCC has ruled various interesting judgments. In its judgment of 29 April 2020, the NCC ruled whether commercial parties, domiciled in New York and Amsterdam, entered into a EUR 169 million M&A transaction and whether COVID-19 circumstances allowed for mitigation of a EUR 30 million LOI fee arrangement for cost compensation to the potential seller in case the transaction was not concluded (NCC, ECLI:NL:RBAMS:2020:2406). While the transaction agreement was not signed, the potential seller argued that the transaction was agreed upon by the buyer through imputable communications from its advisers and/or conduct of the buyer.
The NCC declared that Dutch law allows the parties broad leeway as to how they communicate what may or may not be construed as an offer or acceptance. The assessment is based on what a reasonable person in the same circumstances would have understood from such communication. Here, the LOI’s binary mechanism (either execute and deliver the paperwork for the transaction agreement by the agreed date, or pay a EUR 30 million fee) was not seen as an absolute formal requirement for contract formation, but it did set a high bar for there to be any agreement through other channels. The communications relied on by seller did not clear that bar.
As to the mitigation of the EUR 30 million LOI fee arrangement for cost compensation to the potential seller, the NCC concluded that there is no well-established case law on COVID-19 for which it applied a new “share the pain” approach, which focuses on preserving the parties’ contractual equilibrium. Since the fee arrangement allocated risk and expressed commitment, the NCC decided that the potential buyer should pay the fee as agreed upon. The COVID-19 crisis does not make that outcome unacceptable under Dutch law.
Michiel TeekensGGI member firm
TeekensKarstens advocaten notarissen
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TeekensKarstens advocaten notarissen (TK) is a full service Dutch law firm with extensive experience in the field of international law. TK has established specific international teams to provide international clients with tailor-made services and information.
Michiel Teekens is a Partner with the firm. He is an international corporate and commercial litigator and Chair of the International Law team of experts in TK.
Published: Litigation & Dispute Resolution Newsletter, No. 13, Autumn 2020 l Photo: Nataraj - stock.adobe.com