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ASB Greenworld v. NAI and arbitrators

2009 December 7

Court: Netherlands Supreme Court

Date: December 4, 2009

LJN Number: BJ7834

Case: Sagro Aannemingsmaatschappij Zeeland initiated institutional arbitration proceedings under the rules of the Netherlands Arbitration Institute against a German company and against ASB Greenworld. Greenworld appeared in the arbitral proceedings and raised the plea that the arbitral tribunal lacked jurisdiction on the ground that there was no valid arbitration agreement. Arbitrators dismissed the plea and awarded the claim as filed by Sagro. Subsequently Greenworld filed an application to the Court in order to set the arbitral award aside for absence of a valid arbitration agreement. The Court denied the application but the Court of Appeal later indeed did quash the arbitral award for absence of a valid arbitration agreement. Later appeals to the Netherlands Supreme Court were dismissed. This did not end proceedings. Greenworld subsequently held the arbitrators and the Netherlands Arbitration Institute personally liable, for committing an unlawful act (or tort) under Dutch law. The claim was dismissed in two instances and Greenworld appealed to the Netherlands Supreme Court, which led to a landmark decision on arbitrator liability in The Netherlands.

Held: The mere fact that a decision is set aside does not make the decision wrong. Arbitrators render judicial or quasi-judicial functions that render them comparable to judges. Like judges, arbitrators should be at liberty to judge cases. When arbitral awards are set aside, this does not necessarily mean the decisions were wrong and decisions can only be held to be unlawful in exceptional cases.

As a general rule formulated by the Netherlands Supreme Court, arbitrators can only incur personal liability in the event of intent, wilful misconduct or if arbitrators manifestly failed to exercise due care and skill.

The appeal failed.

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