The Party Autonomy Rule of Article 32a of the Code of Civil Procedure: when does the NCC have jurisdiction?

Whose party is this?

NCC further discusses Article 32a of the Code of Civil Procedure

Earlier this year, we published a three-part series on the Netherlands Commercial Court (NCC). In Part III, we addressed the substantive requirements for submitting a dispute to the NCC, in particular the requirement that there must be an international dispute.

There is another substantive condition that has received less attention so far: the dispute must—in accordance with Article 32a of the Code of Civil Procedure—concern a legal relationship that is ‘freely determined by the parties’. A recent ruling of the NCC has provided further clarity on the interpretation of this requirement (also known as the party autonomy rule) in disputes in which mandatory provisions also play a role.

Background

The case involved a dispute between the Dutch Batavia Biopharma B.V. (BBP) and the Korean CJ Cheiljedang Corporation (CJ), both shareholders of Batavia Biosciences B.V. BBP argued that it was entitled to appoint non-executive directors under the shareholders’ agreement, the articles of association and Dutch corporate law. CJ contested this right. The parties had included a forum selection clause in their December 2021 shareholders’ agreement in favour of the NCC.

Party Autonomy Rule

As is customary, the NCC assessed its own jurisdiction ex officio. In addition to establishing that the NCC had international jurisdiction (based on the forum selection clause) and that the dispute had an international character (CJ is located in Korea), the Court addressed the following question: does this dispute comply with the party autonomy rule of Article 32a of the Code of Civil Procedure?

Article 32a of the Code of Civil Procedure stipulates that the NCC can only hear disputes arising from a legal relationship that is ‘freely determined by the parties’. This formulation forms the basis of the jurisdiction of the NCC, but at the same time raises fundamental questions of interpretation. The question may arise—especially in disputes involving mandatory provisions—whether this requirement has been met. Corporate law, after all, contains numerous mandatory rules governing the organisation and operation of legal entities. The key question in this case was therefore: does the presence of mandatory corporate law automatically preclude the NCC’s jurisdiction?

The NCC ruled that the party autonomy rule is limited in scope and only deprives the NCC of jurisdiction if (i) the public interest is at stake, or (ii) there are issues that directly affect the interests of third parties (which may be or are contrary to public order).

Concrete examples of legal areas in which parties lack full autonomy include: the protection of vulnerable individuals such as minors in family law, the public interest in the case of personal status (such as marriage and divorce), and the interests of debtors and creditors in cases of guardianship, receivership, debt restructuring, and bankruptcy. What these examples have in common is that they concern legal relationships in which the legal system does not permit the parties to fully independently determine the legal consequences, because the interests at stake transcend the individual parties.

In the case between BBP and CJ, such circumstances did not apply. The issue was the fulfilment of a shareholders’ agreement between the two shareholders. The result: BBP and CJ determined their own legal relationship. So whose party was it? Entirely their own.

Conclusion

Do you have questions about the NCC, shareholder disputes, or whether your dispute is in accordance with the party autonomy rule? If so, please contact us. Our litigation team has extensive experience with complex international proceedings and is happy to advise you on the best approach.