Netherlands
In your jurisdiction, are there any formal ADR procedures available for resolving commercial disputes other than litigating (or arbitrating) to a final hearing?
Parties invariably informally negotiate to some degree at the outset of a dispute either as an alternative to, or at the same time as litigation or arbitration. However, there are also a number of more formal types of ADR which are common-place in the Netherlands across all types of commercial disputes. After, arbitration, the main types of ADR in the Netherlands are binding advice and mediation.
Binding advice involves a neutral third party, the binding advisor, giving a decision that is binding for the parties. This form of ADR is typically used in technical or specialized disputes. The Supreme Court rendered an important judgment about binding judgment and the right to being heard on June 2, 2023 (link). Also, there are various independent resolution committees (onafhankelijke geschillencommissies) who handle complaints about certain services or products (for example for consumer affairs, financial services and health insurance), in order to reduce the number of disputes that go to court and is cheaper. Such committees render their decisions by ways of a binding advice, although the existence of these committees do not prohibit parties to go directly to the Courts.
Mediation is a process where an impartial third party, the mediator, helps parties reach a mutually acceptable solution to their conflict. Mediation is commonly used in labor disputes, family issues, and commercial disagreements.
Does engaging in ADR have any effect on potential or existing litigation or arbitration?
Entering into mediation or binding advice affects limitation periods. Article 3:319(1) Dutch Civil Code (“DCC”) stipulates that, if a binding advice has been requested and obtained, the new limitation period will begin to run on the day following the day on which the binding advice was issued. The new limitation period is the same as the original, but not longer than five years. With regards to mediation, the Dutch Supreme Court decided in 2021 that the start of mediation in a cross-border dispute, can be equated with the interruption actions referred to in a 3:316 BW, see a decision of the Dutch Supreme Court, ECLI:NL:HR:2021:274.
Engaging in binding advice may prevent parties from entering into litigation or arbitration. After parties have chosen binding advice, either after a dispute has arisen or contractually, the parties are bound by following this procedure. If a party goes to court, whilst having agreed on binding advice with the other party, the judge will declare the claimant inadmissible. This ends the procedure before the ordinary court.
The question as to whether or not professional parties can be held to mediate was recently raised before the Dutch Supreme Court, after parties appealed a decision of the Court of Appeal of The Hague in September 13, 2022 (ECLI:NL:GHDHA:2022:1851). In this case, an agreement between two parties contained a multi-tiered arbitration clause, where parties should first try to mediate the dispute, and only after that could refer the matter to mediation. One of parties sought annulment of several arbitral awards on the grounds that (among other things) no mediation had taken place, and therefore the arbitrator had no competence to hear the dispute. The Court of Appeal, acting as the competent court of first instance to hear annulment claims, dismissed the claim. According to the Court of Appeal, the arbitration clause could reasonably be interpreted as not containing a binding obligation to mediate. As a result, the Court of Appeal did not address the broader question of whether mediation can ever be binding. The party filed an appeal in cassation. On July 12, 2024, the Dutch Supreme Court rendered its judgment (ECLI:NL:HR:2024:1078) and confirmed for the first time that a mediation clause can have a binding effect. Although the Dutch Supreme Court upheld the Court of Appeal’s finding that the clause did not impose a binding obligation to mediate, it clarified that whether or not professional parties can be compelled to mediate depends on (i) the interpretation of the mediation clause and (ii) the discretion of the court.
The Supreme Court found that a mediation clause (or multi-tiered dispute resolution clause) can oblige parties to attempt mediation before initiating legal proceedings or arbitration, but also be interpreted as not imposing such an obligation. The content of a mediation clause and the binding or non-binding effect must be determined by interpretation. This depends on the meaning that the parties could reasonably attribute to the mediation clause in the given circumstances and on what they could reasonably expect from each other in this regard (the Haviltex-standard). The circumstances that a mediation clause has been agreed between professional parties and that the agreement and the dispute arising from it have a business character, may play a role in the interpretation, but do not automatically mean that the mediation clause must be interpreted in such a way that it obliges the parties to attempt mediation before they initiate legal proceedings (or arbitration proceedings). If a mediation clause mandates mediation and a party proceeds with legal action without first fulfilling this obligation, the court may, at the request of the other party, suspend the proceedings to give them an opportunity to attempt mediation. Nevertheless, the court is not required to grant such a suspension – for instance, if the case is too urgent to be referred to mediation, or “if it is pointless to attempt mediation”, whereby the Supreme Court did not clarify why mediation would not give a resolution in urgent disputes or when it is “pointless” to attempt mediation. Also, a mediation clause may not be applied if its application would result in an unacceptable infringement of the parties’ right of access to the courts, which is also guaranteed by Article 6 ECHR.
Note that parties can opt for mediation even if the case is already before the court. This can be done by the request of the parties or at the request of the judge (either in writing or during a hearing). The principles of “mediation alongside litigation” (mediation naast rechtspraak) are the following: 1) a mediation agreement sets out the tasks and obligations of everyone involved; 2) mediation normally lasts no longer than three months, often shorter 3) with the exception of criminal cases, the judicial proceedings are suspended. After agreement, the procedure stops. If there is no or partial agreement, the case will go back to the judge 4) new information that emerges during the mediation is confidential. This information may not be used later without the other party’s permission 5) normally all parties are present at all discussions 6) lawyers or representatives can attend the mediation by mutual agreement 7) the mediator adheres to the regulations of the Netherlands Mediation Institute (“NMI”).
Is ADR compulsory and if so are there any consequences if a party fails to engage in ADR? If it is not compulsory are there any plans for this to change?
As set out above (question 2), if parties have opted for binding advice (and most likely also mediation), they are held to these proceedings. Parties can opt for mediation even if their case is already in court and mediation is actively promoted by the courts. This is called mediation in addition to justice. This can be done at the parties’ own request or at the request of the court or tribunal where the case is pending. The judge can invite parties to this in writing. A judge can also propose during a hearing to opt for mediation. However, the basic principle remains that parties can always withdraw from mediation.
Can the parties agree, in advance of any potential dispute, to engage in ADR?
Yes. The parties can agree in advance that they will or may try one or more ADR methods to resolve any dispute that may arise and many commercial contracts will include dispute resolution clauses involving one or more of these methods. This has the advantage of putting ADR automatically “on the agenda” in the event of a dispute and providing a mechanism for reaching a quick solution. However, see above (question 2) with regards to mediation and binding advice about the limitations and formalities the parties should follow. Also, parties can only submit their disputes to mediation or arbitration if “the legal consequences are at the free disposal of the parties”. Parties are therefore not entirely free to withdraw all disputes from the courts. A good example is the dissolution of a marriage, which can only be submitted to the state court judge.
When does ADR generally take place?
In principal, ADR can take time at any time during court proceedings and is also actively encouraged by the courts and will often provide a reason to stay the proceedings. Only in limited cases, can the outcome of binding advice be brought to the courts.
Is ADR subject to without prejudice privilege and/or confidential? If not, is there any other means to protect confidential information?
In principle, information shared within the lawyer-client relationship and settlement negotiations between lawyers are confidential.
In the case of binding advice, as in arbitration, the main rule is that both the procedure and the decision are private. In addition to the parties’ representatives, other persons may also be present at the hearing as an observer, unless one of the parties objects. Audience members must declare in advance, in writing, that they will keep information regarding parties confidential. During the hearing, the basic principle is that the presence of the listener in speech and behavior should in no way influence the treatment. If the listener does not observe appropriate neutrality, the chairman will point this out to the person and, if necessary, ask them to leave the hearing room.
Parties to mediation are obliged not to share information from the mediation that was not known separately with third parties or, for example, to use it as evidence in a later lawsuit. Note that this does not include information that was known before or outside the mediation. Parties cannot “unknow”. The obligation of confidentiality during mediation therefore means that the parties do not share information about the course of the mediation with third parties – this can also be a judge. This also concerns the substantive discussion, the positions, any negotiations conducted and documents that were shared in that context in the mediation. The obligation of confidentiality also applies to any agreement in which the result of the mediation is recorded. In this context, it has been decided (Amsterdam Court of Appeal Amsterdam Court of Appeal decision, November 8, 2016, ECLI:NL:GHAMS :2016:4434)that the scope of the confidentiality obligation means that information about the (method of) termination of the mediation also falls under the confidentiality obligation.
Does the output from ADR create precedents?
No, these outcome do not have a precedential or res judicata effect on itself.
Who bears the costs of ADR?
Often the parties share equally the costs of a mediation procedure but they can make other agreements about the distribution. In employment related cases for example, the employer often pays the costs of the mediation and they record this in the mediation agreement.
The binding advisor will – depending on what the parties have agreed – charge their fee (plus any disbursements and VAT) to one of the parties (for example the “loser”) or to each party equally.
It should be noted that since March 1, 2023, the Legal Aid Board (Raad voor Rechtsbijstand) has started offering a contribution for a referral by the judiciary to mediation. The mediation starting contribution is a subsidy of €150 excluding VAT per paying party for the first 2.5 hours of the mediation after a referral from the judiciary. If the subsidy is awarded, the first 2.5 hours of the mediation are free for a paying party after a referral from the judiciary. After these 2.5 hours, the mediator charges his/her own hourly rate that he/she has specified to the Council. With the subsidy, the Legal Aid Council also hopes to introduce parties who do not qualify for a mediation addition to mediation and thus achieve a sustainable outcome. Mediators can report to the Council to participate in the mediation starting contribution subsidy scheme. After the mediation referred by the judiciary, the mediator can apply for the subsidy from the court’s mediation office.
Is your jurisdiction subject to any specific rules for cross border ADR?
The Netherlands is not a party to the United Nations Convention on International Settlement Agreements Resulting from Mediation (Singapore Convention). Although the European Union was closely involved in the treaty negotiations of the Singapore Convention on Mediation, to date it has not signed it. The Netherlands – as part an EU member state – only attended the negotiations as an observer.
On November 21, 2012, the Directive 2008/52/EC of the European Parliament and of the Council of May 21, 2008 on certain aspects of mediation in civil and commercial matters in cross border disputes (the “Directive”) was implemented into the Dutch Code of Civil Procedure (Wetboek van Burgerlijke Rechtsvordering) and the DCC, which gave for example the basis for an interruption period of claims after parties have initiated a mediation procedure and which also promotes the use of mediation.
A binding advice is on itself, not enforceable yet, and parties have to go the state courts to obtain a judgment to be able to enforce, as the contents of binding advice are regarded as a settlement agreement in the meaning of Article 7:900 DCC. The judge will often consider the contents of the “settlement agreement” in which the binding advice is contained on its merits. However, the judge will generally adopt the contents quickly, and render a Dutch judgment, which is enforceable under the Brussel Regulation, Lugano Convention, Hague Choice of Court Convention, Hague Judgments Convention and various bilateral treaties.
Are there any particularly unusual features of ADR in your jurisdiction that you are aware are different to other jurisdictions?
A binding advisor must meet certain quality requirements and at the very least, the principles of due process must be observed when drawing up the binding advice.
A “mediator” is an unprotected title in the Netherlands. This means that in principle anyone can call themselves a mediator. However, this is different if a quality mark is attached to it, which does make it a protected profession. For this reason, the Dutch Mediation Federation (the Mediatorsfederatie Nederland, “MfN”) and ADR register were established. Mediators who wish to carry a protected title can register with these registers. It should also be emphasized that the question of whether a mediation clause in a contract is binding depends on the wording and the parties’ intention. If the parties wish to include such binding effect, the parties to an agreement should carefully consider the wording and it is advisable to make some drafting notes in order to prove the parties’ intention to refer the matter to mediation at a later stage.
Compared to some jurisdictions where the “evaluative style” of mediation is dominant, mediators in the Netherlands predominantly apply the “facilitative style” of mediation. Facilitative mediation is aimed at the underlying interests of the parties and is based on the Harvard negotiation model. A conflict is considered a clash of interests. Facilitating mediators see it as their job to help parties identify and better understand the needs and interests of both themselves and the other party, to the level necessary to reach a solution. The facilitating mediator then guides the parties through a structured process to a solution that meets the actual interests of the parties. The mediator controls this at process level. The facilitating mediator refrains from making statements about the content of the conflict and possible solutions. Caucus is used, but only to support the plenary process, for example when parties are too emotional to talk to each other constructively. The advantage of this mediation style is that it focuses on win-win solutions, the disadvantage can be that the parties become dependent on the mediator and communication mainly takes place between the parties and the mediator and not between the parties themselves.
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