Covid-19 – Commercial contracts

First Dutch Covid-19 case law rendered by Netherlands Commercial Court (NCC)
The NCC rendered an interesting judgement in a commercial contract case on 29 April 2020 with reference to Covid-19 circumstances. The NCC denied the first claim – EUR 169 million claim (purchase sum) by a US company (the seller) against a company domiciled in Amsterdam (the buyer) based on the circumstance that the transaction contract was not signed yet. However, the second claim, i.e. the alternative claim of the so-called break up fee was granted to the US seller despite the request of the Dutch buyer based on the current Covid-19 situation to modify the amount. The NCC noted that the hefty break up fee of EUR 30 million allocates risk and expresses commitment, and also caps the defendant‘s exposure. The NCC therefore rejected the defense of change of circumstances due to Covid-19 and the defendant has to pay the break up fee to the claimant.

This is the first Dutch case law referring to Covid-19 and it gives guidance when Covid-19 circumstances are acceptable to set contractual obligations aside. Several circumstances have to be taken into account and it does not go without saying that in times of Covid-19, contracts should not be honored.

The NCC was launched on 1 January 2019 and is located in Amsterdam. The entire proceedings (written and oral) is in English. The NCC aims to quickly and effectively resolve all types of international business disputes. It is not required that the parties are Dutch or that the dispute is governed by Dutch law. The parties must have a written agreement in which it is understood that the dispute should be settled through the NCC. Parties can still agree to submit the matter to the NCC after the dispute has arisen and even in ongoing proceedings. A Dutch judgement is enforceable in many countries worldwide due to several treaties and conventions therefor the NCC has a strong position in the international arena of alternative dispute resolution. Proceedings in the Netherlands based on the civil law system are efficient and less extensive than proceedings in the English speaking common law countries. The NCC is considered as an excellent alternative for companies involved in international business disputes.

Please let us know if you need further information with regard to the NCC.

Legal impact
Companies all over the world are affected by preventative measures to combat the pandemic. As a consequence parties are trying to get out of contracts, or put their contractual obligations on hold or even aside. This often results in non payments and disruption of business. The legal impact is enormous. Communication between parties is important as it depends on several circumstances whether you can base your defense on Covid-19 when you don’t perform your contractual obligations under a commercial contract.

Feel free to contact us to analyze your commercial contracts in order to assess what the possibilities are in terms of remedies or relief in times of Covid-19.