Binding advice

What we do

A binding opinion is an alternative to arbitration proceedings. There are few mandatory rules regarding binding opinions. Consequently, parties are largely free to structure a binding opinion procedure as they see fit. Instead of a judgment, a binding opinion procedure results in a settlement agreement. A binding opinion procedure can be very informal, fast, and cost-effective. In practice, we observe that engaging legal assistance is highly conducive to a favorable outcome.

We have the experience and expertise to assume various roles during a binding arbitration procedure: from advisor to counsel. Contact us to discuss the possibilities.

Binding advice or arbitration: what is the difference?

Binding advice and arbitration are both forms of private dispute resolution outside the government courts, but they differ fundamentally from a legal perspective. Arbitration is extensively regulated by law in Book Four of the Code of Civil Procedure (Articles 1020 to 1076 Rv) and has a judicial character. Binding advice does not have this extensive regulation: it relies on the rules of the settlement agreement (Articles 7:900 to 7:906 BW). The most important practical difference lies in the outcome. Arbitration ends in an arbitral award that has immediate executory force following leave for enforcement (exequatur) from the preliminary relief judge. Binding advice ends in a settlement that binds the parties contractually, but which you cannot have executed immediately without a notarial deed. We objectively compare for you which route suits your dispute, whether you are an international corporation or the baker on the corner.

The legal basis: settlement agreement (Article 7:900 of the Dutch Civil Code)

Binding advice is a form of a settlement agreement. Article 7:900 of the Dutch Civil Code (BW) stipulates that, in a settlement agreement, parties bind themselves to one another to a determination of what legally applies between them, for the purpose of ending or preventing uncertainty or dispute. Pursuant to Article 7:900 paragraph 2 of the BW, this determination can also be achieved through a decision by a third party: the binding advisor. The decision of that third party is subject to judicial review pursuant to Article 7:904 of the BW. Legal experts distinguish between pure binding advice (where the advisor independently determines what applies between the parties) and impure binding advice (where the advisor fills a gap or modifies an existing legal relationship). The form you choose partly determines the scope for subsequent review. Our lawyers and in-house counsel establish the assignment and the ground rules in advance, ensuring that no disputes arise regarding these frameworks later on.

When can a binding opinion be annulled? (Article 7:904 of the Dutch Civil Code)

A binding opinion is legally sound, but not unassailable. Article 7:904, paragraph 1 of the Dutch Civil Code stipulates that a decision by a binding arbitrator is voidable if adherence to it would be unacceptable according to standards of reasonableness and fairness in view of its content or the manner in which it was reached. The court conducts only a marginal review: it does not assess whether it would have decided differently itself, but rather whether the arbitrator, taking all circumstances into account, could reasonably have arrived at this opinion. In practice, annulment rarely succeeds, for example in cases of seriously defective reasoning or violation of fundamental principles of proper procedural conduct, such as the right to be heard and to respond. Are you wondering whether you are bound by an opinion or whether you wish to challenge one? We assess the chances of success realistically and litigate before the ordinary courts where necessary.

The binding arbitration procedure step by step

Because the law provides hardly any mandatory regulations regarding binding advice, parties largely determine the procedure themselves. Typically, it proceeds as follows: parties stipulate in an agreement (or an existing contract clause) that they will submit their dispute to one or more binding advisors. Subsequently, the advisor(s) are appointed, possessing the appropriate expertise for the dispute. The parties exchange positions and documents, after which a hearing and counter-hearing takes place. The advisor makes their decision and records it, ideally in a settlement agreement. Unlike arbitration, in binding advice one of the parties may be appointed as advisor themselves; this is excluded in arbitration. We draft the procedural agreements, monitor deadlines and cost allocation, and ensure that the hearing and counter-hearing proceed properly, so that the advice holds up later.

Enforcement of a binding opinion

A common misconception is that a binding opinion, like an arbitral award, can be executed immediately. That is not the case. An arbitral award acquires an enforceable title after permission from the preliminary relief judge; we advise on its execution during the enforcement of an arbitral award. A binding opinion binds the parties contractually, but does not in itself constitute an enforceable title. If the counterparty fails to comply with the opinion, you must in principle initiate proceedings before the ordinary courts to enforce compliance. You can avoid this by having the opinion included in a notarial deed, or by combining a binding opinion with an arbitration clause so that the outcome is recorded as an arbitral settlement award (Article 1062 of the Dutch Code of Civil Procedure). We think proactively with you about the most watertight route to compliance.

For whom we work

MKB Juristen works with mixed teams of lawyers and in-house counsel. As a result, you benefit from both the litigation skills of a lawyer and the commercial, pragmatic perspective of an in-house counsel. We assist international corporations in complex disputes, but equally well the freelancer and the baker on the corner who wants to resolve a conflict quickly and affordably. Whether you wish to initiate a binding advisory procedure, defend yourself, have an advisory opinion set aside, or make the right choice between binding advice and arbitration : contact us to discuss the possibilities.