Didam judgment: contracts void or voidable?

The Supreme Court has ruled on several occasions that the general principles of proper administration also apply to private legal acts of an administrative body. It follows from Union law that a public body subject to a tendering requirement must provide an appropriate degree of publicity to potential interested parties.

In the Didam judgment at the end of 2021, these principles converged insofar as the Supreme Court ruled that it follows from Article 3:14 of the Dutch Civil Code (Burgerlijk Wetboek) that a public body must observe the principle of equality when concluding a contract for the sale of immovable property. This means that potential interested parties must be given scope to compete and that the public body must apply objective, verifiable and reasonable selection criteria and guarantee openness with regard to these criteria and the sales process. This only differs if there is only one interested party, but even in that case the public body must be transparent about its intention to sell and justify why it is reasonable that only one party is interested. Meanwhile, case law has confirmed that this applies unconditionally to the leasing of real estate by public bodies.[1]

en tot verkoop en te motiveren waarom er redelijkerwijs slechts één gegadigde in beeld is. Inmiddels is in de rechtspraak bevestigd dat een en ander onverkort geldt voor verhuur van onroerende zaken door overheidsorganen.[1]

Legal effect

De Hoge Raad heeft zich destijds niet uitgelaten over de rechtsgevolgen van handelingen in strijd met de uitgangspunten van het Didam-arrest, waardoor niet op voorhand vaststaat dat een inbreuk op het beginsel van gelijke kansen c.q. gelijkheidsbeginsel leidt tot nietigheid of vernietigbaarheid van een reeds gesloten overeenkomst.

At the time, the Supreme Court did not rule on the legal consequences of actions in violation of the principles of the Didam judgment, which means that it is not a foregone conclusion that a violation of the principle of equal opportunity or equality leads to the nullity or voidability of a contract already concluded.

Pursuant to Article 3:14 in conjunction with Article 3:40(1) of the Dutch Civil Code, a violation of the administrative law principle of equality can lead to the contract being nullified. This must be a ‘qualified violation’, however, in the sense that the conduct is so severe that it should lead to nullity.[2] According to the central government, violation of the principles of the Didam judgment does not necessarily lead to nullity or voidability of contracts already concluded.[3]

Verstappen appears to argue that these contracts are indeed void from a dogmatic point of view, but that one should not unreservedly assume such a weighty legal consequence due to the enormous impact on private legal dealings in the real estate sector.[4] In a more comprehensive analysis, Bartels concludes that, with the exception of egregious violations such as cronyism and corruption, contracts entered into before the Didam judgment are not void. He considers contracts entered into after the Didam judgment as ‘candidates for nullity’ if the contracting parties knew or should have known that they were acting in violation of the Didam judgment.[5]

The preliminary relief judge of the District Court Midden-Nederland ruled at the end of March 2023 that applying the Didam judgment to a contract already concluded could lead to nullity of the contract. Following the referral back by the Supreme Court, the Arnhem-Leeuwarden Court of Appeal ruled that the contract in the original Didam case was voidable. Different legal consequences, but with huge impact on real estate practice. Note that in both cases, the administrative body was obviously unaware of the criteria set out by the Supreme Court.

Conclusion

Leaving aside the legal tenability of the aforementioned rulings, the issue is whether it is desirable that pre-Didam contracts can be annulled or even deemed never to have existed. Ultimately, it is up to the Supreme Court to decide what legal effect any conflict with the legal rules from the Didam judgment should have. A strict distinction between contracts concluded before and after the Didam judgment is desirable. Until then, there is uncertainty and ambiguity on the part of public bodies, contracting parties and prospective buyers/ tenants who entered into a contract before the Didam judgment.

[1] Rb. Noord-Nederland 15 december 2022, ECLI:NL:RBNNE:2022:4846, r.o. 4.3 en 4.4 en Rb. Midden-Nederland 15 december 2022, ECLI:NL:RBMNE:2022:5402, r.o. 4.15 t/m 4.20.
[2] Hof Den Haag 29 januari 2013, ECLI:NL:GDHA:2013:BZ2014, r.o. 4 en 9.
[3] Factsheet Didam-arrest, 10 januari 2022, par. 12, (https://www.volkshuisvestingnederland.nl/onderwerpen/grondbeleid/gronduitgifte-overheden-arrest-didam), laatstelijk geraadpleegd op 22 januari 2023.
[4] L.C.A.  Verstappen, ‘De nieuwe rol van de notaris bij verkoop van overheidsvastgoed’, WPNR 2022/7355, p. 42.
[5] S.E. Bartels, ‘Zijn Didam-strijdige overeenkomsten nietig?’, WPNR 2022/7392, p. 865.

Lastly

Are you a contracting party or a potential interested party in an immoveable property contract with a public body? If so, please do not hesitate to contact me or one of the other specialists at GMW advocaten to discuss your options.