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Interruption of statutory limitation by way of written notice: a matter of interpretation

Interruption of statutory limitation by way of written notice: a matter of interpretation

Interruption of statutory limitation by way of written notice: a matter of interpretation

02.12.2015 NL law

In judgment of 18 September 2015, ECLI:NL:HR:2015:2741, the Dutch Supreme Court reversed a decision of the Amsterdam Court of Appeal, in which it was held that a letter by US counsel for the claimant to US counsel for the defendant did not contain an “unequivocal reservation of rights” and therefore did not interrupt the Dutch statute of limitation. 

According to the Supreme Court, the courts should not only have looked at the wording of the letter, but also to the context within which the letter was sent and the other circumstances of the case (including subsequent communications between the claimant and the defendant).

International Strategies Group (“ISG“), based in the Virgin Islands, sued Royal Bank of Scotland (“RBS“) as the legal successor of ABN Amro Bank (“ABN Amro“). ISG fell victim to a multi-million dollar fraud and lost all of the funds that it had deposited into accounts maintained at ABN Amro. According to ISG, if ABN Amro had been more prudent its funds would not have disappeared. After an initial attempt to pursue its claims in the United States, in 2007 ISG initiated proceedings before the District Court of Amsterdam, the Netherlands, claiming damages upward of USD 14 million.

Both the District Court and the Amsterdam Court of Appeal dismissed the action, holding that ISG’s claims had become time barred. Under Dutch law, a claim for damages expires five years after the claimant is able to bring the claim. According to Article 3:317(1) Dutch Civil Code, this statutory limitation period is interrupted if the claimant sends the defendant a written notice in which he or she unequivocally reserves the right to damages.

ISG argued that the limitation period was successfully interrupted on 8 August 2003, when its counsel in the United States sent a letter the ABN Amro’s U.S. counsel, stating:

We have been retained by International Strategies Group to (…) assess additional actions which may be required to best serve the interests of our clients in accomplishing a full disclosure concerning the unusual circumstances surrounding funds deposited by them into accounts maintained at ABN Amro. (…)

Various questions have arisen which I am anxious to review with you as counsel to ABN Amro. Most curious are the mysterious details concerning the (…) payment of $ 400,000 to ABN Amro employee (…) out of our client’s funds on deposit in an account at ABN Amro. Explanations which I have reviewed are incomplete and insufficient at best.

It would appear that ABN Amro may be liable for the regrettable ‘disappearance’ of the entire syndicated $24,000,000 (…)

I’ve been trying cases involving commercial disputes for over thirty years and I have become convinced that litigation is the least efficient and most uncivilized method of dispute resolution known to man. That said, if you’re able to gather some facts which may shed some light on these issues, I would welcome a visit to New York and a chat all under the ‘cloak’ of Rule 408.

I would also think it appropriate to put ABN Amro carriers on notice of these potential claims.

I look forward to hearing from you

Both the District Court and the Court of Appeal rejected this argument, holding that the letter did not contain an “unequivocal” reservation of a claim.

However, the Supreme Court overturned the Amsterdam Court of Appeal’s decision.

Referring to earlier case law, the Supreme Court emphasized that it is a matter of interpretation whether a notice letter contains a reservation of rights that is sufficiently “unequivocal” to interrupt the statute of limitations. When interpreting the letter, the courts should look at its wording, the context within which the letter was sent and the other circumstances of the case (including subsequent communications between the claimant and the defendant).

The Supreme Court held that the Court of Appeal had failed properly to substantiate its view that the letter of 8 August 2003 did not contain a sufficiently unequivocal reservation of rights, considering that the letter:

  • was sent by ISG’s outside counsel to ABN Amro’s outside counsel;
  • specifically states “that ABN Amro may be liable for the regrettable ‘disappearance’ of the entire syndicated $ 24,000,000”;
  • includes references to the possibility of litigation between the parties; and
  • suggests that it would be “appropriate to put ABN Amro carriers on notice of these potential claims”;
  • The case was referred to the Court of Appeal of The Hague for further review.

This decision is by-and-large in line with earlier case law of the Supreme Court. Still, it is surprising to see that the Supreme Court attaches specific importance to the fact that the notice letter had been sent by ISG’s outside counsel to ABN Amro’s outside counsel. For the Court of Appeal, the fact that the letter was sent between counsels militated against holding that the letter served to interrupt the statute of limitations. In Dutch legal practice it is generally accepted that notice letters may be sent directly to the opposite party – and not only to their counsel – if they serve to interrupt a limitation period (and some would even recommend doing so). Against that background, it is not immediately clear why the fact that the letter was sent between outside counsels would benefit ISG’s position.

Arguably, however, the proper background against which the letter ought to be interpreted, is American legal practice (cf. Supreme Court 17 February 2006, ECLI:NL:HR:2006:AU9717 (Royal & Sun Alliance / Universal Pictures)). In the U.S. context in which ISG’s counsel sent his letter to ABN Amro’s counsel, would that letter normally be interpreted as a sufficiently clear signal that ISG is reserving its right to damages? Does it matter that in most common law systems one cannot interrupt – or ‘toll’ – a statute of limitations by sending a notice letter? These and similar questions are not addressed by the Supreme Court. Indeed, the U.S. context is missing entirely from the Supreme Court’s analysis.

Whatever one’s view on this Supreme Court decision, in matters governed by Dutch law we continue to recommend the inclusion of an express and unequivocal reservation of one’s rights and defences in any notice letter to the opposite party.

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