A protracted legal dispute between the City of Amsterdam and entrepreneur X has for the time being come to an end. The Court of Appeal of Amsterdam recently rejected the entrepreneur’s request to set aside the arbitration award previously rendered. Attorney at law Onno Hennis discusses how the Court of Appeal arrived at this judgement.
There has been a long-standing dispute between the entrepreneur and the City of Amsterdam. In essence, this dispute is related to the granting of permits for a commercial shipping company that the entrepreneur intended to set up. Eventually, the highest administrative Court ruled in favour of him stating that the City of Amsterdam had wrongfully refused to grant him the permit. As a result of the refusal, the entrepreneur claimed to have suffered a loss of almost € 6 million. According to the City, the loss suffered by the entrepreneur was less than approximately € 80,000.
Since the parties did not agree on the amount of the compensation, they conducted an arbitration procedure on the matter. In the arbitration procedure, the arbitration board ruled that the City of Amsterdam was to pay an amount of € 471,482 to the entrepreneur. This amount did not suffice for the challenging party. According to him, the arbitration award had not been effected on proper grounds. He therefore requested the Court to set aside the arbitration award.
A high threshold for setting aside an arbitration award usually applies. An arbitration award can only be set aside for a few limited reasons specified by law. These are largely formal reasons. The Court cannot review the substantial facts of the arbitration award. After all, the annulment procedure is not a disguised appeal procedure.
As a first reason for annulment, the entrepreneur argued that the arbitration board had acted in violation of the assignment. The Court of Appeal failed to agree. Contrary to the opinion of the entrepreneur, the Court of Appeal concluded that the arbitration board had been impartial and independent. The Court of Appeal moreover ruled that the challenging party had forfeited his right to complain about the method of calculation of the loss, because he had not sufficiently objected to this in the arbitration proceedings. Finally, the entrepreneur argued that the arbitration board had wrongly failed to order the City to submit a piece of evidence and that the City should not have made its own specification of the loss. The Court of Appeal considered that the arbitration board has some freedom with regard to the application of the rules of evidence (and valuation) and that the arbitration board had not acted contrary to the rules of law.
As a second ground for annulment, the entrepreneur stated that the judgement had not been reasoned. The Court stated first of all that annulment on this ground is only possible in the absence of stated reasons and therefore not in cases of inadequate reasoning. This shows that a very high threshold applies here. After assessing the absence of reasoning, the Court concluded that the judgement should be set aside for this reason.
Finally, the challenging party argued that the arbitration award was contrary to public order. The Court stated first of all that annulment for this reason is only possible if the content of the arbitration award is contrary to fundamental mandatory law or in case of a conflict with the principle of the right to a fair hearing, or in the event the arbitrators had not been impartial and independent. According to the Court of Appeal, the relevant statements forwarded by the entrepreneur had been insufficient.
The Court of Appeal consequently upheld the arbitration award. The ruling shows once again that in practice, it is very difficult to overturn an arbitration award. In general, the Court respects the arbitrators’ decision. If the entrepreneur wishes to continue his fight, he has no choice but to contest the decision in cassation. However, the criterium at the Supreme Court is even more stringent. The Supreme Court will only quash the decision of the Court of Appeal in case the Court of Appeal has violated the law or if the decision contains technicalities. This will not soon be the case.
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At AMS Advocaten Onno focuses on corporate and commercial litigation. He advises clients on various legal issues in the areas of company law, contract law and tort. Follow Onno on LinkedIn.