Enforcement of arbitral award: permission of the court required!

In the Netherlands, enforcement of an arbitral award requires the permission of the court. A ruling of the Court of Utrecht under the previous arbitration law makes it clear that the court will only refuse permission in very exceptional cases. Arbitration lawyer Onno Hennis explains that there are good reasons for this, on the basis of this judgement.

Requirement to obtain permission to enforce

In the Netherlands, as in many other countries, the enforcement of an arbitral award requires permission to enforce. A bailiff can only take enforcement measures, such as the attachment of a bank account or the seizure of goods, if he has written permission to enforce (in the Netherlands called exequatur). The rationale behind this is that the judiciary is the final element in all legal proceedings, even if they are settled entirely privately (such as arbitration).

Permission to enforce is granted on request

The winning party to arbitration will ask the court for permission to enforce if the counterparty does not comply with the award voluntarily. The application proceedings for this are quite simple. Note: In some cases, the application proceedings may be ex parte. In other cases, the counterparty may oppose the application.

Refusal to grant permission to enforce

In principle, the court must always grant permission. However, if the arbitral award or the arbitral proceedings (under the previous arbitration law) would breach public order or public morals, the grant could be denied. This would be the case, for example, in the event of a prima facie violation of due process, or if there is a lack of an arbitration agreement. In other words, the court will only refuse permission if there are fundamental errors or if the proceedings were conducted in an obviously improper manner.

Dispute about accession agreement

The case at the Court of Utrecht concerned a dispute that had arisen after a hospital had terminated an ‘accession agreement’ with a medical specialist. The medical specialist then instituted arbitration proceedings against the hospital with the Dutch Healthcare Arbitration Tribunal. In the end, the arbitration tribunal ordered the hospital to pay EUR 300,000 in damages. The hospital then instituted termination proceedings.

Inadmissibility, because arbitration was instituted too late?

The medical specialist then requested the court for permission to enforce the judgement. The hospital objected to the request. It argued that the medical specialist had instituted the arbitration proceedings after the period of one month stipulated in the accession agreement, and thus too late. According to the hospital, the tribunal should have declared the medical specialist’s claim inadmissible.

Reliance on contractual expiry period unreasonable

However, the tribunal rejected the hospital’s reliance on the medical specialist’s failure to meet the contractual expiry period, in the light of standards of reasonableness and fairness. The tribunal considered that the medical specialist had initiated summary proceedings before the regular court at the same time as the arbitration proceedings. Moreover, the tribunal considered that the medical specialist had made it clear to the hospital that he would not accept the termination. The tribunal found that, under these circumstances, the hospital was not entitled to invoke the contractual (expiry) period.

Request for permission to enforce through the court

The hospital then applied to the court to prevent the medical specialist from being granted permission to enforce by (again) relying on the contractual (expiry) period. This would mean that the debate would be reopened, but this time about the question whether the medical specialist can enforce the arbitral award. The hospital argued that the tribunal had made an obvious error by considering that the medical specialist had a cause of action. The hospital claimed that if the court were to grant permission to enforce the arbitral award – in spite of this obvious error – this would be contrary to due process of law (and thus public order). The hospital, therefore, requested the court not to grant permission or at least defer its decision until a decision has been made about the reversal of the judgement.

Procedure for ordering enforcement: not an appeal in disguise

Even though something can be said for not granting permission, pending the question of the inadmissibility of the medical specialist’s action, the law (rightfully) stipulates otherwise. The fact that the judgement may conceivably not be upheld in the termination proceedings is not sufficient. Only when it is (practically) certain that the judgement will be annulled, it will be possible to refuse permission. The court, therefore, grants the medical specialist permission to enforce the award. The procedure for ordering enforcement is not an appeal in disguise. The tribunal has spoken and only if there are obvious errors, the court may refuse to grant permission.

AMS Advocaten: Assistance in procedures for ordering enforcement

Do you have an arbitral award and want to take enforcement measures against your counterparty?We can conduct the application proceedings on your behalf. Did you lose arbitration proceedings? We can also assist you in the execution stage.