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- Rechtbank Amsterdam
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NCC 19/012 (C/13/667529)
- Bijzondere kenmerken
This case is about the scope of the release and full discharge provision in a Settlement Agreement governed by English law between claimant (Subsea Survey Solutions, a Russia-based company) and defendant (South Stream, based in Amsterdam).
Subsea initiated proceedings before the NCC District Court, claiming payment by South Stream of an amount in excess of EUR 22 million pertaining to alleged non-contractual damages under Russian law.
In today’s judgment, the NCC District Court finds that Subsea - by agreeing to the release and full discharge in the Settlement Agreement - is barred from bringing this claim. Applying English law, the court rules that a reasonable person having all the background knowledge which would have been available to the parties, would have clearly understood that the parties’ intention was to release South Stream from any and all claims under any law, including non-contractual claims under Russian law. Therefore, the court dismisses Subsea’s claims.
In the same judgment the court awards South Stream’s counterclaim to have its full legal defence costs reimbursed, which currently are at least EUR 400,000. The court awards these costs on the basis of Clause 11 of the Settlement Agreement. Subsea’s defence that the costs claimed by South Stream are unreasonable was raised in vain. The court applies Article 242 DCCP. According to paragraph 2 of this Article, the court cannot mitigate costs agreed by parties concerning “a dispute that has arisen” and which was “settled” by the parties. That is the case here.
Summary in Dutch:
In deze zaak gaat het om de reikwijdte van een finale kwijting die is opgenomen in een vaststellingsovereenkomst (Settlement Agreement) die is gesloten tussen Subsea Survey Solutions (gevestigd in Rusland) en South Stream (gevestigd in Amsterdam). Subsea heeft in deze procedure een vordering ingesteld tot betaling van een bedrag van ruim 22 miljoen euro aan schadevergoeding wegens schending van niet-contractuele verbintenissen naar Russisch recht.
In het vonnis van vandaag oordeelt de NCC District Court (de meervoudige kamer van de Netherlands Commercial Court, hierna: NCC) dat de vordering van Subsea binnen de reikwijdte van de kwijtingsclausule (artikel 7) van de vaststellingsovereenkomst valt. Op de (uitleg van de) overeenkomst is Engels recht van toepassing. Voor een redelijk persoon met dezelfde achtergrondkennis als partijen zou het duidelijk zijn dat het de bedoeling van partijen was om South Stream finale kwijting te verlenen voor alle vorderingen naar welk recht dan ook, en dus ook voor vorderingen wegens schending van niet-contractuele verbintenissen naar Russisch recht. De vordering van Subsea wordt dan ook afgewezen.
De NCC wijst de tegenvordering van South Stream tot vergoeding van alle door haar daadwerkelijk gemaakte proceskosten (ruim EUR 400.000) toe. Het verweer van Subsea, dat de gemaakte kosten niet redelijk zijn, slaagt niet. De redelijkheid van overeengekomen proceskosten wordt beheerst door artikel 242 Rv. In lid 2 van artikel 242 Rv is bepaald dat de redelijkheidstoets niet geldt voor proceskostenregelingen die door partijen zijn getroffen in overeenkomsten die strekken tot regeling van een reeds gerezen geschil. Daarvan is in dit geval sprake (artikel 11 van de vaststellingsovereenkomst).
NTHR 2020, afl. 4, p. 189
- Verrijkte uitspraak
AMSTERDAM DISTRICT COURT
Netherlands Commercial Court
NCC District Court
Case number: NCC 19/012 (C/13/667529)
4 March 2020
SUBSEA SURVEY SOLUTIONS LLC,
Moscow (Russian Federation),
represented by N.H. Margetson, lawyer,
SOUTH STREAM TRANSPORT B.V.,
Amsterdam (the Netherlands),
represented by B.R.D. Hoebeke, R.H. Hansen and J.M. Sánchez Pueyo, lawyers.
Parties will be referred to as Subsea and South Stream. They will be jointly referred to as the ‘Parties’. The term ‘lawyer’ has the meaning as defined in Article 3.1.1 NCC Rules of Procedure (NCCR).
1 Procedural history
Subsea submitted a writ of summons (dagvaarding), dated 10 April 2019, setting out its claims against South Stream to the Civil Section of the Amsterdam District Court. Its exhibits were submitted by separate brief (akte overlegging producties).
By letter dated 20 May 2019, Subsea, acting on behalf of the Parties, requested the Amsterdam District Court to refer the case to the Netherlands Commercial Court (NCC District Court).
The Amsterdam District Court did so by letter dated 24 May 2019.
Subsequently, Subsea submitted its documents and exhibits to the NCC District Court. As the Parties agreed to use NCC’s electronic filing and communication system (eNCC) on a voluntary basis, these documents and exhibits and all further documents and exhibits were submitted both in hardcopy as well as electronically in eNCC.
On 27 August 2019, South Stream filed its statement of defence and counterclaim, with exhibits.
Subsea submitted its statement of defence against the counterclaim on 30 October 2019.
Lastly, South Stream submitted a Brief submitting an exhibit (an overview of costs incurred by South Stream) on 7 January 2020.
On 11 December 2019, the court proposed, and the Parties did not object, to limit the debate at the first hearing to the counterclaim and the preliminary defence raised by South Stream, which is that all of Subsea’s claims are barred by Clause 7 of the Settlement Agreement.
The court held a hearing on 21 January 2020. The lawyers of the Parties pleaded their cases and submitted pleading notes, and made use of their right to a reply and rejoinder. The court made a record (proces-verbaal) of this hearing.
Subsequently, judgment date was set for today.
South Stream is involved in the construction of an offshore pipeline across the Black Sea which directly connects the gas reserves in Russia to the Turkish gas transportation network. This project is known as ‘Turkstream’.
On 18 February 2014, South Stream entered into a contract with Subsea engaging it to perform a series of underwater surveys to collect key data of the seabed corridor in which the pipeline was planned to be laid (referred to by the Parties as the Geotechnical Contract).
A second contract was concluded between the Parties on 28 July 2014 (referred to by the Parties as the UXO Contract). Under this contract Subsea would collect data required to detect munition and ordnance items on the seabed and to conduct an archaeological and ecological survey within the seabed corridor of the pipeline.
During the period from 2014 through 2018, the contracts were amended several times. The Geotechnical Contract was terminated in October 2014 but reinstated again in 2016.
On 16 April 2018, the Parties signed an agreement to terminate all contracts and settle all their disputes (the ‘Settlement Agreement’). The relevant Recitals and Articles of the Settlement Agreement are cited below.
(A) On 18 February 2014 the Parties entered into the Contract for performance of the seabed geotechnical investigation on the Russian slope No LEG-CON-CON-151013 which was subsequently amended, terminated, reinstated and further amended (the "Geotechnical Contract");
(B) On 28 July 2014 the Parties entered into the Contract for services related to "SR 1- ROV Survey (UXO and Inspection Tasks)" No LEG-CON-CON-151579 as amended from time to time (the "UXO Contact");
(C) Before the Effective Date, certain disputes arose between the Parties concerning the performance under the Geotechnical Contract, UXO Contract and other agreements between the Parties:
a. The Contractor informed the Company of its claims for alleged wrongful termination of the Geotechnical Contract by the Company (letter of Margetson Van 't Zelfde & Co law firm dated 19 September 2017), alleged intimidation of the Contractor by the Company (letter of Margetson Van ‘t Zelfde & Co law firm dated 06 October 2017), alleged unjust enrichment by the Company in connection with the UXO Contract (letter of Margetson Van 't Zelfde & Co law firm dated 13 December 2017), as well as other potential claims the amount of which the Contractor estimated as c. 55 million Euros;
b. The Company rejected the three letter claims in its letters dated 21 December 2017, 14 December 2017, 13 December 2017, respectively, The Company rejected some other claims of the Contractor during the dispute resolution meeting between the Parties that took place on 8-9 February 2018 in the Company office in Amsterdam. In addition, the Company claimed from the Contractor a portion of advance payment and the liquidated damages, as detailed in the Company letter sent to the Contractor on 12 March 2018;
AND WHEREAS the Parties have resolved to reconcile the outstanding performance under the Geotechnical Contract and UXO Contract, to settle all their disputes and to enter into this Agreement;
NOW THEREFORE in consideration of the mutual covenants, promises and provisos herein contained the receipt and sufficiency of which consideration is hereby acknowledged by both Parties, the Parties agree as follows:
1. The Geotechnical Contract and UXO Contract and all related contracts between the Parties and all rights and obligations existing under or in connection with each and all those contracts are terminated as of the Effective Date.
5. The amounts specifically stated in this Agreement represent the full and final payment under or in connection with the Geotechnical Contract and UXO Contract.
7. The Contractor, including its directors, employees, servants, agents, affiliates, subsidiaries, predecessors, successors and assigns, hereby releases and forever discharges the Company and its directors, employees, servants, agents, predecessors, successors, affiliates and assigns, from any and all manner of action and actions, causes or causes of actions, suits, debts, dues, sums of money, claims and demands whatsoever at law or in equity which it (or anyone claiming through it or in its name) ever had, now has or may hereafter have for any matters arising from or in relation to the Geotechnical Contract and UXO Contract and any and all contracts between the Parties related to those contracts..
11. Each Party hereby indemnifies, and shall keep indemnified, the other Party against all costs and damages (including the entire legal expenses of the Parties) incurred in all future actions, claims and proceedings in respect of any of the Geotechnical Contract and UXO Contract which it or its parent, subsidiaries, assigns, transferees, representatives, principals, agents, officers or directors ("Related Parties") or any of them may bring against the other Party or its Related Parties or any of them.
15. The Recitals hereto form part of this Agreement
17. This Agreement shall be governed by, and construed in accordance with, the law of England and Wales.
18. Any dispute arising out of or in connection with, or concerning the carrying into effect of, this Agreement shall be subject to shall be finally resolved by arbitration under the Rules of Arbitration of the International Chamber of Commerce, which rules are deemed to be incorporated by reference into this Clause. (…)
3 The claim and counterclaim
Subsea claims payment of an amount of EUR 22,470,765.08. The legal basis for this claim is the recovery under Russian law of non-contractual damages allegedly caused by South Stream by the involuntary standby of Subsea’s vessel with geotechnical equipment in the years 2014 to 2018. Subsea claims a further EUR 11,485.00 in extrajudicial costs and in costs of the proceedings. The court is requested to declare its judgment on the claims enforceable notwithstanding appeal.
South Stream requests the court:
to declare that under Clause 11 of the Settlement Agreement, Subsea must indemnify, and keep indemnified, South Stream against all costs and damages (including the entire legal expenses of South Stream) incurred in connection with the claims brought in these proceedings; and
to order Subsea to compensate South Stream, in full, for any such costs and damages together with statutory (commercial) interest on the basis of Article 6:119 Dutch Civil Code (DCC) or Article 6:119a DCC,
o or, in the alternative, to order Subsea to compensate South Stream for the actual costs, including actual attorneys’ fees, in relation to the present proceedings together with statutory interest; and
to order Subsea to pay the costs of these proceedings (including follow-up costs), to the extent these are not already included in a judgment granting South Stream’s counterclaim; and
to declare its judgment enforceable notwithstanding appeal.
4 Discussion of Subsea’s claims
South Stream explicitly waived its right under the Settlement Agreement to have the case dealt with by arbitration under the Rules of Arbitration of the International Chamber of Commerce (Clause 18 of the Settlement Agreement). As South Stream as the defendant in this case is domiciled in Amsterdam, this court has jurisdiction under Article 4 of Regulation (EU) No 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (recast).
The requirements for the NCC District Court to deal with the case – see Article 30r Dutch Code of Civil Procedure (DCCP) and Article 1.3.1 NCCR – are met:
the Parties have expressly agreed that proceedings will be in English before the Netherlands Commercial Court;
the action is a civil or commercial matter within the Parties’ autonomy; and
the matter concerns an international dispute.
In the current stage of the proceedings the debate is limited to the preliminary defence raised by South Stream, which is that all of Subsea’s claims are barred by Clause 7 of the Settlement Agreement. Therefore, for now only the applicable law needs to be established governing this preliminary defence. The Parties agreed that the Settlement Agreement, including its construction, would be governed by English law (Clause 17 of the Settlement Agreement). The subject-matter of the agreement does not raise any question regarding the application of (overriding provisions of) any other law than English law. As a consequence, the court will apply English law to the preliminary defence.
The answer to the question whether any claims by Subsea (as far as is relevant in these proceedings: also non-contractual claims under Russian law) against South Stream are barred under the Settlement Agreement depends on the wording, content and scope of the Settlement Agreement as to be determined by interpretation of that agreement. As English law applies to that issue, the court will first set out the principles guiding the construction of settlement agreements under English law, and then apply those principles to the case at hand.
Principles of construction of a settlement agreement under English law
The interpretation of a settlement agreement is governed by the same principles of construction as any other contract (see Bingham LJ in BCCI v Ali  1 AC 251 at para. 8). The Parties and their expert witnesses on English law share that view.
In the UK Supreme Court case Arnold v. Britton  UKSC 36, Lord Neuberger (at para. 15) summarised the interpretation of contracts under English law as follows in his principal speech:
“When interpreting a written contract, the court is concerned to identify the intention of the parties by reference to “what a reasonable person having all the background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean”, to quote Lord Hoffman in Chartbrook Ltd v Persimmon Homes Ltd  UKHL 38 (…), para. 14. And it does so by focusing on the meaning of the relevant words (…) in their documentary, factual and commercial context. That meaning has to be assessed in the light of (i) the natural and ordinary meaning of the clause, (ii) any other relevant provisions of the lease, (iii) the overall purpose of the clause and the lease, (iv) the facts and circumstances known or assumed by the parties at the time that the document was executed, and (v) commercial common sense, but (vi) disregarding subjective evidence of any party’s intentions.”
The circumstances mentioned under (i)-(v) are referred to in English contract law as the ‘factual matrix’.
Where a contract is sophisticated, or complex, or has been negotiated and prepared with the assistance of skilled (legal) professionals, a textual analysis may be given predominance or heavy weight within the factual matrix referred to above. As Lord Hodge expressed in Wood v. Capita Insurance Services Ltd  UKSC 24 (at para.13):
“Textualism and contextualism are not conflicting paradigms in a battle for exclusive occupation of the field of contractual interpretation. Rather, the lawyer and the judge, when interpreting any contract, can use them as tools to ascertain the objective meaning of the language which the parties have chosen to express their agreement. The extent to which each tool will assist the court in its task will vary according to the circumstances of the particular agreement or agreements. Some agreements may be successfully interpreted principally by textual analysis, for example because of their sophistication and complexity and because they have been negotiated and prepared with the assistance of skilled professionals. The correct interpretation of other contracts may be achieved by a greater emphasis on the factual matrix, for example because of their informality, brevity or the absence of skilled professional assistance. But negotiators of complex formal contracts may often not achieve a logical and coherent text because of, for example, the conflicting aims of the parties, failures of communication, differing drafting practices, or deadlines which require the parties to compromise in order to reach agreement. There may often therefore be provisions in a detailed professionally drawn contract which lack clarity and the lawyer or judge in interpreting such provisions may be particularly helped by considering the factual matrix and the purpose of similar provisions in contracts of the same type.”
In the case at hand the issue arose what the relevance is of considerations for the interpretation of a contract. The court rules that the content of a recital is relevant for the interpretation of a contract because it is part of the relevant factual matrix. Asplin LJ states in Blackpool Football Club (Properties) Ltd v. JSC Baltic International Bank & Anor  EWCA Civ 372 (para. 26) that:
“It is obviously also necessary to take into account the relevant factual circumstances known to the parties at the date on which the Investment Agreement was executed. I agree with the Judge that Recital (C)(iv) although only a recital, provides evidence of the relevant factual matrix.”
In addition, in this case the Parties explicitly agreed that the Recitals form part of the operative part of the contract (clause 15 of the Settlement Agreement).
With regard to the interpretation of a settlement agreement, a relevant case is the House of Lords case BCCI v. Ali  UKHL 8. Lord Bingham pointed out (at para. 8) in this matter that it is possible for a party to release a claim or a right of which it is unaware and of which it could not be aware if sufficiently clear wording has been used to make clear that this was its intention. In Lord Bingham’s words:
“A party may, at any rate in a compromise agreement supported by valuable consideration, agree to release claims or rights of which he is unaware and of which he could not be aware, even claims which could not on the facts known to the parties have been imagined, if appropriate language is used to make plain that that is his intention.”
Lord Bingham continued (at para. 10) that where such clear language is absent, a court must be very slow to infer that a party intended to surrender rights and claims of which it was unaware and could not have been aware (commonly known as the ‘cautionary principle’). In the wording of Lord Bingham:
“But a long and in my view salutary line of authority shows that, in the absence of clear language, the court will be very slow to infer that a party intended to surrender rights and claims of which he was unaware and could not have been aware.”
In essence, this means that if sufficiently clear language is used, a waiver of claims or rights of which a party is unaware and of which it could not be aware is acceptable under English law.
The Parties and their expert witnesses on English law agreed in essence about the content of English law on construction of (settlement) agreements as expressed above but differ as to how these principles should be applied to the facts of the case at hand.
Construction of Clause 7 of the Settlement Agreement
The court will now turn to the interpretation of Clause 7 of the Settlement Agreement.
To recall, Clause 7 reads as follows:
“The Contractor [Subsea; comment added by the court], including its directors, employees, servants, agents, affiliates, subsidiaries, predecessors, successors and assigns, hereby releases and forever discharges the Company [South Stream; comment added by the court] and its directors, employees, servants, agents, affiliates, subsidiaries, predecessors, successors and assigns, from any and all manner of action and actions, causes or causes of actions, suits, debts, dues, sums of money, claims and demands whatsoever at law or in equity which it (or anyone claiming through it or in its name) ever had, now has or may hereafter have for any matters arising from or in relation to the Geotechnical Contract and the UXO Contract and any and all contracts between the Parties related to those contracts.”
At the hearing Subsea admitted that the claims it pursues in these proceedings are based on the same facts that were known to it at the time when the Settlement Agreement was entered into. At the hearing Subsea also conceded that non-contractual claims also fall within the scope of Clause 7. Therefore, the question which remains to be answered is whether Clause 7 applies only to (non-)contractual claims under English law (Subsea’s position), or under any law, including Russian law (South Stream’s position).
At the hearing, Subsea raised the argument that the phrase in Clause 7 “at law or in equity” limits the release to claims under English law only, as only English law makes a distinction between common law and equity. Subsea argues that the claims made in this case are based on Russian statutory (civil) law, and therefore do not fall within the scope of Clause 7.
South Stream objected to Subsea raising this point at the hearing and not at an earlier stage. The hearing was a hearing pursuant to Article 87 DCCP. At such hearing it is in principle allowed to raise new arguments, provided this is not contrary to due process. The court agrees that the argument could and should have been raised at an earlier stage. It should have been included in the writ of summons, as – apparently – it is Subsea’s main argument why its claims are not barred by Clause 7. It is not a response to South Stream’s explanation of the construction of Clause 7. However, the phrase “at law or in equity” forms a part of this clause, and therefore South Stream could expect this point to be raised. South Stream even did touch upon this issue in its speaking notes where it explicitly argued, with reference to this phrase, that the clause covers claims under any law. In addition, South Stream’s English law expert, Ms Boase, was well able to respond to this point at the hearing. In summary: South Stream was not prejudiced in its defence.
In reply to Subsea’s argument, South Stream argued that the wording of Clause 7 gives no reason to limit the clause to claims under English law only. “At law” can refer to any law. By adding the phrase “at law or in equity”, the Parties expressed their intention to cover any claims, irrespective of the relevant law system, and as far as English law is concerned, also claims in equity.
The court now turns to the natural and ordinary meaning of the text of Clause 7 (see para. 4.6 above). The Parties used broad language to define the type of claims that would be covered by Clause 7 of the Settlement Agreement:
“[Subsea] (…) hereby releases and forever discharges [South Stream] from”
- “any and all manner of action and actions”,
- [any and all] “causes or causes of actions”,
- [any and all] “suits, debts, dues, sums of money, claims and demands whatsoever”,
- “arising from” [the Geotechnical Contract and the UXO Contract],
- “or in relation to” [the Geotechnical Contract and the UXO Contract],
- [arising from or in relation to] “any and all contracts” between the Parties “related to” those contracts.
To these phrases the Parties added the words “at law or in equity”. There is no doubt that – absent these words – all current and future claims on whatever grounds under any law (of any jurisdiction) would fall within the scope of the release and discharge, given the clear and broad wording of this clause. A mere textual analysis provides no insight into what the Parties intended with the addition “at law or in equity”: whether to limit or to expand the release and discharge.
As a result, the court needs to look at the factual matrix.
First, it must be observed that the language used in Clause 7 of the Settlement Agreement to specify the claims covered by the release and discharge is very broad (see para. 4.21 above). The clause refers to any and all manners of action and actions, causes or causes of actions, suits, debts, dues, sums of money, claims and demands whatsoever arising from or in relation to the Geotechnical Contract and the UXO Contract. As admitted by Subsea, the clause covers not only contractual claims, but also non-contractual claims. This very broad wording of Clause 7 Settlement Agreement is an indication that the Parties intended to bar any existing and future claim of Subsea under whatever heading and on whatever ground against South Stream, including non-contractual claims under Russian law.
Second, the other relevant provisions in the Settlement Agreement and the Recitals show that the Parties had the intention to bar any existing and future claim of Subsea against South Stream under whatever heading and on whatever ground, including non-contractual claims under Russian law.
The other provisions of the Settlement Agreement state that the Parties agreed to pay each other certain sums of money as “full and final payment under or in connection” with the terminated contracts (Clause 2 to 5). This is also evident from the Recitals, which form part of the Settlement Agreement (Clause 15). Recital C refers to various non-contractual claims made by Subsea against South Stream for alleged wrongful termination, intimidation, and unjust enrichment, “as well as other potential claims the amount of which the Contractor estimates as c. 55 million Euros”. The subsequent Recital says that the Parties entered into the Settlement Agreement “to settle all their disputes”. Further, Clause 11 confirms the Parties’ intention to do more than only settle claims under English law. By adding this clause to the Settlement Agreement, the Parties agreed that if any of them were to bring any action against the other party in the future, this would result in liability for “all costs and damages” incurred by this “other party” in the action.
Third, it follows from the above that the overall purpose of the Settlement Agreement was both to terminate the contractual relationship that existed between the Parties (Clause 1) and to settle all their disputes (see the Recitals: “to settle all their disputes”). These disputes were not limited to claims under English law only. Where the Parties are commercial parties that had the benefit of legal advice in drafting the Settlement Agreement, they should have used wording which clearly states a limitation of the release and discharge to claims under English law only if this was their intention. By failing to do so, a reasonable person could understand the broad wording used to intend to bar a non-contractual claim under Russian law as well.
Fourth, Subsea admitted that the facts underlying its current claims under Russian law are the same as the facts that were known to Subsea when it agreed to the Settlement Agreement. Subsea merely states that it was not aware that these facts and circumstances known to the Parties when entering into and executing the Settlement Agreement also gave rise to a potential claim under Russian law. Any omission of Subsea to timely qualify these facts under Russian law should remain for the account of Subsea as a professional commercial party that had or could have the benefit of expert legal advice on Russian law. This is particularly relevant here, where the directors and shareholders of Subsea are Russian.
Lastly, if the purpose for entering into the Settlement Agreement is to “settle all disputes” and to penalise a party for ever bringing any claim on whatever ground relating to the terminated contractual relationship (including non-contractual claims), from a commercial perspective it does not make sense to limit the release to claims under English law only, and to leave wide open the possibility to bring claims under any other law (including Russian law).
For the reasons stated above, the court finds that a reasonable person having all the background knowledge which would have been available to the Parties, would have clearly understood that the Parties’ intention was to release South Stream from any and all claims under any law.
In conclusion, the court holds that Subsea is barred from bringing the claims submitted in this case, and therefore will dismiss these claims.
5 Discussion of South Stream’s counterclaim
The principal legal basis for South Stream’s counterclaim to have, in brief, its full legal defence costs awarded is Clause 11 of the Settlement Agreement which, to recall, reads as follows:
“Each Party hereby indemnifies, and shall keep indemnified, the other Party against all costs and damages (including the entire legal expenses of the Parties) incurred in all future actions, claims and proceedings in respect of any of the Geotechnical Contract and UXO Contract which it or its parent, subsidiaries, assigns, transferees, representatives, principals, agents, officers or directors ("Related Parties") or any of them may bring against the other Party or its Related Parties or any of them.”
As this counterclaim is intended to seek payment on the basis of Clause 11 of the Settlement Agreement, English law applies as the law governing the Settlement Agreement (see para. 4.3 above).
Subsea’s primary defence is that the Settlement Agreement does not apply to the claims in these proceedings.
As follows from the court’s rulings on the claims of Subsea, this defence does not hold.
Subsea’s alternative position is that the type of claims brought in these proceedings are not, as a matter of English law, “claims and proceedings in respect of any of the Geotechnical Contract and UXO Contract”.
In light of:
the broad language used in Clause 11 (“in respect of”), and
the broad scope of the Settlement Agreement as a whole, as explained the previous chapter of this judgment,
the court finds that a reasonable person would have clearly understood that the Parties’ intention was that the claims initiated in these proceedings by Subsea against South Stream were “claims and proceedingsany of the Geotechnical Contract and UXO Contract” (underlining by the court) in the sense of Clause 11 Settlement Agreement. The court therefore also rejects Subsea’s alternative position.
Subsea’s third defence is that the costs claimed by South Stream (EUR 446,464.19 up until 30 December 2019) are not reasonable in amount and not necessary for the proper handling of the case.
The reasonableness test of the cost compensation requested by South Stream is not a matter of English law, but is governed by Dutch procedural law. Reasonableness of cost allocation in civil cases is crucial for safeguarding access to justice. For this reason, Dutch courts generally only compensate the successful party for a relatively limited part of their actual litigation costs (using specific rates (liquidatietarief)). If Dutch courts in international cases were obligated to apply foreign law when allocating costs, access to court could be in serious jeopardy. Therefore, the reasonableness test under Dutch procedural law, which is incorporated in Article 242 DCCP, is to be regarded as an overriding mandatory provision pursuant to Article 9 of the Rome I Regulation.
Article 242 DCCP reads, to the extent relevant, as follows (in English translation):
(1) The court may, on its own initiative, reduce amounts where it determines that they were agreed in respect of compensation of costs of process (proceskosten) (…). The court may not reduce such costs to an amount lower than the amount of the costs of process to be determined in accordance with the law (…).
(2) Article 242(1) does not apply to (…) agreements that serve to settle a dispute that has arisen.
This Article also applies, as far as is relevant in the case at hand, to agreements on costs of process agreed between commercial parties (Dutch Supreme Court 10 July 2015, ECLI:NL:HR:2015:1868, para. 3.5.3).
At the hearing the court on its own initiative referred to this provision and asked counsel to comment on the issues of the applicability of this statutory provision and, if applicable, the application of this provision. And so they did.
Before addressing the reasonableness of the costs claimed under paragraph 1 of Article 242 DCCP, the court needs to determine whether the dispute raised by Subsea qualifies as “a dispute that has arisen” and was “settled”, as meant in Article 242 (2) DCCP. If so, the reasonableness test in Article 242 (1) DCCP does not apply to the agreed costs.
The parliamentary notes that are relevant under Dutch law when it comes to the interpretation of a statutory provision do provide some clarity as to its meaning (in English translation):
“Lastly, attention must be given to the fact that parties must be free to allocate costs once a dispute has arisen between them. One could think of a cost allocation arrangement in an agreement which puts an end to the dispute for good or such arrangement in an agreement which only limits the dispute to certain points. This notion led to the incorporation of paragraph 2 into Article 57b [predecessor of Article 242; comment added by the court].”
[source: Tweede Kamer, zitting 1980-1981, 16 593, nr. 3, p. 12]
There is no established case law as to when the exception laid down in Article 242 (2) DCCP applies.
As follows from paragraphs 4.15 to 4.25 of this judgment, the dispute brought by Subsea before this court was a dispute purported to be settled by the Settlement Agreement. Therefore, by initiating these proceedings Subsea essentially brought up a dispute which “had arisen” between the Parties, and which had been “settled” for good by the conclusion of the Settlement Agreement. Therefore, the cost allocation agreement incorporated in the Settlement Agreement (Clause 11) also extends to the dispute raised by Subsea in these proceedings.
As a result, the exception of Article 242 (2) DCCP applies in this case and the court therefore has no power to mitigate the cost allocation agreed by the Parties.
The court will therefore award the claims by South Stream on the basis of Article 11 Settlement Agreement in full, and will give an order on the counterclaim to this effect. As a consequence, there is no need to discuss the alternative ground presented by South Stream for its counterclaim, nor to award costs of process (pursuant to Article 239 DCCP) regarding Subsea’s claims in addition to what has been awarded on the counterclaim.
South Stream requested the court to increase the costs awarded in the judgment with the statutory (commercial) interest on the basis of Article 6:119 or Article 6:119a DCC.
As English law applies to the counterclaim to the extent where it is based on Article 11 of the Settlement Agreement, the question whether any interest is due over the costs awarded under this Article is also governed by English law. Therefore, the interest cannot be awarded pursuant to the relevant provisions of Dutch law, as claimed by South Stream. Instead, the court will award the interest due under English law.
South Stream further requested the court to declare its judgment enforceable notwithstanding appeal.
Pursuant to Article 233 DCCP, as a rule, a judgment is enforceable pending appeal, without the need for the party who obtained the judgment to provide security. An exception to this rule may be justified where the interest of the party against whom judgment is obtained in maintaining the existing situation during appeal or its interest in security being provided, outweighs the interest of the party obtaining the judgment in immediate enforcement and in not having to provide security (Dutch Supreme Court 20 December 2019, ECLI:NL:HR:2019:2026, para. 5.8). In this case Subsea did not rely on any circumstances justifying such exception. Therefore, the judgment will be declared enforceable notwithstanding appeal.
On the claim
dismisses Subsea’s claims,
declares that a cost order (pursuant to Article 239 DCCP) is not needed in light of the cost order given on the counterclaim,
On the counterclaim
declares that under Clause 11 of the Settlement Agreement, Subsea must indemnify, and keep indemnified, South Stream against all costs and damages (including the entire legal expenses of South Stream) incurred in connection with the claims
brought in these proceedings,
orders Subsea to compensate South Stream, in full, for any such costs and damages together with statutory interest pursuant to English law,
declares the order under 6.4 enforceable notwithstanding appeal,
dismisses any other claim.
Done by R.A. Dudok van Heel, C.W.D. Bom and R.P.J.L. Tjittes, Judges, assisted by W.A. Visser, Clerk of the court.
Issued in public on 4 March 2020.
APPROVED FOR DISTRIBUTION IN eNCC
THE SIGNED ORIGINAL IS IN THE HARD COPY FILE