UIA Seminar - “The Issues Which Really Count For Clients In International Agency, Distribution and...

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

CHOICE OF LAW AND CHOICE OF LAW AND JURISDICTION CLAUSES IN JURISDICTION CLAUSES IN

CROSS-BORDER AGENCY AND CROSS-BORDER AGENCY AND DISTRIBUTION AGREEMENTS DISTRIBUTION AGREEMENTS FROM AN EU PERSPECTIVEFROM AN EU PERSPECTIVE

by by Carlo H. Mastellone, avvocatoCarlo H. Mastellone, avvocato

Firenze, ItaliaFirenze, Italia

STUDIO LEGALE MASTELLONESTUDIO LEGALE MASTELLONE

FIRENZE MILANO ROMA VERONA

I. NEGOTIATION I. NEGOTIATION STRATEGIESSTRATEGIES In addition to:In addition to: Taking into account different negotiation Taking into account different negotiation

styles, language and culturestyles, language and culture Aiming to a written contract enforceable in Aiming to a written contract enforceable in

the countries of both partiesthe countries of both parties Avoiding conflicts by understanding Avoiding conflicts by understanding

respective rights and dutiesrespective rights and duties

Address dispute resolution Address dispute resolution system completely and fairlysystem completely and fairly



LETTERS OF INTENTLETTERS OF INTENT

LOI should not have any binding effect except for the clauses that in the except for the clauses that in the

parties’ intention should have a parties’ intention should have a binding effect - binding effect - confidentialityconfidentiality of of secret information disclosed; secret information disclosed; standstillstandstill / / lock-outlock-out; ; right of first refusalright of first refusal

Should include a choice of forum and Should include a choice of forum and choice of law clausechoice of law clause



CHOICE OF LAW OF CHOICE OF LAW OF NON-CONTRACTUAL NON-CONTRACTUAL OBLIGATIONSOBLIGATIONS

Art. 14. Freedom of choiceArt. 14. Freedom of choice, Reg. , Reg. (EC) No 864/2007 (“Rome II”)(EC) No 864/2007 (“Rome II”)

The choice shall be expressed or The choice shall be expressed or demonstrated with reasonable demonstrated with reasonable certainty by the circumstances of certainty by the circumstances of the case and shall not prejudice the case and shall not prejudice the rights of third parties.the rights of third parties.



WHAT DOES THE WHAT DOES THE GOVERNING LAW GOVERNING LAW DETERMINE?DETERMINE? Duty to negotiate in good faith?Duty to negotiate in good faith? Legal content of an agreement to Legal content of an agreement to

negotiate?negotiate? Effect of breaking off negotiationsEffect of breaking off negotiations Liabilities for negotiating in bad-Liabilities for negotiating in bad-

faithfaith Remedies availableRemedies available



COMMON LAW vs. COMMON LAW vs. CIVIL LAWCIVIL LAW No general rule requiring the parties No general rule requiring the parties

to negotiate in good faith [to negotiate in good faith [““How can How can a court be expected to decide a court be expected to decide whether, subjectively, a proper whether, subjectively, a proper reason existed for the termination of reason existed for the termination of negotiations? negotiations? ]]

vs. parties have a duty to behave parties have a duty to behave according to good faith [and according to good faith [and culpa culpa in contrahendoin contrahendo]]



JURISDICTION ABSENT JURISDICTION ABSENT A CHOICE OF COURTA CHOICE OF COURT An action founded on the pre-An action founded on the pre-

contractual liability of the defendant is contractual liability of the defendant is a matter relating to tort, delict or a matter relating to tort, delict or quasi-delict within the meaning of quasi-delict within the meaning of Article 5(3) of the Brussels Convention Article 5(3) of the Brussels Convention [ECJ judgment [ECJ judgment 17.09.2002, in case C-17.09.2002, in case C-334/00, 334/00, Fonderie Officine Meccaniche Fonderie Officine Meccaniche Tacconi S.p.A. Vs., Heinrich Wagner Tacconi S.p.A. Vs., Heinrich Wagner Sinto Maschinenfabrik GmbHSinto Maschinenfabrik GmbH]]



COUNCIL REGULATION COUNCIL REGULATION (EC) No 44/2001(EC) No 44/2001

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

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



GOVERNING LAW GOVERNING LAW ABSENT A CHOICE OF ABSENT A CHOICE OF LAW LAW Reg. (EC) No 864/2007 (“Rome Reg. (EC) No 864/2007 (“Rome

II”) applicable from Jan. 11, 2009II”) applicable from Jan. 11, 2009 ““Culpa in contrahendoCulpa in contrahendo , as an , as an

autonomous conceptautonomous concept , includes , includes the violation of the duty of the violation of the duty of disclosure and the breakdown of disclosure and the breakdown of contractual negotiations (Recitals contractual negotiations (Recitals No. 30) No. 30)



GOVERNING LAW GOVERNING LAW (continued)(continued) Absent an express choice of law (art. Absent an express choice of law (art.

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



GOVERNING LAW GOVERNING LAW (continued)(continued)

Alternative criteria, law of the Alternative criteria, law of the countrycountry

(a) in which the damage occurs(a) in which the damage occurs

(b) where both parties are resident(b) where both parties are resident

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



II. LITIGATION II. LITIGATION STRATEGIESSTRATEGIES

Which are the most appropriate Which are the most appropriate contractual strategies to be contractual strategies to be implemented when litigation implemented when litigation cannot be avoided?cannot be avoided?

Arbitration or ordinary courts?Arbitration or ordinary courts?



ADVANTAGES OF ADVANTAGES OF ARBITRATIONARBITRATION

NeutralityNeutrality Specific competencesSpecific competences Excluding the other party’s courtsExcluding the other party’s courts Simple and informalSimple and informal One instance only One instance only The time elementThe time element Cost considerations Cost considerations



ADVANTAGES OF ADVANTAGES OF ARBITRATION (cont.)ARBITRATION (cont.)

Tailor made proceedingsTailor made proceedings ConfidentialityConfidentiality Good relationsGood relations Award can be based on fairnessAward can be based on fairness Language of proceedings Language of proceedings Recognition of the foreign awardRecognition of the foreign award



CIRCUMSTANCES IN CIRCUMSTANCES IN FAVOUR OF ORDINARY FAVOUR OF ORDINARY COURTSCOURTS Exporter in a merely defensive Exporter in a merely defensive

positionposition Non arbitrability of the disputeNon arbitrability of the dispute Limited financial value of the Limited financial value of the

disputedispute



THE “ARBITRABILITY” THE “ARBITRABILITY” OF DISPUTESOF DISPUTES

The 1958 New York Convention The 1958 New York Convention The Belgian Supreme Court The Belgian Supreme Court

judgement of October 15, 2004judgement of October 15, 2004 ((Colvi v. InterdicaColvi v. Interdica))



JURISDICTION ABSENT JURISDICTION ABSENT A CHOICE OF COURTA CHOICE OF COURT

Reg. (EC) No 44/2001, art. 5.1.(b) Reg. (EC) No 44/2001, art. 5.1.(b) in matters relating to a contract:in matters relating to a contract:

- in the case of the provision of - in the case of the provision of services, the court for the place in services, the court for the place in a Member State where, under the a Member State where, under the contract, the services were contract, the services were provided or should have been provided or should have been providedprovided



MAKE SURE THE MAKE SURE THE CHOICE OF FORUM IS CHOICE OF FORUM IS EFFECTIVEEFFECTIVE in writing or evidenced in writingin writing or evidenced in writing according to parties’ practices according to parties’ practices according with usage the parties are according with usage the parties are

or ought to have been aware of and or ought to have been aware of and which in their trade is widely known which in their trade is widely known to, and regularly observed by, parties to, and regularly observed by, parties to contracts of the type involved in to contracts of the type involved in the particular trade concerned (art. the particular trade concerned (art. 23)23)



EFFECTIVE CHOICE OF EFFECTIVE CHOICE OF FORUM (continued)FORUM (continued) Jurisdiction shall be exclusive Jurisdiction shall be exclusive

(unless otherwise agreed)(unless otherwise agreed) Durable communications by Durable communications by

electronic means: equivalent to electronic means: equivalent to "writing“"writing“

Validity of jurisdiction clause in a Validity of jurisdiction clause in a distributorship agreement tacitly distributorship agreement tacitly renewed [ECJ, renewed [ECJ, Iveco Iveco v v Van Hool Van Hool ]]



SELECTING THE BEST FORUM CLAUSE

““The parties agree to submit The parties agree to submit to the [exclusive] [non-to the [exclusive] [non-exclusive] jurisdiction of the exclusive] jurisdiction of the [English] courts”[English] courts”



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



MAKE SURE THE MAKE SURE THE ARBITRATION CLAUSE ARBITRATION CLAUSE IS EFFECTIVEIS EFFECTIVE Formal requirements under the 1958

New York Convention: very narrow very narrow definition of “writing”, art. II(2)definition of “writing”, art. II(2)

Uncitral Model law, art. 7 (2)Uncitral Model law, art. 7 (2): …: … or or other means of telecommunication other means of telecommunication which provide a record of the which provide a record of the agreementagreement

Formal requirements under national laws



PATHOLOGICAL ARBITRATION CLAUSES

Any dispute shall be referred to a Any dispute shall be referred to a Queen’s Counsel of the English Queen’s Counsel of the English BarBar

Arbitration by the “Official Arbitration by the “Official Chamber of Commerce in Paris”Chamber of Commerce in Paris”

The designation of a non existent The designation of a non existent appointing authority appointing authority



PRE-ACTION PRE-ACTION INJUNCTIONS - THE ECJ INJUNCTIONS - THE ECJ PERSPECTIVE PERSPECTIVE Civil law jurisdictions generally find Civil law jurisdictions generally find

anti-foreign-suit injunctions offensive, anti-foreign-suit injunctions offensive, even violative of international laweven violative of international law

Common law jurisdictions, especially Common law jurisdictions, especially courts in the UK and US, consider an courts in the UK and US, consider an anti-foreign-suit injunction anti-foreign-suit injunction appropriate under some appropriate under some circumstances.circumstances.



NOT COMPATIBLE NOT COMPATIBLE WITH REG. 44/2001WITH REG. 44/2001 Anti-suit injunction, concerning the Anti-suit injunction, concerning the

applicability of an arbitration applicability of an arbitration agreement, cited by a litigant in order agreement, cited by a litigant in order to contest the jurisdiction of the court to contest the jurisdiction of the court before which he is being sued:before which he is being sued:

Every court seised itself determines, under Every court seised itself determines, under the rules applicable to it, whether it has the rules applicable to it, whether it has jurisdiction to resolve the dispute before it jurisdiction to resolve the dispute before it anti-suit injunction, contrary to the general anti-suit injunction, contrary to the general principle that every courtprinciple that every court



NOT COMPATIBLE NOT COMPATIBLE WITH REG. 44/2001WITH REG. 44/2001 An anti-suit injunction also runs An anti-suit injunction also runs

counter to the trust which the counter to the trust which the Member States accord to one Member States accord to one another’s legal systems and another’s legal systems and judicial institutions judicial institutions

Applicant would therefore be Applicant would therefore be deprived of a form of judicial deprived of a form of judicial protection to which it is entitled protection to which it is entitled [ECJ judgment 10 February 2009 in the West Tankers/Front [ECJ judgment 10 February 2009 in the West Tankers/Front Comor case]Comor case] STUDIO LEGALE MASTELLONESTUDIO LEGALE MASTELLONE


THE FUTURE: THE THE FUTURE: THE HAGUE CONVENTIONHAGUE CONVENTION

Hague Convention of 30 June 2005 Hague Convention of 30 June 2005 on Choice of Court Agreements on Choice of Court Agreements

Not yet in force, but signed by the Not yet in force, but signed by the EU (April 1, 2009) and by the EU (April 1, 2009) and by the United States of America (January United States of America (January 19, 2009) and ratified by Mexico 19, 2009) and ratified by Mexico (October 26, 2007)(October 26, 2007)



EXCLUSIVE CHOICE OF EXCLUSIVE CHOICE OF COURT AGREEMENTCOURT AGREEMENT

must be concluded or must be concluded or documented documented

i) in writing; ori) in writing; or ii) by any other means of ii) by any other means of

communication which renders communication which renders information accessible so as to be information accessible so as to be usable for subsequent reference;usable for subsequent reference;



THREE MAIN RULESTHREE MAIN RULES

The The chosen court chosen court must hear the must hear the casecase

Any Any court seized but not chosen court seized but not chosen must dismiss the case must dismiss the case

Any judgment rendered by the Any judgment rendered by the designated court must be designated court must be recognised and enforced in other recognised and enforced in other Contracting StatesContracting States



EU MEDIATION EU MEDIATION DIRECTIVE June 28, DIRECTIVE June 28, 20082008 on certain aspects of mediation in on certain aspects of mediation in

civil and commercial matterscivil and commercial matters: : purpose tpurpose to facilitate access to o facilitate access to dispute resolution and to promote dispute resolution and to promote the amicable settlement of disputes the amicable settlement of disputes by encouraging the use of mediation by encouraging the use of mediation and by ensuring a sound relationship and by ensuring a sound relationship between mediation and judicial between mediation and judicial proceedings. proceedings.



III. CHOICE OF LAW III. CHOICE OF LAW STRATEGIESSTRATEGIESWhat choices are available?What choices are available? Law of the country of either of the Law of the country of either of the

parties to the contractparties to the contract Law of a neutral third country (Swiss Law of a neutral third country (Swiss

law)law) Combination of two laws, i.e. different Combination of two laws, i.e. different

laws to govern different aspects of the laws to govern different aspects of the contract (contract (depeçage)depeçage)



WHAT CHOICES ARE WHAT CHOICES ARE AVAILABLE?AVAILABLE? (continued)(continued) PPrinciples common to two or more rinciples common to two or more

specified legal systems will govern specified legal systems will govern [“common principles of English and [“common principles of English and French law, and in the absence of French law, and in the absence of such common principles, by such such common principles, by such principles of international trade law principles of international trade law as have been applied by national as have been applied by national and international tribunals” ]and international tribunals” ]



WHAT CHOICES ARE WHAT CHOICES ARE AVAILABLE?AVAILABLE? (continued)(continued) ““floating choice of law clause”floating choice of law clause” ““saving clause”saving clause” ““general principles of law”, general principles of law”,

“transnational law” or “international “transnational law” or “international commercial law” (commercial law” (lex mercatorialex mercatoria))

CISGCISG UNIDROIT PrinciplesUNIDROIT Principles



COMMON ERRORS

British LawBritish Law Law of the member states of the Law of the member states of the

European UnionEuropean Union



MAKE SURE THE MAKE SURE THE CHOICE OF LAW IS CHOICE OF LAW IS EFFECTIVEEFFECTIVE

The choice must be: The choice must be: expressed or demonstrated with expressed or demonstrated with

reasonable certaintyreasonable certainty by the terms by the terms of the contract or the of the contract or the circumstancescircumstances of the case of the case (art. 3.1 (art. 3.1 Rome Conv.)Rome Conv.)

clearly demonstrated … clearly demonstrated … (art. 3.1 . 3.1 Reg. Rome I)Reg. Rome I)



LIMITS LAID BY MANDATORY RULES OF LAW A national court will normally apply A national court will normally apply

its mandatory laws, whatever the its mandatory laws, whatever the applicable substantive law it appliesapplicable substantive law it applies

mandatory law for international mandatory law for international arbitration: the law of the place of arbitration: the law of the place of arbitration, or where the contract arbitration, or where the contract was to be performed or of the place was to be performed or of the place of enforcement. of enforcement.



EC DIRECTIVE 86/653 ON SELF-EMPLOYED COMMERCIAL AGENTS The parties may not derogate from The parties may not derogate from

Articles 17 and 18 (termination Articles 17 and 18 (termination indemnity or compensation) to the indemnity or compensation) to the detriment of the commercial agent detriment of the commercial agent before the agency contract expiresbefore the agency contract expires

ECJ judgment 9 November 2000, ECJ judgment 9 November 2000, case C-381/98, case C-381/98, Ingmar GB Ltd v. Ingmar GB Ltd v. Eaton Leonard Technologies IncEaton Leonard Technologies Inc



MIND YOUR BELGIAN DISTRIBUTOR! Belgian Law of 27 July 1961 on the Belgian Law of 27 July 1961 on the

unilateral termination of exclusive unilateral termination of exclusive distribution agreements of distribution agreements of indefinite duration:indefinite duration:

non-Belgian choice of courts or non-Belgian choice of courts or arbitration clause + foreign law arbitration clause + foreign law clause: not always a watertight clause: not always a watertight solution (ex art. 7.1 Rome Conv.) solution (ex art. 7.1 Rome Conv.)



GOVERNING LAW GOVERNING LAW ABSENT A CHOICE OF ABSENT A CHOICE OF LAW LAW Law of the country with which the Law of the country with which the

agreement is most closely agreement is most closely connectedconnected

or of the country of residence of or of the country of residence of the party who is to effect the the party who is to effect the performance which is performance which is characteristic of the contractcharacteristic of the contract



ROME I REG., ART. 4

(b) Service contract: law of the (b) Service contract: law of the service provider’s country of service provider’s country of residenceresidence

(e) Franchise contract: law of the (e) Franchise contract: law of the franchisee’s country of residencefranchisee’s country of residence

(f) Distribution contract: law of the (f) Distribution contract: law of the distributor’s country of residencedistributor’s country of residence



DOES THE CISG APPLY TO DISTRIBUTION AGREEMENTS? Unless CISG is the chosen governing Unless CISG is the chosen governing

law: CISG applies if the Distributor law: CISG applies if the Distributor Agreement (a framework agreement Agreement (a framework agreement distinct from the sales contracts distinct from the sales contracts concluded in the performance of the concluded in the performance of the former) can be characterized as a former) can be characterized as a contract for the sale of goods contract for the sale of goods [U.S. District [U.S. District Court, Southern District of New York 21 July 1997, Helen Court, Southern District of New York 21 July 1997, Helen Kaminski Pty. Ltd. v. Marketing Australian Products, Inc.] Kaminski Pty. Ltd. v. Marketing Australian Products, Inc.]



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

CHOICE OF LAW AND JURISDICTION CLAUSES IN CHOICE OF LAW AND JURISDICTION CLAUSES IN CROSS-BORDER AGENCY AND DISTRIBUTION CROSS-BORDER AGENCY AND DISTRIBUTION

AGREEMENTS FROM AN EU PERSPECTIVEAGREEMENTS FROM AN EU PERSPECTIVE

THANK YOU FOR YOUR THANK YOU FOR YOUR ATTENTION!ATTENTION!

ANY QUESTIONS?ANY QUESTIONS?

Carlo H. Mastellone, avvocatoCarlo H. Mastellone, avvocato

Firenze, ItaliaFirenze, Italia



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