The Hague Court of Appeal: Embassy requires permit from UWV to dismiss employee

Introduction
The applicability of Dutch employment law to employment contracts between embassies and their staff has long been a topic of discussion. One aspect of this discussion involves the question whether or not embassies require a permit from the competent government authority (in Dutch: Uitvoeringsinstituut Werknemersverzekeringen, UWV) in order to dismiss employees on business economic grounds. The Hague Court of Appeal has recently given a ruling on this issue (ECLI:NL:GHDHA:2021:673).

The significance of this case lies in the Court of Appeal’s ruling that the immunity from jurisdiction does not preclude embassies from the obligation to obtain a dismissal permit from the UWV. Embassies are obliged to obtain such a permit when dismissing an employee based on, inter alia, business economic grounds- regardless of whether or not a choice of law is included in the employment contract. Please find an explanation of the case below.

Unilateral termination of employment contract and ruling of the lower (cantonal) court
Under Dutch law the dismissal of employees is governed by mandatory statutory dismissal provisions. Employers may unilaterally terminate indefinite contracts by giving notice of termination. The most striking difference to other jurisdictions is that, in that scenario, employers must in principle, before they can give notice, apply for a dismissal permit from the UWV (in case of business economic grounds or long-term sickness) or request the court to terminate the contract (in case of other dismissal grounds).

In this case, the Egyptian embassy (Embassy) terminated an employment contract of a Dutch employee on business economic grounds, without obtaining prior permission from the UWV. The employee petitioned the court to, inter alia, declare the dismissal to be null and void. The Embassy invoked immunity from jurisdiction. The court sided with the employee and declared the dismissal to be null and void.

The case at the Court of Appeal
The Embassy appealed the court’s decision and brought forward the following arguments:

1. Immunity from jurisdiction
   The Embassy stated that the court had incorrectly ruled that the Embassy could not invoke immunity from jurisdiction. Recognizing that generally employment law disputes are not covered by immunity, the Embassy reasoned that there are exceptions to this general rule. It stated that Egypt and the Netherlands had in this case made alternate arrangements and that the employee conducted public law-related business for the Embassy. Furthermore, the Embassy argued that it had received presidential instructions to close the office where the employee worked.
   
   While the - in this case applicable and relevant - United Nations treaty regarding immunity does include exceptions in case of alternate arrangements between the states and for employees who conduct public law-related matters, the Court of Appeal ruled that neither exception applied in this case as both statements were insufficiently substantiated. The fact that the office where the employee worked was closed by order of presidential instructions from Egypt did not imply immunity from jurisdiction either.
    
2. Choice of law
   Furthermore, the Embassy stated that the court incorrectly ruled that the parties to the employment contract had (implicitly) made a choice of law for Dutch law. According to the Embassy, Egyptian law applied to the contract instead.
   
   The Court of Appeal did not follow this line of reasoning, pointing out that based on article 8 (1) of the European Regulation EC No 593/2008 (Rome I) (Rome I), an employment contract is governed by the law chosen by the parties. However, this choice may not lead to the employee losing the protections he would enjoy based on the law that would be applicable, had no choice of law been made (the so-called objectively applicable law). If no choice of law is made, the employment contract is governed by the law of the country in which the employee habitually carries out his work (article 8 (2) Rome I). If it appears from the circumstances as a whole that the contract is more closely connected with another country, then the law of that other country applies (article 8 (4) Rome I).
   
   The Court of Appeal ruled that in this particular case, the employment contract did not include a choice of law (implicit or otherwise) and because the employee carried out his work in the Netherlands, Dutch law applied. Moreover, even if a choice of law had been made for Egyptian law, this would not have changed the outcome of the case. After all, such a choice of law cannot derogate from the employment law protections of the employee under Dutch law. The termination of employment therefore has to comply with Dutch mandatory law regarding termination of employment.

Following the above, the Court of Appeal concluded that the appeal was unsuccessful and upheld the decision of the lower court.

Finally
Should you have any questions regarding the above, please do not hesitate to contact us.