Sales Distribution Agreement – Goods or Services?

28 agosto 2018

  • Italia
  • Contratos de distribución
  • Litigios

Arbitration is a well-known system for dispute resolutions, and works as an alternative to judicial procedures. Parties are free to choose this system and to submit their conflicts to specific arbitrators or institutions.

It is usually considered that arbitration is a good way to solve conflicts but preferable to those arisen between big corporations or involving important amounts of money. Although this assumption is generally accepted, there is an alternative for distribution disputes suitable for smaller companies and cases with lower amounts claimed.

And here is the essential question: why a manufacturer/franchisor or a distributor/agent/franchisee should choose a specialized arbitration for their agreements instead of a more general one or, even, a judicial procedure? The answer seems clear: an arbitrator with knowledge not only in procedural questions but in substantive matters will be able to better understand the conflict between the parties and, therefore, to grant a better award. Take into account that, for instance in my Country, Spain, a Judge of First instance can deal in the same day with a distribution contract, a construction case, a conflict between heirs, and a discussion in a community of owners. All of this requires the analysis of different facts and completely different legislations and it is true that specific commercial problems do not usually have judges experts in international trading. But, how to choose a good specialized arbitrator? And, how to choose the arbitral procedure and the institution in terms of organization, neutrality, costs and time?

The IDArb was created in 2016 by the International Distribution Institute (www.idiproject.com) in collaboration with the Chambre de Commerce d’Industries et de Services de Genève (CCIG www.ccig.ch) and the Swiss Chambers’ Arbitration Institution (SCAI www.swissarbitration.org) and offers to the distribution sector (distribution, agency, franchising, selective distribution) a specialized, expedited and affordable arbitration procedure, not only for big international corporations but also for smaller cases. In fact, the expedited procedure is particularly foreseen for amounts below one million CHF (approx. 880.000 €).

The objectives and main characteristics of IDArb which make it suitable for all the distribution disputes are:

  1. A list of specialized arbitrators experts in this particular field is available for ad hoc or institutional arbitration and IDArb is able to assist the parties to choose one of them.

Specialized arbitrators from different countries and legal cultures have been appointed by a Selecting Committee reviewing their experience in one or more fields of distribution law. Therefore, parties can trust that the arbitrator will have concrete skills in the business with an in-depth understanding of the disputed issues. This is not a general knowledge on commercial law, but a concrete one on distribution, expressly verified by the Committee. Parties can even examine some examples of cases in which every arbitrator has been involved in.

  1. In order to maintain its high quality, the IDArb organizes training seminars for its appointed arbitrators. In these seminars, they are able to discuss about the general management of the arbitration, the procedural aspects and how to solve possible incidents in collaboration with the Institutions and their Rules. This will make all the proceedings more manageable and the possible difficulties more easily solved. Last seminar took place in Geneva in November 8, 2018 and participants have discussed, amongst other subjects, on evidences, witnesses and document production.
  2. The expedited arbitration procedure permits the parties to have a tailored procedure managed by SCAI under the Swiss Rules of International Arbitration, specially adapted for small disputes in the field of distribution.
  3. Time is also an essential element: the award in the expedited procedure will be issued in a maximum term of six months (only exceptional circumstances permit the Court to extend such time-limit), and, if parties agree, it can be decided only on documentary evidence.
  4. Costs are reasonable and known in advance.
  5. And, as final but important remark, IDArb has also adopted some recommendations where, upon request of the parties, mediation is favoured, the arbitrator my consider giving a preliminary non-binding and provisional assessment of the dispute and should have a pro-active position in order to facilitate an amicable settlement.

To have further information about the clause to use in the contracts, the list of specialized arbitrators, their skills, experience and complete CV, and the recommendations for expedited arbitration, you can follow the link: https://www.idiproject.com/content/idarb-idi-arbitration-project

El Código Civil y Comercial de la República Argentina (el “Código”) no contiene artículos específicos para los contratos de distribución. Por ello, al contrato de distribución se lo considera como un “contrato innominado”, el cual contiene, entre otras cosas, elementos de los contratos de compraventa, agencia y mandato. Por lo tanto, si el contrato de distribución no posee una regla específica para un caso particular, las partes deben aplicar por analogía los artículos de estos tres tipos de contratos (compraventa, agencia y mandato) como reglas standard hasta el punto de que sean aplicables en casa caso. Asimismo, el Artículo 1511 del Código establece que las reglas del Capítulo 18 (Contratos de Concesión) aplicarán para los Contratos de Distribución cuando corresponda.

Forma

El Código no requiere de ninguna forma en particular para celebrar este tipo de contratos. Sin embargo, comunmente estos contratos se realizan por escrito.

Cláusulas Importantes

Para todas las partes:

  1. a) Fuerza Mayor: considerando que en la Argentina tiende a existir un ambiente inestable para los negocios debido a razones políticas, las partes deben considerar la posibilidad de incluir en los contratos cláusulas de “cambios de legislación” o “acciones de gobierno” dentro de la definición de fuerza mayor.
  2. b) Seguro de los productos. Es importante que en caso de suceder algún siniestro con los productos, los mismos estén cubiertos para no perder todo el dinero de los mismos.
  3. c) Registración del producto.

Para el proveedor:

  1. a) Pago (si es internacional, sin impuestos, cláusulas para recibir el monto total sin deducciones o retenciones).
  2. b) Moneda (en virtud de la inestabilidad del Peso Argentino, es importante establecer cláusulas de reajuste de precio o establecer el precio en Dólares Estadounidenses).
  3. c) Recall del Producto.
  4. d) Tiempo de entrega.
  5. e) Retrasos.
  6. f) Condiciones del stock.

Para el distribuidor:

  1. a) Retornos.
  2. b) Compensación de clientela.
  3. c) Producto defectuoso.
  4. d) Muestras del producto.

Incoterms

En los contratos de distribución nacionales no es usual utilizar Incoterms. Sin embargo, en los contratos de distribución internacionales, es común utilizar los siguientes Incoterms:

Para el transporte aereo: FCA (Free Carrier); para el transporte por barco: FOB(Free On Board).

Responsabilidad sobre el Producto

Conforme la Ley Nº 24.240 de Defensa del Consumidor, el consumidor tiene un plazo de 3 años para realizar un reclamo contra el distribudor y/o el proveedor, mientras que para otras partes de la cadena de comercialización, los cuales tiene una relación contractual directa con el distribuidor y/o proveedor (ej: minoristas que adquirieron los productos del distribuidor y/o un subcontratista del distribuidor), el plazo es de 10 años. En cualquier caso, los partes deben estar interesados en la posibilidad de establecer que el plazo de 3 años comience a contarse desde la fecha de vencimiento de los productos en lugar de la fecha de terminación del contrato (ej: un producto puede ser guardado y no vendido por un tiempo y por ende el plazo de 3 años retrasarse).

Propiedad Intelectual

El proveedor debe realizar y renovar la registración de las marcas de los productos en Argentina. En función de ello, es importante incluir una cláusula en el contrato que establezca que las marcas son de propiedad del proveedor y que el distribuidor únicamente puede usarlas en la medida que tenga autorización por parte del proveedor mientras se encuentre vigente el contrato. Asimismo, el distribuidor debe proteger las marcas del proveedor.

Resolución

Las Partes pueden acordar libremente como podrá resolverse el contrato. En caso de existir un cláusula de resolución sin causa, la misma debe tener un preaviso razonable para que la otra parte pueda conseguir otro distribuidor o enfrentar la pérdida del cliente, dependiendo quien ejerza la opción.

Ley Aplicable y Jurisdicción

Las partes pueden pactar la ley que consideren mejor para resolver cualqueir asunto del contrato. Asimismo, las partes también podrán elegir libremente que tribunal o arbitraje elegir dentro del país o en el extranjero.

El autor de este post es Tomás García Navarro.

President Erdogan made a presidential decree that mandatorily requires use of Turkish lira for transactions concluded between parties resident in Turkey. The Decree amending the Decree on Protecting the value of Turkish Lira, (The Decree) is published in the Official Gazette and came into force on 13th September 2018.

The Decree orders use of Turkish Lira for purchase and sale of all kinds of goods, commodities, services and real estate. All kinds of lease and rental of vehicles and all kinds of goods and real estate must also be made by using Turkish Liras. The decree also stipulates that no reference to currency exchange tying a contract payment or value to foreign currency can be made and the all contracts between Turkish residents even if foreign owned must be based on Turkish Liras.

Let’s see the changes introduced by the regulation point by point.

No Use of Foreign Currency in domestic Contracts

New currency policy states that all payments related to contracts between local parties i.e. Turkish Residents whether legal persons or real persons must be made in Turkish liras.

Accordingly all real estate transactions must be made in Turkish liras and no reference can be made to foreign currencies.

All Contracts Must be Amended within 30 days

The Decree establishes also that all contracts between Turkish residents made before 13th September 2018 must be amended and the payments must be converted into Turkish liras from any foreign currency within 30 days from the publish date of The Decree (13th September 2018): this shall mean that all contracts based on foreign currencies must be amended within 14th October 2018.

There is no reference to a currency exchange rate when amending contracts into Turkish Liras. The parties are free to agree on any currency rate when amending however this cannot be stipulated in the contract but only for negotiation purposed when drafting the amendment.

The governmental projects which have been signed earlier should be coordinated with the related authority and adaption should be made in line with the new currency regime.

Import and Export of Goods and Services

The new decree does not impact an export or import relation, as long as one of the parties is not Turkish resident. However one must note that The Decree may have an impact on Turkish based subsidiaries of multinational companies trading with foreign currency.

There is no limitation in bringing foreign currency into country.

Sanctions

New foreign currency policy does not address any criminal or administrative sanctions. New regulations should be expected to implement the practice of The Decree. Needless to say, if one of the parties of an existing contract based on foreign currency will be eager to take the matter to the civil courts if no amendment is made within 30 days and easily obtain a court decision for amendment.

Conclusion

This move is considered as one of the steps of measure step to support the ailing local currency.

Slipping Turkish Liras has been an on-going concern for Turkey in last 6 months. The sudden drop of Turkish Liras exchange rate urged the government to find a quick cure to increase the value of Turkish liras or at least to maintain the status.

Those days, some rough policies have been adopted by governments to safeguard the fragile Turkish Lira. The measures taken indeed prevented Turkish economy to accelerate and take off. With the new liberal look after 1983 elections many of these hard measures were lifted and the law on Protection of Turkish Liras was eased. The era before 1980s when there were hard policies applied to protect Turkish Lira was in a different world than today.

The latest measure may or may not address an improvement but it is a fact that many foreign investors or local investors funded by foreign institutions will have to struggle due to the new regulations pushing them to amend their contracts into Turkish Liras from foreign currencies.

Not what you would expect 

When can you terminate, how should you terminate, and how much are you exposed?!

The outcomes of termination of a business relationship with an Israeli counterpart in Israel arise again and again as a question in many disputes between International corporations and Israeli counterparts, such as distributors or franchisees.

This is mainly because Israeli law does not include specific laws regulating or regarding distribution or franchising or other kinds of business ventures (except a relatively new agency law – referring in a limited manner to specific kinds of agency only) – and thus disputes in said regards are determined based on the general principles of contract law, the contractual and factual bases – obviously resulting in considerable uncertainty as to specific matters.

However, substantial case law, such as in the matter of Johnson & Johnson International that ended up paying compensation in the equivalent to over 1.5 Million US$, indicates the basics and threshold of what can be expected in such disputes, and, if implemented wisely, may assist in planning the disengagement or termination of a business relationship, in a manner that would be the least costly for the terminating party and minimize its exposure to a lawsuit.

In many cases, domestic parties invest many years and/or fortunes, in order to penetrate the domestic market with the foreign service or products, and to promote sales in the subject region, for the benefit of both the international corporation and the domestic party.

Nevertheless, often the international corporation decides for various reasons (such as establishing an «in-house» operation» in the target location or substituting the distributor/franchisee) to terminate the oral or written contractual relationship.

What are the legal foundations involved in such termination as per due notice of termination and corresponding compensation – if at all?

Generally, this issue arises in cases in which the contract does not specify a period of the business relationship, and, as a principle of law, contracts may be terminated by reasonable notice and subject to the fundamental good faith principle.

Contracts are not perceived as binding upon the parties indefinitely. The question is always what is the reasonable time for termination notice, and is the termination done in good faith (which is always a tricky and vague issue). Compensation is commonly awarded in accordance with what the courts find as the due notice period that may also entail compensation for damages related to said breach.

As always, there are exceptions, such as breach of trust toward the manufacturer/franchisor, that may have great impact on any due notice obligations, as far as justification for immediate termination that can be deemed immune to breach of due notice or good faith obligations.

The truth is the reasonability of the due notice varies from case to case!

However, Israeli case law is extremely sensitive to the actual reasoning of termination and how genuine it is, as opposed to asserting a tactical breach argument in an attempt to «justify» avoiding a due notice period or adequate compensation.

In this respect, in many cases simple «non-satisfaction» was denied as a legitimate argument for breach of contract, while safeguarding the freedom of contracts and the right to terminate an ongoing contract with due notice and good faith.

There are various common parameters referred to in the case law, to determine the adequate time of due notice, including, for instance, the magnitude of investment; the time required for rearrangement of business towards the new situation (including time required to find an alternative supplier product which can be marketed); the magnitude of the product/service out of the entire distributor’s business, etc.

Time and again, although not as binding rule, the due notice period seems to be in the range of around 12 months, as a balance between the right of termination and the reasonable time for rearranging the business in light of the termination. There were, however, cases in which due notice for termination was deemed as short as three months and as long as two years – but these are rather exceptional.

Another guiding point in the case law is the factor of exclusivity or non-exclusivity, as well as the concept that the longer the business relationship, the less the distributor/franchisee may expect compensation/reimbursement for investment – based on the concept that he has enjoyed the fruits of the investment.

The outcome of not providing such adequate due notice might result in actual compensation reflecting the loss of profit of the business in the last year before the termination, or for the whole term the court finds a due notice was in place, or, in cases of bad faith, even a longer period reflecting the damages.

In conclusion, given the legal regime in Israel, such exposure might be extremely considerable for any international or foreign business. It would, therefore, be vital and as a consequence of real value to plan the strategy of disengagement/termination of the business with the domestic counterpart in Israel, in advance and prior to executing it, and there are, indeed, adequate and wise strategies that may be implemented for the best result.

It is often the case – in practice – that an ongoing commercial relationship builds slowly over time through a series of sales agreements, without the parties ever signing an actual distribution agreement to set down their respective rights and responsibilities.

At first blush this might appear to be a good thing: one can sidestep being bound, especially long-term, to the other party. But on closer scrutiny the solution becomes problematic, especially for anyone operating internationally.

One of the key issues that arises when an international contractual arrangement is not in writing, is identifying the court with jurisdiction over any dispute arising therefrom. In the European Union, the issue is resolved by the provisions of Regulation 1215/2012 (“Brussels I recast”). Pursuant to Article 7 of the Regulation, as an alternative to the defendant’s courts, jurisdiction in a contractual dispute may lie with the court in the place of performance of the obligation in question. Next to this general rule are two criteria to identify the “place of performance”, differentiated according to the type of contract at issue. For a contract for goods, it is the place of delivery for the goods; in a contract for services, it is the place where the services are provided.   

Thus, to identify the court with jurisdiction, it is crucial that a contract fall under one of these categories: goods or services.

No doubt this distinction is quite simple in many circumstances. In the case of a distribution agreement, or of a commercial concession agreement, the issue may become thorny.

The European Court of Justice has analysed this issue on a number of occasions, most recently in their judgement of 8 March 2018 (Case no. C-64/17) following the request for a preliminary ruling from a Portuguese Court of Appeal. The parties to the action were a Portuguese distributor, a company called Lusavouga, and a Belgian company called Saey Home & Garden, that produced articles for the home and garden, including a line of products branded “Barbecook”.

Following Saey’s decision to break off the commercial relationship – notice of which was sent in an email dated 17 July 2014 – Lusavouga brought action in Portugal seeking compensation for the unexpected termination of the agreement, and goodwill indemnity. Saey raised a plea of lack of jurisdiction of the Portuguese court, citing their general conditions of sale (mentioned in their invoices) which required that a Court in Belgium be competent for dispute resolution.

The facts thus presented two issues to be resolved in light of the Brussels I recast Regulation: deciding whether a jurisdiction clause in a vendor’s general terms and conditions pursuant to Art. 25 of the Regulation shall apply, and, if not, choosing the court with jurisdiction under Art. 7 of the Regulation.

Shall a jurisdiction clause contained within a vendor’s general terms and conditions apply to a distribution relationship?

The supplier company apparently considered their course of dealing with the Portuguese retailer nothing more than a concatenation of individual sales of goods, governed by their general terms and conditions. Consequently, they argued that any dispute arising from the relationship should be subject to the jurisdiction clause identifying Belgium as the court with jurisdiction under those terms and conditions.

Thus, a determination was needed on whether, under these facts, there was a valid prorogation of jurisdiction under Article 25, paragraph 1 of Regulation 1215/2012.

The Court of Justice has long opined that if the jurisdiction clause is included in the general contract conditions drafted by one of the parties, the contract signed by the other party must contain an express reference to those general conditions in order to ensure the real consent thereto by the parties (judgement of 14 December 1976, Estasis Salotti di Colzani, case no. 24/76; judgement of 16 March 1999, Castelletti, case no. C-159/97; judgement of 7 July 2016, Höszig, case no. C-225/15). Moreover, to be valid, the clause must involve a particular legal relationship (judgement of 20 April 2016, Profit Investment SIM, case no. C-366/13).

In the instant case, the referring court found it self-evident that the legal relationship at bar was a commercial concession agreement entered into for the purpose of distributing Saey products in Spain, a contract that was not evidenced in writing.

From this perspective, it is clear that the general conditions contained in the Saey invoices could have no bearing on the commercial concession agreement: assuming Lusavouga’s consent had been proven, the selection of Belgium as the forum would have applied if anything to the individual sales agreements, but not to those duties arising from the separate distribution agreement.

What, then, would be the court with jurisdiction for the duties arising from the commercial concession agreement?

Absent any jurisdiction clause, the issue would be decided under Art. 7, point 1 of Regulation 1215/2012, under which it becomes imperative to establish whether a contract is for goods or for services.

The “provision of services” has been defined by the Court of Justice as an activity, not mere omissions, undertaken in return for remuneration (judgement of 23 April 2009, Falco, case no. C-533/07).

With the judgements in Corman Collins of 19 December 2013 (case no. C-9/12), and Granarolo of 14 July 2016 (case no. C-196/15), the Court held that in a typical distribution agreement, the dealer renders a service, in that they are involved in increasing the distribution of supplier’s product, and receives in consideration therefor a competitive advantage, access to advertising platforms, know-how, or payment facilities. In light of such elements, the contract relationship should be deemed one for services. If on the other hand the commercial relationship is limited to a concatenation of agreements, each for the purpose of a delivery and pickup of merchandise, then what we have is not a typical distribution agreement, and the contractual relationship shall be construed as one for the sale of goods.

Once the contract has been categorised as one for services, one must then determine “the place where, under the contract, the services are provided”. The Court specifies that such location shall be understood as the member state of the place of the main provision of services, as it follows from the provisions of the contract  or – as in the case at issue – the actual performance of the same. Only where it is impossible to identify such location shall the domicile of the party rendering the service be used.

From the referring court’s description of the contractual relationship, and from the Court of Justice’s understanding of the distributor’s performance of services, it would be logical to find that the principal location for performance of services was Spain, where Lusavouga “was involved in increasing the distribution of products” of Saey.

It is clear that neither the manufacturer nor the distributor would ever have intended such a result, and they might have avoided it being chosen for them by reducing their agreement in writing, including a jurisdiction clause therein.

By the same token, viewed from the outside, the Portuguese judges’ apparent conviction that the situation was one of an actual dealership contract would leave ample room for debate. After all, a number of elements would lead to the opposite conclusion. However, even in terms of that aspect, the absence of a written contract left room for interpretation that might lead to unforeseen – and perhaps rather risky – consequences.

In conclusion, the wisdom of setting down the terms and conditions of a sales distribution agreement in writing appears clear. This is not only because one can avoid those ambiguities we have described above, but also because it specifies other important clauses stipulated by the parties that should not be left to chance: exclusivity of area, if any, or with respect to specific sales channels, the contract period and termination notice, any duties to promote the product, control over end-user personal data, and the possibility of, and methods for, any online sales of products.

Agreements restricting competition are prohibited as anticompetitive agreements by Article 101 TFEU unless the agreement’s impact on trade or competition is not appreciable (cf. the EU Court of Justice in the Expedia case, C-226/11, judgment of 13 December 2012). Whether an agreement constitutes an appreciable restriction of competition or is in the «safe harbour» can be assessed according to the European Commission’s De Minimis Notice. Accordingly, an agreement is particularly appreciable if its object is to restrict competition. This applies in particular to so-called hardcore restrictions, such as vertical price maintenance (or resale price maintenance = “RPM”).

Regarding a special offer for dietary products, the German Higher Regional Court of Celle surprisingly took a different view and decided that even resale price maintenance could be considered non-appreciable and thus falling outside the ban of anticompetitive business practices under Article 101 TFEU (judgment of 07.04.2016, Case 13 U 124/15 [Kart]). In this case, the manufacturer made a special offer to a group of its customers (pharmacies) with a special purchase discount: once, for a limited period and limited to a maximum quantity. In return, the customers should commit themselves to «present the product clearly… and not fall below a resale price of EUR 15.95«.

The Hanover Regional Court had instead seen the agreement as an unlawful resale price maintenance (judgment of 25 August 2015, Case 18 O 91/15) – and now the German Federal Court confirmed the same: the minimum prices specified here within the advertising campaign appreciably restrict competition and are thus banned as anticompetitive business practice under Article 101 TFEU (judgment of 17 October 2017, Case KZR 59/16). This corresponds to the case law of the EU Court of Justice in the Expedia case (see above) and the German Federal Court with regard to the sales requirement «one bar extra « (i.e. without extra charge compared to the usual package size) of the Italian confectionery manufacturer Ferrero (judgment of 08.04.2003, Case KZR 3/02) – because the latter explicitly concerns «the scope for price increases resulting from the increased contents of the package» – not, however, the retailer’s decision to set prices freely downwards.

Practical tips

Vertical price fixing is generally prohibited, whereas providing a manufacturer’s suggested retail price (MSRP, also “recommended retail price”) and maximum selling prices are allowed – this is briefly the principle of German and European antitrust law on pricing frameworks. Furthermore, recommended retail prices and maximum selling prices (“MSP”) are subject to the restriction that they » they do not amount to a fixed or minimum sale price as a result of pressure from, or incentives offered by, any of the parties” (Article 4 lit. a Vertical Block Exemptions Regulation). That means:

  • the manufacturer or supplier may provide guidance,
  • however, the reseller may set his sales prices freely.

Exceptions may apply – in addition to the RPM on the price of books or in the case of specialisation agreements – by way of the efficiency defence under Article 101 (3) TFEU in individual cases, e.g.

  • in the introductory period when launching new products on the market, or
  • in the case of short-term special offers if accompanied by a corresponding increase in efficiency, for example by investing the higher margin into better customer advice, which benefits all customers and Resale Price Maintenance prevents retailers who do not offer the customer advice from free riding (cf. EU Guidelines on Vertical Restraints, para. 225).

Such actions, however, require excellent preparation because manufacturers can only set resale prices for very short periods if they can convincingly demonstrate efficiency gains such as preventing free-riders.

In the case of fixed prices, the competition authorities quickly become sensitive. For example, fines for vertical price maintenance have recently been imposed again in Germany. In this respect, special care must be taken particularly in distribution and sales agreements.

  1. Correspondingly, each company’s sales team should continue following the previous case law on recommended retail prices, maximum selling prices and discount campaigns. Guidance for the practice is provided by

Geoblocking is a discriminatory practice preventing customers (mainly on-line customers) from accessing and/or purchasing products or services from a website located in another member State, because of the nationality of the customer or his place of residence or establishment.

The EU Regulation no. 2018/302 of 28 February 2018 on addressing unjustified geoblocking and other forms of discrimination based on customers’ nationality, place of residence or place of establishment within the internal market will enter into force on 2 December 2018.

The current situation

The EU Commission carried out a «mystery shopping» survey on over 10 000 e-commerce websites in the EU. The geoblocking figures are quite high! 63% of the websites do not let shoppers to buy from another EU country (even 86% for electric household appliances and 79% for electronics and computer hardware).

The survey shows also that 92% of on-line retailers require customers to register on their website and to provide them with e-mail address, physical address and telephone number. The registration is denied most of the time because of a foreign delivery address for 27% of the websites. Almost half of the websites give no information about the place of delivery while shopping on the website although this information on delivery restrictions has to be provided in due time during the shopping process. At the end, according to this EC survey, only 37% of the websites truly allow e-shoppers to freely buy on-line from another EU country (without restriction as regards place of establishment, place of delivery and mean of payment).

On the other side, only 50% of European customers buy products from on-line shops based in another EU member State while the value and the volume of e-commerce, globally speaking increase thoroughly year after year, but only on a domestic scope not throughout Europe.

On 23 June 2017, the European Council asked for a real implementation of the Digital Single Market strategy in all its elements including cross border partial delivery, consumer protection and prohibition of undue geoblocking.

The lack of the current legal frameworks

The service directive (n°2006/123/CE) and article 101 of the TFUE address already the discrimination practices based on nationality or place or residence or establishment.

According to article 20 (2) of the service directive, the EU member States must ensure that professionals do not treat customers differently based on their place of residence or establishment or nationality (unless objective exception). On the other side, EU competition law on vertical restraints (article 101 TFUE and the block exemption regulation and its guidelines) considers restrictions on passive sales as hard core restrictions violating EU competition rules. However, both set of rules (service directive and competition law framework) appear not to be fully effective in practice.

With this respect, the recent report of the European commission about the competition enquiry in the e-commerce sector shows, among others, that geoblocking was used at a large scale within the European e-commerce sector.

The aim of the geoblocking regulation

The goal of the geoblocking regulation is to prevent professionals from implementing direct or indirect discrimination based on the nationality, the place of residence or the place of establishment of their customers when dealing with cross border e-commerce transactions.

The scope of the geoblocking regulations

The new Regulation will only apply to online sales between businesses and end-user consumers or businesses.

The new Regulation will apply to websites operated within the European Union or to websites operated outside the European Union but proposing goods or services to customers established throughout in the European Union.

What are the new rules of management of an e-commerce website?

„As regards the access to the website

Under the Regulation, a business may neither block nor restrict, through the use of technological measures, access to their online interfaces for reasons related to nationality, place of residence or place of establishment of an internet user. However, businesses are authorized to redirect customers to a different website than the one they were trying to access provided the customer expressly agrees thereto and can still easily visit the website version they originally tried to access.

„As regards the terms and conditions of sales of the website

The Regulation forbids businesses from applying different general conditions of access to goods or services according to a customer’s nationality or place of residence or place of establishment (as identified by their IP address in particular) in the following three cases:

  • where the goods sold by the business are delivered in a different member state to which the business offers delivery (or where the goods are collected at a location jointly agreed upon by the business and the customer);
  • where the business offers electronically supplied services such as cloud, data storage, hosting services etc. (but not services offering access to copyright-protected content such as streaming or online-gaming services);
  • where the business supplies services received by the customer in a country in which the business also operates (such as car rental and hotel accommodation services or ticketing services for sporting or cultural events).

„ As regards the means of payment on the website

The Regulation forbids businesses from applying different conditions for payment transactions to accepted means of payment for reasons related to a customer’s nationality, place of residence or place of establishment, or to the location of the payment account or the place of establishment of the payment service provider (provided that authentication requirements are fulfilled and that payment transactions are made in a currency accepted by the business).

What are the impacts of this regulation on e-retailers?

Although formally excluded from the scope of the Regulation, relations between suppliers and distributors or wholesalers will still be impacted by it since provisions of agreements between businesses under which distributors undertake not to make passive sales (e.g., by blocking or restricting access to a website) for reasons related to a customer’s nationality, place of residence or place of establishment “shall be automatically void”.

The geoblocking regulation therefore impacts distributors twofold: first, directly in their relations with customers (end-user consumers or user-businesses), and second, indirectly in regard to their obligations under the exclusive distribution agreement.

The geoblocking regulation shall have to be coordinated with the existing competition law framework, especially the guidelines on vertical restraints which set up specific rules applying to on-line sales. On-line sales are likened to passive sales. The guidelines mention four examples of practices aiming to indirectly guarantee territorial protection which are prohibited when supplier and exclusive distributor agree:

  • that the exclusive distributor shall prevent customers in another territory from visiting their website or shall automatically refer them to the supplier’s or other distributors’ websites,
  • that the exclusive distributor shall terminate an online sale if the purchaser’s credit card data show that the purchaser is not from the exclusive distributor’s exclusive territory,
  • to limit the share of sales made by the exclusive distributor through the internet (but the contract may provide for minimum offline targets in absolute terms and for online sales to remain coherent compared to offline sales).
  • that the exclusive distributor shall pay a higher price for goods intended for sale on the internet than for goods intended for sale offline.

Manufacturers will have to decide whether they adopt a unique European gateway website or multiple local commercial offers, it being known that price differentiation is still possible per category of clients.

Indeed, the new Regulation does not oblige the e-retailers to harmonize their price policies, they must only allow EU consumers to access freely and easily to any version of their website. Likewise, this Regulation does not oblige e-retailers to ship products all over Europe, but just allow EU consumers to purchase goods from whichever website they want and to arrange the shipment themselves, if need be.

Finally on a more contractual level, it is not very clear yet how the new geoblocking rules could impact directly or indirectly the conflict of law rules applicable to consumer contracts, as per the Rome I regulation especially when the consumer will be allowed to handover the product purchased on a foreign website in the country of this website (which imply no specific delivery in the country where the consumer is established).

Therefore B2C general terms and conditions of websites would need to be reviewed and adapted on both marketing and legal sides.

Una vez convencidos de la utilidad de la mediación como método de solucionar conflictos entre franquiciador y franquiciado y tomada la decisión de incluir en los contratos una cláusula que la prevea, el último paso sería qué elementos debemos tener en cuenta a la hora de redactarla.

  1. La negociación previa. Parece recomendable que ambas partes se concedan la posibilidad de intentar resolver el problema con una negociación formal previa. La mediación no excluye el intento previo llevado a cabo por los interesados o sus abogados, no obstante, parece recomendable que se prevea contractualmente un plazo adecuado a las circunstancias. La experiencia demuestra que alargar demasiado esta fase puede producir como resultado que el conflicto se vaya agravando y resulte más complicado incluso acercarse a la mediación.
  2. La cláusula puede igualmente prever el lugar en el que la mediación se llevará a cabo. De nuevo en este punto las partes son libres. Es conveniente que éste sea preciso indicando la ciudad.
  3. El idioma en el que va a desarrollarse la mediación es facultad de las partes. No habrá dificultad en mediaciones en las que ambas partes usen el mismo idioma, pero es muy conveniente en contratos con partes que los tengan diferentes, o que pertenezcan a regiones o países con diferentes lenguas cooficiales. La redacción o firma del contrato en un idioma concreto no presupone que ese haya de ser el idioma de la mediación. Es un elemento a tener muy en cuenta también a la hora de solicitar un mediador que pueda usar dicho idioma en la institución de mediación elegida.
  4. El procedimiento puede decidirse igualmente por las partes. En particular, el número de sesiones, la duración máxima prevista, la participación de asesores, etc. Téngase en cuenta que la mayor o menor regulación permitirá evitar futuros conflictos al respecto, aunque también supondrá enmarcar más la libertad de las partes que, no obstante, permanecerán libres para modificar de común acuerdo lo pactado.
  5. El plazo de duración de la mediación puede igualmente contemplarse. Ello permitiría, por ejemplo, evitar que la mediación se alargue únicamente con fines estratégicos meramente procesales o para recabar información de la otra parte antes de iniciar un procedimiento, etc. Los mediadores profesionales, no obstante, son capaces de identificar estas maniobras teniendo la facultad también de poner ellos mismos fin a la mediación en caso de constatarlas.
  6. Elegir al mediador o a la institución de mediación es una elección importante. Las partes pueden ponerse de acuerdo sobre quién será su mediador, indicar en el contrato los elementos para elegirlo, o someterse directamente a una Institución de Mediación para que sea ésta quien lo designe conforme a sus propias reglas. Estas decisiones pueden ser alternativas (es decir, que las partes se pongan de acuerdo sobre el mediador y, en caso de falta de acuerdo, someterse a una institución que lo nombre), o pueden ser únicas. La designación de una Institución requiere que tenga la suficiente garantía de estabilidad (evitar designar instituciones de corta trayectoria o sin demasiada garantía de futuro), con un panel suficiente de mediadores en función de las características de la mediación (idioma, competencia, experiencia) y que permita la flexibilidad necesaria para su funcionamiento.
  7. Por último, es conveniente que la cláusula incluya una vía alternativa en caso de que la mediación no llegue a buen puerto bien porque las partes no llegan a un acuerdo, bien porque se retiran de la mediación. Recordemos que la mediación no cierra las puertas a que el conflicto sea resuelto mediante el recurso a la jurisdicción ordinaria o al arbitraje. Y en materia de arbitraje especializado en contratos de distribución el IDArb (https://www.idiproject.com/content/idarb-idi-arbitration-project) es una excelente opción.

Irene Grassi

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    Resale Price Maintenance – Exception for short-term promotions?

    12 agosto 2018

    • Alemania
    • Contratos de distribución

    Arbitration is a well-known system for dispute resolutions, and works as an alternative to judicial procedures. Parties are free to choose this system and to submit their conflicts to specific arbitrators or institutions.

    It is usually considered that arbitration is a good way to solve conflicts but preferable to those arisen between big corporations or involving important amounts of money. Although this assumption is generally accepted, there is an alternative for distribution disputes suitable for smaller companies and cases with lower amounts claimed.

    And here is the essential question: why a manufacturer/franchisor or a distributor/agent/franchisee should choose a specialized arbitration for their agreements instead of a more general one or, even, a judicial procedure? The answer seems clear: an arbitrator with knowledge not only in procedural questions but in substantive matters will be able to better understand the conflict between the parties and, therefore, to grant a better award. Take into account that, for instance in my Country, Spain, a Judge of First instance can deal in the same day with a distribution contract, a construction case, a conflict between heirs, and a discussion in a community of owners. All of this requires the analysis of different facts and completely different legislations and it is true that specific commercial problems do not usually have judges experts in international trading. But, how to choose a good specialized arbitrator? And, how to choose the arbitral procedure and the institution in terms of organization, neutrality, costs and time?

    The IDArb was created in 2016 by the International Distribution Institute (www.idiproject.com) in collaboration with the Chambre de Commerce d’Industries et de Services de Genève (CCIG www.ccig.ch) and the Swiss Chambers’ Arbitration Institution (SCAI www.swissarbitration.org) and offers to the distribution sector (distribution, agency, franchising, selective distribution) a specialized, expedited and affordable arbitration procedure, not only for big international corporations but also for smaller cases. In fact, the expedited procedure is particularly foreseen for amounts below one million CHF (approx. 880.000 €).

    The objectives and main characteristics of IDArb which make it suitable for all the distribution disputes are:

    1. A list of specialized arbitrators experts in this particular field is available for ad hoc or institutional arbitration and IDArb is able to assist the parties to choose one of them.

    Specialized arbitrators from different countries and legal cultures have been appointed by a Selecting Committee reviewing their experience in one or more fields of distribution law. Therefore, parties can trust that the arbitrator will have concrete skills in the business with an in-depth understanding of the disputed issues. This is not a general knowledge on commercial law, but a concrete one on distribution, expressly verified by the Committee. Parties can even examine some examples of cases in which every arbitrator has been involved in.

    1. In order to maintain its high quality, the IDArb organizes training seminars for its appointed arbitrators. In these seminars, they are able to discuss about the general management of the arbitration, the procedural aspects and how to solve possible incidents in collaboration with the Institutions and their Rules. This will make all the proceedings more manageable and the possible difficulties more easily solved. Last seminar took place in Geneva in November 8, 2018 and participants have discussed, amongst other subjects, on evidences, witnesses and document production.
    2. The expedited arbitration procedure permits the parties to have a tailored procedure managed by SCAI under the Swiss Rules of International Arbitration, specially adapted for small disputes in the field of distribution.
    3. Time is also an essential element: the award in the expedited procedure will be issued in a maximum term of six months (only exceptional circumstances permit the Court to extend such time-limit), and, if parties agree, it can be decided only on documentary evidence.
    4. Costs are reasonable and known in advance.
    5. And, as final but important remark, IDArb has also adopted some recommendations where, upon request of the parties, mediation is favoured, the arbitrator my consider giving a preliminary non-binding and provisional assessment of the dispute and should have a pro-active position in order to facilitate an amicable settlement.

    To have further information about the clause to use in the contracts, the list of specialized arbitrators, their skills, experience and complete CV, and the recommendations for expedited arbitration, you can follow the link: https://www.idiproject.com/content/idarb-idi-arbitration-project

    El Código Civil y Comercial de la República Argentina (el “Código”) no contiene artículos específicos para los contratos de distribución. Por ello, al contrato de distribución se lo considera como un “contrato innominado”, el cual contiene, entre otras cosas, elementos de los contratos de compraventa, agencia y mandato. Por lo tanto, si el contrato de distribución no posee una regla específica para un caso particular, las partes deben aplicar por analogía los artículos de estos tres tipos de contratos (compraventa, agencia y mandato) como reglas standard hasta el punto de que sean aplicables en casa caso. Asimismo, el Artículo 1511 del Código establece que las reglas del Capítulo 18 (Contratos de Concesión) aplicarán para los Contratos de Distribución cuando corresponda.

    Forma

    El Código no requiere de ninguna forma en particular para celebrar este tipo de contratos. Sin embargo, comunmente estos contratos se realizan por escrito.

    Cláusulas Importantes

    Para todas las partes:

    1. a) Fuerza Mayor: considerando que en la Argentina tiende a existir un ambiente inestable para los negocios debido a razones políticas, las partes deben considerar la posibilidad de incluir en los contratos cláusulas de “cambios de legislación” o “acciones de gobierno” dentro de la definición de fuerza mayor.
    2. b) Seguro de los productos. Es importante que en caso de suceder algún siniestro con los productos, los mismos estén cubiertos para no perder todo el dinero de los mismos.
    3. c) Registración del producto.

    Para el proveedor:

    1. a) Pago (si es internacional, sin impuestos, cláusulas para recibir el monto total sin deducciones o retenciones).
    2. b) Moneda (en virtud de la inestabilidad del Peso Argentino, es importante establecer cláusulas de reajuste de precio o establecer el precio en Dólares Estadounidenses).
    3. c) Recall del Producto.
    4. d) Tiempo de entrega.
    5. e) Retrasos.
    6. f) Condiciones del stock.

    Para el distribuidor:

    1. a) Retornos.
    2. b) Compensación de clientela.
    3. c) Producto defectuoso.
    4. d) Muestras del producto.

    Incoterms

    En los contratos de distribución nacionales no es usual utilizar Incoterms. Sin embargo, en los contratos de distribución internacionales, es común utilizar los siguientes Incoterms:

    Para el transporte aereo: FCA (Free Carrier); para el transporte por barco: FOB(Free On Board).

    Responsabilidad sobre el Producto

    Conforme la Ley Nº 24.240 de Defensa del Consumidor, el consumidor tiene un plazo de 3 años para realizar un reclamo contra el distribudor y/o el proveedor, mientras que para otras partes de la cadena de comercialización, los cuales tiene una relación contractual directa con el distribuidor y/o proveedor (ej: minoristas que adquirieron los productos del distribuidor y/o un subcontratista del distribuidor), el plazo es de 10 años. En cualquier caso, los partes deben estar interesados en la posibilidad de establecer que el plazo de 3 años comience a contarse desde la fecha de vencimiento de los productos en lugar de la fecha de terminación del contrato (ej: un producto puede ser guardado y no vendido por un tiempo y por ende el plazo de 3 años retrasarse).

    Propiedad Intelectual

    El proveedor debe realizar y renovar la registración de las marcas de los productos en Argentina. En función de ello, es importante incluir una cláusula en el contrato que establezca que las marcas son de propiedad del proveedor y que el distribuidor únicamente puede usarlas en la medida que tenga autorización por parte del proveedor mientras se encuentre vigente el contrato. Asimismo, el distribuidor debe proteger las marcas del proveedor.

    Resolución

    Las Partes pueden acordar libremente como podrá resolverse el contrato. En caso de existir un cláusula de resolución sin causa, la misma debe tener un preaviso razonable para que la otra parte pueda conseguir otro distribuidor o enfrentar la pérdida del cliente, dependiendo quien ejerza la opción.

    Ley Aplicable y Jurisdicción

    Las partes pueden pactar la ley que consideren mejor para resolver cualqueir asunto del contrato. Asimismo, las partes también podrán elegir libremente que tribunal o arbitraje elegir dentro del país o en el extranjero.

    El autor de este post es Tomás García Navarro.

    President Erdogan made a presidential decree that mandatorily requires use of Turkish lira for transactions concluded between parties resident in Turkey. The Decree amending the Decree on Protecting the value of Turkish Lira, (The Decree) is published in the Official Gazette and came into force on 13th September 2018.

    The Decree orders use of Turkish Lira for purchase and sale of all kinds of goods, commodities, services and real estate. All kinds of lease and rental of vehicles and all kinds of goods and real estate must also be made by using Turkish Liras. The decree also stipulates that no reference to currency exchange tying a contract payment or value to foreign currency can be made and the all contracts between Turkish residents even if foreign owned must be based on Turkish Liras.

    Let’s see the changes introduced by the regulation point by point.

    No Use of Foreign Currency in domestic Contracts

    New currency policy states that all payments related to contracts between local parties i.e. Turkish Residents whether legal persons or real persons must be made in Turkish liras.

    Accordingly all real estate transactions must be made in Turkish liras and no reference can be made to foreign currencies.

    All Contracts Must be Amended within 30 days

    The Decree establishes also that all contracts between Turkish residents made before 13th September 2018 must be amended and the payments must be converted into Turkish liras from any foreign currency within 30 days from the publish date of The Decree (13th September 2018): this shall mean that all contracts based on foreign currencies must be amended within 14th October 2018.

    There is no reference to a currency exchange rate when amending contracts into Turkish Liras. The parties are free to agree on any currency rate when amending however this cannot be stipulated in the contract but only for negotiation purposed when drafting the amendment.

    The governmental projects which have been signed earlier should be coordinated with the related authority and adaption should be made in line with the new currency regime.

    Import and Export of Goods and Services

    The new decree does not impact an export or import relation, as long as one of the parties is not Turkish resident. However one must note that The Decree may have an impact on Turkish based subsidiaries of multinational companies trading with foreign currency.

    There is no limitation in bringing foreign currency into country.

    Sanctions

    New foreign currency policy does not address any criminal or administrative sanctions. New regulations should be expected to implement the practice of The Decree. Needless to say, if one of the parties of an existing contract based on foreign currency will be eager to take the matter to the civil courts if no amendment is made within 30 days and easily obtain a court decision for amendment.

    Conclusion

    This move is considered as one of the steps of measure step to support the ailing local currency.

    Slipping Turkish Liras has been an on-going concern for Turkey in last 6 months. The sudden drop of Turkish Liras exchange rate urged the government to find a quick cure to increase the value of Turkish liras or at least to maintain the status.

    Those days, some rough policies have been adopted by governments to safeguard the fragile Turkish Lira. The measures taken indeed prevented Turkish economy to accelerate and take off. With the new liberal look after 1983 elections many of these hard measures were lifted and the law on Protection of Turkish Liras was eased. The era before 1980s when there were hard policies applied to protect Turkish Lira was in a different world than today.

    The latest measure may or may not address an improvement but it is a fact that many foreign investors or local investors funded by foreign institutions will have to struggle due to the new regulations pushing them to amend their contracts into Turkish Liras from foreign currencies.

    Not what you would expect 

    When can you terminate, how should you terminate, and how much are you exposed?!

    The outcomes of termination of a business relationship with an Israeli counterpart in Israel arise again and again as a question in many disputes between International corporations and Israeli counterparts, such as distributors or franchisees.

    This is mainly because Israeli law does not include specific laws regulating or regarding distribution or franchising or other kinds of business ventures (except a relatively new agency law – referring in a limited manner to specific kinds of agency only) – and thus disputes in said regards are determined based on the general principles of contract law, the contractual and factual bases – obviously resulting in considerable uncertainty as to specific matters.

    However, substantial case law, such as in the matter of Johnson & Johnson International that ended up paying compensation in the equivalent to over 1.5 Million US$, indicates the basics and threshold of what can be expected in such disputes, and, if implemented wisely, may assist in planning the disengagement or termination of a business relationship, in a manner that would be the least costly for the terminating party and minimize its exposure to a lawsuit.

    In many cases, domestic parties invest many years and/or fortunes, in order to penetrate the domestic market with the foreign service or products, and to promote sales in the subject region, for the benefit of both the international corporation and the domestic party.

    Nevertheless, often the international corporation decides for various reasons (such as establishing an «in-house» operation» in the target location or substituting the distributor/franchisee) to terminate the oral or written contractual relationship.

    What are the legal foundations involved in such termination as per due notice of termination and corresponding compensation – if at all?

    Generally, this issue arises in cases in which the contract does not specify a period of the business relationship, and, as a principle of law, contracts may be terminated by reasonable notice and subject to the fundamental good faith principle.

    Contracts are not perceived as binding upon the parties indefinitely. The question is always what is the reasonable time for termination notice, and is the termination done in good faith (which is always a tricky and vague issue). Compensation is commonly awarded in accordance with what the courts find as the due notice period that may also entail compensation for damages related to said breach.

    As always, there are exceptions, such as breach of trust toward the manufacturer/franchisor, that may have great impact on any due notice obligations, as far as justification for immediate termination that can be deemed immune to breach of due notice or good faith obligations.

    The truth is the reasonability of the due notice varies from case to case!

    However, Israeli case law is extremely sensitive to the actual reasoning of termination and how genuine it is, as opposed to asserting a tactical breach argument in an attempt to «justify» avoiding a due notice period or adequate compensation.

    In this respect, in many cases simple «non-satisfaction» was denied as a legitimate argument for breach of contract, while safeguarding the freedom of contracts and the right to terminate an ongoing contract with due notice and good faith.

    There are various common parameters referred to in the case law, to determine the adequate time of due notice, including, for instance, the magnitude of investment; the time required for rearrangement of business towards the new situation (including time required to find an alternative supplier product which can be marketed); the magnitude of the product/service out of the entire distributor’s business, etc.

    Time and again, although not as binding rule, the due notice period seems to be in the range of around 12 months, as a balance between the right of termination and the reasonable time for rearranging the business in light of the termination. There were, however, cases in which due notice for termination was deemed as short as three months and as long as two years – but these are rather exceptional.

    Another guiding point in the case law is the factor of exclusivity or non-exclusivity, as well as the concept that the longer the business relationship, the less the distributor/franchisee may expect compensation/reimbursement for investment – based on the concept that he has enjoyed the fruits of the investment.

    The outcome of not providing such adequate due notice might result in actual compensation reflecting the loss of profit of the business in the last year before the termination, or for the whole term the court finds a due notice was in place, or, in cases of bad faith, even a longer period reflecting the damages.

    In conclusion, given the legal regime in Israel, such exposure might be extremely considerable for any international or foreign business. It would, therefore, be vital and as a consequence of real value to plan the strategy of disengagement/termination of the business with the domestic counterpart in Israel, in advance and prior to executing it, and there are, indeed, adequate and wise strategies that may be implemented for the best result.

    It is often the case – in practice – that an ongoing commercial relationship builds slowly over time through a series of sales agreements, without the parties ever signing an actual distribution agreement to set down their respective rights and responsibilities.

    At first blush this might appear to be a good thing: one can sidestep being bound, especially long-term, to the other party. But on closer scrutiny the solution becomes problematic, especially for anyone operating internationally.

    One of the key issues that arises when an international contractual arrangement is not in writing, is identifying the court with jurisdiction over any dispute arising therefrom. In the European Union, the issue is resolved by the provisions of Regulation 1215/2012 (“Brussels I recast”). Pursuant to Article 7 of the Regulation, as an alternative to the defendant’s courts, jurisdiction in a contractual dispute may lie with the court in the place of performance of the obligation in question. Next to this general rule are two criteria to identify the “place of performance”, differentiated according to the type of contract at issue. For a contract for goods, it is the place of delivery for the goods; in a contract for services, it is the place where the services are provided.   

    Thus, to identify the court with jurisdiction, it is crucial that a contract fall under one of these categories: goods or services.

    No doubt this distinction is quite simple in many circumstances. In the case of a distribution agreement, or of a commercial concession agreement, the issue may become thorny.

    The European Court of Justice has analysed this issue on a number of occasions, most recently in their judgement of 8 March 2018 (Case no. C-64/17) following the request for a preliminary ruling from a Portuguese Court of Appeal. The parties to the action were a Portuguese distributor, a company called Lusavouga, and a Belgian company called Saey Home & Garden, that produced articles for the home and garden, including a line of products branded “Barbecook”.

    Following Saey’s decision to break off the commercial relationship – notice of which was sent in an email dated 17 July 2014 – Lusavouga brought action in Portugal seeking compensation for the unexpected termination of the agreement, and goodwill indemnity. Saey raised a plea of lack of jurisdiction of the Portuguese court, citing their general conditions of sale (mentioned in their invoices) which required that a Court in Belgium be competent for dispute resolution.

    The facts thus presented two issues to be resolved in light of the Brussels I recast Regulation: deciding whether a jurisdiction clause in a vendor’s general terms and conditions pursuant to Art. 25 of the Regulation shall apply, and, if not, choosing the court with jurisdiction under Art. 7 of the Regulation.

    Shall a jurisdiction clause contained within a vendor’s general terms and conditions apply to a distribution relationship?

    The supplier company apparently considered their course of dealing with the Portuguese retailer nothing more than a concatenation of individual sales of goods, governed by their general terms and conditions. Consequently, they argued that any dispute arising from the relationship should be subject to the jurisdiction clause identifying Belgium as the court with jurisdiction under those terms and conditions.

    Thus, a determination was needed on whether, under these facts, there was a valid prorogation of jurisdiction under Article 25, paragraph 1 of Regulation 1215/2012.

    The Court of Justice has long opined that if the jurisdiction clause is included in the general contract conditions drafted by one of the parties, the contract signed by the other party must contain an express reference to those general conditions in order to ensure the real consent thereto by the parties (judgement of 14 December 1976, Estasis Salotti di Colzani, case no. 24/76; judgement of 16 March 1999, Castelletti, case no. C-159/97; judgement of 7 July 2016, Höszig, case no. C-225/15). Moreover, to be valid, the clause must involve a particular legal relationship (judgement of 20 April 2016, Profit Investment SIM, case no. C-366/13).

    In the instant case, the referring court found it self-evident that the legal relationship at bar was a commercial concession agreement entered into for the purpose of distributing Saey products in Spain, a contract that was not evidenced in writing.

    From this perspective, it is clear that the general conditions contained in the Saey invoices could have no bearing on the commercial concession agreement: assuming Lusavouga’s consent had been proven, the selection of Belgium as the forum would have applied if anything to the individual sales agreements, but not to those duties arising from the separate distribution agreement.

    What, then, would be the court with jurisdiction for the duties arising from the commercial concession agreement?

    Absent any jurisdiction clause, the issue would be decided under Art. 7, point 1 of Regulation 1215/2012, under which it becomes imperative to establish whether a contract is for goods or for services.

    The “provision of services” has been defined by the Court of Justice as an activity, not mere omissions, undertaken in return for remuneration (judgement of 23 April 2009, Falco, case no. C-533/07).

    With the judgements in Corman Collins of 19 December 2013 (case no. C-9/12), and Granarolo of 14 July 2016 (case no. C-196/15), the Court held that in a typical distribution agreement, the dealer renders a service, in that they are involved in increasing the distribution of supplier’s product, and receives in consideration therefor a competitive advantage, access to advertising platforms, know-how, or payment facilities. In light of such elements, the contract relationship should be deemed one for services. If on the other hand the commercial relationship is limited to a concatenation of agreements, each for the purpose of a delivery and pickup of merchandise, then what we have is not a typical distribution agreement, and the contractual relationship shall be construed as one for the sale of goods.

    Once the contract has been categorised as one for services, one must then determine “the place where, under the contract, the services are provided”. The Court specifies that such location shall be understood as the member state of the place of the main provision of services, as it follows from the provisions of the contract  or – as in the case at issue – the actual performance of the same. Only where it is impossible to identify such location shall the domicile of the party rendering the service be used.

    From the referring court’s description of the contractual relationship, and from the Court of Justice’s understanding of the distributor’s performance of services, it would be logical to find that the principal location for performance of services was Spain, where Lusavouga “was involved in increasing the distribution of products” of Saey.

    It is clear that neither the manufacturer nor the distributor would ever have intended such a result, and they might have avoided it being chosen for them by reducing their agreement in writing, including a jurisdiction clause therein.

    By the same token, viewed from the outside, the Portuguese judges’ apparent conviction that the situation was one of an actual dealership contract would leave ample room for debate. After all, a number of elements would lead to the opposite conclusion. However, even in terms of that aspect, the absence of a written contract left room for interpretation that might lead to unforeseen – and perhaps rather risky – consequences.

    In conclusion, the wisdom of setting down the terms and conditions of a sales distribution agreement in writing appears clear. This is not only because one can avoid those ambiguities we have described above, but also because it specifies other important clauses stipulated by the parties that should not be left to chance: exclusivity of area, if any, or with respect to specific sales channels, the contract period and termination notice, any duties to promote the product, control over end-user personal data, and the possibility of, and methods for, any online sales of products.

    Agreements restricting competition are prohibited as anticompetitive agreements by Article 101 TFEU unless the agreement’s impact on trade or competition is not appreciable (cf. the EU Court of Justice in the Expedia case, C-226/11, judgment of 13 December 2012). Whether an agreement constitutes an appreciable restriction of competition or is in the «safe harbour» can be assessed according to the European Commission’s De Minimis Notice. Accordingly, an agreement is particularly appreciable if its object is to restrict competition. This applies in particular to so-called hardcore restrictions, such as vertical price maintenance (or resale price maintenance = “RPM”).

    Regarding a special offer for dietary products, the German Higher Regional Court of Celle surprisingly took a different view and decided that even resale price maintenance could be considered non-appreciable and thus falling outside the ban of anticompetitive business practices under Article 101 TFEU (judgment of 07.04.2016, Case 13 U 124/15 [Kart]). In this case, the manufacturer made a special offer to a group of its customers (pharmacies) with a special purchase discount: once, for a limited period and limited to a maximum quantity. In return, the customers should commit themselves to «present the product clearly… and not fall below a resale price of EUR 15.95«.

    The Hanover Regional Court had instead seen the agreement as an unlawful resale price maintenance (judgment of 25 August 2015, Case 18 O 91/15) – and now the German Federal Court confirmed the same: the minimum prices specified here within the advertising campaign appreciably restrict competition and are thus banned as anticompetitive business practice under Article 101 TFEU (judgment of 17 October 2017, Case KZR 59/16). This corresponds to the case law of the EU Court of Justice in the Expedia case (see above) and the German Federal Court with regard to the sales requirement «one bar extra « (i.e. without extra charge compared to the usual package size) of the Italian confectionery manufacturer Ferrero (judgment of 08.04.2003, Case KZR 3/02) – because the latter explicitly concerns «the scope for price increases resulting from the increased contents of the package» – not, however, the retailer’s decision to set prices freely downwards.

    Practical tips

    Vertical price fixing is generally prohibited, whereas providing a manufacturer’s suggested retail price (MSRP, also “recommended retail price”) and maximum selling prices are allowed – this is briefly the principle of German and European antitrust law on pricing frameworks. Furthermore, recommended retail prices and maximum selling prices (“MSP”) are subject to the restriction that they » they do not amount to a fixed or minimum sale price as a result of pressure from, or incentives offered by, any of the parties” (Article 4 lit. a Vertical Block Exemptions Regulation). That means:

    • the manufacturer or supplier may provide guidance,
    • however, the reseller may set his sales prices freely.

    Exceptions may apply – in addition to the RPM on the price of books or in the case of specialisation agreements – by way of the efficiency defence under Article 101 (3) TFEU in individual cases, e.g.

    • in the introductory period when launching new products on the market, or
    • in the case of short-term special offers if accompanied by a corresponding increase in efficiency, for example by investing the higher margin into better customer advice, which benefits all customers and Resale Price Maintenance prevents retailers who do not offer the customer advice from free riding (cf. EU Guidelines on Vertical Restraints, para. 225).

    Such actions, however, require excellent preparation because manufacturers can only set resale prices for very short periods if they can convincingly demonstrate efficiency gains such as preventing free-riders.

    In the case of fixed prices, the competition authorities quickly become sensitive. For example, fines for vertical price maintenance have recently been imposed again in Germany. In this respect, special care must be taken particularly in distribution and sales agreements.

    1. Correspondingly, each company’s sales team should continue following the previous case law on recommended retail prices, maximum selling prices and discount campaigns. Guidance for the practice is provided by

    Geoblocking is a discriminatory practice preventing customers (mainly on-line customers) from accessing and/or purchasing products or services from a website located in another member State, because of the nationality of the customer or his place of residence or establishment.

    The EU Regulation no. 2018/302 of 28 February 2018 on addressing unjustified geoblocking and other forms of discrimination based on customers’ nationality, place of residence or place of establishment within the internal market will enter into force on 2 December 2018.

    The current situation

    The EU Commission carried out a «mystery shopping» survey on over 10 000 e-commerce websites in the EU. The geoblocking figures are quite high! 63% of the websites do not let shoppers to buy from another EU country (even 86% for electric household appliances and 79% for electronics and computer hardware).

    The survey shows also that 92% of on-line retailers require customers to register on their website and to provide them with e-mail address, physical address and telephone number. The registration is denied most of the time because of a foreign delivery address for 27% of the websites. Almost half of the websites give no information about the place of delivery while shopping on the website although this information on delivery restrictions has to be provided in due time during the shopping process. At the end, according to this EC survey, only 37% of the websites truly allow e-shoppers to freely buy on-line from another EU country (without restriction as regards place of establishment, place of delivery and mean of payment).

    On the other side, only 50% of European customers buy products from on-line shops based in another EU member State while the value and the volume of e-commerce, globally speaking increase thoroughly year after year, but only on a domestic scope not throughout Europe.

    On 23 June 2017, the European Council asked for a real implementation of the Digital Single Market strategy in all its elements including cross border partial delivery, consumer protection and prohibition of undue geoblocking.

    The lack of the current legal frameworks

    The service directive (n°2006/123/CE) and article 101 of the TFUE address already the discrimination practices based on nationality or place or residence or establishment.

    According to article 20 (2) of the service directive, the EU member States must ensure that professionals do not treat customers differently based on their place of residence or establishment or nationality (unless objective exception). On the other side, EU competition law on vertical restraints (article 101 TFUE and the block exemption regulation and its guidelines) considers restrictions on passive sales as hard core restrictions violating EU competition rules. However, both set of rules (service directive and competition law framework) appear not to be fully effective in practice.

    With this respect, the recent report of the European commission about the competition enquiry in the e-commerce sector shows, among others, that geoblocking was used at a large scale within the European e-commerce sector.

    The aim of the geoblocking regulation

    The goal of the geoblocking regulation is to prevent professionals from implementing direct or indirect discrimination based on the nationality, the place of residence or the place of establishment of their customers when dealing with cross border e-commerce transactions.

    The scope of the geoblocking regulations

    The new Regulation will only apply to online sales between businesses and end-user consumers or businesses.

    The new Regulation will apply to websites operated within the European Union or to websites operated outside the European Union but proposing goods or services to customers established throughout in the European Union.

    What are the new rules of management of an e-commerce website?

    „As regards the access to the website

    Under the Regulation, a business may neither block nor restrict, through the use of technological measures, access to their online interfaces for reasons related to nationality, place of residence or place of establishment of an internet user. However, businesses are authorized to redirect customers to a different website than the one they were trying to access provided the customer expressly agrees thereto and can still easily visit the website version they originally tried to access.

    „As regards the terms and conditions of sales of the website

    The Regulation forbids businesses from applying different general conditions of access to goods or services according to a customer’s nationality or place of residence or place of establishment (as identified by their IP address in particular) in the following three cases:

    • where the goods sold by the business are delivered in a different member state to which the business offers delivery (or where the goods are collected at a location jointly agreed upon by the business and the customer);
    • where the business offers electronically supplied services such as cloud, data storage, hosting services etc. (but not services offering access to copyright-protected content such as streaming or online-gaming services);
    • where the business supplies services received by the customer in a country in which the business also operates (such as car rental and hotel accommodation services or ticketing services for sporting or cultural events).

    „ As regards the means of payment on the website

    The Regulation forbids businesses from applying different conditions for payment transactions to accepted means of payment for reasons related to a customer’s nationality, place of residence or place of establishment, or to the location of the payment account or the place of establishment of the payment service provider (provided that authentication requirements are fulfilled and that payment transactions are made in a currency accepted by the business).

    What are the impacts of this regulation on e-retailers?

    Although formally excluded from the scope of the Regulation, relations between suppliers and distributors or wholesalers will still be impacted by it since provisions of agreements between businesses under which distributors undertake not to make passive sales (e.g., by blocking or restricting access to a website) for reasons related to a customer’s nationality, place of residence or place of establishment “shall be automatically void”.

    The geoblocking regulation therefore impacts distributors twofold: first, directly in their relations with customers (end-user consumers or user-businesses), and second, indirectly in regard to their obligations under the exclusive distribution agreement.

    The geoblocking regulation shall have to be coordinated with the existing competition law framework, especially the guidelines on vertical restraints which set up specific rules applying to on-line sales. On-line sales are likened to passive sales. The guidelines mention four examples of practices aiming to indirectly guarantee territorial protection which are prohibited when supplier and exclusive distributor agree:

    • that the exclusive distributor shall prevent customers in another territory from visiting their website or shall automatically refer them to the supplier’s or other distributors’ websites,
    • that the exclusive distributor shall terminate an online sale if the purchaser’s credit card data show that the purchaser is not from the exclusive distributor’s exclusive territory,
    • to limit the share of sales made by the exclusive distributor through the internet (but the contract may provide for minimum offline targets in absolute terms and for online sales to remain coherent compared to offline sales).
    • that the exclusive distributor shall pay a higher price for goods intended for sale on the internet than for goods intended for sale offline.

    Manufacturers will have to decide whether they adopt a unique European gateway website or multiple local commercial offers, it being known that price differentiation is still possible per category of clients.

    Indeed, the new Regulation does not oblige the e-retailers to harmonize their price policies, they must only allow EU consumers to access freely and easily to any version of their website. Likewise, this Regulation does not oblige e-retailers to ship products all over Europe, but just allow EU consumers to purchase goods from whichever website they want and to arrange the shipment themselves, if need be.

    Finally on a more contractual level, it is not very clear yet how the new geoblocking rules could impact directly or indirectly the conflict of law rules applicable to consumer contracts, as per the Rome I regulation especially when the consumer will be allowed to handover the product purchased on a foreign website in the country of this website (which imply no specific delivery in the country where the consumer is established).

    Therefore B2C general terms and conditions of websites would need to be reviewed and adapted on both marketing and legal sides.

    Una vez convencidos de la utilidad de la mediación como método de solucionar conflictos entre franquiciador y franquiciado y tomada la decisión de incluir en los contratos una cláusula que la prevea, el último paso sería qué elementos debemos tener en cuenta a la hora de redactarla.

    1. La negociación previa. Parece recomendable que ambas partes se concedan la posibilidad de intentar resolver el problema con una negociación formal previa. La mediación no excluye el intento previo llevado a cabo por los interesados o sus abogados, no obstante, parece recomendable que se prevea contractualmente un plazo adecuado a las circunstancias. La experiencia demuestra que alargar demasiado esta fase puede producir como resultado que el conflicto se vaya agravando y resulte más complicado incluso acercarse a la mediación.
    2. La cláusula puede igualmente prever el lugar en el que la mediación se llevará a cabo. De nuevo en este punto las partes son libres. Es conveniente que éste sea preciso indicando la ciudad.
    3. El idioma en el que va a desarrollarse la mediación es facultad de las partes. No habrá dificultad en mediaciones en las que ambas partes usen el mismo idioma, pero es muy conveniente en contratos con partes que los tengan diferentes, o que pertenezcan a regiones o países con diferentes lenguas cooficiales. La redacción o firma del contrato en un idioma concreto no presupone que ese haya de ser el idioma de la mediación. Es un elemento a tener muy en cuenta también a la hora de solicitar un mediador que pueda usar dicho idioma en la institución de mediación elegida.
    4. El procedimiento puede decidirse igualmente por las partes. En particular, el número de sesiones, la duración máxima prevista, la participación de asesores, etc. Téngase en cuenta que la mayor o menor regulación permitirá evitar futuros conflictos al respecto, aunque también supondrá enmarcar más la libertad de las partes que, no obstante, permanecerán libres para modificar de común acuerdo lo pactado.
    5. El plazo de duración de la mediación puede igualmente contemplarse. Ello permitiría, por ejemplo, evitar que la mediación se alargue únicamente con fines estratégicos meramente procesales o para recabar información de la otra parte antes de iniciar un procedimiento, etc. Los mediadores profesionales, no obstante, son capaces de identificar estas maniobras teniendo la facultad también de poner ellos mismos fin a la mediación en caso de constatarlas.
    6. Elegir al mediador o a la institución de mediación es una elección importante. Las partes pueden ponerse de acuerdo sobre quién será su mediador, indicar en el contrato los elementos para elegirlo, o someterse directamente a una Institución de Mediación para que sea ésta quien lo designe conforme a sus propias reglas. Estas decisiones pueden ser alternativas (es decir, que las partes se pongan de acuerdo sobre el mediador y, en caso de falta de acuerdo, someterse a una institución que lo nombre), o pueden ser únicas. La designación de una Institución requiere que tenga la suficiente garantía de estabilidad (evitar designar instituciones de corta trayectoria o sin demasiada garantía de futuro), con un panel suficiente de mediadores en función de las características de la mediación (idioma, competencia, experiencia) y que permita la flexibilidad necesaria para su funcionamiento.
    7. Por último, es conveniente que la cláusula incluya una vía alternativa en caso de que la mediación no llegue a buen puerto bien porque las partes no llegan a un acuerdo, bien porque se retiran de la mediación. Recordemos que la mediación no cierra las puertas a que el conflicto sea resuelto mediante el recurso a la jurisdicción ordinaria o al arbitraje. Y en materia de arbitraje especializado en contratos de distribución el IDArb (https://www.idiproject.com/content/idarb-idi-arbitration-project) es una excelente opción.

    Benedikt Rohrssen

    Áreas de práctica

    • Agencia
    • Contratos de distribución
    • e-commerce
    • Franquicia
    • Inversiones
    Contáctanos Benedikt