This article discusses the judgment of the Dutch Supreme Court issued on 19 February 2021 that answers the question whether the initiation of a mediation in cross-border disputes interrupts the statutory limitation period for civil claims.
Introduction
Lately, the doctrine of the statute of limitation has been concretized in the Netherlands by means of various judgments of the Supreme Court.[1] In a recent ruling dated 19 February 2021, the Supreme Court issued a judgment in a case involving, inter alia, the interruptive effect of a cross-border mediation on ongoing statutory limitation periods.[2]
The court in the first instance and the court of appeals had ruled that commencing mediation does not interrupt a statutory limitation period for a nullification claim, on the basis that mediation does not qualify as an act of interruption under Dutch law. The Supreme Court, however, taking note of the fact that the claimant’s place of residence is Belgium and the defendant’s domicile is the Netherlands, regarded the dispute in which mediation was initiated as a cross-border dispute and subsequently applied the Mediation Directive (2008/52/EC) (“The Mediation Directive“). The Supreme Court ruled that commencing mediation in a cross-border dispute pursuant to the Mediation Directive can be put on a par with the acts of interruption mentioned in the Dutch Civil Code and has similar interruptive effects on ongoing statutory limitation periods.
Statutory limitation periods and interruption under Dutch law
The doctrine of statute of limitations, including the interruption of statutory limitation periods, is of great importance. After the expiration of a statutory limitation period, the claimant can no longer enforce its claim. The defendant must explicitly invoke the expiration of a statutory limitation period. It is, therefore, essential for the claimant to properly and timely file its claim or otherwise interrupt the statutory limitation period. The main rule under Dutch law is that a civil claim becomes time-barred after a statutory limitation period of twenty years, unless an exception applies. However, such exceptions are plentiful and most types of claims become time barred after five years. Furthermore, the date on which such statutory limitation periods commence may differ for different types of claims.
Statutory limitation periods may be interrupted, after which a new statutory limitation period commences. The new period is equal in length to the original statutory limitation period. Statutory limitation periods can be interrupted through various ways; the most common are (i) the initiation of litigation with regard to the claim that can become time-barred, or (ii) a written notice of interruption in which the claimant unequivocally reserves its rights. For certain types of claims, Dutch law specifies that the notice of interruption as described under (ii) above only has interruptive effect if the claimant initiates legal proceedings within six months after the notice has been sent.[3] If the claimant fails to do so, the statutory limitation period has not been interrupted.
Mediation in cross-border disputes from an EU law perspective
The Mediation Directive sheds a different light on the Dutch statute of limitations principles in cross-border disputes from an EU law perspective. The Mediation Directive aims to promote mediation because it can lead to a cost-effective and swift resolution of disputes in cross-border civil and commercial matters. The Mediation Directive ensures that parties who choose mediation in an attempt to settle a dispute, are not subsequently prevented from initiating judicial proceedings about that dispute by the expiry of limitation or prescription periods during the mediation process. During the legislative process for the implementation of the Mediation Directive in the Netherlands, it was decided to implement the Mediation Directive in a separate law (instead of in the Dutch Civil Code). The scope of that law is limited to cross-border disputes; in other words, only cross-border disputes fall within the scope of the Mediation Directive. The law also provides that ongoing statutory limitation periods, including those for nullification claims, can be interrupted by commencing mediation. This is in contrast with pure domestic mediations. Under Dutch law, the start of a mediation process in a purely domestic dispute cannot be regarded as an act of interruption, which means that a statutory limitation period continues irrespective of whether mediation is initiated.
The Supreme Court Judgment: Cross-border mediation interrupts Dutch statutory limitation period
The claimant in these proceedings resided in Belgium during the proceedings, whereas the defendant had its registered office in the Netherlands. The Belgian claimant was the (indirect) shareholder of a group of companies active in insurance brokerage and financial advice. There was an urgent need for financing due to a severe liquidity shortage. The defendant in the proceedings, a Dutch finance company, offered financial assistance in the group’s takeover by a third party. In that connection, a dispute arose, which was finally resolved amicably by means of a settlement laid down in a settlement agreement. In the first two court instances, the claimant argued that the settlement agreement had to be nullified on the grounds of (primarily) error and (alternatively) abuse of circumstances when the settlement agreement was concluded. A cross-border mediation process was started in that respect. However, the parties could not reach an understanding, after which the claimant initiated civil court proceedings against the finance company. The finance company essentially raised the defence that the claims of the claimant had become time-barred during (and despite of) the mediation.
In the first instance and on appeal, the dispute was decided based on the Dutch legal framework on statute of limitations and interruption. In the Supreme Court proceedings, the court first set out the above-mentioned legal framework based on the Mediation Directive and the interruptive effect of mediation in cross-border cases. The Supreme Court considered that it was the legislator’s sole intention to promote mediation in cross-border disputes and that parties in such cross-border disputes may not be prevented from subsequently commencing legal proceedings with respect to their dispute as a result of an expiration of statutory limitation periods during the mediation process. To achieve that goal, the Supreme Court ultimately decided that initiating mediation in cross-border disputes has to be put on a par with the acts of interruption mentioned in Article 3:316 of the Civil Code, implying that the mediation interrupted the statute of limitation and overturned the Court of Appeal. The Supreme Court also ruled that in case of a written notice of interruption, the requirement to start legal proceedings within six months after the notice to ensure the notice has interruptive effect, can also be met by starting mediation within six months after sending the notice.
Conclusion
The judgment confirms the interruptive effects of initiating a cross-border mediation on the statutory limitation periods for civil claims. However, as the judgment only pertains to cross-border disputes, claimants in a purely domestic dispute should be aware that mediation does not interrupt the limitation period of their claim. In this context, it should be noted that a dispute that initially appeared to be purely domestic may subsequently become cross-border in the sense of the Mediation Directive (for example, because one of the parties’ residence or domicile changes), and thus fall within the scope of the Mediation Directive. In those cases, a mediation can have an interrupting effect.
[1] See also: https://globallitigationnews.bakermckenzie.com/2020/11/26/the-interruption-of-limitation-periods-of-accumulated-claims-against-the-dutch-general-partnership-and-its-individual-partner.
[2] Supreme Court 19 February 2021, ECLI:NL:HR:2021:274.
[3] Cf. Article 3:316 DCC.
