Civil litigation cost allocation in the Netherlands

Every legal system has its own set of rules and connected principles regarding civil litigation cost allocation which determine if the winning party is entitled to certain financial compensation. From a cross-border perspective, these rules and principles of foreign law systems are often misunderstood and seen as too simplified. For example, in the Netherlands, people often enviously assume that the winning party in a US litigation proceeding is automatically entitled to huge cost compensation awards. However, in the US, each party usually pays their own legal fees – even the winning party. 

In the Netherlands, the principle is applied that the losing party covers the victorious party's legal expenses. This coverage encompasses court fees, attorney's fees, and miscellaneous expenses. Yet, rather than reflecting the actual costs incurred, compensation is calculated via a pre-set scale, commonly referred to as the liquidation rate. This system aims to make justice accessible while deterring baseless lawsuits. Critics have argued that the fixed costs compensation method is no longer in proportion with the actual costs of litigation proceedings. 

A noteworthy deviation permits the awarding of actual expenses in situations marked by procedural abuse or illegal actions. This exception is grounded in a foundation of legal precedent, suggesting it's reserved for instances where the litigation is so blatantly unfounded that initiating or continuing a claim is deemed irresponsible, given the opposing party's interests. 

The bar for classifying an action as procedural abuse or illegal is high. It demands that a claim or defence relies on deliberately incorrect facts or untenable positions known, or which should have been known, from the start. The high-proof requirement is by design, aiming to protect the fundamental right to court access, as enshrined in Article 6 of the European Convention on Human Rights. In this regard, judicial caution is paramount. 

A detailed exploration of the Dutch method of handling litigation costs presents a compelling case study for legal practitioners, particularly those operating outside the Netherlands. It illustrates the Dutch judiciary's firm stance against frivolous legal actions and unlawful behaviour, all the while safeguarding individuals' fundamental rights. The provision for recovering actual costs in specific cases acts as a deterrent against unfounded lawsuits, striking a thoughtful balance between curbing legal system abuse and guaranteeing justice accessibility. 

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Michiel Teekens is a Partner with TeekensKarstens advocaten notarissen (TK). He is an international corporate and commercial litigator and Chair of the International Law team of experts in TK. He also serves as Global Chair of the GGI Litigation & Dispute Resolution (LDR) Practice Group.