A contract that is drawn up in Dutch cannot simply be translated into English, or vice versa

Professor André Janssen explains what internationally oriented lawyers have to consider when dealing with Dutch company law. Non-Dutch lawyers often do not know the exact meaning of typical Dutch legal terms, and that knowledge is relevant for the proper drafting of a contract. The Commercial Law programme devotes extensive attention to this topic.

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What are common pitfalls for internationally oriented company lawyers?

“Jurisprudence is a language-based discipline, and each legal system has its own terminology. That’s why a contract that is drawn up in Dutch cannot simply be translated into English, or vice versa. In certain areas of the law, such as mergers and acquisitions or international purchase agreements, everything is generally drawn up in English. In such cases, you, as a lawyer, must have mastered the correct terminology.

Various globally oriented companies have their headquarters in the Netherlands, and that number has been increasing since Brexit. These companies employ lawyers who may speak Dutch reasonably well, but they lack the knowledge of Dutch law because they received their legal training elsewhere. They may for that reason not know the exact meaning of typical Dutch terms, and that knowledge is definitely relevant for the proper drafting of a contract.”

Can you give some examples of specific Dutch legal terminology?

“Terms such as ‘goede trouw‘ or ‘redelijkheid en billijkheid‘are important in Dutch law. These terms are not found as such in other legal systems. You could say that ‘good faith’ is the English equivalent of ‘goede trouw‘, but that phrase does not have exactly the same meaning. That means that you have to be fully aware of this to know what you have to stipulate in a contract.

Incidentally, a characteristic of Dutch contracts is that they are generally quite short. In the Netherlands, many things are regulated in the Dutch Civil Code, so a reference to it will often suffice for lawyers. Neither the United Kingdom nor the United States has a code of this kind. Instead, they work with a case law system that is based on individual cases. English and US lawyers are therefore used to arranging as much as possible in a contract. That’s why contracts drawn up by common law lawyers are often long.

Parties are free to choose the legal system that best suits their contract situation. This is called forum shopping and it’s allowed. In terms of that choice, I’ve seen a change since Brexit. Until recently, many international disputes were decided by an English court, but it seems that the Dutch court is increasingly being chosen post-Brexit. Due to the UK’s exit from the EU, enforcing a ruling by an English judge in an EU country can lead to problems. The reason that people seem to prefer to submit a dispute to a Dutch court is that they generally speak good English here, and the Netherlands is known as a liberal country. The establishment of the Netherlands Commercial Court (NCC) in 2019 also seems to contribute to this preference.”

What is your favourite subject in company law?

“That is contract law, especially international purchase agreements. These are governed by the Vienna Convention, a treaty that has existed since 1980 and has never been amended. A current development in this area is the question of whether the convention is also adequate for disputes in which digitisation plays a role. Forty years ago, for example, there were no goods with digital elements. But a television has now become a smart TV, and a telephone a smartphone. In the event of non-conformity (i.e., the product does not meet the requirements that the buyer could expect at the time of delivery), the buyer has a right to compensation. But with digitalisation, it’s now possible that the smart TV was satisfactory at the time of delivery, but it no longer works after a few months due to a faulty update. Does this mean that the smart TV is not in conformity? These are interesting questions. As far as I know, there have been no published judgements on this yet. That doesn’t mean that it has not already been litigated, but parties often use arbitration in disputes concerning the Vienna Convention and those cases are treated as confidential.

By the way, I am of the opinion that although the Vienna Convention dates from 1980, it can still be applied effectively in practice. For those subjects that the convention does not sufficiently regulate, parties can make additional agreements.”

Do you have a tip for company lawyers who work internationally?

“Make sure you’re well prepared and aware of the applicable regulations and their impact on the contract. Try to explain subjects that may be open to discussion (because they can be interpreted differently from an international perspective) as clearly as possible in the contract. In legal proceedings, you often see that afterwards there is disagreement about what the actual intention of a contract provision was. If, for instance, you use a word like tekortkoming (non-compliance) that is common in the Netherlands but you draw up the contract in English, you should clearly explain in which situations that applies. In the Commercial Law programme, this subject is expressly mentioned in the contract law section. This course series is aimed at company lawyers who draft international contracts in English from the Netherlands. Dutch law is the focus, but the programme is offered entirely in English.”

André Janssen is Chair Professor of Private Law at Radboud University.