‘Booking.com’: judgment Supreme Court on limitation period for pension contribution claims

1. Limitation period under Article 3:308 of the Dutch Civil Code (‘five years’) or Article 3:306 (‘twenty years’)?

In short, the ‘legal knot’ concerns the question of whether the limitation period under Article 3:308 of the Dutch Civil Code applies to the above-mentioned pension contribution claims. If so, what is the starting point of the limitation period? According to Article 3:308 of the Dutch Civil Code, that starting point is linked to the moment of enforceability of the claim in question.

In the previous news item on this case, we explained how it appears to follow from the system of the statute of limitations law that, in principle, the ‘main rule’ of Article 3:306 of the Dutch Civil Code (the long, ‘objective’ limitation period of twenty years) applies to pension contribution claims of a mandatory industry-wide pension fund against an employer. We also argued this in our news item (in Dutch) about the judgment of the Arnhem-Leeuwarden Court of Appeal of 15 October 2019 (ECLI:NL:GHARL:2019:8464). The Midden-Nederland District Court ruled along the same lines on 21 April 2021 (ECLI:NL:RBMNE:2021:1723) and 30 June 2021 (ECLI:NL:RBMNE:2021:2910).

1. Based on the legal system, the short, ‘subjective’ five-year period of Article 3:308 of the Dutch Civil Code (which is regularly applied in lower courts) does not appear to apply to a pension contribution claim arising directly from ‘substantive law’, where the debtor and creditor often do not know each other. The ‘automatic’ and unabridged application of the short limitation period of Article 3:308 of the Dutch Civil Code can therefore lead to unfair outcomes.
2. Put simply, if all the conditions for the applicability of the scope of a so-called mandatory participation decree are met, an industry-wide pension fund must, in principle, grant ‘unlimited’ pension entitlements to employees (and subsequently pay them out), even if no pension contributions have been paid in the past and the industry pension fund was not familiar with the employee in question and his employer(s).
3. Sub ‘b’ is the result of, among other things, the interaction of the principle of ‘geen premie, wel recht’ (‘no contribution, but entitlement’), the Supreme Court judgments ‘Labots’ (ECLI:NL:HR:2012:BT8462) and ‘Carlande’ (ECLI:NL:HR:2015:588) and Article 59 of the Pensions Act (Pensioenwet). This article stipulates that a legal claim against a pension administrator for payment of pension benefits cannot expire during the lifetime of the person entitled to the pension. These circumstances, including the situation where the (unknown) employer has never paid pension contributions to the industry-wide pension fund, logically put pressure on the ‘coverage ratio’ (dekkingsgraad) of industry-wide pension funds. The financial risks are ultimately borne by the ‘collective’, i.e. the employers and employees involved in the industry.
4. A (too) short limitation period of five years, as provided for in Article 3:308 of the Dutch Civil Code, exacerbates the problem, or at least increases the risks involved, because missed pension contributions can then only be claimed by an industry-wide pension fund from an employer to a very limited extent. This is despite the fact that in some cases such an employer has remained ‘under the proverbial radar’ for decades and has therefore never fulfilled its statutory (payment) obligations.

The problem summarised above has been regularly recognised in literature and jurisprudence, resulting in widely divergent case law. In many (but not all) cases, courts have ruled that although Article 3:308 of the Dutch Civil Code applies to this type of pension contribution claim, the moment of enforceability was subsequently ‘tinkered with’ in order to mitigate the above-mentioned unfair outcomes in favour of industry-wide pension funds.

1. The moment of enforceability (and therefore the starting point of the short limitation period) was, for example, linked to either (i) the payment term of a contribution invoice that was actually issued by the industry-wide pension fund (in accordance with its implementation regulations), or (ii) the moment at which the industry-wide pension fund could reasonably have been aware of the claim and the employer liable for it.
2. Both alternatives under ‘a’ could in fact create a kind of ‘infinite limitation period’ because the enforceability of the premium claims (and thus the starting point of the limitation period) arises at a time that may be decades after the (legal) creation of the claim in question. This is contrary (as the AG rightly points out in his opinion prior to the judgment) to the intention of the legislature behind the short, subjective limitation period of (inter alia) Article 3:308 of the Dutch Civil Code.

There are further legal objections to these ‘improper solutions’ from the lower courts; for more details, please refer to our previous news item and the opinion of the AG (in Dutch, e.g. under 4.26). This ‘struggle’ with a reasonable application of Article 3:308 of the Dutch Civil Code, as noticed in lower court rulings and  which has led, inter alia, to the use of the aforementioned ‘improper solutions’, illustrates, in our view, that it follows from the legal system and legislative history that not the subjective limitation period of Article 3:308 of the Dutch Civil Code, but the objective limitation period of Article 3:306 of the Dutch Civil Code applies – or at least should apply – to this type of pension contribution claim (arising directly from substantive law).

2. The Supreme Court has ‘cut’ the proverbial ‘knot’ in its second Booking.com judgment: in principle, Article 3:308 of the Dutch Civil Code applies

The Supreme Court has not ‘untangled’ the proverbial ‘knot’ regarding the ‘limitation period’ issue in this second Booking.com judgment, but simply ‘cut’ it by (in a so-called superfluous consideration) ruling that Article 3:308 of the Dutch Civil Code applies, in principle, to this type of claim (section 3.2.2 of the judgment), without discussing (or referring to) the legal system or legislative history ‘behind’ the subjective limitation period. By way of explanation, the Supreme Court merely refers in a footnote to an earlier judgment handed down under old law (see also our previous news item on this subject).

With regard to the moment at which these claims become enforceable (which marks the start of the limitation period), the Supreme Court then refers in section 3.2.4 to Article 26 of the Pensions Act, in which the Supreme Court effectively reads an ‘absolute limitation’ regarding the (maximum possible) period for payment of pension contributions by an employer. This means that the moment of enforceability (and therefore the start of the limitation period) cannot be postponed ‘indefinitely’, for example by making it dependent on an action by an industry-wide pension fund, such as the sending of a contribution invoice (section 3.2.7 of the judgment).

It also follows (correctly) from the judgment that subjective or objective ‘knowledge’ is not decisive for the moment of enforceability, assuming that Article 3:308 of the Dutch Civil Code applies. The ‘improper solutions’ referred to in the previous paragraph (and in our previous news item), found in lower court case law, in the application of Article 3:308 of the Dutch Civil Code, therefore appear to be (indeed) incorrect.

3. Possible consequences of the second Booking.com judgment for legal practice

We expect that, following this second Supreme Court judgment in the Booking.com case, the following three questions will be litigated more frequently in the future.

1. What exactly qualifies as ‘deliberately concealing the pension premium claim or its enforceability’ (as referred to in Article 3:320 of the Dutch Civil Code in conjunction with Article 3:321(1)(f) of the Dutch Civil Code) within the context of an employer's general investigation and information obligations? As mentioned above, case law in other areas of civil law seems to indicate that (intentional) ‘withholding’ can also be regarded as ‘deliberate concealment’; active action to conceal is therefore not necessarily required.
2. How high is the proverbial ‘bar’ for the limiting effect of reasonableness and fairness when invoking the limitation period of Article 3:308 of the Dutch Civil Code? Pension benefits that are not matched by contribution payments are borne by the collective. An industry-wide pension fund is highly dependent on the cooperation of the companies in the industry. According to the District Court of Rotterdam (ECLI:NL:RBROT:2021:3805), for example, this is incompatible with the possibility that an employer can evade its contribution payment obligations simply by ‘sitting still’ for years. Therefore, this district court judge is of the opinion that under these circumstances, the restrictive effect of reasonableness and fairness precludes the employer from invoking the statute of limitations (Article 3:308 of the Dutch Civil Code).
3. Can an industry-wide pension fund (indeed) claim payment of the missed pension contributions (as is currently generally assumed) as ‘compensation for damages’ under Article 6:162 of the Dutch Civil Code? Do missed investment returns also qualify as compensable damage? As long as an industry-wide pension fund is not aware of both the claim (the ‘damage’) and the employer liable for it, the limitation period under Article 3:310 of the Dutch Civil Code is twenty years after the claim arises (by operation of law).

If the Supreme Court had ‘untangled’ the ‘legal knot’ regarding the applicability of either Article 3:306 of the Dutch Civil Code or Article 3:308 of the Dutch Civil Code instead of simply ‘cutting’ it, the three legal questions above would not be as ‘pressing’ as they now appear to be, with all the (expected) consequences that this entails.

4. Would it not have been simpler to apply Article 3:306 of the Dutch Civil Code instead of Article 3:308?

Now that the Supreme Court, without going into the legal system and legislative history behind the statute of limitations law, has simply ruled that the five-year period of Article 3:308 of the Dutch Civil Code applies in principle, it seems inevitable that many legal proceedings will be brought on the three (most important) legal questions on this issue, mentioned in paragraph 3. We expect these proceedings to lead to very ‘casuistic’ and possibly widely divergent case law on legal aspects such as the ‘limiting effect of reasonableness and fairness’, the possible ‘concurrence’ of limitation periods and the question of when there is ‘deliberate concealment of the existence of the premium claim or its enforceability’.

5. Conclusion

We therefore (unfortunately) cannot imagine that this second Booking.com judgment by the Supreme Court will lead to greater clarity and ‘legal certainty’, at least in the short term; on the contrary. Application of Article 3:306 of the Dutch Civil Code, in line with the legal system and legislative history ‘behind’ these subjective and objective limitation periods, could, on the other hand, have provided the necessary clarity and legal certainty, made the three legal questions mentioned in paragraph 3 considerably less ‘pressing’ and would also have done more justice to the other (long or even non-existent) limitation periods within the so-called ‘pension triangle’ between industry-wide pension funds, employers and employees.

If you have any questions regarding the above news item or require legal advice on the scope of industry-wide (collective labour agreement and pension) regulations, please do not hesitate to contact us. We will be happy to assist you.