The Loser Pays (Everything?)
A commonly raised question – especially in the international commercial practice – is how litigation costs are dealt with in the Netherlands. In other words: can the prevailing party recover all incurred costs from the losing party?
The statutory system only provides for a partial recovery of costs. In practice, this is often regarded as undesirable and parties oftentimes choose to deviate from that system (mostly contractually before a dispute has arisen). Such an arrangement usually stipulates that the prevailing party is entitled to a full cost recovery. The question arises to what extent Dutch law allows for such an arrangement.
An order for costs under civil law
An order for costs under civil law is governed by articles 237-240 of the Dutch Code of Civil Procedure (“DCCP”). In its judgment of 12 June 2015, the Dutch Supreme Court ruled that these articles contain, notwithstanding special circumstances, “both exhaustive and exclusive rules governing the costs which the unsuccessful party may be ordered to pay”. On 15 September 2017, the Supreme Court formulated an exception to this, stipulating that “an obligation to fully recover legal procedural costs is conceivable, but only in the case of ‘exceptional circumstances’, such as abuse of procedural law and wrongful acts”.
Only four days later, on 19 September 2017, the Appellate Court of Arnhem-Leeuwarden further specified this (or did the Appellate Court go beyond the framework of the Supreme Court?). The Appellate Court ruled that professional parties acting in a commercial setting can agree that the unsuccessful party must bear all costs of the legal proceedings. In this regard, only the reasonably incurred are eligible for recovery.
An order for costs before the Netherlands Commercial Court
On 1 January 2019, the Netherlands Commercial Court was established. The NCC handles cases – and issues judgments – in English. Proceedings before the NCC are governed by the ‘NCC Rules of Procedure’.
The NCC Rules of Procedure, more specifically article 10.2 thereof, allow parties to agree to an arrangement which provides for full cost recovery.
The need for clarification
The NCC, and also the Appellate Court of Arnhem-Leeuwarden, seem to deviate from the rules regarding the allocation of costs laid down in articles 237-240 DCCP. After all, is it reasonable to conclude that those cases involved ‘exceptional circumstances’ as meant by the Supreme Court in its judgment of 15 September 2017?
In the commercial practice, there seems to be a need for the possibility to agree on a full cost recovery. However, the question arises whether such an agreement is permissible. After all, the Supreme Court ruled that the provisions of articles 237-240 DCCP are exhaustive and exclusive, apart from cases which involve exceptional circumstances. Is it an exceptional circumstance that two contract parties elect to deviate from the statutory rules?
An answer to that question (from the Supreme Court?) would be most welcome.