Foreign party involved in Dutch proceedings: who pays the legal costs?
If legal action succeeds, the other party can be sentenced to pay the legal costs. We explained earlier what these legal costs are, and how the amount of the legal costs is determined (and how this works in cases about intellectual property, where the basic premise is compensation of the actual legal costs). But what if there is a foreign party added to the proceedings? AMS lawyer Thomas van Vugt had such a case and explains, based on a ruling on a procedural issue, how this can be addressed.
Sentence is a ‘dead letter’
If such a foreign party is sentenced to pay the legal costs, in some cases such a ruling is a ‘dead letter’. The chance that another party residing abroad simply ignores the ruling is larger than if this concerned a Dutch party.
General rule: provide security otherwise inadmissible
The legislator anticipated this risk and therefore stipulated, in article 224 of the Code of Civil Procedure, that a foreign party can be mandated to provide security for the legal costs it would have to pay if unsuccessful. For example, that amount of expected legal costs then has to be paid to a third-party account where it has to remain until the proceedings are completed.
If such a foreign party does not provide security when requested, this can mean he is inadmissible. The demand for security has to be submitted as a procedural issue. This usually concerns a Dutch respondent making the demand for security for the legal costs against a foreign claimant.
The following ruling illustrates the fact that such an obligation to provide security in advance by a foreign party. This was a ruling on a procedural issue where AMS Lawyers acted as counsel for an American claimant. The other party, a Dutch private company, demanded that the American claimant was sentenced to provide security for the legal costs, which amount was set at €17,000.-. The Dutch company stated that the American did not have a place of domicile in The Netherlands, so that he was obliged, pursuant to article 224 of the Code of Civil Procedure, to provide security for payment of the possible legal costs. The general rule in article 224 of the Code of Civil Procedure requires this.
Convention with the US from 1956
The American claimant invoked article 224 paragraph 2 sub a of the Code of Civil Procedure, which states as an exception to the obligation to provide security in the first paragraph, “if this arises from a convention”. The American claimant lived in the United States and his country concluded, on 27 March 1956, a convention with The Netherlands, i.e. the Convention of Friendship, Trade and Shipping. This convention and the protocol to the convention means that citizens (including companies) of the United States are exempt from making a security deposit for legal costs. In short, the exceptional position applied to the American claimant.
American does not have to provide security
Thanks to this 1956 convention, the American claimant did not have to provide security for the legal costs and the legal action could continue. If this had been a foreign party to which an exception did not apply, he would have had to provide security. If the foreign party was unable or unwilling to do so, he would have been inadmissible. That would have ended the legal action.