Corona and the effects on contracts under Dutch law
The measures taken by the Dutch government regarding the corona epidemic have affected the performance of commercial contracts in the Netherlands.
Under Dutch contract law both the corona pandemic and the measures taken by governments (not only by the Dutch government, but also by foreign governments) may constitute overmacht (force majeure). The majority of legal writers has taken that preliminary position.
What is the Netherlands Commercial Court of Appeal?
The Netherlands Commercial Court (NCC) and its appellate counterpart, the Netherlands Commercial Court of Appeal (NCCA), are specialist chambers established on 1 January 2019 to hear international commercial disputes entirely in English under Dutch law.
The NCC and NCCA operate within the regular Dutch court structure. They are not separate institutions or arbitral tribunals. Instead, they function as dedicated English-language chambers within existing Dutch courts, handling disputes between parties who have agreed in writing to submit their case to these courts. Dutch procedural law governs the proceedings throughout.
The procedure before the NCC and NCCA incorporates modern case management elements drawn from international commercial litigation practice. Written submissions, oral hearings, and judgments all take place in English. Proceedings are, as a rule, public. However, parties may request restricted access where genuinely confidential commercial information is at stake.
Judges assigned to the NCC and NCCA are selected specifically for their proficiency in English and their experience in complex commercial matters. The court charges filing fees approximately four times higher than those applicable in standard Dutch civil proceedings, which reflects the specialist nature of the service and the resources involved.
Leading Dutch legal commentary notes that the NCC and NCCA were designed to position the Netherlands as a competitive venue for cross-border commercial litigation within Europe, particularly following Brexit. International businesses that previously directed disputes to English courts gained a new option: full English-language proceedings within an EU member state, under a well-developed civil law system.
How does the NCC fit within Dutch civil procedure?
The NCC applies standard Dutch civil procedural law, meaning that all rights and remedies available in ordinary Dutch civil proceedings remain fully available before the NCC, including appeals to the NCCA.
Parties wishing to bring their dispute before the NCC must have agreed to do so in writing. This agreement can be included in a commercial contract as a choice-of-forum clause. Without such a written agreement, the NCC has no jurisdiction. Moreover, the dispute must have an international character, though Dutch legal commentary indicates that this requirement is interpreted broadly in practice.
Because the NCC applies Dutch civil procedure, the full body of Dutch contract law governs the substance of disputes. This includes the rules on force majeure, unforeseen circumstances, contract interpretation under the Haviltex standard, and the principles of reasonableness and fairness. Parties therefore gain the procedural convenience of English-language proceedings without sacrificing the substantive legal framework of Dutch contract law.
Contract performance and force majeure under Dutch law
Article 6:75 of the Dutch Civil Code regulates that specific performance of a contract under Dutch law can no longer be expected in case of overmacht (force majeure):
A non-performance cannot be attributed to the debtor if he is not to blame for it nor accountable for it by virtue of law, a juridical act or generally accepted principles.
Force majeure under Dutch law due to the corona crisis
Whether the effects of the corona crisis would constitute overmacht under Dutch contract law depends on the interpretation of the particular contract at hand and the specific circumstances of the case.
Whether a contractual obligor is relieved from his contractual obligations depends on the terms of the contract in the context of the factual circumstances at hand.
In assessing the legal position of a party to a contract under Dutch law, not only the express contractual rights need to be considered. Apart from the explicit wording of the contract, a contractual relationship under Dutch law is also governed by the overriding principles of reasonableness and fairness (redelijkheid en billijkheid). Depending on the circumstances, a contract party is required to take into account the legitimate and reasonable interests of the other party when exercising his contractual rights.
If parties have a dispute about a specific contractual provision, the Haviltex doctrine as developed by the Dutch Supreme Court (Hoge Raad) needs to be applied. According to the Haviltex doctrine it is decisive what the parties can both reasonably attribute in the given circumstances to the relevant contractual provision and what they can reasonably expect from each other in this respect. In interpreting a contract under Dutch law one should take note (for instance) of relevant statements made by the parties prior to (and also after) entering into the contract. Apart from such statements, conduct is also relevant in interpreting commercial contracts under Dutch law. This is the case even if the circumstances would justify that great significance is given to the contractual wording used by the parties. An "entire agreement clause" would not automatically change this.
Apart from the contract, the effects of remedies that may apply in case of overmacht and onvoorziene omstandigheden (unforeseen circumstances) also need to be assessed.
How does Dutch contract interpretation differ from English law?
Dutch contract law interprets agreements by reference to the reasonable expectations of both parties in light of all surrounding circumstances, whereas English law places considerably greater weight on the plain textual meaning of the written document.
Under the Haviltex standard, a Dutch court asks what meaning the parties could reasonably have attributed to the contractual language, and what conduct they could reasonably have expected from one another. This is an inherently contextual exercise. Statements made before and after the conclusion of a contract, the course of dealing between the parties, and general commercial usage all feed into the analysis.
English law approaches the same question differently. The court identifies the meaning that a reasonable person, with all the background knowledge available to the parties at the time of contracting, would understand the document to convey. Context is relevant, however the text retains primacy. Since the English Supreme Court's decisions in Arnold v Britton and Wood v Capita, English courts have moved back toward a more textual approach, retreating from the broader contextual reading associated with earlier case law. Leading Dutch commentary observes that this shift reflects judicial concern that contextual reasoning can too easily become a tool for rewriting what parties plainly agreed.
One practical consequence of this divergence matters greatly before the NCC. International commercial contracts often originate in an Anglo-American drafting tradition and contain typical Anglo-American clauses, such as entire agreement clauses, no oral modification clauses, and representations and warranties provisions. When such a contract is governed by Dutch law, a Dutch court interprets those clauses using the Haviltex standard, not the English textual approach. The result may differ significantly from what an English court would reach on the same wording. Parties who draft in an Anglo-American style but choose Dutch law as their governing law should be aware of this gap.
What role do entire agreement and no oral modification clauses play in Dutch law?
Under Dutch law, an entire agreement clause expresses the parties' intention to contain their relationship exhaustively within the written contract, but it does not prevent a court from supplementing gaps in that contract through the operation of good faith and reasonableness.
An entire agreement clause restricts the use of external evidence in interpretation proceedings. It signals that prior negotiations and collateral representations are not part of the agreed terms. However, Dutch courts do not treat such a clause as a complete barrier to contextual reasoning. Where the contract is silent on a point, the supplementary effect of reasonableness and fairness under Article 6:2 of the Dutch Civil Code may still fill the gap.
A no oral modification clause requires that any change to the contract be made in writing. Together with an entire agreement clause, this combination is sometimes called a "zipper clause" in international drafting practice. Whether such a clause is fully binding under Dutch law depends on the nature of the parties, the type of transaction, the course of negotiations, and any conduct following the conclusion of the contract. A professional party that openly acts inconsistently with a no oral modification clause for a sustained period may find that the other party acquires a reasonable expectation that the written form requirement has been waived, at least in the circumstances at hand.
Corona and a force majeure clause in a contract under Dutch law
Under Dutch civil law, parties to a contract can deviate from article 6:75 of the Dutch Civil Code. Parties can contractually define when contract performance would be impossible because of uncontrollable events. Most commercial contracts contain force majeure clauses (and many commercial contracts in the Netherlands also contain so-called MAC clauses, "Material Adverse Change clauses").
Such clauses typically regulate the specific remedies that could be invoked under certain circumstances. In case of a force majeure event, the contractual obligor may be relieved from both (i) the duty of specific performance, as well as (ii) the duty to pay schadevergoeding (damages) because of his non-performance.
The Burgerlijk Wetboek does, however, provide an arrangement regarding compensation for damages in case of overmacht. Article 6:78 of the Dutch Civil Code reads:
1. As far as the debtor has enjoyed a benefit from a not attributable non-performance, which benefit he would not have enjoyed if he would have performed in conformity with his obligation, he has to undo, in accordance with the rules for an unjustified enrichment, the damage that the creditor has suffered from his non-performance.
2. When this benefit is a debt-claim of the debtor against a third party, then the debtor may comply with the previous paragraph through a transfer of that debt-claim to the creditor.
Most commercial contracts in the Netherlands give the other party the possibility to terminate or alter the contract in case of non-performance by the obligor due to overmacht.
When is contractual performance impossible due to the corona measures?
If there is no contractual clause to the contrary, the parties to a contract under Dutch law can generally claim specific performance, if this is not definitively or temporarily impossible.
Under Dutch law, contract performance is deemed impossible in the event governmental corona measures would reasonably preclude this.
Performance of a contract under Dutch law will not generally be considered impossible if the obligor can in some way or form still fulfil his obligations. Under Dutch contract law there is a limit to this: the obligor must make a reasonable effort to perform his contractual duties, but generally is not held to make an unreasonably excessive and disproportionate effort.
Impossibility to perform a contract due to governmental corona measures
The governmental measures to address the corona crisis could legally constitute the impossibility to perform a commercial contract under Dutch law.
This has to be assessed case by case, for each specific contract.
Do the corona measures preclude performance of the obligations arising out of a contract under Dutch law? Generally, the obligor has the onus to set out in sufficient detail that he is unable to perform his contractual obligations due to the corona measures. And if the other party would take the opposite position, then the onus of proof rests upon the obligor.
As a general rule of Dutch contract law, any failure of a party in the performance of one of its obligations under the contract automatically grants to the other party the power to terminate the agreement. Article 6:265 of the Dutch Civil Code reads as follows:
1. Every failure of a party in the performance of one of his obligations, gives the opposite party the right to set aside the mutual agreement in full or in part, unless the failure, given its specific nature or minor importance, does not justify this setting aside and its legal effects.
2. As far as performance is not permanently or temporarily impossible, the right to set aside the mutual agreement only arises when the debtor is in default.
The statutory right under article 6:265 of the Dutch Civil Code to set aside an agreement under Dutch law does not require the failure in the performance to be attributable to the obligor. This right also exists in case of overmacht.
Whether a party to a contract under Dutch law can terminate (set aside) that contract is wholly dependent on the circumstances and uitleg (interpretation) of the contract at hand.
Article 6:267 of the Dutch Civil Code sets out the ways in which a mutual agreement can be set aside because of non-performance:
1. The setting aside of a mutual agreement is effectuated by means of a written notification of the party who is entitled to set aside the agreement, addressed to the opposite party to that agreement. If the mutual agreement has been concluded solely by electronic means, it may also be set aside by means of a notification addressed to the other party by electronic means. […]
2. A mutual agreement may also be set aside by a judgment of the court upon a legal claim of the party who is entitled to rescind the agreement.
Such a termination does not have a retroactive effect, article 6:269 of the Dutch Civil Code reads:
The setting aside of a mutual agreement as meant in this Section has no retroactive effect, except that an offer of the debtor to perform his obligation, made at a moment that the creditor already had brought a right of action (legal claim) to the court in order to set aside the mutual agreement, shall have no effect when the court afterwards decides to set aside that agreement.
Corona crisis as unforeseen circumstances under Dutch law
A contractual party can under Dutch law request the court (i) to modify a contract, or (ii) to modify the consequences of a contract, or (iii) to wholly or partially terminate a contract on the ground of onvoorziene omstandigheden (unforeseen circumstances).
Article 6:258 of the Dutch Civil Code reads:
1. Upon a right of action of one of the parties to an agreement, the court may change the legal effects of that agreement or it may dissolve this agreement in full or in part if there are unforeseen circumstances of such a nature that the opposite party, according to standards of reasonableness and fairness, may not expect an unchanged continuation of the agreement. The court may change or dissolve the agreement with retroactive effect.
2. The court shall not change or dissolve the agreement as far as the unforeseen circumstances, in view of the nature of the agreement or of common opinion, should remain for account of the party who appeals to these circumstances.
3. For the purpose of this Article, a person to whom a right or obligation from the agreement has passed, is equated with an original party to that agreement.
An "unforeseen circumstance" should be unforeseen when closing the contract (and not "unforeseeable" as such). In other words: parties to a contract under Dutch law shall not have incorporated the possibility of the occurrence of such an event in the contract.
Is the corona crisis a normal risk or an unforeseen circumstance under Dutch law?
The Dutch courts have been quite hesitant in applying the remedy ex article 6:258 of the Dutch Civil Code, and have generally assumed that certain inherent risks should be borne by commercial parties themselves.
Given the extreme nature of the governmental corona measures, Dutch courts may decide that contractual parties are not faced with normal (acceptable) commercial risks. It can generally be assumed that the bulk of contracts under Dutch law does not "foresee" such a crisis. The governmental corona measures qualify as onvoorziene omstandigheden in the sense of article 6:258 of the Dutch Civil Code.
Application of article 6:258 of the Dutch Civil Code can lead to (i) suspension, (ii) modification or (iii) termination of the contract, or (iv) can give rise to a duty to renegotiate the contract, in order to find a better balance in the contractual relationship between the parties and to distribute fairly and reasonably the burden resulting from the onvoorziene omstandigheden (the corona measures). Article 6:260 of the Dutch Civil Code may be of relevance in this regard:
1. When the court has changed or dissolved an agreement on the basis of Article 6:258 or 6:259, it may set additional conditions in its judgment.
2. If the court changes or partially dissolves the agreement on the basis of Article 6:258 or 6:259, it may order that one or more parties may rescind the agreement entirely by means of a written notification within a period to be set in its judgment. In that event the change or partial dissolvement (dissolution) of the agreement shall not take effect before this period has expired.
3. When an agreement has been changed or entirely or partially dissolved on the basis of Article 6:258 or 6:259, then also the judgment which ordered this change or dissolvement may be registered in the public registers, provided that it has become final and binding or that it is immediately enforceable.
4. When a person is summoned to appear in court in relation to a right of action based on Article 6:258 or 6:259 and the accompanying writ of summons is served on him at his elected domicile in the Netherlands as meant in Article 6:252, paragraph 2, then also his legal successors, who have not registered themselves in the public registers as new creditor, will have been summoned by means of this writ. […]
5. Other legal facts that change or end a registered agreement may be registered as well in the public registers, as far as they are based on a court judgment that has become final and binding, or that is immediately enforceable.
Claiming damages as a result of non-performance due to the corona crisis
A party to a contract under Dutch law can also seek schadevergoeding (damages) as a result of wanprestatie (non-performance). He can do so (i) in addition to termination of the contract or (ii) as an alternative to contract termination.
To do so successfully, the non-performance of the contract must be attributable to the obligor. Otherwise the obligor is not liable to compensate for resulting damage.
Force majeure relieves the obligor from an obligation to pay damages, and the same applies to onvoorziene omstandigheden.
Why choose the Netherlands Commercial Court for international disputes?
The NCC and NCCA offer international parties a combination that few courts in continental Europe can match: full English-language proceedings, a professionally trained judiciary with commercial expertise, and the substantive certainty of a well-developed civil law system.
For parties accustomed to Anglo-American contract structures, the ability to litigate in English removes a significant practical barrier. However, they should note that the court applies Dutch substantive law, not English law. Concepts such as "condition," "warranty," "indemnity," and "representation" carry specific technical meanings in English law that do not automatically carry over into Dutch law when those terms appear in a contract governed by Dutch law. Dutch courts interpret such clauses according to the Haviltex standard, giving weight to the reasonable expectations of both parties in the full contractual and commercial context.
Leading Dutch legal commentary takes the view that the NCC is best suited to disputes where parties have deliberately chosen Dutch law and Dutch courts, rather than disputes where Dutch law applies only by default. Parties that invest in a carefully considered choice-of-court clause for the NCC, combined with a clear governing law clause, place themselves in the strongest position to benefit from the court's specialist expertise. Consulting a Dutch lawyer when drafting such clauses is advisable, particularly where the contract mixes Anglo-American terminology with Dutch law as the applicable legal system.