Penalty payments under Dutch law

A penalty payment, or “dwangsom” under Dutch law, is a powerful legal instrument used to ensure compliance with a judicial ruling. A civil penalty is a legal remedy that can be imposed by a court to induce a convicted person to comply with a court order. This remedy is often used when there is a fear that the convicted person will not comply with a sentence imposed, or when a previous sentence has not been complied with. The fine acts as a financial incentive and must be sufficiently dissuasive to induce the offender to comply with the sentence. But how exactly does a penalty payment work, when can it be imposed, and what are the rules regarding limitation periods and interruption? In this article, we delve into these important aspects in greater detail.

Penalty payments under Dutch law

A penalty payment, or “dwangsom” under Dutch law, is a legal tool to ensure compliance with a judicial ruling. How does a penalty payment work, when can it be imposed, and what are the rules regarding limitation periods and interruption? This article explains these aspects in detail.

What is a penalty payment under Dutch law?

It is important to distinguish between a penalty payment imposed by a court (dwangsom) and a contractual penalty clause in a commercial contract under Dutch law. A penalty payment is a judicial tool that ensures compliance with a court order. A contractual penalty clause is an agreement between parties in a commercial contract to deter breaches. The key difference lies in their origins—one results from judicial intervention, while the other is a mutually agreed term in a contract.

For more information about time limits for legal actions, you can refer to time limit for complaints in the Netherlands.

A penalty payment is a financial incentive that a court may impose under Dutch civil law. It compels a party to perform or refrain from an action. This could involve removing an unlawful structure or stopping a prohibited activity. The goal is to enforce compliance with the primary court order. A penalty can be a fixed amount per violation or a recurring amount per time unit, such as 500 euro per day of non-compliance.

The judge may also set a maximum cap to prevent the penalty from escalating. This mechanism pressures the party to comply. In some cases, penalty clauses ensure compliance with contractual obligations.

Is a penalty payment always imposed under Dutch law?

Court-imposed penalty payments differ from contractual penalties. Penalty payments require a specific request from the claimant and approval by the judge. Contractual penalties are pre-agreed and automatically apply upon breach, provided they are reasonable and not punitive. This difference highlights that penalty payments involve judicial intervention, while contractual penalties are private arrangements enforced through litigation.

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A penalty payment is not automatically imposed by the court. The requesting party must ask for it. The judge decides whether the penalty is appropriate and sets the amount. In some cases, a penalty payment cannot be imposed, such as when the obligation involves a monetary payment or when a legal status is established, like nullifying a contract.

A penalty payment cannot be imposed by the judge without a request. The party must explicitly request it, and the judge decides if it is warranted. Without a request, no penalty payment will be linked to the primary order. Contractual penalty clauses are common in contracts to enforce obligations.

When can no penalty payment be imposed under Dutch law?

Penalty payments have certain restrictions. They cannot be applied to monetary obligations. Contractual penalty clauses are more flexible. Parties have freedom in setting these clauses, provided they do not violate Dutch statutory provisions or are unreasonable. This flexibility makes contractual penalty clauses a preferred option in many commercial contracts, allowing parties to quantify damages for non-compliance.

For more insights into liability issues, consider reading exclusion of liability for indirect damage in the Netherlands.

Penalty payments are not allowed when the obligation involves paying a monetary sum. If the court declares a certain legal status, like nullifying a contract or pronouncing bankruptcy, no penalty payment can be imposed. Penalty payments ensure compliance with active duties, not declaratory judgments.

Penalty clauses are often used in contracts to deter breaches. In many common law jurisdictions, these clauses are enforceable if they are reasonable and not punitive.

When is a penalty payment not due under Dutch law?

A penalty payment is payable only if the primary obligation can be executed. The penalty starts accruing after the judgment is served by a bailiff to the liable party. This ensures that the liable party knows about the ruling and the obligations. There may be exceptions if the court sets an effective date in the ruling.

A penalty payment is not forfeited if the primary obligation is suspended, such as during an appeal or cassation when the ruling is not provisionally enforceable. If a party appeals a non-enforceable ruling, penalty accrual is on hold until the appeal decision. Most judgments are provisionally enforceable, allowing immediate compliance during appeals.

A creditor may also seek compensation for non-compliance. This compensation could be fines or other penalties under Dutch law to meet obligations.

What is the limitation period for a penalty payment under Dutch civil law?

To understand more about limitation issues in Dutch law, explore limitation period in the Netherlands.

Penalty payments under Dutch civil law have a limitation period of six months from the day they are forfeited. Creditors must act within six months to collect. This short limitation emphasizes that penalty payments prompt timely compliance, not generate prolonged liabilities.

Specific rules under the Dutch Civil Code regulate how penalties and sanctions are enforced, ensuring creditors exercise their rights promptly.

How can the limitation period be interrupted under Dutch law?

Learn more about legal strategies like prejudgment attachment in the Netherlands for effective enforcement of claims.

A creditor can interrupt the limitation period of forfeited penalty payments by taking action. This can be done by sending a formal notice or demand, showing that the creditor maintains the right to demand compliance with the primary court order. Following an interruption, the six-month limitation period starts again.

Under Dutch contract law, creditors must take proactive measures to maintain their right to collect penalties. A written demand clearly stating the creditor’s intent resets the six-month limitation. Without this, the creditor may lose the ability to enforce the penalty.

Penalty clauses in contracts can deter breaches effectively. These clauses, sometimes called liquidated damages clauses, quantify the compensation for specific breaches, ensuring the injured party is adequately compensated.

What to do in case of an appeal under Dutch law?

If an appeal is lodged against a provisionally enforceable judgment, the obligation to comply with the primary order and pay penalty payments remains intact. Therefore, the creditor must interrupt the limitation period every six months during the appeal to ensure penalties remain enforceable.

During the lengthy appeal process, the creditor must stay vigilant and take steps to preserve their rights. Stuiting, or interruption of the limitation, must happen every six months to prevent penalties from lapsing. Practically, this means issuing reminders or formal demands to reset the limitation period.

These proactive measures help creditors claim compensation and enforce the ruling under Dutch civil law even if an appeal delays enforcement.

Practical example: failure to comply with court orders under Dutch law

Consider a commercial scenario where parties have a contractual penalty clause for non-compliance. If a supplier fails to deliver goods on time, the buyer may invoke the clause, leading to a pre-agreed fine per day of delay. Unlike court-imposed penalties, contractual penalties are predefined and do not need judicial approval to be enforceable. However, if challenged, courts in the Netherlands may assess if the penalty clause is enforceable based on its reasonableness and proportionality under Dutch law.

Take the example of a property owner ordered by the court to remove an unauthorized structure. The court sets a penalty of €500 per day for non-compliance. The property owner initially complies but then appeals. Since the ruling is provisionally enforceable, penalties accrue during the appeal.

The creditor (e.g., a municipality or neighbor) must issue a formal notice every six months to enforce compliance and collect accrued penalties. Failing to do so may mean the limitation period expires, and they lose the right to collect.

This underscores the importance of understanding both the enforcement and limitation aspects of penalty payments under Dutch law. Creditors must be proactive to utilize penalty payments effectively.

In serious offences where non-compliance leads to significant harm, additional fines or sanctions may be imposed by the public prosecutor under Dutch law to ensure compliance and uphold court authority.

Need assistance with Dutch penalty payments?

Are you dealing with a penalty payment or have questions about limitation periods and interruption? Remko Roosjen, a Dutch attorney in the Netherlands, is ready to provide expert legal advice and assistance. Feel free to reach out for professional support.

Contact Us

For more information or any questions regarding penalty payments, please do not hesitate to contact Remko Roosjen or one of our other contract lawyers from MAAK Advocaten. Committed to excellence, our Dutch lawyers provide superior legal services tailored to your distinct needs. You can reach our law firm in the Netherlands through our website, by email, or phone.

Our approachable and skilled staff at MAAK Attorneys will be delighted to assist you, arranging a meeting with one of our specialized attorneys in the Netherlands. Whether you need a Dutch litigation attorney or a Dutch contract lawyer in Amsterdam, we are eager to guide you through the legal intricacies and secure the most favorable results for your situation.

Contact details

Remko Roosjen | attorney-at-law (‘advocaat’)
+31 (0)20 – 210 31 38
remko.roosjen@maakadvocaten.nl

The information on this legal blog serves purely for educational purposes and should not be taken as specific legal guidance. While we endeavor to maintain accurate and current information, we do not assert its absolute completeness or relevance to your particular situation. For advice tailored to your legal concerns, we urge you to engage with a licensed attorney. Please note that the blog’s content may change without notice, and we are not liable for any inaccuracies or missing information.