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UIA Seminar - “ The Issues Which Really Count For Clients In International Agency, Distribution and Franchising Agreements - An Update For Some, An Eye Opener For Others!”, Atlanta 1 - 2 May 2009.

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UIA Seminar - “The Issues Which Really Count For Clients In International Agency, Distribution and Franchising Agreements - An Update For Some, An Eye Opener For Others!”, Atlanta 1 - 2 May 2009

CHOICE OF LAW AND JURISDICTION CLAUSES IN CROSS-BORDER AGENCY AND DISTRIBUTION AGREEMENTS FROM AN EU PERSPECTIVE

 by Carlo H. Mastellone, avvocato

Firenze, Italia

STUDIO LEGALE MASTELLONE

FIRENZE MILANO ROMA VERONA

i negotiation strategies
I. NEGOTIATION STRATEGIES
  • In addition to:
  • Taking into account different negotiation styles, language and culture
  • Aiming to a written contract enforceable in the countries of both parties
  • Avoiding conflicts by understanding respective rights and duties
  • Address dispute resolution system completely and fairly

STUDIO LEGALE MASTELLONE

FIRENZE MILANO ROMA VERONA

letters of intent
LETTERS OF INTENT
  • LOI should not have any binding effect
  • exceptfor the clausesthat in the parties’ intentionshouldhave a bindingeffect - confidentialityof secret information disclosed; standstill / lock-out; right of first refusal
  • Should include a choice of forum and choice of law clause

STUDIO LEGALE MASTELLONE

FIRENZE MILANO ROMA VERONA

choice of law of non contractual obligations
CHOICE OF LAW OF NON-CONTRACTUAL OBLIGATIONS

Art. 14. Freedomofchoice, Reg. (EC) No 864/2007 (“Rome II”)

The choiceshallbeexpressed or demonstratedwithreasonablecertaintyby the circumstancesof the case and shallnotprejudice the rightsofthirdparties.

STUDIO LEGALE MASTELLONE

FIRENZE MILANO ROMA VERONA

what does the governing law determine
WHAT DOES THE GOVERNING LAW DETERMINE?
  • Duty to negotiate in good faith?
  • Legal content of an agreement to negotiate?
  • Effect of breaking off negotiations
  • Liabilities for negotiating in bad-faith
  • Remedies available

STUDIO LEGALE MASTELLONE

FIRENZE MILANO ROMA VERONA

common law vs civil law
COMMON LAW vs. CIVIL LAW
  • No generalrulerequiring the partiestonegotiate in goodfaith [“How can a court be expected to decide whether, subjectively, a proper reason existed for the termination of negotiations? ]
  • vs. partieshave a duty tobehaveaccordingtogoodfaith [and culpa in contrahendo]

STUDIO LEGALE MASTELLONE

FIRENZE MILANO ROMA VERONA

jurisdiction absent a choice of court
JURISDICTION ABSENT A CHOICE OF COURT
  • An action founded on the pre-contractual liability of the defendant is a matter relating to tort, delict or quasi-delict within the meaning of Article 5(3) of the Brussels Convention [ECJ judgment 17.09.2002, in case C-334/00, FonderieOfficineMeccanicheTacconiS.p.A. Vs., Heinrich Wagner SintoMaschinenfabrik GmbH]

STUDIO LEGALE MASTELLONE

FIRENZE MILANO ROMA VERONA

council regulation ec no 44 2001
COUNCIL REGULATION (EC) No 44/2001

Article 5 - A person domiciled in a Member State may, in another Member State, besued: …

3. in matters relating to tort, delict or quasi-delict, in the courts for the place where the harmful event occurred or may occur

STUDIO LEGALE MASTELLONE

FIRENZE MILANO ROMA VERONA

governing law absent a choice of law
GOVERNING LAW ABSENT A CHOICE OF LAW
  • Reg. (EC) No 864/2007 (“Rome II”) applicable from Jan. 11, 2009
  • “Culpa in contrahendo , as an autonomous concept , includes the violation of the duty of disclosure and the breakdown of contractual negotiations (Recitals No. 30)

STUDIO LEGALE MASTELLONE

FIRENZE MILANO ROMA VERONA

governing law continued
GOVERNING LAW (continued)
  • Absent an express choice of law (art. 14), the law applicable to a non-contractual obligation arising out of dealings prior to the conclusion of a contract, whether the contract is concluded or not, is the law that applies to the contract or that would have been applicable had it been entered into (art. 12)

STUDIO LEGALE MASTELLONE

FIRENZE MILANO ROMA VERONA

governing law continued1
GOVERNING LAW (continued)
  • Alternative criteria, law of the country

(a) in which the damage occurs

(b) where both parties are resident

(c) with which, having regard to all circumstances, the contract is manifestly more closely connected

STUDIO LEGALE MASTELLONE

FIRENZE MILANO ROMA VERONA

ii litigation strategies
II. LITIGATION STRATEGIES
  • Which are the most appropriate contractual strategies to be implemented when litigation cannot be avoided?
  • Arbitration or ordinarycourts?

STUDIO LEGALE MASTELLONE

FIRENZE MILANO ROMA VERONA

advantages of arbitration
ADVANTAGES OF ARBITRATION
  • Neutrality
  • Specific competences
  • Excluding the other party’s courts
  • Simple and informal
  • One instance only
  • The time element
  • Cost considerations

STUDIO LEGALE MASTELLONE

FIRENZE MILANO ROMA VERONA

advantages of arbitration cont
ADVANTAGES OF ARBITRATION (cont.)
  • Tailor made proceedings
  • Confidentiality
  • Good relations
  • Award can be based on fairness
  • Language of proceedings
  • Recognition of the foreign award

STUDIO LEGALE MASTELLONE

FIRENZE MILANO ROMA VERONA

circumstances in favour of ordinary courts
CIRCUMSTANCES IN FAVOUR OF ORDINARY COURTS
  • Exporter in a merely defensive position
  • Non arbitrability of the dispute
  • Limited financial value of the dispute

STUDIO LEGALE MASTELLONE

FIRENZE MILANO ROMA VERONA

the arbitrability of disputes
THE “ARBITRABILITY” OF DISPUTES
  • The 1958 New York Convention
  • The Belgian Supreme Court judgement of October 15, 2004 (Colvi v. Interdica)

STUDIO LEGALE MASTELLONE

FIRENZE MILANO ROMA VERONA

jurisdiction absent a choice of court1
JURISDICTION ABSENT A CHOICE OF COURT
  • Reg. (EC) No 44/2001, art. 5.1.(b) in mattersrelatingto a contract:
  • - in the case of the provisionof services, the court for the place in a Member State where, under the contract, the services wereprovided or shouldhavebeenprovided

STUDIO LEGALE MASTELLONE

FIRENZE MILANO ROMA VERONA

make sure the choice of forum is effective
MAKE SURE THE CHOICE OF FORUM IS EFFECTIVE
  • in writing or evidenced in writing
  • accordingtoparties’ practices
  • accordingwithusage the parties are or oughttohavebeenawareof and which in theirtradeiswidelyknownto, and regularlyobservedby, partiestocontractsof the typeinvolved in the particulartradeconcerned (art. 23)

STUDIO LEGALE MASTELLONE

FIRENZE MILANO ROMA VERONA

effective choice of forum continued
EFFECTIVE CHOICE OF FORUM (continued)
  • Jurisdictionshallbeexclusive (unlessotherwiseagreed)
  • Durablecommunicationsby electronic means: equivalentto "writing“
  • Validity of jurisdiction clause in a distributorship agreement tacitly renewed [ECJ, Ivecov Van Hool]

STUDIO LEGALE MASTELLONE

FIRENZE MILANO ROMA VERONA

selecting the best forum clause
SELECTING THE BEST FORUM CLAUSE
  • “The parties agree to submit to the [exclusive] [non-exclusive] jurisdiction of the [English] courts”

STUDIO LEGALE MASTELLONE

FIRENZE MILANO ROMA VERONA

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“Any legal proceedings instituted against the Distributor by the Principal shall be brought in the courts of the distributor’s country of domicile and any legal proceedings against the Principal by the Distributor shall be brought in the courts of the Principal’s country of domicile and for the purposes of such proceedings the law governing this agreement and such proceedings shall in each case be deemed to be the law of the country in which the relevant proceedings have been instituted in accordance with this clause. For the purpose of proceedings brought against it by the other party under this clause each party agrees to submit to the jurisdiction of the courts of the other party’s country of domicile”

STUDIO LEGALE MASTELLONE

FIRENZE MILANO ROMA VERONA

make sure the arbitration clause is effective
MAKE SURE THE ARBITRATION CLAUSE IS EFFECTIVE
  • Formal requirements under the 1958 New York Convention: very narrow definition of “writing”, art. II(2)
  • Uncitral Model law, art. 7 (2): …or other means of telecommunication which provide a record of the agreement
  • Formal requirements under national laws

STUDIO LEGALE MASTELLONE

FIRENZE MILANO ROMA VERONA

pathological arbitration clauses
PATHOLOGICAL ARBITRATION CLAUSES
  • Any dispute shall be referred to a Queen’s Counsel of the English Bar
  • Arbitration by the “Official Chamber of Commerce in Paris”
  • The designation of a non existent appointing authority

STUDIO LEGALE MASTELLONE

FIRENZE MILANO ROMA VERONA

pre action injunctions the ecj perspective
PRE-ACTION INJUNCTIONS - THE ECJ PERSPECTIVE
  • Civil law jurisdictions generally find anti-foreign-suit injunctions offensive, even violative of international law
  • Common law jurisdictions, especially courts in the UK and US, consider an anti-foreign-suit injunction appropriate under some circumstances.

STUDIO LEGALE MASTELLONE

FIRENZE MILANO ROMA VERONA

not compatible with reg 44 2001
NOT COMPATIBLE WITH REG. 44/2001
  • Anti-suit injunction, concerning the applicability of an arbitration agreement, cited by a litigant in order to contest the jurisdiction of the court before which he is being sued:
  • Every court seised itself determines, under the rules applicable to it, whether it has jurisdiction to resolve the dispute before it anti-suit injunction, contrary to the general principle that every court

STUDIO LEGALE MASTELLONE

FIRENZE MILANO ROMA VERONA

not compatible with reg 44 20011
NOT COMPATIBLE WITH REG. 44/2001
  • An anti-suit injunction also runs counter to the trust which the Member States accord to one another’s legal systems and judicial institutions
  • Applicant would therefore be deprived of a form of judicial protection to which it is entitled [ECJ judgment 10 February 2009 in the West Tankers/Front Comor case]

STUDIO LEGALE MASTELLONE

FIRENZE MILANO ROMA VERONA

the future the hague convention
THE FUTURE: THE HAGUE CONVENTION
  • Hague Convention of 30 June 2005 on Choice of Court Agreements
  • Not yet in force, but signed by the EU (April 1, 2009) and by the United States of America (January 19, 2009) and ratified by Mexico (October 26, 2007)

STUDIO LEGALE MASTELLONE

FIRENZE MILANO ROMA VERONA

exclusive choice of court agreement
EXCLUSIVE CHOICE OF COURT AGREEMENT
  • must be concluded or documented
  • i) in writing; or
  • ii) by any other means of communication which renders information accessible so as to be usable for subsequent reference;

STUDIO LEGALE MASTELLONE

FIRENZE MILANO ROMA VERONA

three main rules
THREE MAIN RULES
  • The chosen court must hear the case
  • Any court seized but not chosen must dismiss the case
  • Any judgment rendered by the designated court must be recognised and enforced in other Contracting States

STUDIO LEGALE MASTELLONE

FIRENZE MILANO ROMA VERONA

eu mediation directive june 28 2008
EU MEDIATION DIRECTIVE June 28, 2008
  • on certainaspectsofmediation in civil and commercial matters: purpose to facilitate accessto dispute resolution and topromote the amicablesettlementofdisputesbyencouraging the useofmediation and byensuring a sound relationshipbetweenmediation and judicialproceedings.

STUDIO LEGALE MASTELLONE

FIRENZE MILANO ROMA VERONA

iii choice of law strategies
III. CHOICE OF LAW STRATEGIES

What choices are available?

  • Law of the country of either of the parties to the contract
  • Law of a neutral third country (Swiss law)
  • Combination of two laws, i.e. different laws to govern different aspects of the contract (depeçage)

STUDIO LEGALE MASTELLONE

FIRENZE MILANO ROMA VERONA

what choices are available continued
WHAT CHOICES ARE AVAILABLE? (continued)
  • Principles common totwo or more specifiedlegalsystemswillgovern [“common principlesof English and Frenchlaw, and in the absenceofsuch common principles, bysuchprinciplesofinternationaltradelawashavebeenappliedbynational and internationaltribunals” ]

STUDIO LEGALE MASTELLONE

FIRENZE MILANO ROMA VERONA

what choices are available continued1
WHAT CHOICES ARE AVAILABLE? (continued)
  • “floatingchoiceoflawclause”
  • “savingclause”
  • “generalprinciplesoflaw”, “transnationallaw” or “international commercial law” (lexmercatoria)
  • CISG
  • UNIDROIT Principles

STUDIO LEGALE MASTELLONE

FIRENZE MILANO ROMA VERONA

common errors
COMMON ERRORS
  • British Law
  • Law of the memberstatesof the EuropeanUnion

STUDIO LEGALE MASTELLONE

FIRENZE MILANO ROMA VERONA

make sure the choice of law is effective
MAKE SURE THE CHOICE OF LAW IS EFFECTIVE

The choicemustbe:

  • expressed or demonstrated with reasonable certainty by the terms of the contract or the circumstances of the case (art. 3.1 RomeConv.)
  • clearlydemonstrated … (art. 3.1 Reg. Rome I)

STUDIO LEGALE MASTELLONE

FIRENZE MILANO ROMA VERONA

limits laid by mandatory rules of law
LIMITS LAID BY MANDATORY RULES OF LAW
  • A national court will normally apply its mandatory laws, whatever the applicable substantive law it applies
  • mandatory law for international arbitration: the law of the place of arbitration, or where the contract was to be performed or of the place of enforcement.

STUDIO LEGALE MASTELLONE

FIRENZE MILANO ROMA VERONA

ec directive 86 653 on self employed commercial agents
EC DIRECTIVE 86/653 ON SELF-EMPLOYED COMMERCIAL AGENTS
  • The parties may not derogate from Articles 17 and 18 (termination indemnity or compensation) to the detriment of the commercial agent before the agency contract expires
  • ECJ judgment 9 November 2000, case C-381/98, Ingmar GB Ltd v. Eaton Leonard Technologies Inc

STUDIO LEGALE MASTELLONE

FIRENZE MILANO ROMA VERONA

mind your belgian distributor
MIND YOUR BELGIAN DISTRIBUTOR!
  • Belgian Law of 27 July 1961 on the unilateral termination of exclusive distribution agreements of indefinite duration:
  • non-Belgian choice of courts or arbitration clause + foreign law clause: not always a watertight solution (ex art. 7.1 Rome Conv.)

STUDIO LEGALE MASTELLONE

FIRENZE MILANO ROMA VERONA

governing law absent a choice of law1
GOVERNING LAW ABSENT A CHOICE OF LAW
  • Law of the countrywithwhich the agreement ismostcloselyconnected
  • or of the countryof residence of the party whoistoeffect the performance whichischaracteristicof the contract

STUDIO LEGALE MASTELLONE

FIRENZE MILANO ROMA VERONA

rome i reg art 4
ROME I REG., ART. 4
  • (b) Service contract: lawof the service provider’s countryof residence
  • (e) Franchisecontract: lawof the franchisee’s countryof residence
  • (f) Distributioncontract: lawof the distributor’s countryof residence

STUDIO LEGALE MASTELLONE

FIRENZE MILANO ROMA VERONA

does the cisg apply to distribution agreements
DOES THE CISG APPLY TO DISTRIBUTION AGREEMENTS?
  • Unless CISG is the chosen governing law: CISG applies if the Distributor Agreement (a framework agreement distinct from the sales contracts concluded in the performance of the former) can be characterized as a contract for the sale of goods [U.S. District Court, Southern District of New York 21 July 1997, Helen Kaminski Pty. Ltd. v. Marketing Australian Products, Inc.]

STUDIO LEGALE MASTELLONE

FIRENZE MILANO ROMA VERONA

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UIA Seminar - “The Issues Which Really Count For Clients In International Agency, Distribution and Franchising Agreements - An Update For Some, An Eye Opener For Others!”, Atlanta 1 - 2 May 2009

CHOICE OF LAW AND JURISDICTION CLAUSES IN CROSS-BORDER AGENCY AND DISTRIBUTION AGREEMENTS FROM AN EU PERSPECTIVE

THANK YOU FOR YOUR ATTENTION!

ANY QUESTIONS?

Carlo H. Mastellone, avvocato

Firenze, Italia

STUDIO LEGALE MASTELLONE

FIRENZE MILANO ROMA VERONA

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STUDIO LEGALE MASTELLONE

FIRENZE MILANO ROMA VERONA

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STUDIO LEGALE MASTELLONE

FIRENZE MILANO ROMA VERONA

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STUDIO LEGALE MASTELLONE

FIRENZE MILANO ROMA VERONA

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