Gag Clauses in Administrative and Private Law: When (Un)Permissible?

Nevertheless, private law agreements regularly include provisions in which a party commits not to use public law remedies, such as submitting a view, objection, or appeal, against decisions of a government authority, such as an environmental permit or a zoning plan. Such provisions are also referred to as “gag clauses.”

This blog sets out what a gag clause is, when such a clause is (un)permissible, and under what conditions it can be legally valid. It also discusses the ruling of the District Court Midden-Nederland of 22 July 2020 (ECLI:NL:RBMNE:2020:2863), which shows how problematic gag clauses can be in practice if not properly drafted.

A gag clause is a provision in an agreement in which a party waives the right to object or appeal or otherwise use administrative legal remedies against a specific project, for example, a construction plan or other activities on a nearby plot.

When entering into an agreement, parties are in principle free to determine with whom they contract and what content and form the agreement has. This principle is referred to as freedom of contract. However, this freedom of contract is not absolute. Article 3:40 of the Dutch Civil Code states that a legal act is null and void if its content or purpose is contrary to good morals or public order or a mandatory legal provision. In addition, Article 17 of the Constitution, Article 6 ECHR, and Article 14 ICCPR guarantee the right to legal protection and access to the courts.

When a gag clause is too generally worded, lacks a term, and applies to successors in title, it may constitute an impermissible restriction of legal protection. In such cases, an appeal to freedom of contract will generally not hold up in court. This makes a poorly drafted gag clause potentially problematic.

According to established case law of, among others, the Trade and Industry Appeals Tribunal, the Administrative Jurisdiction Division of the Council of State, and the Central Appeals Tribunal, a contractual provision waiving objection or appeal has no public law legal effect. Only under strict conditions, for example when there is a clear and unqualified waiver regarding a specific and substantively fixed decision, can such a declaration have legal consequences (cf. CBb 23 March 2016, ECLI:NL:CBB:2016:68, para. 7.2). The fundamental nature of legal protection means that administrative bodies and administrative courts are generally not bound by private law waivers.

The case of 22 July 2020 concerned a plot on which in 1981 a servitude of non-building was established. The deed of transfer also stipulated that the buyers (and their successors) would refrain from objecting to residential development on the remaining part of the plot, under penalty of a substantial fine. The seller later submitted an application for an environmental permit for conversion into a residence, against which the buyers first submitted a view and then an objection. The buyers also filed an objection against the boundary fence. The objections committee declared the objections unfounded. The seller then invoked the gag clause in civil proceedings on 22 July 2020 and claimed the forfeited penalty from the objector.

The District Court Midden-Nederland ruled that the content of the gag clause constituted an impermissible infringement on the buyers’ legal protection for the following reasons:

1. The text of the clause does not in any way clarify which (future) construction plans are involved. It is unclear what is meant by “any construction with residential designation”;
2. The clause does not include an end date. It states that the buyers may never file any objection. This means that the clause continuously denies legal protection to the buyers and thus continuously infringes on the aforementioned fundamental rights;
3. The deed stipulates that the clause must be imposed on successors in title of the buyers and their successors, etc. The provision therefore wrongly contains “a perpetual effect at the expense of every new owner,” as the court ruled.

Thus, in this case, the gag clause was declared null and void. Therefore, there was no prohibition, and no penalty was forfeited.

The question of when a gag clause is permissible has not yet been answered by the Supreme Court. Lower case law shows that a gag clause may be permissible under civil law in exceptional cases. It is essential that:

1. the clause relates to a specific situation or development;
2. the clause has a limited duration;
3. the clause does not disproportionately bind future successors in title.

In a ruling by the District Court of Amsterdam dated 6 January 2010, ECLI:NL:RBAMS:2010:BR2022, and the District Court of Zeeland-West-Brabant dated 18 April 2018, ECLI:NL:RBZWB:2018:2689, it was ruled that a gag clause was permissible because the above conditions were met.

Gag clauses lie at the intersection of freedom of contract, public order and good morals, and fundamental legal protection. Only a carefully drafted clause can be permissible.

The need for proper drafting, as well as an appropriate penalty, increases the likelihood that a gag clause can be effective. Our firm regularly advises and litigates on this topic.

For questions, please contact Cindy Koningferander. 

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