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Italia
Italy – New rules on unfair trading practices and contractual requirements in the agricultural and food supply chain
9 febrero 2022
- Agricultura
- Contratos
Summary
Political, environmental or health crises (like the Covid-19 outbreak and the attack of Ukraine by the Russian army) can cause an increase in the price of raw materials and components and generalized inflation. Both suppliers and distributors find themselves faced with problems related to the often sudden and very substantial increase in the price of their own supplies. French law lays down specific rules in that regard.
Two main situations can be distinguished: where the parties have just established a simple flow of orders and where the parties have concluded a framework agreement fixing firm prices for a fixed term.
Price increase in a business relationship
The situation is as follows: the parties have not concluded a framework agreement, each sales contract concluded (each order) is governed by the General T&Cs of the supplier; the latter has not undertaken to maintain the prices for a minimum period and applies the prices of the current tariff.
In principle, the supplier can modify its prices at any time by sending a new tariff. However, it must give written and reasonable notice in accordance with the provisions of Article L. 442-1.II of the Commercial Code, before the price increase comes into effect. Failure to respect sufficient notice, it could be accused of a sudden «partial» termination of commercial relations (and subject to damages).
A sudden termination following a price increase would be characterized when the following conditions are met:
- the commercial relationship must be established: broader concept than the simple contract, taking into account the duration but also the importance and the regularity of the exchanges between the parties;
- the price increase must be assimilated to a rupture: it is mainly the size of the price increase (+1%, 10% or 25%?) that will lead a judge to determine whether the increase constitutes a «partial» termination (in the event of a substantial modification of the relationship which is nevertheless maintained) or a total termination (if the increase is such that it involves a termination of the relationship) or if it does not constitute a termination (if the increase is minimal);
- the notice granted is insufficient by comparing the duration of the notice actually granted with that of the notice in accordance with Article L. 442-1.II, taking into account in particular the duration of the commercial relationship and the possible dependence of the victim of the termination with respect to the other party.
Article L. 442-1.II must be respected as soon as French law applies to the relation. In international business relations, to know how to deal with Article L.442-1.II and conflicts of laws and jurisdiction of competent courts, please see our previous article published on Legalmondo blog.
Price increase in a framework contract
If the parties have concluded a framework contract (such as supply, manufacturing, …) for several years and the supplier has committed to fixed prices, how, in this case, can it change these prices?
In addition to any indexation clause or renegotiation (hardship) clause which would be stipulated in the contract (and besides specific legal provisions applicable to special agreements as to their nature or economic sector), the supplier may seek to avail himself of the legal mechanism of «unforeseeability» provided for by article 1195 of the civil code.
Three prerequisites must be cumulatively met:
- an unforeseeable change in circumstances at the time of the conclusion of the contract (i.e.: the parties could not reasonably anticipate this upheaval);
- a performance of the contract that has become excessively onerous (i.e.: beyond the simple difficulty, the upheaval must cause a disproportionate imbalance);
- the absence of acceptance of these risks by the debtor of the obligation when concluding the contract.
The implementation of this mechanism must stick to the following steps:
- first, the party in difficulty must request the renegotiation of the contract from its co-contracting party;
- then, in the event of failure of the negotiation or refusal to negotiate by the other party, the parties can (i) agree together on the termination of the contract, on the date and under the conditions that they determine, or (ii) ask together the competent judge to adapt it;
- finally, in the absence of agreement between the parties on one of the two aforementioned options, within a reasonable time, the judge, seized by one of the parties, may revise the contract or terminate it, on the date and under the conditions that he will set.
The party wishing to implement this legal mechanism must also anticipate the following points:
- article 1195 of the Civil Code only applies to contracts concluded on or after October 1, 2016 (or renewed after this date). Judges do not have the power to adapt or rebalance contracts concluded before this date;
- this provision is not of public order. Therefore, the parties can exclude it or modify its conditions of application and/or implementation (the most common being the framework of the powers of the judge);
- during the renegotiation, the supplier must continue to sell at the initial price because, unlike force majeure, unforeseen circumstances do not lead to the suspension of compliance with the obligations.
Key takeaways:
- analyse carefully the framework of the commercial relationship before deciding to notify a price increase, in order to identify whether the prices are firm for a minimum period and the contractual levers for renegotiation;
- correctly anticipate the length of notice that must be given to the partner before the entry into force of the new pricing conditions, depending on the length of the relationship and the degree of dependence;
- document the causes of the price increase;
- check if and how the legal mechanism of unforeseeability has been amended or excluded by the framework contract or the General T&Cs;
- consider alternatives strategies, possibly based on stopping production/delivery justified by a force majeure event or on the significant imbalance of the contractual provisions.
Summary
By means of Legislative Decree No. 198 of November 8th, 2021, Italy implemented Directive (EU) 2019/633 on unfair trading practices in business-to-business relationships in the agricultural and food supply chain. The Italian legislator introduced stricter rules than those provided for in the directive. Moreover, it has provided for some mandatory contractual requirements, within the framework of Article 168 of Regulation (EC) 1308/2013, but more restrictive than those of the Regulation. The new provisions shall apply irrespective of the law applicable to the contract and the country of the buyer, hence they concern cross-border relationships as well. They significantly impact contractual relationships related to the chain of fresh and processed food products, including wine, and certain non-food agricultural products, and require companies in the concerned sectors to review their contracts and business practices with respect to their relationships with customers and suppliers.
The provisions introduced by the decree also apply to existing contracts, which shall be made compliant by 15 June 2022.
Introduction
With Directive (EU) 2019/633, the EU legislator introduced a detailed set of unfair trading practices in business-to-business relationships in the agricultural and food supply chain, in order to tackle unbalanced trading practices imposed by strong contractual parties. The directive has been transposed in Italy by Legislative Decree No. 198 of November 8th, 2021 (it came into force on December 15th, 2021), which introduced a long list of provisions qualified as unfair trading practices in the context of business-to-business relationships in the agricultural and food supply chain. The list of unfair practices is broader than the one provided for in the EU directive.
The transposition of the directive was also the opportunity to introduce some mandatory requirements to contracts for the supply of goods falling within the scope of the decree. These requirements, adopted in the framework of Article 168 of Regulation (EC) 1308/2013, replaced and extended those provided for in Article 62 of Decree-Law 1/2012 and Article 10-quater of Decree-Law 27/2019.
Scope of application
The legislation applies to commercial relationships between buyers (including the public administration) and suppliers of agricultural and food products and in particular to B2B contracts having as object the transfer of such products.
It does not apply to agreements in which a consumer is party, to transfers with simultaneous payment and delivery of the goods and transfers of products to cooperatives or producer organisations within the meaning of Legislative Decree 102/2005.
It applies, inter alia, to sale, supply and distribution agreements.
Agricultural and food products means the goods listed in Annex I of the Treaty on the Functioning of the European Union, as well as those not listed in that Annex but processed for use as food using listed products. This includes all products of the agri-food chain, fresh and processed, including wine, as well as certain agricultural products outside the food chain, including animal feed not intended for human consumption and floricultural products.
The rules apply to sales made by suppliers based in Italy, whilst the country where the buyer is based is not relevant. It applies irrespective of the law applicable to the relationship between the parties. Therefore, the new rules also apply in case of international contractual relationships subject to the law of another country.
In transposing the directive, the Italian legislator decided not to take into consideration the «size of the parties»: while the directive provides for turnover thresholds and applies to contractual relations in which the buyer has a turnover equal to or greater than the supplier, the Italian rules apply irrespective of the turnover of the parties.
Contractual requirements
Article 3 of the decree introduced some mandatory requirements for contracts for the supply or transfer of agricultural and food products. These requirements, adopted in the framework of Article 168 of Regulation (EC) 1308/2013, replaced and extended those established by Article 62 of Decree-Law 1/2012 and Article 10-quater of Decree-Law 27/2019 (which had been repealed).
Contracts must comply with the principles of transparency, fairness, proportionality and mutual consideration of performance.
Contracts must be in writing. Equivalent forms (transport documents, invoices and purchase orders) are only allowed if a framework agreement containing the essential terms of future supply agreements has been entered into between supplier and buyer.
Of great impact is the requirement for contracts to have a duration of at least 12 months (contracts with a shorter duration are automatically extended to the minimum duration). The legislator requires companies in the supply chain (with some exceptions) to operate not with individual purchases but with continuous supply agreements, which shall indicate the quantity and characteristics of the products, the price, the delivery and payment method.
A considerable operational change is required due to the need to plan and contract quantities and prices of supplies. As far as the price is concerned, it no longer seems possible to agree on it from time to time during the relationship on the basis of orders or new price lists from the supplier. The price may be fixed or determinable according to the criteria laid down in the contract. Therefore, companies not intending to operate at a fixed price will have to draft contractual clauses containing the criteria for determining the price (e.g. linking it to stock exchange quotations, fluctuations in raw material or energy prices).
The minimum duration of at least 12 months may be waived. However, the derogation shall be justified, either by the seasonality of the products or other reasons (that are not specified in the decree). Other reasons could include the need for the buyer to meet an unforeseen increase in demand, or the need to replace a lost supply.
The provisions described above may also be derogated from by framework agreements concluded by the most representative business organisations.
Prohibited unfair trading practices and specific derogations
The decree provides for several cases qualified as unfair trading practices, some of which are additional to those provided for in the directive.
Article 4 contains two categories of prohibited practices, which transpose those of the directive.
The first concerns practices which are always prohibited, including, first of all, payment of the price after 30 days for perishable products and after 60 days for non-perishable products. This category also includes the cancellation of orders for perishable goods at short notice; unilateral amendments to certain contractual terms; requests for payments not related to the sale; contractual clauses obliging the supplier to bear the cost of deterioration or loss of the goods after delivery; refusal by the buyer to confirm the contractual terms in writing; the acquisition, use and disclosure of the supplier’s trade secrets; the threat of commercial retaliation by the buyer against the supplier who intends to exercise contractual rights; and the claim by the buyer for the costs incurred in examining customer complaints relating to the sale of the supplier’s products.
The second category relates to practices which are prohibited unless provided for in a written agreement between the parties: these include the return of unsold products without payment for them or for their disposal; requests to the supplier for payments for stoking, displaying or listing the products or making them available on the market; requests to the supplier to bear the costs of discounts, advertising, marketing and personnel of the buyer to fitting-out premises used for the sale of the products.
Article 5 provides for further practices always prohibited, in addition to those of the directive, such as the use of double-drop tenders and auctions (“gare ed aste a doppio ribasso”); the imposition of contractual conditions that are excessively burdensome for the supplier; the omission from the contract of the terms and conditions set out in Article 168(4) of Regulation (EU) 1308/2013 (among which price, quantity, quality, duration of the agreement); the direct or indirect imposition of contractual conditions that are unjustifiably burdensome for one of the parties; the application of different conditions for equivalent services; the imposition of ancillary services or services not related to the sale of the products; the exclusion of default interest to the detriment of the creditor or of the costs of debt collection; clauses imposing on the supplier a minimum time limit after delivery in order to be able to issue the invoice; the imposition of the unjustified transfer of economic risk on one of the parties; the imposition of an excessively short expiry date by the supplier of products, the maintenance of a certain assortment of products, the inclusion of new products in the assortment and privileged positions of certain products on the buyer’s premises.
A specific discipline is provided for sales below cost: Article 7 establishes that, as regards fresh and perishable products, this practice is allowed only in case of unsold products at risk of perishing or in case of commercial operations planned and agreed with the supplier in writing, while in the event of violation of this provision the price established by the parties is replaced by law.
Sanctioning system and supervisory authorities
The provisions introduced by the decree, as regards both contractual requirements and unfair trading practices, are backed up by a comprehensive system of sanctions.
Contractual clauses or agreements contrary to mandatory contractual requirements, those that constitute unfair trading practices and those contrary to the regulation of sales below cost are null and void.
The decree provides for specific financial penalties (one for each case) calculated between a fixed minimum (which, depending on the case, may be from 1,000 to 30,000 euros) and a variable maximum (between 3 and 5%) linked to the turnover of the offender; there are also certain cases in which the penalty is further increased.
In any event, without prejudice to claims for damages.
Supervision of compliance with the provisions of the decree is entrusted to the Central Inspectorate for the Protection of Quality and Fraud Repression of Agri-Food Products (ICQRF), which may conduct investigations, carry out unannounced on-site inspections, ascertain violations, require the offender to put an end to the prohibited practices and initiate proceedings for the imposition of administrative fines, without prejudice to the powers of the Competition and Market Authority (AGCM).
Recommended activities
The provisions introduced by the decree also apply to existing contracts, which shall be made compliant by 15 June 2022. Therefore:
- the companies involved, both Italian and foreign, should carry out a review of their business practices, current contracts and general terms and conditions of supply and purchase, and then identify any gaps with respect to the new provisions and adopt the relevant corrective measures.
- As the new legislation applies irrespective of the applicable law and is EU-derived, it will be important for companies doing business abroad to understand how the EU directive has been implemented in the countries where they operate and verify the compliance of contracts with these rules as well.
In an important and very reasoned judgment delivered by the Court of Cassation of France on September 30, 2020, relating to the enforceability of arbitration clauses in international consumer contracts, the Supreme Court judged that these clauses must be considered unfair and cannot be opposed to consumers.
The Supreme Court traditionally insisted on the priority given to the arbitrator to decide on his own jurisdiction, laid down in Article 1448 of the Code of Civil Procedure (principle known as «competence-competence», Jaguar, Civ. 1re, May 21, 1997, nos. 95-11.429 and 95-11.427).
The ECJ expressed its hostility towards such clauses when they are opposed to consumers. In Mostaza Claro (C-168/05), it referred to the internal laws of member states, while considering that the procedural modalities offered by states should not “make it impossible in practice or excessively difficult to exercise the rights conferred by public order to consumers (“Directive 93/13, concerning unfair terms in consumer contracts, must be interpreted as meaning that a national court seized of an action for annulment of an arbitration award must determine whether the arbitration agreement is void and annul that award where that agreement contains an unfair term, even though the consumer has not pleaded that invalidity in the course of the arbitration proceedings, but only in that of the action for annulment”).
It therefore referred to the national judge the right to implement its legislation on unfair terms, and therefore to decide, on a case-by-case basis, whether the arbitration clause should be considered unfair. This is what the Court of Cassation decided, ruling out the case-by-case method, and considering that in any event such a clause must be excluded in relations with consumers.
The Court of Cassation adopted the same solution in international employment contracts, where it traditionally considers that arbitration clauses contained in international employment contracts are enforceable against employee (Soc. 16 Feb. 1999, n ° 96-40.643).
The Supreme Court, although traditionally very favourable to arbitration, gradually builds up a set of specific exceptions to ensure the protection of the «weak» party.
Resumen
Al terminar los contratos de agencia y distribución la principal fuente de conflicto es la reclamación de una indemnización por clientela. La Ley española del Contrato de Agencia —al igual que la Directiva sobre Agentes comerciales— prevé que cuando se extingue el contrato, el agente tendrá derecho, si se dan determinadas condiciones, a una indemnización. En España, por analogía (aunque con salvedades y matices), esta indemnización se puede reclamar también en contratos de distribución.
Para que se reconozca esta indemnización es necesario que el agente (o el distribuidor: para más detalles, consulte este artículo) hayan aportado nuevos clientes o incrementado sensiblemente las operaciones con los preexistentes, que su actividad pueda seguir produciendo ventajas sustanciales al empresario y que resulte equitativo. Todo esto condiciona que se reconozca el derecho a la indemnización y su cuantía.
Estas expresiones (nuevos clientes, incremento sensible, pueda producir, ventajas sustanciales, equitativo) son difíciles de definir a priori, por lo que, para tener éxito, es recomendable que las reclamaciones ante los tribunales se apoyen, caso por caso, en informes de expertos, supervisados por un abogado.
Hay, al menos en España, una tendencia a reclamar directamente el máximo que prevé la norma (un año de remuneraciones calculada como media de los cinco anteriores) sin entrar en más análisis. Pero si se hace así, se corre el riesgo de que un juez rechace la petición por considerarla sin fundamento. Por lo tanto, y a partir de nuestra experiencia, me parece conveniente orientar sobre cómo fundamentar mejor la reclamación de esta indemnización y su cuantía.
Conviene que el agente/distribuidor, el perito y el abogado tengan en cuenta lo siguiente:
Comprobar cuál ha sido la aportación del agente
Si existían clientes antes de iniciarse el contrato y qué volumen de ventas se hacía con ellos. Para reconocer esta indemnización es necesario que el agente haya incrementado el número de clientes o las operaciones con los preexistentes.
Analizar la importancia de esos clientes a la hora de seguir aportando ventajas al empresario
Su recurrencia, su fidelidad (al empresario y no al agente), la tasa de migración (cuántos seguirán con el empresario al concluir el contrato o con el agente). En efecto, Será difícil hablar de “clientela” si solo ha habido clientes esporádicos, ocasionales, no recurrentes (o poco) o que seguirán permaneciendo fieles al agente y no al empresario.
Cómo se queda el agente al terminar el contrato
¿Podrá hacer competencia al empresario o hay restricciones en el contrato? Si el agente puede seguir atendiendo a los mismos clientes, pero para un empresario diferente, la indemnización se podría discutir bastante.
¿Es equitativa la indemnización?
Examinar cómo ha actuado el agente en el pasado: si ha cumplido sus obligaciones, su trabajo a la hora de introducir los productos o abrir el mercado, la posible evolución de tales productos o servicios en el futuro, etc.
¿Perderá comisiones el agente?
Aquí hay que examinar si tenía exclusividad; su mayor o menor facilidad para hacerse con un nuevo contrato (p.ej. por edad, crisis económica, el tipo de productos, etc.) o con una nueva fuente de ingresos, la evolución de las ventas durante los últimos años (las consideradas para la indemnización), etc.
Es necesario también calcular el máximo legal que no podrá superarse
La media anual de lo percibido durante el período del contrato (o de 5 años si duró más). Esto incluirá no solo las comisiones, sino cualquier cantidad fija, bonificaciones, premios, etc. o los márgenes en caso los distribuidores.
Y, por último, conviene incluir en el informe del experto todos los documentos analizados
Si no se hace así y solo se mencionan, podría dar lugar a que no se tengan en cuenta por un juez.
Consulte la Guía Práctica sobre Contratos de Agencia Internacional
Para leer más sobre las principales características de un contrato de agencia en España, consulte nuestra Guía.
Summary
The recent post-Brexit trade deal makes no provision for jurisdiction or the enforcement of judgments.
Therefore, the UK dropped out of the jurisdiction of the Brussels (Recast) Regulation (No. 1215/2012) on 31 December 2020.
The EU has not yet approved the UK’s accession to the Lugano Convention, but may do in the future.
Unless the transitional provisions from the Withdrawal Agreement apply, jurisdiction and enforcement of judgments will be governed by the Hague Convention 2005 if there is an applicable exclusive jurisdiction clause
If the Hague Convention of 2005 does not apply, then the UK and EU courts will apply their own national rules.
Judgments will continue to be reciprocally enforceable between the UK and Norway from 1 January 2021.
On the first day of 2021 the UK left the EU regimes with which European lawyers are familiar. We appeared to enter “uncharted territory”. Not so. In fact, there are charts for this territory – or maps, to use a more modern word. You just need to know which maps.
Whether you are a lawyer or a businessperson, in whatever country, you need answers to two questions. Which laws govern jurisdiction and enforcement of judgments between EU member states and the UK; and how should businesses act as a result?
What happened?
The EU and UK reached a post-Brexit trade deal, the Trade and Cooperation Agreement (“TCA”), on Christmas Eve 2020. The provisions of the TCA became UK law as the European Union (Future Relationship) Act on 31 December 2020. The TCA made provision for judicial cooperation in criminal matters, but did not mention judicial cooperation in civil matters, or jurisdiction and enforcement of judgments in civil and commercial proceedings.
So where do we look for law on those matters?
We look at the position immediately before Brexit. As every lawyer should know the Brussels (Recast) Regulation (No. 1215/2012) governed the enforcement and recognition of judgments between EU member states.
Also, the Lugano Convention 2007 governs jurisdiction and enforcement of judgments in commercial and civil matters between EU member states and Iceland, Liechtenstein, Norway and Switzerland. It operates in substantially the same way as Brussels (Recast) does between EU member states.
The UK was party to the Convention by virtue of its EU membership. Now that the UK is not a member of the EU, the contracting parties could agree that the UK could join the Lugano Convention as an independent contracting party, and there would be little change to the position on jurisdiction and enforcement. English jurisdiction clauses would continue to be respected and English court judgments would continue to be readily enforceable throughout EU member states and EFTA countries, and vice versa.
The problem is that the EU has not agreed to the UK joining the Lugano Convention
The UK submitted its application to accede to the Lugano Convention in its own right on 8 April 2020. But accession requires the consent of all contracting parties including the EU. Iceland, Norway and Switzerland have indicated their support for the UK’s accession, but the EU’s position is still not yet clear and the TCA is silent on this matter.
While the EU still may belatedly support the UK’s accession to Lugano, it does not currently apply. In any case, a three-month time-lag applies between agreement and entry into force, unless all the contracting parties agree to waive it.
Where are we now?
If the transitional provisions provided for by the Withdrawal Agreement as explained in my previous post do not apply, the Brussels (Recast) Regulation will not apply to jurisdiction and enforcement between the EU and UK.
If they do not, then you first need to decide whether the Hague Convention on Choice of Court Agreements 2005 is applicable. The Hague Convention 2005 applies between EU Member States, Mexico, Singapore and Montenegro. The Hague Convention first came into force for the UK when the EU acceded on 1 October 2015 and the UK re-acceded after Brexit in its own right with effect from 1 January 2021.
The Hague Convention 2005 applies if:
- The dispute falls within the scope of the Convention as provided for by Article 2 – e.g. the Convention does not apply to employment and consumer contracts or claims for personal injury;
- There is an exclusive jurisdiction clause within the meaning of Article 3; and
- The exclusive jurisdiction clause is entered into after the Convention came into force for the country whose courts are seized, and proceedings are commenced after the Convention came into force for the country whose courts are seized within the meaning of Article 16.
There is some uncertainty as to whether EU member states will treat the Hague Convention as having been in force from 1 October 2015, or only from when the UK re-accedes on 1 January 2021. The UK’s view is that the Convention will apply to the UK from 1 October 2015; the EU’s view is that it will apply to the UK from 1 January 2021. What is not in dispute is that for exclusive English jurisdiction clauses agreed on or after 1 January 2021, the contracting states will respect exclusive English jurisdiction clauses and enforce the resulting judgments.
If the 2005 Hague Convention does not apply, then the UK and EU courts will apply their own national rules to questions of jurisdiction and enforcement. In the UK, the rules will essentially be the same as the ‘common-law’ rules currently on enforcement applied to non-EU parties, for example the United States.
The Norwegian exception
The UK and Norway have reached an agreement which extends and updates an old mutual enforcement treaty, the 1961 Convention for the Reciprocal Recognition and Enforcement of Judgments in Civil Matters between the UK and Norway, which will apply if the UK does not re-accede to the Lugano Convention. The practical effect of this agreement is that judgments will continue to be reciprocally enforceable between the UK and Norway from 1 January 2021.
How should your business act now?
The applicable legal framework for each dispute will depend on the facts of each case. You should review the dispute resolution clauses in your cross-border contracts to assess how they may be affected by Brexit and to seek specialist advice where necessary. You should also seek advice on dispute resolution provisions when entering into new cross-border contracts in 2021.
This week the Interim Injunction Judge of the Netherlands Commercial Court ruled in summary proceedings, following a video hearing, in a case on a EUR 169 million transaction where the plaintiff argued that the final transaction had been concluded and the defendant should proceed with the deal.
This in an – intended – transaction where the letter of intent stipulates that a EUR 30 million break fee is due when no final agreement is signed.
In addition to ruling on this question of construction of an agreement under Dutch law, the judge also had to rule on the break fee if no agreement was concluded and whether it should be amended or reduced because of the current Coronavirus / Covid-19 crisis.
English Language proceedings in a Dutch state court, the Netherlands Commercial Court (NCC)
The case is not just interesting because of the way contract formation is construed under Dutch law and application of concepts of force majeure, unforeseen circumstances and amendment of agreements under the concepts of reasonableness and fairness as well as mitigation of contractual penalties, but also interesting because it was ruled on by a judge of the English language chamber of the Netherlands Commercial Court (NCC).
This new (2019) Dutch state court offers a relatively fast and cost-effective alternative for international commercial litigation, and in particular arbitration, in a neutral jurisdiction with professional judges selected for both their experience in international disputes and their command of English.
The dispute regarding the construction of an M&A agreement under Dutch law in an international setting
The facts are straightforward. Parties (located in New York, USA and the Netherlands) dispute whether final agreement on the EUR 169 million transaction has been reached but do agree a break fee of €30 million in case of non-signature of the final agreement was agreed. However, in addition to claiming there is no final agreement, the defendant also argues that the break fee – due when there is no final agreement – should be reduced or changed due to the coronavirus crisis.
As to contract formation it must be noted that Dutch law allows broad leeway on how to communicate what may or may not be an offer or acceptance. The standard is what a reasonable person in the same circumstances would have understood their communications to mean. Here, the critical fact is that the defendant did not sign the so-called “Transaction Agreement”. The letter of intent’s binary mechanism (either execute and deliver the paperwork for the Transaction Agreement by the agreed date or pay a EUR 30 million fee) may not have been an absolute requirement for contract formation (under Dutch law) but has significant evidentiary weight. In M&A practice – also under Dutch law – with which these parties are thoroughly familiar with, this sets a very high bar for concluding a contract was agreed other than by explicit written agreement. So, parties may generally comfortably rely on what they have agreed on in writing with the assistance of their advisors.
The communications relied on by claimant in this case did not clear the very high bar to assume that despite the mechanism of the letter of intent and the lack of a signed Transaction Agreement there still was a binding agreement. In particular attributing the other party’s advisers’ statements and/or conduct to the contracting party they represent did not work for the claimant in this case as per the verdict nothing suggested that the advisers would be handling everything, including entering into the agreement.
Court order for actual performance of a – deemed – agreement on an M&A deal?
The Interim Injunction Judge finds that there is not a sufficient likelihood of success on the merits so as to justify an interim measure ordering the defendant to actually perform its obligations under the disputed Transaction Agreement (payment of EUR 169 million and take the claimant’s 50% stake in an equestrian show-jumping business).
Enforcement of the break fee despite “Coronavirus”?
Failing the conclusion of an agreement, there was still another question to answer as the letter of intent mechanism re the break fee as such was not disputed. Should the Court enforce the full EUR 30 million fee in the current COVID-19 circumstances? Or should the fee’s effects be modified, mitigated or reduced in some way, or the fee agreement should even be dissolved?
Unforeseen circumstances, reasonableness and fairness
The Interim Injunction Judge rules that the coronavirus crisis may be an unforeseen circumstance, but it is not of such a nature that, according to standards of reasonableness and fairness, the plaintiff cannot expect the break fee obligation to remain unchanged. The purpose of the break fee is to encourage parties to enter into the transaction and attribute / share risks between them. As such the fee limits the exposure of the parties. Payment of the fee is a quick way out of the obligation to pay the purchase price of EUR 169 million and the risks of keeping the target company financially afloat. If financially the coronavirus crisis turns out less disastrous than expected, the fee of EUR 30 million may seem high, but that is what the parties already considered reasonable when they waived their right to invoke the unreasonableness of the fee. The claim for payment of the EUR 30 million break fee is therefore upheld by the Interim Injunction Judge.
Applicable law and the actual practice of it by the courts
The relevant three articles are in this case articles 6:94, 6:248 and 6:258 of the Dutch Civil Code. They relate to the mitigation of contractual penalties, unforeseen circumstances and amendment of the agreement under the tenets of reasonableness and fairness. Under Dutch law the courts must with all three exercise caution. Contracts must generally be enforced as agreed. The parties’ autonomy is deemed paramount and the courts’ attitude is deferential. All three articles use language stating, essentially, that interference by the courts in the contract’s operation is allowed only to avoid an “unacceptable” impact, as assessed under standards of reasonableness and fairness.
There is at this moment of course no well- established case law on COVID-19. However, commentators have provided guidance that is very helpful to think through the issues. Recently a “share the pain” approach has been advocated by a renowned law Professor, Tjittes, who focuses on preserving the parties’ contractual equilibrium in the current circumstances. This is, in the Court’s analysis, the right way to look at the agreement here. There is no evidence in the record suggesting that the parties contemplated or discussed the full and exceptional impact of the COVID-19 crisis. The crisis may or may not be unprovided for. However, the court rules in the current case there is no need to rule on this issue. Even if the crisis is unprovided for, there is no support in the record for the proposition that the crisis makes it unacceptable for the claimant to demand strict performance by the defendant. The reasons are straightforward.
The break fee allocates risk and expresses commitment and caps exposure. The harm to the business may be substantial and structural, or it may be short-term and minimal. Either way, the best “share the pain” solution, to preserve the contractual equilibrium in the agreement, is for the defendant to pay the fee as written in the letter of intent. This allocates a defined risk to one party, and actual or potential risks to the other party. Reducing the break fee in any business downturn, the fee’s express purpose – comfort and confidence to get the deal done – would not be accomplished and be derived in precisely the circumstances in which it should be robust. As a result, the Court therefore orders to pay the full EUR 30 million fee. So the break fee stipulation works under the circumstances without mitigation because of the Corona outbreak.
The Netherlands Commercial Court, continued
As already indicated above, the case is interesting because the verdict has been rendered by a Dutch state court in English and the proceedings where also in English. Not because of a special privilege granted in a specific case but based on an agreement between parties with a proper choice of forum clause for this court. In addition to the benefit to of having an English forum without mandatorily relying on either arbitration or choosing an anglophone court, it also has the benefit of it being a state court with the application of the regular Dutch civil procedure law, which is well known by it’s practitioners and reduces the risk of surprises of a procedural nature. As it is as such also a “normal” state court, there is the right to appeal and particularly effective under Dutch law access to expedited proceeding as was also the case in the example referred to above. This means a regular procedure with full application of all evidentiary rules may still follow, overturning or confirming this preliminary verdict in summary proceedings.
Novel technology in proceedings
Another first or at least a novel application is that all submissions were made in eNCC, a document upload procedure for the NCC. Where the introduction of electronic communication and litigation in the Dutch court system has failed spectacularly, the innovations are now all following in quick order and quite effective. As a consequence of the Coronavirus outbreak several steps have been quickly tried in practice and thereafter formally set up. At present this – finally – includes a secure email-correspondence system between attorneys and the courts.
And, also by special order of the Court in this present case, given the current COVID-19 restrictions the matter was dealt with at a public videoconference hearing on 22 April 2020 and the case was set for judgment on 29 April 2020 and published on 30 April 2020.
Even though it is a novel application, it is highly likely that similar arrangements will continue even after expiry of current emergency measures. In several Dutch courts videoconference hearings are applied on a voluntary basis and is expected that the arrangements will be formalized.
Eligibility of cases for the Netherlands Commercial Court
Of more general interest are the requirements for matters that may be submitted to NCC:
- the Amsterdam District Court or Amsterdam Court of Appeal has jurisdiction
- the parties have expressly agreed in writing that proceedings will be in English before the NCC (the ‘NCC agreement’)
- the action is a civil or commercial matter within the parties’ autonomy
- the matter concerns an international dispute.
The NCC agreement can be recorded in a clause, either before or after the dispute arises. The Court even recommends specific wording:
“All disputes arising out of or in connection with this agreement will be resolved by the Amsterdam District Court following proceedings in English before the Chamber for International Commercial Matters (“Netherlands Commercial Court” or “NCC District Court”), to the exclusion of the jurisdiction of any other courts. An action for interim measures, including protective measures, available under Dutch law may be brought in the NCC’s Court in Summary Proceedings (CSP) in proceedings in English. Any appeals against NCC or CSP judgments will be submitted to the Amsterdam Court of Appeal’s Chamber for International Commercial Matters (“Netherlands Commercial Court of Appeal” or “NCCA”).”
The phrase “to the exclusion of the jurisdiction of any other courts” is included in light of the Hague Convention on Choice of Court Agreements. It is not mandatory to include it of course and parties may decide not to exclude the jurisdiction of other courts or make other arrangements they consider appropriate. The only requirement being that such arrangements comply with the rules of jurisdiction and contract. Please note that choice of court agreements are exclusive unless the parties have “expressly provided” or “agreed” otherwise (as per the Hague Convention and Recast Brussels I Regulation).
Parties in a pending case before another Dutch court or chamber may request that their case be referred to NCC District Court or NCC Court of Appeal. One of the requirements is to agree on a clause that takes the case to the NCC and makes English the language of the proceedings. The NCC recommends using this language:
We hereby agree that all disputes in connection with the case [name parties], which is currently pending at the *** District Court (case number ***), will be resolved by the Amsterdam District Court following proceedings in English before the Chamber for International Commercial Matters (“Netherlands Commercial Court” or ”NCC District Court). Any action for interim measures, including protective measures, available under Dutch law will be brought in the NCC’s Court in Summary Proceedings (CSP) in proceedings in English. Any appeals against NCC or CSP judgments will be submitted to the Amsterdam Court of Appeal’s Chamber for International Commercial Matters (“Netherlands Commercial Court of Appeal” or “NCC Court of Appeal”).
To request a referral, a motion must be made before the other chamber or court where the action is pending, stating the request and contesting jurisdiction (if the case is not in Amsterdam) on the basis of a choice-of-court agreement (see before).
Additional arrangements in the proceedings before the Netherlands Commercial Court
Before or during the proceedings, parties can also agree special arrangements in a customized NCC clause or in another appropriate manner. Such arrangements may include matters such as the following:
- the law applicable to the substantive dispute
- the appointment of a court reporter for preparing records of hearings and the costs of preparing those records
- an agreement on evidence that departs from the general rules
- the disclosure of confidential documents
- the submission of a written witness statement prior to the witness examination
- the manner of taking witness testimony
- the costs of the proceedings.
Visiting lawyers and typical course of the procedure
All acts of process are in principle carried out by a member of the Dutch Bar. Member of the Bar in an EU or EEA Member State or Switzerland may work in accordance with Article 16e of the Advocates Act (in conjunction with a member of the Dutch Bar). Other visiting lawyers may be allowed to speak at any hearing.
The proceedings will typically follow the below steps:
- Submitting the initiating document by the plaintiff (summons or request as per Dutch law)
- Assigned to three judges and a senior law clerk.
- The defendant submits its defence statement.
- Case management conference or motion hearing (e.g. also in respect of preliminary issues such as competence, applicable law etc.) where parties may present their arguments.
- Judgment on motions: the court rules on the motions. Testimony, expert appointment, either at this stage or earlier or later.
- The court may allow the parties to submit further written statements.
- Hearing: the court interviews the parties and allows them to present their arguments. The court may enquire whether the dispute could be resolved amicably and, where appropriate, assist the parties in a settlement process. If appropriate, the court may discuss with the parties whether it would be advisable to submit part or all of the dispute to a mediator. At the end of the hearing, the court will discuss with the parties what the next steps should be.
- Verdict: this may be a final judgment on the claims or an interim judgment ordering one or more parties to produce evidence, allowing the parties to submit written submissions on certain aspects of the case, appointing one or more experts or taking other steps.
Continuous updates, online resources Netherlands Commercial Court
As a final note the English language website of the Netherlands Commercial Court provides ample information on procedure and practical issues and is updated with a high frequence. Under current circumstance even at a higher pace. In particular for practitioners it’s recommended to regularly consult the website. https://www.rechtspraak.nl/English/NCC/Pages/default.aspx
This is a summary of the approved measures, which unfortunately for both tenants and landlords do not include any public aid or tax relief and just refer to a postponement in the payment of the rent.
Premises to which they are applied
Leased premises dedicated to activities different than residential: commercial, professional, industrial, cultural, teaching, amusement, healthcare, etc. They also apply to the lease of a whole industry (i.e. hotels, restaurants, bars, etc., which are the most usual type of businesses object of this deal).
Types of tenants
- Individual entrepreneurs or self-employed persons who were registered before Social Security before the declaration of the state of alarm on March 14th, 2020
- Small and medium companies, as defined by article 257.1 of the Capital Companies Act: those who fulfil during two consecutive fiscal years these figures: assets under € 4 million, turnover under € 8 million and average staff under 50 people
Types of landlords
In order to benefit from these measures, the landlord should be a housing public entity or company or a big owner, considering as such the individuals or companies who own more than 10 urban properties (excluding parking places and storage rooms) or a built surface over 1.500 sqm.
Measures approved
The payment of the rent is postponed without interest meanwhile the state of alarm is in force, but in any case, for a maximum period of four months. Once the state of alarm is overcome, and in any case in a maximum term of four months, the postponed rents should be paid along a maximum period of two years, or the duration of the lease agreement, should it be less than two years.
For landlords different to those mentioned above
The tenant could apply before the landlord for the postponement in the payment of the rent (but the landlord is not obliged to accept it), and the parties can use the guarantee that the tenant should mandatorily have provided at the beginning of any lease agreement (usually equal to two month’s rent, but could be more if agreed by the parties), in full or in part, in order to use it to pay the rent. The tenant will have to provide again the guarantee within one year’s term, or less should the lease agreement have a shorter duration.
Activities to which it is applied
Activities which have been suspended according to the Royal Decree that declared the state of alarm, dated march, 14ht, 2020, or according to the orders issued by the authorities delegated by such Royal Decree. This should be proved through a certificated issued by the tax authorities.
If the activity has not been directly suspended by the Royal Decree, the turnover during the month prior to the postponement should be less than 75% of the average monthly turnover during the same quarter last year. This should be proved through a responsible declaration by the tenant, and the landlord is authorised check the bookkeeping records.
Term to apply and procedure
The tenant should apply for these measures before the landlord within one month’s term from the publication of the Royal Decree-law, that is, from April 22nd, 2020, and the landlord (in case belongs to the groups mentioned in point c) is obliged to accept the tenant’s request, except if both parties have already agreed something different. The postponement would be applied to the following month.
As the state of alarm was declared more than one month ago (March 14th), landlords and tenants have already been reaching some agreements, for example 50% rent reduction during the state of alarm, and 50% rent postponement during the following 6 months. Tenants who do not reach an agreement with the landlord could face an eviction procedure, however court procedures are suspended during the state of alarm. We have also seen some abusive non-payment of rent by tenants.
When is becomes impossible to reach an agreement with the landlord, tenants have the legal remedy of claiming in Court for the application of the “rebus sic stantibus” principle, which was highly demanded during the 2008 financial crisis but very seldom applied by the Courts. This principle is aimed to re-balance the parties’ obligations when their situation had deeply changed because of unforeseen circumstances beyond their control. This principle is not included in the Spanish Civil Code, but the Supreme Court has accepted its application, in a very restricted way, in some occasions.
Resumen – ¿Qué podemos aprender en el tiempo de Covid-19 que se pueda usar en la mediación? ¿Y qué podemos aprender de la mediación para utilizarlo en esta crisis?
Como saben, la mediación es una forma de resolver conflictos en los que las partes mantienen en sus manos la posible solución. No necesitan acudir a un tercero (juez o árbitro) que les imponga la respuesta. Las partes pueden imaginar más libremente lo que necesitan y cómo resolver sus diferencias.
Algunos de los elementos y técnicas que usan los mediadores en una mediación también se pueden usar y aprender del tiempo actual de Covid-19. Y esta crisis también nos ayuda a comprender por qué son tan importantes en la mediación.
La cooperación para obtener la solución es mejor que las decisiones unilaterales e impuestas
Por lo general, tendemos a pensar que la cooperación es un signo de debilidad y recurrimos a ella solo si no podemos imponer nuestro parecer o ganar nuestro caso. Sin embargo, como en esta época del Covid-19, donde los países, los científicos y las personas debemos luchar juntos, cuando nos enfrentamos a un conflicto, la cooperación y el ir más allá de las propias posiciones nos ofrece la posibilidad de explorar soluciones que, de lo contrario, permanecerían ocultas.
«Ahora se reconoce cada vez más que existen formas cooperativas de negociar nuestras diferencias y que incluso si no se puede encontrar una solución “ganar-ganar”, a menudo se puede llegar a un acuerdo inteligente que es mejor para ambas partes que la alternativa. […]
Vale la pena recordar tres puntos sobre intereses compartidos. Primero, los intereses compartidos permanecen latentes en cada negociación. Puede que no sean inmediatamente obvios. Segundo, los intereses compartidos son oportunidades, no regalos del cielo. Tercero, enfatizar los intereses compartidos puede hacer que la negociación sea más fluida y amigable.» [Fisher, Richard; Ury, William. «Getting to Yes: Negotiating an agreement without giving in»].
Escuchar es altamente eficaz
En el tiempo del Covid-19 tendemos a aceptar mejor una información que confirma nuestras creencias y aceptamos mejores indicaciones que están de acuerdo con nuestras preferencias y creencias. Sin embargo, también en este momento, escuchar es de una enorme importancia para comprender las causas y las soluciones.
Un mediador siempre escuchará a las partes y les ayudará a hacer lo mismo. Escuchar los argumentos del otro, su explicación de los hechos, intereses y necesidades, las razones de sus decisiones … tiene también una importancia crucial para encontrar una solución conjunta.
«Ya sea que usted sea un tercero neutral (facilitador profesional, amigo o gerente) o uno de los participantes, a medida que escucha todas las historias, comienza a sentir la mejor solución.» [Levine, Stewart. «Getting to Resolution: Turning Conflict Into Collaboration».]
Una solución para mí también puede ser una solución para ti
En la época del Covid-19 nos parece claro a todos que una solución común va a ser la única posible. Una vacuna salvará al mundo entero. En la mediación, el principal beneficio es comprender que, a diferencia de una sentencia judicial o un laudo arbitral, una solución conjunta (no impuesta) es posible y un beneficio para mí no implica un daño o una pérdida para mi oponente.
«Un mediador trabaja para comprender la perspectiva de cada parte en el conflicto y buscar el valor en ella. En este rol, se abstiene de juzgar qué lado está bien o mal. En cambio, intenta ver el mérito en la perspectiva de cada lado.» [Shapiro, Daniel. «Building Agreement»].
Dominamos la solución y creamos el acuerdo en un entorno seguro
La solución a la crisis actual no solo depende de las autoridades y de los profesionales de la salud. Una gran parte de la solución se basa en la participación de todos, lavarse las manos, respetar la distancia social, mantenerse a salvo en casa evitando el contagio y el colapso de los hospitales.
En el tribunal dejamos la decisión del conflicto en manos de un tercero –el juez, el árbitro–. En una mediación, por el contrario, la solución permanece en nuestras manos. Sabemos cuáles son nuestros intereses, creamos nuestro acuerdo. Nuestra imaginación es nuestra aliada para encontrar la solución junto con la contraparte y la asistencia y experiencia del mediador que no la impone, pero ayuda a las partes a encontrarla. Muy a menudo, lo que las partes podrían obtener en la mediación va mucho más allá de lo que un juez podría haber otorgado. Y esto en un ambiente confidencial.
«El sabio es modesto y escaso de palabras. Cuando se ha cumplido su tarea y las cosas se han completado, todas las personas dicen: «¡Nosotros mismos lo hemos logrado!«» [Lao Tzu]
Las emociones son importantes
Las emociones, buenas y malas, son inevitables. En especial en períodos de incertidumbre, crisis y pérdida de control, todos nos enfrentamos a fuertes emociones. Esto es cierto en situaciones como en esta del Covid-19 y en todos los conflictos, y no solo en los personales. Los egos, las envidias, los miedos, las ansiedades … también son parte de nuestra vida cotidiana, trabajo y negocios, pero rara vez se tienen en cuenta en los tribunales cuando se resuelven los conflictos. Un mediador ayudará a tenerlos en cuenta en un entorno seguro y como parte del conflicto mismo.
«Resolver problemas parece más fácil que hablar de emociones. El problema es que cuando los sentimientos están en el corazón de lo que está sucediendo, son el negocio en cuestión e ignorarlos es casi imposible.» [Stone, Douglas. «Difficult Conversations: How to Discuss What Matters Most»].
[NOTA: Los pasajes reproducidas en los puntos 1, 2, 3 y 5 son traducciones libres del autor]
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France | Arbitration clauses in international contracts with consumers are not enforceable
16 febrero 2021
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Summary
Political, environmental or health crises (like the Covid-19 outbreak and the attack of Ukraine by the Russian army) can cause an increase in the price of raw materials and components and generalized inflation. Both suppliers and distributors find themselves faced with problems related to the often sudden and very substantial increase in the price of their own supplies. French law lays down specific rules in that regard.
Two main situations can be distinguished: where the parties have just established a simple flow of orders and where the parties have concluded a framework agreement fixing firm prices for a fixed term.
Price increase in a business relationship
The situation is as follows: the parties have not concluded a framework agreement, each sales contract concluded (each order) is governed by the General T&Cs of the supplier; the latter has not undertaken to maintain the prices for a minimum period and applies the prices of the current tariff.
In principle, the supplier can modify its prices at any time by sending a new tariff. However, it must give written and reasonable notice in accordance with the provisions of Article L. 442-1.II of the Commercial Code, before the price increase comes into effect. Failure to respect sufficient notice, it could be accused of a sudden «partial» termination of commercial relations (and subject to damages).
A sudden termination following a price increase would be characterized when the following conditions are met:
- the commercial relationship must be established: broader concept than the simple contract, taking into account the duration but also the importance and the regularity of the exchanges between the parties;
- the price increase must be assimilated to a rupture: it is mainly the size of the price increase (+1%, 10% or 25%?) that will lead a judge to determine whether the increase constitutes a «partial» termination (in the event of a substantial modification of the relationship which is nevertheless maintained) or a total termination (if the increase is such that it involves a termination of the relationship) or if it does not constitute a termination (if the increase is minimal);
- the notice granted is insufficient by comparing the duration of the notice actually granted with that of the notice in accordance with Article L. 442-1.II, taking into account in particular the duration of the commercial relationship and the possible dependence of the victim of the termination with respect to the other party.
Article L. 442-1.II must be respected as soon as French law applies to the relation. In international business relations, to know how to deal with Article L.442-1.II and conflicts of laws and jurisdiction of competent courts, please see our previous article published on Legalmondo blog.
Price increase in a framework contract
If the parties have concluded a framework contract (such as supply, manufacturing, …) for several years and the supplier has committed to fixed prices, how, in this case, can it change these prices?
In addition to any indexation clause or renegotiation (hardship) clause which would be stipulated in the contract (and besides specific legal provisions applicable to special agreements as to their nature or economic sector), the supplier may seek to avail himself of the legal mechanism of «unforeseeability» provided for by article 1195 of the civil code.
Three prerequisites must be cumulatively met:
- an unforeseeable change in circumstances at the time of the conclusion of the contract (i.e.: the parties could not reasonably anticipate this upheaval);
- a performance of the contract that has become excessively onerous (i.e.: beyond the simple difficulty, the upheaval must cause a disproportionate imbalance);
- the absence of acceptance of these risks by the debtor of the obligation when concluding the contract.
The implementation of this mechanism must stick to the following steps:
- first, the party in difficulty must request the renegotiation of the contract from its co-contracting party;
- then, in the event of failure of the negotiation or refusal to negotiate by the other party, the parties can (i) agree together on the termination of the contract, on the date and under the conditions that they determine, or (ii) ask together the competent judge to adapt it;
- finally, in the absence of agreement between the parties on one of the two aforementioned options, within a reasonable time, the judge, seized by one of the parties, may revise the contract or terminate it, on the date and under the conditions that he will set.
The party wishing to implement this legal mechanism must also anticipate the following points:
- article 1195 of the Civil Code only applies to contracts concluded on or after October 1, 2016 (or renewed after this date). Judges do not have the power to adapt or rebalance contracts concluded before this date;
- this provision is not of public order. Therefore, the parties can exclude it or modify its conditions of application and/or implementation (the most common being the framework of the powers of the judge);
- during the renegotiation, the supplier must continue to sell at the initial price because, unlike force majeure, unforeseen circumstances do not lead to the suspension of compliance with the obligations.
Key takeaways:
- analyse carefully the framework of the commercial relationship before deciding to notify a price increase, in order to identify whether the prices are firm for a minimum period and the contractual levers for renegotiation;
- correctly anticipate the length of notice that must be given to the partner before the entry into force of the new pricing conditions, depending on the length of the relationship and the degree of dependence;
- document the causes of the price increase;
- check if and how the legal mechanism of unforeseeability has been amended or excluded by the framework contract or the General T&Cs;
- consider alternatives strategies, possibly based on stopping production/delivery justified by a force majeure event or on the significant imbalance of the contractual provisions.
Summary
By means of Legislative Decree No. 198 of November 8th, 2021, Italy implemented Directive (EU) 2019/633 on unfair trading practices in business-to-business relationships in the agricultural and food supply chain. The Italian legislator introduced stricter rules than those provided for in the directive. Moreover, it has provided for some mandatory contractual requirements, within the framework of Article 168 of Regulation (EC) 1308/2013, but more restrictive than those of the Regulation. The new provisions shall apply irrespective of the law applicable to the contract and the country of the buyer, hence they concern cross-border relationships as well. They significantly impact contractual relationships related to the chain of fresh and processed food products, including wine, and certain non-food agricultural products, and require companies in the concerned sectors to review their contracts and business practices with respect to their relationships with customers and suppliers.
The provisions introduced by the decree also apply to existing contracts, which shall be made compliant by 15 June 2022.
Introduction
With Directive (EU) 2019/633, the EU legislator introduced a detailed set of unfair trading practices in business-to-business relationships in the agricultural and food supply chain, in order to tackle unbalanced trading practices imposed by strong contractual parties. The directive has been transposed in Italy by Legislative Decree No. 198 of November 8th, 2021 (it came into force on December 15th, 2021), which introduced a long list of provisions qualified as unfair trading practices in the context of business-to-business relationships in the agricultural and food supply chain. The list of unfair practices is broader than the one provided for in the EU directive.
The transposition of the directive was also the opportunity to introduce some mandatory requirements to contracts for the supply of goods falling within the scope of the decree. These requirements, adopted in the framework of Article 168 of Regulation (EC) 1308/2013, replaced and extended those provided for in Article 62 of Decree-Law 1/2012 and Article 10-quater of Decree-Law 27/2019.
Scope of application
The legislation applies to commercial relationships between buyers (including the public administration) and suppliers of agricultural and food products and in particular to B2B contracts having as object the transfer of such products.
It does not apply to agreements in which a consumer is party, to transfers with simultaneous payment and delivery of the goods and transfers of products to cooperatives or producer organisations within the meaning of Legislative Decree 102/2005.
It applies, inter alia, to sale, supply and distribution agreements.
Agricultural and food products means the goods listed in Annex I of the Treaty on the Functioning of the European Union, as well as those not listed in that Annex but processed for use as food using listed products. This includes all products of the agri-food chain, fresh and processed, including wine, as well as certain agricultural products outside the food chain, including animal feed not intended for human consumption and floricultural products.
The rules apply to sales made by suppliers based in Italy, whilst the country where the buyer is based is not relevant. It applies irrespective of the law applicable to the relationship between the parties. Therefore, the new rules also apply in case of international contractual relationships subject to the law of another country.
In transposing the directive, the Italian legislator decided not to take into consideration the «size of the parties»: while the directive provides for turnover thresholds and applies to contractual relations in which the buyer has a turnover equal to or greater than the supplier, the Italian rules apply irrespective of the turnover of the parties.
Contractual requirements
Article 3 of the decree introduced some mandatory requirements for contracts for the supply or transfer of agricultural and food products. These requirements, adopted in the framework of Article 168 of Regulation (EC) 1308/2013, replaced and extended those established by Article 62 of Decree-Law 1/2012 and Article 10-quater of Decree-Law 27/2019 (which had been repealed).
Contracts must comply with the principles of transparency, fairness, proportionality and mutual consideration of performance.
Contracts must be in writing. Equivalent forms (transport documents, invoices and purchase orders) are only allowed if a framework agreement containing the essential terms of future supply agreements has been entered into between supplier and buyer.
Of great impact is the requirement for contracts to have a duration of at least 12 months (contracts with a shorter duration are automatically extended to the minimum duration). The legislator requires companies in the supply chain (with some exceptions) to operate not with individual purchases but with continuous supply agreements, which shall indicate the quantity and characteristics of the products, the price, the delivery and payment method.
A considerable operational change is required due to the need to plan and contract quantities and prices of supplies. As far as the price is concerned, it no longer seems possible to agree on it from time to time during the relationship on the basis of orders or new price lists from the supplier. The price may be fixed or determinable according to the criteria laid down in the contract. Therefore, companies not intending to operate at a fixed price will have to draft contractual clauses containing the criteria for determining the price (e.g. linking it to stock exchange quotations, fluctuations in raw material or energy prices).
The minimum duration of at least 12 months may be waived. However, the derogation shall be justified, either by the seasonality of the products or other reasons (that are not specified in the decree). Other reasons could include the need for the buyer to meet an unforeseen increase in demand, or the need to replace a lost supply.
The provisions described above may also be derogated from by framework agreements concluded by the most representative business organisations.
Prohibited unfair trading practices and specific derogations
The decree provides for several cases qualified as unfair trading practices, some of which are additional to those provided for in the directive.
Article 4 contains two categories of prohibited practices, which transpose those of the directive.
The first concerns practices which are always prohibited, including, first of all, payment of the price after 30 days for perishable products and after 60 days for non-perishable products. This category also includes the cancellation of orders for perishable goods at short notice; unilateral amendments to certain contractual terms; requests for payments not related to the sale; contractual clauses obliging the supplier to bear the cost of deterioration or loss of the goods after delivery; refusal by the buyer to confirm the contractual terms in writing; the acquisition, use and disclosure of the supplier’s trade secrets; the threat of commercial retaliation by the buyer against the supplier who intends to exercise contractual rights; and the claim by the buyer for the costs incurred in examining customer complaints relating to the sale of the supplier’s products.
The second category relates to practices which are prohibited unless provided for in a written agreement between the parties: these include the return of unsold products without payment for them or for their disposal; requests to the supplier for payments for stoking, displaying or listing the products or making them available on the market; requests to the supplier to bear the costs of discounts, advertising, marketing and personnel of the buyer to fitting-out premises used for the sale of the products.
Article 5 provides for further practices always prohibited, in addition to those of the directive, such as the use of double-drop tenders and auctions (“gare ed aste a doppio ribasso”); the imposition of contractual conditions that are excessively burdensome for the supplier; the omission from the contract of the terms and conditions set out in Article 168(4) of Regulation (EU) 1308/2013 (among which price, quantity, quality, duration of the agreement); the direct or indirect imposition of contractual conditions that are unjustifiably burdensome for one of the parties; the application of different conditions for equivalent services; the imposition of ancillary services or services not related to the sale of the products; the exclusion of default interest to the detriment of the creditor or of the costs of debt collection; clauses imposing on the supplier a minimum time limit after delivery in order to be able to issue the invoice; the imposition of the unjustified transfer of economic risk on one of the parties; the imposition of an excessively short expiry date by the supplier of products, the maintenance of a certain assortment of products, the inclusion of new products in the assortment and privileged positions of certain products on the buyer’s premises.
A specific discipline is provided for sales below cost: Article 7 establishes that, as regards fresh and perishable products, this practice is allowed only in case of unsold products at risk of perishing or in case of commercial operations planned and agreed with the supplier in writing, while in the event of violation of this provision the price established by the parties is replaced by law.
Sanctioning system and supervisory authorities
The provisions introduced by the decree, as regards both contractual requirements and unfair trading practices, are backed up by a comprehensive system of sanctions.
Contractual clauses or agreements contrary to mandatory contractual requirements, those that constitute unfair trading practices and those contrary to the regulation of sales below cost are null and void.
The decree provides for specific financial penalties (one for each case) calculated between a fixed minimum (which, depending on the case, may be from 1,000 to 30,000 euros) and a variable maximum (between 3 and 5%) linked to the turnover of the offender; there are also certain cases in which the penalty is further increased.
In any event, without prejudice to claims for damages.
Supervision of compliance with the provisions of the decree is entrusted to the Central Inspectorate for the Protection of Quality and Fraud Repression of Agri-Food Products (ICQRF), which may conduct investigations, carry out unannounced on-site inspections, ascertain violations, require the offender to put an end to the prohibited practices and initiate proceedings for the imposition of administrative fines, without prejudice to the powers of the Competition and Market Authority (AGCM).
Recommended activities
The provisions introduced by the decree also apply to existing contracts, which shall be made compliant by 15 June 2022. Therefore:
- the companies involved, both Italian and foreign, should carry out a review of their business practices, current contracts and general terms and conditions of supply and purchase, and then identify any gaps with respect to the new provisions and adopt the relevant corrective measures.
- As the new legislation applies irrespective of the applicable law and is EU-derived, it will be important for companies doing business abroad to understand how the EU directive has been implemented in the countries where they operate and verify the compliance of contracts with these rules as well.
In an important and very reasoned judgment delivered by the Court of Cassation of France on September 30, 2020, relating to the enforceability of arbitration clauses in international consumer contracts, the Supreme Court judged that these clauses must be considered unfair and cannot be opposed to consumers.
The Supreme Court traditionally insisted on the priority given to the arbitrator to decide on his own jurisdiction, laid down in Article 1448 of the Code of Civil Procedure (principle known as «competence-competence», Jaguar, Civ. 1re, May 21, 1997, nos. 95-11.429 and 95-11.427).
The ECJ expressed its hostility towards such clauses when they are opposed to consumers. In Mostaza Claro (C-168/05), it referred to the internal laws of member states, while considering that the procedural modalities offered by states should not “make it impossible in practice or excessively difficult to exercise the rights conferred by public order to consumers (“Directive 93/13, concerning unfair terms in consumer contracts, must be interpreted as meaning that a national court seized of an action for annulment of an arbitration award must determine whether the arbitration agreement is void and annul that award where that agreement contains an unfair term, even though the consumer has not pleaded that invalidity in the course of the arbitration proceedings, but only in that of the action for annulment”).
It therefore referred to the national judge the right to implement its legislation on unfair terms, and therefore to decide, on a case-by-case basis, whether the arbitration clause should be considered unfair. This is what the Court of Cassation decided, ruling out the case-by-case method, and considering that in any event such a clause must be excluded in relations with consumers.
The Court of Cassation adopted the same solution in international employment contracts, where it traditionally considers that arbitration clauses contained in international employment contracts are enforceable against employee (Soc. 16 Feb. 1999, n ° 96-40.643).
The Supreme Court, although traditionally very favourable to arbitration, gradually builds up a set of specific exceptions to ensure the protection of the «weak» party.
Resumen
Al terminar los contratos de agencia y distribución la principal fuente de conflicto es la reclamación de una indemnización por clientela. La Ley española del Contrato de Agencia —al igual que la Directiva sobre Agentes comerciales— prevé que cuando se extingue el contrato, el agente tendrá derecho, si se dan determinadas condiciones, a una indemnización. En España, por analogía (aunque con salvedades y matices), esta indemnización se puede reclamar también en contratos de distribución.
Para que se reconozca esta indemnización es necesario que el agente (o el distribuidor: para más detalles, consulte este artículo) hayan aportado nuevos clientes o incrementado sensiblemente las operaciones con los preexistentes, que su actividad pueda seguir produciendo ventajas sustanciales al empresario y que resulte equitativo. Todo esto condiciona que se reconozca el derecho a la indemnización y su cuantía.
Estas expresiones (nuevos clientes, incremento sensible, pueda producir, ventajas sustanciales, equitativo) son difíciles de definir a priori, por lo que, para tener éxito, es recomendable que las reclamaciones ante los tribunales se apoyen, caso por caso, en informes de expertos, supervisados por un abogado.
Hay, al menos en España, una tendencia a reclamar directamente el máximo que prevé la norma (un año de remuneraciones calculada como media de los cinco anteriores) sin entrar en más análisis. Pero si se hace así, se corre el riesgo de que un juez rechace la petición por considerarla sin fundamento. Por lo tanto, y a partir de nuestra experiencia, me parece conveniente orientar sobre cómo fundamentar mejor la reclamación de esta indemnización y su cuantía.
Conviene que el agente/distribuidor, el perito y el abogado tengan en cuenta lo siguiente:
Comprobar cuál ha sido la aportación del agente
Si existían clientes antes de iniciarse el contrato y qué volumen de ventas se hacía con ellos. Para reconocer esta indemnización es necesario que el agente haya incrementado el número de clientes o las operaciones con los preexistentes.
Analizar la importancia de esos clientes a la hora de seguir aportando ventajas al empresario
Su recurrencia, su fidelidad (al empresario y no al agente), la tasa de migración (cuántos seguirán con el empresario al concluir el contrato o con el agente). En efecto, Será difícil hablar de “clientela” si solo ha habido clientes esporádicos, ocasionales, no recurrentes (o poco) o que seguirán permaneciendo fieles al agente y no al empresario.
Cómo se queda el agente al terminar el contrato
¿Podrá hacer competencia al empresario o hay restricciones en el contrato? Si el agente puede seguir atendiendo a los mismos clientes, pero para un empresario diferente, la indemnización se podría discutir bastante.
¿Es equitativa la indemnización?
Examinar cómo ha actuado el agente en el pasado: si ha cumplido sus obligaciones, su trabajo a la hora de introducir los productos o abrir el mercado, la posible evolución de tales productos o servicios en el futuro, etc.
¿Perderá comisiones el agente?
Aquí hay que examinar si tenía exclusividad; su mayor o menor facilidad para hacerse con un nuevo contrato (p.ej. por edad, crisis económica, el tipo de productos, etc.) o con una nueva fuente de ingresos, la evolución de las ventas durante los últimos años (las consideradas para la indemnización), etc.
Es necesario también calcular el máximo legal que no podrá superarse
La media anual de lo percibido durante el período del contrato (o de 5 años si duró más). Esto incluirá no solo las comisiones, sino cualquier cantidad fija, bonificaciones, premios, etc. o los márgenes en caso los distribuidores.
Y, por último, conviene incluir en el informe del experto todos los documentos analizados
Si no se hace así y solo se mencionan, podría dar lugar a que no se tengan en cuenta por un juez.
Consulte la Guía Práctica sobre Contratos de Agencia Internacional
Para leer más sobre las principales características de un contrato de agencia en España, consulte nuestra Guía.
Summary
The recent post-Brexit trade deal makes no provision for jurisdiction or the enforcement of judgments.
Therefore, the UK dropped out of the jurisdiction of the Brussels (Recast) Regulation (No. 1215/2012) on 31 December 2020.
The EU has not yet approved the UK’s accession to the Lugano Convention, but may do in the future.
Unless the transitional provisions from the Withdrawal Agreement apply, jurisdiction and enforcement of judgments will be governed by the Hague Convention 2005 if there is an applicable exclusive jurisdiction clause
If the Hague Convention of 2005 does not apply, then the UK and EU courts will apply their own national rules.
Judgments will continue to be reciprocally enforceable between the UK and Norway from 1 January 2021.
On the first day of 2021 the UK left the EU regimes with which European lawyers are familiar. We appeared to enter “uncharted territory”. Not so. In fact, there are charts for this territory – or maps, to use a more modern word. You just need to know which maps.
Whether you are a lawyer or a businessperson, in whatever country, you need answers to two questions. Which laws govern jurisdiction and enforcement of judgments between EU member states and the UK; and how should businesses act as a result?
What happened?
The EU and UK reached a post-Brexit trade deal, the Trade and Cooperation Agreement (“TCA”), on Christmas Eve 2020. The provisions of the TCA became UK law as the European Union (Future Relationship) Act on 31 December 2020. The TCA made provision for judicial cooperation in criminal matters, but did not mention judicial cooperation in civil matters, or jurisdiction and enforcement of judgments in civil and commercial proceedings.
So where do we look for law on those matters?
We look at the position immediately before Brexit. As every lawyer should know the Brussels (Recast) Regulation (No. 1215/2012) governed the enforcement and recognition of judgments between EU member states.
Also, the Lugano Convention 2007 governs jurisdiction and enforcement of judgments in commercial and civil matters between EU member states and Iceland, Liechtenstein, Norway and Switzerland. It operates in substantially the same way as Brussels (Recast) does between EU member states.
The UK was party to the Convention by virtue of its EU membership. Now that the UK is not a member of the EU, the contracting parties could agree that the UK could join the Lugano Convention as an independent contracting party, and there would be little change to the position on jurisdiction and enforcement. English jurisdiction clauses would continue to be respected and English court judgments would continue to be readily enforceable throughout EU member states and EFTA countries, and vice versa.
The problem is that the EU has not agreed to the UK joining the Lugano Convention
The UK submitted its application to accede to the Lugano Convention in its own right on 8 April 2020. But accession requires the consent of all contracting parties including the EU. Iceland, Norway and Switzerland have indicated their support for the UK’s accession, but the EU’s position is still not yet clear and the TCA is silent on this matter.
While the EU still may belatedly support the UK’s accession to Lugano, it does not currently apply. In any case, a three-month time-lag applies between agreement and entry into force, unless all the contracting parties agree to waive it.
Where are we now?
If the transitional provisions provided for by the Withdrawal Agreement as explained in my previous post do not apply, the Brussels (Recast) Regulation will not apply to jurisdiction and enforcement between the EU and UK.
If they do not, then you first need to decide whether the Hague Convention on Choice of Court Agreements 2005 is applicable. The Hague Convention 2005 applies between EU Member States, Mexico, Singapore and Montenegro. The Hague Convention first came into force for the UK when the EU acceded on 1 October 2015 and the UK re-acceded after Brexit in its own right with effect from 1 January 2021.
The Hague Convention 2005 applies if:
- The dispute falls within the scope of the Convention as provided for by Article 2 – e.g. the Convention does not apply to employment and consumer contracts or claims for personal injury;
- There is an exclusive jurisdiction clause within the meaning of Article 3; and
- The exclusive jurisdiction clause is entered into after the Convention came into force for the country whose courts are seized, and proceedings are commenced after the Convention came into force for the country whose courts are seized within the meaning of Article 16.
There is some uncertainty as to whether EU member states will treat the Hague Convention as having been in force from 1 October 2015, or only from when the UK re-accedes on 1 January 2021. The UK’s view is that the Convention will apply to the UK from 1 October 2015; the EU’s view is that it will apply to the UK from 1 January 2021. What is not in dispute is that for exclusive English jurisdiction clauses agreed on or after 1 January 2021, the contracting states will respect exclusive English jurisdiction clauses and enforce the resulting judgments.
If the 2005 Hague Convention does not apply, then the UK and EU courts will apply their own national rules to questions of jurisdiction and enforcement. In the UK, the rules will essentially be the same as the ‘common-law’ rules currently on enforcement applied to non-EU parties, for example the United States.
The Norwegian exception
The UK and Norway have reached an agreement which extends and updates an old mutual enforcement treaty, the 1961 Convention for the Reciprocal Recognition and Enforcement of Judgments in Civil Matters between the UK and Norway, which will apply if the UK does not re-accede to the Lugano Convention. The practical effect of this agreement is that judgments will continue to be reciprocally enforceable between the UK and Norway from 1 January 2021.
How should your business act now?
The applicable legal framework for each dispute will depend on the facts of each case. You should review the dispute resolution clauses in your cross-border contracts to assess how they may be affected by Brexit and to seek specialist advice where necessary. You should also seek advice on dispute resolution provisions when entering into new cross-border contracts in 2021.
This week the Interim Injunction Judge of the Netherlands Commercial Court ruled in summary proceedings, following a video hearing, in a case on a EUR 169 million transaction where the plaintiff argued that the final transaction had been concluded and the defendant should proceed with the deal.
This in an – intended – transaction where the letter of intent stipulates that a EUR 30 million break fee is due when no final agreement is signed.
In addition to ruling on this question of construction of an agreement under Dutch law, the judge also had to rule on the break fee if no agreement was concluded and whether it should be amended or reduced because of the current Coronavirus / Covid-19 crisis.
English Language proceedings in a Dutch state court, the Netherlands Commercial Court (NCC)
The case is not just interesting because of the way contract formation is construed under Dutch law and application of concepts of force majeure, unforeseen circumstances and amendment of agreements under the concepts of reasonableness and fairness as well as mitigation of contractual penalties, but also interesting because it was ruled on by a judge of the English language chamber of the Netherlands Commercial Court (NCC).
This new (2019) Dutch state court offers a relatively fast and cost-effective alternative for international commercial litigation, and in particular arbitration, in a neutral jurisdiction with professional judges selected for both their experience in international disputes and their command of English.
The dispute regarding the construction of an M&A agreement under Dutch law in an international setting
The facts are straightforward. Parties (located in New York, USA and the Netherlands) dispute whether final agreement on the EUR 169 million transaction has been reached but do agree a break fee of €30 million in case of non-signature of the final agreement was agreed. However, in addition to claiming there is no final agreement, the defendant also argues that the break fee – due when there is no final agreement – should be reduced or changed due to the coronavirus crisis.
As to contract formation it must be noted that Dutch law allows broad leeway on how to communicate what may or may not be an offer or acceptance. The standard is what a reasonable person in the same circumstances would have understood their communications to mean. Here, the critical fact is that the defendant did not sign the so-called “Transaction Agreement”. The letter of intent’s binary mechanism (either execute and deliver the paperwork for the Transaction Agreement by the agreed date or pay a EUR 30 million fee) may not have been an absolute requirement for contract formation (under Dutch law) but has significant evidentiary weight. In M&A practice – also under Dutch law – with which these parties are thoroughly familiar with, this sets a very high bar for concluding a contract was agreed other than by explicit written agreement. So, parties may generally comfortably rely on what they have agreed on in writing with the assistance of their advisors.
The communications relied on by claimant in this case did not clear the very high bar to assume that despite the mechanism of the letter of intent and the lack of a signed Transaction Agreement there still was a binding agreement. In particular attributing the other party’s advisers’ statements and/or conduct to the contracting party they represent did not work for the claimant in this case as per the verdict nothing suggested that the advisers would be handling everything, including entering into the agreement.
Court order for actual performance of a – deemed – agreement on an M&A deal?
The Interim Injunction Judge finds that there is not a sufficient likelihood of success on the merits so as to justify an interim measure ordering the defendant to actually perform its obligations under the disputed Transaction Agreement (payment of EUR 169 million and take the claimant’s 50% stake in an equestrian show-jumping business).
Enforcement of the break fee despite “Coronavirus”?
Failing the conclusion of an agreement, there was still another question to answer as the letter of intent mechanism re the break fee as such was not disputed. Should the Court enforce the full EUR 30 million fee in the current COVID-19 circumstances? Or should the fee’s effects be modified, mitigated or reduced in some way, or the fee agreement should even be dissolved?
Unforeseen circumstances, reasonableness and fairness
The Interim Injunction Judge rules that the coronavirus crisis may be an unforeseen circumstance, but it is not of such a nature that, according to standards of reasonableness and fairness, the plaintiff cannot expect the break fee obligation to remain unchanged. The purpose of the break fee is to encourage parties to enter into the transaction and attribute / share risks between them. As such the fee limits the exposure of the parties. Payment of the fee is a quick way out of the obligation to pay the purchase price of EUR 169 million and the risks of keeping the target company financially afloat. If financially the coronavirus crisis turns out less disastrous than expected, the fee of EUR 30 million may seem high, but that is what the parties already considered reasonable when they waived their right to invoke the unreasonableness of the fee. The claim for payment of the EUR 30 million break fee is therefore upheld by the Interim Injunction Judge.
Applicable law and the actual practice of it by the courts
The relevant three articles are in this case articles 6:94, 6:248 and 6:258 of the Dutch Civil Code. They relate to the mitigation of contractual penalties, unforeseen circumstances and amendment of the agreement under the tenets of reasonableness and fairness. Under Dutch law the courts must with all three exercise caution. Contracts must generally be enforced as agreed. The parties’ autonomy is deemed paramount and the courts’ attitude is deferential. All three articles use language stating, essentially, that interference by the courts in the contract’s operation is allowed only to avoid an “unacceptable” impact, as assessed under standards of reasonableness and fairness.
There is at this moment of course no well- established case law on COVID-19. However, commentators have provided guidance that is very helpful to think through the issues. Recently a “share the pain” approach has been advocated by a renowned law Professor, Tjittes, who focuses on preserving the parties’ contractual equilibrium in the current circumstances. This is, in the Court’s analysis, the right way to look at the agreement here. There is no evidence in the record suggesting that the parties contemplated or discussed the full and exceptional impact of the COVID-19 crisis. The crisis may or may not be unprovided for. However, the court rules in the current case there is no need to rule on this issue. Even if the crisis is unprovided for, there is no support in the record for the proposition that the crisis makes it unacceptable for the claimant to demand strict performance by the defendant. The reasons are straightforward.
The break fee allocates risk and expresses commitment and caps exposure. The harm to the business may be substantial and structural, or it may be short-term and minimal. Either way, the best “share the pain” solution, to preserve the contractual equilibrium in the agreement, is for the defendant to pay the fee as written in the letter of intent. This allocates a defined risk to one party, and actual or potential risks to the other party. Reducing the break fee in any business downturn, the fee’s express purpose – comfort and confidence to get the deal done – would not be accomplished and be derived in precisely the circumstances in which it should be robust. As a result, the Court therefore orders to pay the full EUR 30 million fee. So the break fee stipulation works under the circumstances without mitigation because of the Corona outbreak.
The Netherlands Commercial Court, continued
As already indicated above, the case is interesting because the verdict has been rendered by a Dutch state court in English and the proceedings where also in English. Not because of a special privilege granted in a specific case but based on an agreement between parties with a proper choice of forum clause for this court. In addition to the benefit to of having an English forum without mandatorily relying on either arbitration or choosing an anglophone court, it also has the benefit of it being a state court with the application of the regular Dutch civil procedure law, which is well known by it’s practitioners and reduces the risk of surprises of a procedural nature. As it is as such also a “normal” state court, there is the right to appeal and particularly effective under Dutch law access to expedited proceeding as was also the case in the example referred to above. This means a regular procedure with full application of all evidentiary rules may still follow, overturning or confirming this preliminary verdict in summary proceedings.
Novel technology in proceedings
Another first or at least a novel application is that all submissions were made in eNCC, a document upload procedure for the NCC. Where the introduction of electronic communication and litigation in the Dutch court system has failed spectacularly, the innovations are now all following in quick order and quite effective. As a consequence of the Coronavirus outbreak several steps have been quickly tried in practice and thereafter formally set up. At present this – finally – includes a secure email-correspondence system between attorneys and the courts.
And, also by special order of the Court in this present case, given the current COVID-19 restrictions the matter was dealt with at a public videoconference hearing on 22 April 2020 and the case was set for judgment on 29 April 2020 and published on 30 April 2020.
Even though it is a novel application, it is highly likely that similar arrangements will continue even after expiry of current emergency measures. In several Dutch courts videoconference hearings are applied on a voluntary basis and is expected that the arrangements will be formalized.
Eligibility of cases for the Netherlands Commercial Court
Of more general interest are the requirements for matters that may be submitted to NCC:
- the Amsterdam District Court or Amsterdam Court of Appeal has jurisdiction
- the parties have expressly agreed in writing that proceedings will be in English before the NCC (the ‘NCC agreement’)
- the action is a civil or commercial matter within the parties’ autonomy
- the matter concerns an international dispute.
The NCC agreement can be recorded in a clause, either before or after the dispute arises. The Court even recommends specific wording:
“All disputes arising out of or in connection with this agreement will be resolved by the Amsterdam District Court following proceedings in English before the Chamber for International Commercial Matters (“Netherlands Commercial Court” or “NCC District Court”), to the exclusion of the jurisdiction of any other courts. An action for interim measures, including protective measures, available under Dutch law may be brought in the NCC’s Court in Summary Proceedings (CSP) in proceedings in English. Any appeals against NCC or CSP judgments will be submitted to the Amsterdam Court of Appeal’s Chamber for International Commercial Matters (“Netherlands Commercial Court of Appeal” or “NCCA”).”
The phrase “to the exclusion of the jurisdiction of any other courts” is included in light of the Hague Convention on Choice of Court Agreements. It is not mandatory to include it of course and parties may decide not to exclude the jurisdiction of other courts or make other arrangements they consider appropriate. The only requirement being that such arrangements comply with the rules of jurisdiction and contract. Please note that choice of court agreements are exclusive unless the parties have “expressly provided” or “agreed” otherwise (as per the Hague Convention and Recast Brussels I Regulation).
Parties in a pending case before another Dutch court or chamber may request that their case be referred to NCC District Court or NCC Court of Appeal. One of the requirements is to agree on a clause that takes the case to the NCC and makes English the language of the proceedings. The NCC recommends using this language:
We hereby agree that all disputes in connection with the case [name parties], which is currently pending at the *** District Court (case number ***), will be resolved by the Amsterdam District Court following proceedings in English before the Chamber for International Commercial Matters (“Netherlands Commercial Court” or ”NCC District Court). Any action for interim measures, including protective measures, available under Dutch law will be brought in the NCC’s Court in Summary Proceedings (CSP) in proceedings in English. Any appeals against NCC or CSP judgments will be submitted to the Amsterdam Court of Appeal’s Chamber for International Commercial Matters (“Netherlands Commercial Court of Appeal” or “NCC Court of Appeal”).
To request a referral, a motion must be made before the other chamber or court where the action is pending, stating the request and contesting jurisdiction (if the case is not in Amsterdam) on the basis of a choice-of-court agreement (see before).
Additional arrangements in the proceedings before the Netherlands Commercial Court
Before or during the proceedings, parties can also agree special arrangements in a customized NCC clause or in another appropriate manner. Such arrangements may include matters such as the following:
- the law applicable to the substantive dispute
- the appointment of a court reporter for preparing records of hearings and the costs of preparing those records
- an agreement on evidence that departs from the general rules
- the disclosure of confidential documents
- the submission of a written witness statement prior to the witness examination
- the manner of taking witness testimony
- the costs of the proceedings.
Visiting lawyers and typical course of the procedure
All acts of process are in principle carried out by a member of the Dutch Bar. Member of the Bar in an EU or EEA Member State or Switzerland may work in accordance with Article 16e of the Advocates Act (in conjunction with a member of the Dutch Bar). Other visiting lawyers may be allowed to speak at any hearing.
The proceedings will typically follow the below steps:
- Submitting the initiating document by the plaintiff (summons or request as per Dutch law)
- Assigned to three judges and a senior law clerk.
- The defendant submits its defence statement.
- Case management conference or motion hearing (e.g. also in respect of preliminary issues such as competence, applicable law etc.) where parties may present their arguments.
- Judgment on motions: the court rules on the motions. Testimony, expert appointment, either at this stage or earlier or later.
- The court may allow the parties to submit further written statements.
- Hearing: the court interviews the parties and allows them to present their arguments. The court may enquire whether the dispute could be resolved amicably and, where appropriate, assist the parties in a settlement process. If appropriate, the court may discuss with the parties whether it would be advisable to submit part or all of the dispute to a mediator. At the end of the hearing, the court will discuss with the parties what the next steps should be.
- Verdict: this may be a final judgment on the claims or an interim judgment ordering one or more parties to produce evidence, allowing the parties to submit written submissions on certain aspects of the case, appointing one or more experts or taking other steps.
Continuous updates, online resources Netherlands Commercial Court
As a final note the English language website of the Netherlands Commercial Court provides ample information on procedure and practical issues and is updated with a high frequence. Under current circumstance even at a higher pace. In particular for practitioners it’s recommended to regularly consult the website. https://www.rechtspraak.nl/English/NCC/Pages/default.aspx
This is a summary of the approved measures, which unfortunately for both tenants and landlords do not include any public aid or tax relief and just refer to a postponement in the payment of the rent.
Premises to which they are applied
Leased premises dedicated to activities different than residential: commercial, professional, industrial, cultural, teaching, amusement, healthcare, etc. They also apply to the lease of a whole industry (i.e. hotels, restaurants, bars, etc., which are the most usual type of businesses object of this deal).
Types of tenants
- Individual entrepreneurs or self-employed persons who were registered before Social Security before the declaration of the state of alarm on March 14th, 2020
- Small and medium companies, as defined by article 257.1 of the Capital Companies Act: those who fulfil during two consecutive fiscal years these figures: assets under € 4 million, turnover under € 8 million and average staff under 50 people
Types of landlords
In order to benefit from these measures, the landlord should be a housing public entity or company or a big owner, considering as such the individuals or companies who own more than 10 urban properties (excluding parking places and storage rooms) or a built surface over 1.500 sqm.
Measures approved
The payment of the rent is postponed without interest meanwhile the state of alarm is in force, but in any case, for a maximum period of four months. Once the state of alarm is overcome, and in any case in a maximum term of four months, the postponed rents should be paid along a maximum period of two years, or the duration of the lease agreement, should it be less than two years.
For landlords different to those mentioned above
The tenant could apply before the landlord for the postponement in the payment of the rent (but the landlord is not obliged to accept it), and the parties can use the guarantee that the tenant should mandatorily have provided at the beginning of any lease agreement (usually equal to two month’s rent, but could be more if agreed by the parties), in full or in part, in order to use it to pay the rent. The tenant will have to provide again the guarantee within one year’s term, or less should the lease agreement have a shorter duration.
Activities to which it is applied
Activities which have been suspended according to the Royal Decree that declared the state of alarm, dated march, 14ht, 2020, or according to the orders issued by the authorities delegated by such Royal Decree. This should be proved through a certificated issued by the tax authorities.
If the activity has not been directly suspended by the Royal Decree, the turnover during the month prior to the postponement should be less than 75% of the average monthly turnover during the same quarter last year. This should be proved through a responsible declaration by the tenant, and the landlord is authorised check the bookkeeping records.
Term to apply and procedure
The tenant should apply for these measures before the landlord within one month’s term from the publication of the Royal Decree-law, that is, from April 22nd, 2020, and the landlord (in case belongs to the groups mentioned in point c) is obliged to accept the tenant’s request, except if both parties have already agreed something different. The postponement would be applied to the following month.
As the state of alarm was declared more than one month ago (March 14th), landlords and tenants have already been reaching some agreements, for example 50% rent reduction during the state of alarm, and 50% rent postponement during the following 6 months. Tenants who do not reach an agreement with the landlord could face an eviction procedure, however court procedures are suspended during the state of alarm. We have also seen some abusive non-payment of rent by tenants.
When is becomes impossible to reach an agreement with the landlord, tenants have the legal remedy of claiming in Court for the application of the “rebus sic stantibus” principle, which was highly demanded during the 2008 financial crisis but very seldom applied by the Courts. This principle is aimed to re-balance the parties’ obligations when their situation had deeply changed because of unforeseen circumstances beyond their control. This principle is not included in the Spanish Civil Code, but the Supreme Court has accepted its application, in a very restricted way, in some occasions.
Resumen – ¿Qué podemos aprender en el tiempo de Covid-19 que se pueda usar en la mediación? ¿Y qué podemos aprender de la mediación para utilizarlo en esta crisis?
Como saben, la mediación es una forma de resolver conflictos en los que las partes mantienen en sus manos la posible solución. No necesitan acudir a un tercero (juez o árbitro) que les imponga la respuesta. Las partes pueden imaginar más libremente lo que necesitan y cómo resolver sus diferencias.
Algunos de los elementos y técnicas que usan los mediadores en una mediación también se pueden usar y aprender del tiempo actual de Covid-19. Y esta crisis también nos ayuda a comprender por qué son tan importantes en la mediación.
La cooperación para obtener la solución es mejor que las decisiones unilaterales e impuestas
Por lo general, tendemos a pensar que la cooperación es un signo de debilidad y recurrimos a ella solo si no podemos imponer nuestro parecer o ganar nuestro caso. Sin embargo, como en esta época del Covid-19, donde los países, los científicos y las personas debemos luchar juntos, cuando nos enfrentamos a un conflicto, la cooperación y el ir más allá de las propias posiciones nos ofrece la posibilidad de explorar soluciones que, de lo contrario, permanecerían ocultas.
«Ahora se reconoce cada vez más que existen formas cooperativas de negociar nuestras diferencias y que incluso si no se puede encontrar una solución “ganar-ganar”, a menudo se puede llegar a un acuerdo inteligente que es mejor para ambas partes que la alternativa. […]
Vale la pena recordar tres puntos sobre intereses compartidos. Primero, los intereses compartidos permanecen latentes en cada negociación. Puede que no sean inmediatamente obvios. Segundo, los intereses compartidos son oportunidades, no regalos del cielo. Tercero, enfatizar los intereses compartidos puede hacer que la negociación sea más fluida y amigable.» [Fisher, Richard; Ury, William. «Getting to Yes: Negotiating an agreement without giving in»].
Escuchar es altamente eficaz
En el tiempo del Covid-19 tendemos a aceptar mejor una información que confirma nuestras creencias y aceptamos mejores indicaciones que están de acuerdo con nuestras preferencias y creencias. Sin embargo, también en este momento, escuchar es de una enorme importancia para comprender las causas y las soluciones.
Un mediador siempre escuchará a las partes y les ayudará a hacer lo mismo. Escuchar los argumentos del otro, su explicación de los hechos, intereses y necesidades, las razones de sus decisiones … tiene también una importancia crucial para encontrar una solución conjunta.
«Ya sea que usted sea un tercero neutral (facilitador profesional, amigo o gerente) o uno de los participantes, a medida que escucha todas las historias, comienza a sentir la mejor solución.» [Levine, Stewart. «Getting to Resolution: Turning Conflict Into Collaboration».]
Una solución para mí también puede ser una solución para ti
En la época del Covid-19 nos parece claro a todos que una solución común va a ser la única posible. Una vacuna salvará al mundo entero. En la mediación, el principal beneficio es comprender que, a diferencia de una sentencia judicial o un laudo arbitral, una solución conjunta (no impuesta) es posible y un beneficio para mí no implica un daño o una pérdida para mi oponente.
«Un mediador trabaja para comprender la perspectiva de cada parte en el conflicto y buscar el valor en ella. En este rol, se abstiene de juzgar qué lado está bien o mal. En cambio, intenta ver el mérito en la perspectiva de cada lado.» [Shapiro, Daniel. «Building Agreement»].
Dominamos la solución y creamos el acuerdo en un entorno seguro
La solución a la crisis actual no solo depende de las autoridades y de los profesionales de la salud. Una gran parte de la solución se basa en la participación de todos, lavarse las manos, respetar la distancia social, mantenerse a salvo en casa evitando el contagio y el colapso de los hospitales.
En el tribunal dejamos la decisión del conflicto en manos de un tercero –el juez, el árbitro–. En una mediación, por el contrario, la solución permanece en nuestras manos. Sabemos cuáles son nuestros intereses, creamos nuestro acuerdo. Nuestra imaginación es nuestra aliada para encontrar la solución junto con la contraparte y la asistencia y experiencia del mediador que no la impone, pero ayuda a las partes a encontrarla. Muy a menudo, lo que las partes podrían obtener en la mediación va mucho más allá de lo que un juez podría haber otorgado. Y esto en un ambiente confidencial.
«El sabio es modesto y escaso de palabras. Cuando se ha cumplido su tarea y las cosas se han completado, todas las personas dicen: «¡Nosotros mismos lo hemos logrado!«» [Lao Tzu]
Las emociones son importantes
Las emociones, buenas y malas, son inevitables. En especial en períodos de incertidumbre, crisis y pérdida de control, todos nos enfrentamos a fuertes emociones. Esto es cierto en situaciones como en esta del Covid-19 y en todos los conflictos, y no solo en los personales. Los egos, las envidias, los miedos, las ansiedades … también son parte de nuestra vida cotidiana, trabajo y negocios, pero rara vez se tienen en cuenta en los tribunales cuando se resuelven los conflictos. Un mediador ayudará a tenerlos en cuenta en un entorno seguro y como parte del conflicto mismo.
«Resolver problemas parece más fácil que hablar de emociones. El problema es que cuando los sentimientos están en el corazón de lo que está sucediendo, son el negocio en cuestión e ignorarlos es casi imposible.» [Stone, Douglas. «Difficult Conversations: How to Discuss What Matters Most»].
[NOTA: Los pasajes reproducidas en los puntos 1, 2, 3 y 5 son traducciones libres del autor]
