Penalty payment (dwangsom)

A penalty payment is an amount the court orders a party to pay if it fails to comply with a judgment. It is not compensation for damage; it is pressure to comply, and it is the reason most orders to act or refrain from acting are complied with at all.

Legal basis

Article 611a of the Dutch Code of Civil Procedure allows the court, on the application of a party, to impose a penalty payment for non-compliance with the principal order. It cannot be imposed for an obligation to pay a sum of money: for that there is ordinary enforcement through attachment.

The court sets the amount, may set it per breach or per day, and will normally set a maximum. Article 611b allows the court to order that the penalty runs only after a certain period, giving the debtor time to comply.

How penalties are incurred and collected

Penalties are incurred automatically once the judgment has been served and the party fails to comply. No further court decision is needed, and the creditor can enforce them like any monetary claim, including by attachment. Whether a penalty has in fact been incurred is often disputed, and that dispute goes to the enforcement judge.

Article 611g contains a trap: penalty payments become time-barred six months after the day on which they were incurred. A creditor who lets a year pass before collecting will find most of the penalties gone.

Adjustment

Under Article 611d the court that imposed the penalty may suspend, reduce or lift it where compliance has become permanently or temporarily impossible. Impossibility is judged strictly: financial inability is not enough.

Where it goes wrong

Orders are often drafted too vaguely to enforce. A penalty attached to an order to cooperate fully produces an argument about what full cooperation means, while a penalty attached to an order to deliver a named document by a named date does not. Precision in the claim is what makes the penalty work.