Author: act legal

In 2017 we wrote a blog about the planned opening of a new commercial court in Amsterdam, the Netherlands Commercial Court (‘NCC’) [ link blog ]. With a small delay the NCC ((NCC District Court and NCC Court of Appeal (‘NCCA’)) has now officially been established. It launched at January 1^st of this year and on March 8^th the first judgement was already delivered, demonstrating its promised ability to “provide swift and firm guidance in complex litigation”.

The NCC procedures are designed to handle complex, international business disputes as swiftly and efficiently as possible. The NCC is built on the solid foundation of the Dutch judiciary, which is highly respected and ranked internationally for being the most efficient, reliable and transparent worldwide. It is based on the principles of accountability, transparent and stables laws, open government and accessible and impartial dispute resolution (for more information: https://worldjusticeproject.org/our-work/research-and-data/wjp-rule-law-index-2019).

The NCC and NCCA offers litigants the opportunity to litigate in English and will be able to give judgments in English. A matter may be submitted to NCC if parties have explicitly decided to litigate before the NCC.

A foreign lawyer can speak in the Netherlands Commercial Court; lawyers who are a member of the Bar in an EU or EEA Member State or Switzerland can perform the same duties as a Dutch lawyer as long as they work in conjunction with a member of the Dutch Bar.

In the case of its first judgement, the parties were based in the Netherlands, Switzerland and Ireland and in summary proceedings the NCC granted permission for pledged shares to be sold and transferred, instead of a public auction (article 3:251 of the Dutch Civil Code) because it agreed that the contemplated transaction would deliver the highest value for the pledged shares and facilitate the business’s recovery.

For more information about the judgement see the NCC website.

For more information on the procedure at the NCC in general, see the Rules of Procedure and the Explanotary Notes.

The amount of enterprises using the franchise concept  is still increasing: worldwide and also in The Netherlands. Franchise can be described – in short – as a contract under which the franchisor grants the franchisee the right to conduct a business using the franchisor’s business method and intellectual property rights, like a trade name. The purpose is to supply products. The franchisee pays for the use of these rights.

Franchises may be subject to any form of business entity existing under Dutch law, in particular:

• private limited liability companies;
• public companies;
• sole proprietorships;
• general partnerships; and
• limited partnerships.

Franchising in The Netherlands – No Dutch Franchise Act

A Dutch Franchise Act does not exists in The Netherlands. The Dutch laws does not contain a specific act with respect to franchise and distribution agreements. Hence, a franchise agreement under Dutch law is governed by the rules of general civil law, together with specific rules that are applicable to specific parts of the contract.

Franchising in the Netherlands – The licensed rights

The licensed rights can include the licensed right to use:

• trademark names;
• secret commercial know-how;
• and other distinguishing features, in the sale of products or services.

The use of franchise agreements is widely spread in The Netherlands, but beware that specific arrangements can be prohibited by EU and national competition law.

Registered trademarks are protected by the Benelux Treaty for Intellectual Property. The registrant of a Benelux trademark has exclusive rights for specific classes of goods or services in Belgium, the Netherlands and Luxembourg if a trademark is registered in the public trademark registry of the Benelux Office for Intellectual Property (BOIP). In addition, the registrant has exclusive rights for specific classes of goods or services in the European Union if a trademark is registered as a community trademark in the public trademark registry of the Office for Harmonisation of the Internal Market (OHIM) of the European Union. A preliminary trademark search can be conducted on the BOIP website.

Please note, know-how is not protected by any intellectual property right. However, know-how may be protected under the general provisions of Dutch unfair competition law (including civil tort). Know-how could be contractually protected by including confidentiality (non-disclosure) obligations in an agreement (for example, a franchise agreement). Confidentiality covenants in franchise agreements are enforceable. The franchisee typically commits itself, for the duration of the

contract as well as following its termination, to keeping all details of the franchisor’s business operations confidential. This will typically extend to non-patented know-how materials. Franchising contracts in the Netherlands may include a financial penalty provision that can be invoked in the event of the other party violating the confidentiality clause. The courts shall have the right to mitigate such penalties. This mitigation right cannot be contractually excluded.

Franchising in the Netherlands – Reasonableness and fairness

There is a general legal obligation on parties to deal with each other in good faith. In the Netherlands, general civil law is governed by the principles of reasonableness and fairness. Franchise agreements

are therefore also governed by reasonableness and fairness. Freedom of contract dictates that parties may agree to draw up contracts in whichever language they choose. However, on the basis of the principle of reasonableness and fairness one could argue that disclosure documents and agreements should be made available in a language that the other party understands. Therefore most of the time the documents are in English language.

Franchising in the Netherlands – Franchise agreement

A franchise agreement is a contract by which the franchisor licenses its trade name and/or business system and practices for a fee to an independent company (the franchisee).

It is very important to review the terms and conditions set forth in franchise documents such as:

• financial obligations;
• the length/term of the agreement;
• choice of venue and choice of law with respect to disputes;
• renewal rights;
• territorial exclusivity;
• requirements for remodelling or refurbishing the location;
• the goodwill associated with the franchisor’s trademarks;
• restrictions on transfer;
• default/termination provisions.

Are you interested in franchising in the Netherlands?

If you are interested in franchising in the Netherlands and you have any legal questions concerning franchising, please do not hesitate to contact us. Our team of experienced lawyers would be happy to help you.

Introduction

A new commercial court, The Netherlands Commercial Court (‘NCC’), will be established in the Netherlands, set up to settle international trade disputes. As the name suggests, this court will be dedicated to commercial and, more importantly, international disputes.

This is in line with the practice in other countries, where commercial law disputes can be decided by specialized courts, such as the Commercial Court in England, the Tribunaux de commerce in France and the Handelsgerichte in some German-speaking countries. Singapore and India also make use of a similar kind of court.

The Netherlands Commercial Court will focus on international trade disputes in a broad sense. Trade has always been international and even more so during the last decades. Not only has English become the first language for cross-border transactions, it has also conquered the domestic domain. Many companies in the Netherlands are either part of an international concern or do business with foreign companies. Because of this, parties involved in cross-border disputes can be forced to conduct court proceedings in a foreign language, making the proceedings more difficult and costly. The Dutch judiciary decided there is need for a more efficient way of litigation and established an English-speaking commercial court.

A short overview of the characteristics of NCC

court in Amsterdam
The NCC will be set up at the courts of Amsterdam, both at the District Court as well as at the Appeal Court level

specialised chambers
All disputes will be resolved by three (Dutch) judges in both first instance and appeal, in contrast to other commercial courts where there is only one judge. The judges of the Netherlands Commercial Court are specialised in international trade law, and are experts in handling commercial disputes

in English
The NCC will enable parties to conduct their Dutch legal proceedings in the English language, except when the Dutch language is selected by all the parties. However, when it comes to cassation at the Supreme Court, this proceeding will still be in Dutch

International conflicts only
Contrary to the initial proposal, the court will be competent in international conflicts only, meaning that there must be either a conflict including at least one foreign party or foreign law being applicable on the matter. Purely national conflicts will not be heard or decided upon

Dutch civil procedural law
The NCC will apply Dutch civil procedural law

costs
Court fees for cases brought before the Netherlands Commercial Court (NCC) and the Netherlands Commercial Court of Appeal (NCCA) are proposed to be € 15,000 and € 20,000 respectively. Although higher than ordinary Dutch legal proceedings, this is a cost-effective alternative in comparison to having cases heard by international commercial courts in other countries where fees may be much higher. Furthermore, there are plans to allow the NCC, in certain cases, to mitigate costs for those parties that demonstrably cannot carry them

voluntary
Litigation before the NCC can only take place on a voluntary basis, so an written agreement is needed to settle a dispute through the NCC. Parties can choose to bring their dispute before the NCC at any moment

no minimum interest criterion
Claims of an undetermined value and disputes between small businesses can also be judged by the Netherlands Commercial Court. However, there are a few limitations; cases that belong at the sub-district court (i.e. ‘’cantonal court cases’’, such as employment law cases, rental disputes,  claims below  € 25,000, etc.) are excluded from the NCC.

Who can go to the NCC

All parties, non-natural persons (such as companies) and natural persons, can submit a matter to the Netherlands Commercial Court. Parties do not have to have any link with the Netherlands, making it an ideal venue for parties from two different states looking for a “neutral” third state.

Launch of the NCC

The NCC was originally proposed to start on the 1^st of January 2017, however this date has now become the 1^st of January 2018. On the 18^th of July 2017 the amendment of the law to provide for the use of English as the language of proceedings and judgements was tabled before the Dutch Parliament. When this legislation has come into force the NCC can open its doors.

Advantages

We believe proceeding before the Netherlands Commercial Court is advantageous for the following reasons:

• the court shall apply Dutch civil procedural law, which is pragmatic, efficient and cost-effective;
• the language of the Netherlands Commercial Court proceedings shall be in English, unless Dutch is chosen, allowing foreign, English-speaking lawyers to be actively involved in these proceedings, decreasing the cost of translation of documents;
• there will be specialized Dutch judges with technical and commercial expertise and experience;
• effective and shorter proceedings;
• ability to split proceedings into a merits and quantification of damages phase;
• evidence may be offered in French, German, English or Dutch, saving time and translation costs;
• paperless litigation;
• recovery options (prejudgment seizure). In the Netherlands, even if a creditor has no title to enforcement yet, he may attach any assets of his debtor under a so-called prejudgment seizure. The attached assets act as security for the creditor’s claim.

Conclusion

The NCC has the potential to become a good alternative for the increasingly expensive international arbitration procedures and a good option for international trade proceedings.

Fort Advocaten is a midsized law firm based in Amsterdam. 30 business lawyers work in specialized teams for both national and international clients. With over 20 years of experience, our legal services focus on real estate law and corporate law, such as corporate litigation. Our teams are well recognized for their experience working in different industries. We guarantee a high level of quality and service due to thorough knowledge of both law and jurisprudence, size and efficiency.

If you have any questions regarding this article or are in need of any advice, please feel free to contact us at any time.

Written by Annemiek Nass and Lynn Rook

If your business extends across international borders into the jurisdiction of the Netherlands, you have undoubtedly been confronted with agreements and procedures that are governed by Dutch law.

In this series of blogs FORT’s insolvency and restructuring specialists explain various Dutch legal concepts and dos and dont’s that may be of use to you if you are faced with a Dutch counterparty in financial distress. In this blog I will discuss the right of suspension (opschortingsrecht).

The right of suspension explained

Suppose you have ordered goods, but only receive part of your order. Your supplier nevertheless requests full payment. Or a second example: you have agreed to regularly deliver goods to a customer. After a while the customer is in arrears of payment. You would of course want to reduce the risk of paying for goods that will never be delivered or of delivering goods that will never be paid for.

That risk arises in particular when you are confronted with a counterparty that is unwilling or unable to fulfil its obligation. The question is whether you are obliged to live up to your end of the deal. The answer is short: No! On certain conditions you have the right to suspend your obligation.

Conditions for exercising your right of suspension

In order for you to suspend your obligation, several conditions must be met. First, you must have a due claim against your counterparty. This implies that your counterparty must be in default of, for example, delivery or payment. Furthermore, there must be a cohesive relation between the due claim and the obligation that is to be suspended. That cohesive relation is assumed to be present when the obligations stem from the same or similar agreements between the parties involved. Finally, the suspension must be proportionate. For example, the delivery of 200 computers should not be suspended when the customer is only a few days late with its payment of an insignificant amount of the overall purchase price.

If these conditions are met, it must be examined to what extent the right of suspension applies. Parties may deviate from the standard legal provision. Hence, parties may mutually agree to restrict or extend the right of suspension or to exclude it as a whole. If your counterparty intends to deviate from the standard legal provision, this is usually defined in their general terms and conditions.

Please be aware of these conditions and the possibilities of deviating from the provisions of Section 6:52 of the Dutch Civil Code. These aspects should be considered before invoking the right to suspend your obligation. You could be held liable for all the loss incurred by your counterparty if the right of suspension is invoked improperly.

All in all, the right of suspension is an effective remedy. It can prevent harmful situations arising from default on the part of your counterparty.