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Francia
France – Abrupt termination of contract
26 septiembre 2017
- Contratos
- Contratos de distribución
- Litigios
Con la reciente sentencia 16601/2017, la Corte Suprema – después de diferentes pronunciamientos contrarios – ha abierto la posibilidad de reconocer en Italia las sentencias extranjeras que contengan daños punitivos.
En este breve artículo veremos en qué consisten los daños punitivos, cuáles son las condiciones por las cuales podrían reconocerse y aplicarse en Italia y, sobretodo, qué medidas conviene tomar para afrontar este nuevo riesgo.
Los daños punitivos, en inglés punitive damages, son un instituto jurídico originario de los ordenamientos anglosajones que prevén la posibilidad de reconocer a la parte perjudicada una indemnización adicional respecto a la compensación del daño sufrido, en los casos en los que el causante del daño haya actuado con dolo o culpa grave (“malice” y “gross negligence”, respectivamente).
Con los daños punitivos, además de la función compensatoria, la indemnización del daño también asume una finalidad sancionadora, típica del derecho penal, actuando como elemento de disuasión ante otros potenciales infractores.
En los ordenamientos en los que se prevén los daños punitivos, el reconocimiento y la cuantificación de la indemnización se someten a la discrecionalidad del juez.
En los Estados Unidos de América los daños punitivos se prevén en los principios de common law, pero se disciplinan de modo diverso en cada uno de los Estados. Sin embargo, en general, se aplican siempre que la conducta del causante del daño haya sido dirigida a causar el daño intencionadamente o, se haya llevado a cabo sin tener en cuenta las normas de seguridad preestablecidas. Por lo general, no pueden reconocerse por el incumplimiento de un contrato, salvo que no se determine como un ilícito (tort) autónomo.
En algunos Estados se prevén límites máximos a los daños punitivos, a veces incorporados en los daños compensatorios, otras veces como cuantía máxima. Además, la Corte Suprema de los EEUU ha intervenido en diferentes casos para limitar el importe de condena.
En los ordenamientos de civil law, entre ellos Italia, el instituto de daños punitivos tradicionalmente no se reconoce, ya que la sanción al causante del daño se considera que queda al margen de los principios del derecho civil, basándose en la concepción de que la indemnización por daños tiene como objetivo restaurar la esfera patrimonial del perjudicado.
En consecuencia, el reconocimiento de los daños punitivos en una sentencia, se obstaculizaban por el límite de orden público y tales sentencias no tenían acceso en el espacio jurídico italiano.
La sentencia de las Secciones Unidas núm. 16601/2017, de 5 de julio de 2017 de la Corte Suprema de Casación ha girado las cartas sobre la mesa.
En el presente caso se solicitó a la Corte de Apelación de Venecia el reconocimiento (ex. Art. 64 de la Ley 218/1995) de tres sentencias de la District Court of Appeal of the State of Florida que, admitió una denuncia de garantía interpuesta por un revendedor americano de cascos contra la sociedad productora italiana, por la cual se había condenado a ésta última al pago de 1.436.136,87 USD (además de gastos e intereses) en base al resarcimiento de los daños causas por un defecto del casco utilizado en un accidente de tráfico.
La Corte de Apelación de Venecia reconoció la eficacia de la sentencia del juez extranjero, considerando que el importe era meramente indemnizatorio y no punitivo. La decisión fue recurrida en Casación por la parte condenada, que sostenía la contrariedad al orden publico de la sentencia estadunidense, en base a la orientación jurisprudencial hasta ese momento.
La Casación ha confirmado la decisión de la Corte de Apelación, considerando que el importe no es punitivo y ha declarado el reconocimiento de la sentencia estadunidense en Italia.
Las Secciones Unidas, por su parte, han aprovechado la ocasión para afrontar la cuestión inherente a la admisibilidad de los daños punitivos en Italia, cambiando la orientación histórica de la Corte Suprema (véase Cass. 1781/2012).
Según la Corte, la noción de responsabilidad civil entendida como mera reparación de los daños sufridos, se debe considerar como obsoleta dada la evolución del instituto a través de intervenciones legislativas y jurisprudenciales nacionales y europeas, que han introducido medidas indemnizatorias con finalidad sancionadora y disuasiva. De hecho, en el ordenamiento italiano es posible encontrar diversos casos de indemnización por daños con finalidad sancionadora: en materia de difamación en medios de comunicación (art. 12 L. 47/48), derechos de autor (art. 158 L 633/41), propiedad industrial (art. 125 D. Lgs 30/2005), abuso del proceso (art. 96.3 c.p.c. y art. 26.2 c.p.a.), derecho laboral (art. 18.14 c.p.c.), derecho de familia (art. 709-ter c.p.c.), etc.
De este modo, la Corte de Casación ha introducido el siguiente principio de derecho: “En el vigente ordenamiento italiano, a la responsabilidad civil no solo se le asigna el deber de restaurar la esfera patrimonial del sujeto que ha sufrido la lesión, porque se consideran incluidas en el sistema la función de disuasión y la función sancionadora de la responsabilidad civil. Por tanto, no es ontológicamente incompatible con el ordenamiento italiano el instituto de origen estadunidense de la indemnización punitiva”.
La consecuencia, a tener en muy cuenta, es que el pronunciamiento abre la puerta a posibles deliberaciones de sentencias extranjeras, que condenen a una de las partes al pago de un importe superior respecto al importe calculado para compensar el prejuicio creado a causa de un daño.
Sin embargo, a tal fin, la Corte Suprema ha dispuesto algunas condiciones para que la sentencia extranjera pueda reconocerse. La decisión ha debido ser tomada en el ordenamiento extranjero en base a:
- Garantizar la tipicidad de la condena.
- La previsibilidad de la misma.
- Los límites cuantificativos.
Los posibles efectos de la Sentencia en el ordenamiento italiano
En primer lugar, hay que tener claro que la Sentencia no ha modificado el sistema indemnizatorio interno del ordenamiento italiano. En otras palabras, la Sentencia no permitirá a los jueces italianos condenar por daños punitivos al interno de los procedimientos italianos.
En cambio, por lo que respecta a las sentencias extranjeras, ahora será posible obtener la indemnización por daños punitivos a través del reconocimiento y la ejecución en el sistema italiano de una decisión extranjera que prevea la condena de dicha tipología de daño, con la condición de que se respeten los mencionados presupuestos.
Por todo lo expuesto, las empresas que hayan invertido o que realicen negocios en países en los que se prevén los daños punitivos, tendrán que tener en consideración dicho riesgo.
Los instrumentos para tutelarse
El empresario quien opere en mercados extranjeros en los que se prevén los daños punitivos debe considerar con atención este riesgo.
La óptica debe ser necesariamente de prevención y los instrumentos a disposición son diversos: en primer lugar, la adopción de cláusulas contractuales que prevean la renuncia del perjudicado a este tipo de daño o, que acuerden un límite a la indemnización de los daños contractuales, por ejemplo limitándolos al valor de los productos o a los servicios ofrecidos.
Es además fundamental, que se conozca la legislación y la jurisprudencia de los mercados en los cuales se opera, incluso indirectamente (por ejemplo, con la distribución comercial de los productos) con el fin de escoger de modo consciente la ley aplicable al contrato y la modalidad de resolución de controversias (por ejemplo, con previsión de la exclusiva jurisdiccional del foro del país que no prevea daños punitivos).
Finalmente, este tipo de responsabilidad y riesgo puede ser objeto de valoración con pólizas aseguradoras que ofrecen una cobertura específica respecto a eventuales condenas de indemnización de daños punitivos.
[Initial note: This article is not aimed as a political article pro or con boycott movements or the Israeli government, but rather as a legal informative overview, in light of the actual and financial impact or exposure international business may have in the referred to matter.]
It is perhaps not known to many international trading players, but under Israeli law, Bill for prevention of damage to the State of Israel through boycott – 2011, affirmed by the Supreme Court in 2015 (after a slight interpretive adjustment), boycotting Israeli origin products, or deliberate avoidance of economic or academic ties, may give rise to a lawsuit for actual damages under civil law.
In light of the international BDS movement, attempting to place pressure upon the State of Israel by means of economic and cultural pressure, Israel has realized such activity, indeed, causes actual harm and damage to Israeli based business, manufacturers, importers/exporters, etc., as well as to academic students and professors, and so on, in cultural ties of many sorts – just because the origin is Israel.
This boycott movement affects the people and businesses of Israel, as opposed to Israeli leaders or politicians or the State of Israel as a state, and conveys questionable (to say the least) economic and cultural negative effects upon the people facing unprecedented obstacles in trade in the international arena – for no wrongdoing on their part.
Regardless of the political opinion one may have concerning the legitimacy, or rather the non-legitimacy, of the BDS movement or concerning the current political policy of the State of Israel – the relatively new law provides actual legal tools to deal with negative economic outcomes (damages, loss of profits, etc.) that businesses or private people encounter or suffer from boycott measures, solely because of their affiliation or relation to the State of Israel.
Regardless of any opinion of the act itself or its enactment, at the end of the day the act exists and may be used and exploited by filing civil lawsuits against anyone who called for or participated in a boycott. In that sense it creates a new civil wrong as part of the Israeli tort laws.
Moreover, even a deliberate avoidance of economic, cultural or academic ties can raise liability for the avoider towards the business or ties avoided, as well as liability for anyone who has called for the boycott or publicly expressed support of it.
The law goes even further – and also excludes the defense argument of «sufficient justification» and thus provides that anyone who has caused or led to a breach of a contract, by calling for a boycott, may be liable for damages, as well.
As for the damages that can be claimed, after the adjustment to the law according to the Supreme Court ruling of 2015 (ruling that compensation must be awarded in correspondence with the actual damages or loss of profit caused, and cancelled the clause for penal compensation) – the entity that may sue for torts is the entity that suffered the damage and what can be sued for is the actual damage according to the regular Israeli torts law.
The law also prohibits a person who calls for a boycott from participating in any public tender, but this is a different focus from the side of the state.
It is worth mentioning that the rationale for this legislation was also reviewed by the widely respected Israeli Supreme Court, that has strongly elaborated that such legislation is constitutional and, inter alia, that international entities and individuals such as the BDS movement (as opposed perhaps to states) should not be able to harm or interfere with international or domestic economic affairs without at least being accountable for the outcome of such, and that freedom of speech cannot be unlimitedly protected when it in fact calls for action (or for refraining from action) that has an actual impact on another and is not simply an expression of an opinion.
To date, it seems that the Magistrates and District Courts of Israel have yet to render judgments in actual cases based on the boycott act, indicating that the implementation of the act is still inchoate. However, it seems that instances and measures of boycotting are on the rise and the methods of boycotting are becoming increasingly overt, in a manner that is bound to lead to considerable litigation in the near future.
Needless to say, issues of jurisdiction, and other aspects of private international law, or imposing jurisdiction on foreign players, are also yet to be resolved in reference to the emergence of lawsuits under the boycott law, but these will surely find their creative legal solutions with the actual submission of lawsuits concerning real life cases.
One of the commonly discussed advantages of international commercial arbitration over litigation in the cross-border context is the enforcement issue. For the purpose of swifter enforcement of foreign arbitral awards, the vast majority of countries signed the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.
On contrary, there is no relevant international treaty of such scale for the enforcement of foreign court judgements. Normally, the special legal basis, such as agreement on judicial cooperation between two or more countries, needs to be relied upon in order to get a court judgment recognized and enforced in another country. There are quite many countries that do not have such an agreement with China. This includes, among others, US, Germany or the Netherlands.
Interestingly, however, recently the Chinese court in Wuhan enforced the US court judgement rendered by the Los Angeles Superior Court of California in the Liu Li v Tao Li and Tong Wu case. It did so despite the fact that there is no agreement between China and US providing for mutual recognition and enforcement of such judgements. The court in Wuhan found, however, that the reciprocity in recognizing and enforcing the court judgments between China and US was established because of an earlier decision of the US District Court of the Central District of California recognizing and enforcing the Chinese judgement rendered by the Higher People’s Court of Hubei in the Hubei Gezhouba Sanlian Industrial Co., Ltd et. al. v Robinson Helicopter Co., Inc. case.
Interestingly, similar course of action was taken earlier in 2016 when the Chinese Nanjing Intermediate People’s Court enforced the Singaporean judgement relying on the reciprocity principle in the Kolma v SUTEX Group case.
How much does it tell us?
Should we now feel safe when opting for own courts in the dispute resolution clauses in the China-related deals? – despite the fact there are no relevant agreements between China and our country? The recent moves of the Chinese courts are, indeed, interesting developments changing the dispute resolution landscape in a desirable direction and increasing the chances for enforcing the foreign commercial court judgements. Yet, as of today, one should not see them as the universal door-openers for the foreign court judgements in similar situations. Accordingly, rather careful approach is recommended and the other dispute resolution methods securing the safer way of enforcement, like arbitration, should be kept in mind. The further changes remain to be seen.
The author of this post is Monika Prusinowska.
If your business is related to France or you wish to develop your business in this direction, you need to be aware of one very specific provision with regards to the termination of a business relationship.
Article L. 442-6, I, 5° of the French Commercial Code protects a party to a contract who considers that the other party has terminated the existing business relationship in a sudden and abrupt way, thus causing her a damage.
This is a ‘public policy’ provision and therefore any contractual provision to the contrary will be unenforceable.
Initially, the lawmaker aimed to protect any business relationship between suppliers and major large-scale retailers delisting (ie, removing a supplier’s products that were referenced by a distributor) at the moment of contracts renegotiations or renewals.
Eventually, the article has been drafted in order to extend its scope to any business relationship, regardless of the status of the professionals involved and the nature of the commercial relationship.
The party who wishes to terminate the business relationship does not need to provide any justification for her actions but must send a sufficient prior notice to the other party.
The purpose is to allow the parties, and in particular the abandoned party, to anticipate the discharge of the contract, in particular in cases of economic dependency.
It is an accentuated obligation of loyalty.
There are only two cases strictly interpreted by case law in which the partner is exempted from sending a prior notice:
- an aggravated breach of a contractual obligation;
- a frustration or a force majeure.
There are two main requirements to be fulfilled in order to be able to invoke this provision in front of a judge – an established business relationship and an abrupt termination.
The judge will assess whether the requirements have been fulfilled on a case by case basis.
What does the term ‘established business relationship’ mean?
The most important criterion is the duration, whether a written contract exists or not.
A relationship may be considered as long-term whether there is a single contract or a few consecutive contracts.
If there is no contract in place, the judge will take into account the following criteria:
- the existence of a long-term established business relationship;
- the good faith of the parties;
- the frequency of the transactions and the importance and evolving of the turnover;
- any agreement on the prices applied and/or the discounts granted to the other party;
- any correspondence exchanged between the parties.
What does the term ‘abrupt termination’ mean?
The Courts consider the application of Article L442-6-I 5° if the termination is “unforeseeable, sudden and harsh”.
The termination must comply with the following three conditions in order to be considered as abrupt:
- with no prior notice or with insufficient prior notice;
- sudden;
- unpredictable.
To consider whether a prior notice is sufficient, a judge may consider the following criteria:
- the investments made by the victim of the termination;
- the business involved (eg seasonal fashion collections);
- a constant increase in turnover;
- the market recognition of the products sold by the victim and the difficulty of finding replacement products;
- the existence of a post-contractual non-compete undertaking ;
- the existence of exclusivity between the parties;
- the time period required for the victim to find other openings or refocus the business activity;
- the existence of any economic dependency for the victim.
The courts have decided that a partial termination may also be considered as abrupt in the following cases:
- an organisational change in the distribution structure of the supplier;
- a substantial decrease in trade flows;
- a change in pricing terms or an increase in prices without any prior notice sent by a supplier granting special prices to the buyers, or in general any unilateral and substantial change in the contract terms.
Whatever the justification for the termination, it is necessary to send a registered letter with an acknowledgment of receipt and ensure that the prior notice is sent sufficienlty in advance (some businesses have specific time periods applicable to them by law).
Compensation for a damage
The French Commercial Code provides for the award of damages in order to compensate a party for an abrupt termination of a business relationship.
The damages are calculated by multiplying the notice period which should have been applied by the average profit achieved prior to the termination. Such profit is evaluated based on the pre-tax gross margin that would have been achieved during the required notice period, had sufficient notice been given.
The courts may also award damages for incidental and consequential losses such as redundancy costs, losses of scheduled stocks, operational costs, certain unamortised investments and restructuring costs, indemnities paid to third parties or even image or reputational damage.
International law
The French supreme court competent in civil law (‘Cour de cassation’) considers that in cases where the decision to terminate the business relationship and the resulting damage take place in two different countries, it is a matter of torts and the applicable law will be the one of the country where the triggering event the most closely connected with the tort took place. Therefore the abrupt termination will be subject to French law if the business of the supplier is located in France.
However, the Court of Justice of the European Union (CJEU) has issued a preliminary ruling dated 14 July 2016 answering two questions submitted by the Paris Court of Appeal in a judgment dated 17 April 2015. A French company had been distributing in France the food products of an Italian company for the last 25 years, with no framework agreement or any exclusivity provision in place. The Italian company had terminated the business relationship with no prior notice. The French company issued proceedings against the Italian company in front of the French courts and invoked the abrupt termination of an established business relationship.
The Italian company opposed both the jurisdiction of the French courts and the legal ground for the action arguing that the Italian courts had jurisdiction as the action involved contract law and was therefore subject to the laws of the country where the commodities had been or should have been delivered, in this case Incoterm Ex-works departing from the plant in Italy.
The CJEU has considered that in case of a tacit contractual relationship and pursuant to European law, the liability will be based on contract law (in the same case, pursuant to French law, the liability will be based on torts). As a consequence, Article 5, 3° of the Regulation (EC) 44/2001, also known as Brussels I (which has been replaced by Regulation (EC) 1215/2012, also known as Brussels I bis) will not apply. Therefore, the competent judge will not be the one of the country where the damage occurred but the one of the country where the contractual obligation was being performed.
In addition and answering the second question submitted to it, the CJEU has considered that the contract is:
- a contract for the sale of goods if its purpose is the delivery of goods, in which case the competent jurisdiction will be the one of the country where the goods have been or should have been delivered; and
- a contract for services if its purpose is the provision of services, in which case the competent jurisdiction will be the one of the country where the services have been or should have been provided.
In this case, the Paris Court of Appeal will have to recharacherise the contractual relationship either as consecutive contracts for the sale of goods and deduct the jurisdiction of the Italian courts, or as a contract for services implying the participation of the distributor in the development and the distribution of the supplier’s goods and business strategy and deduct the jurisdiction of the French courts.
In summary, in case of an intra-Community dispute, the distributor who is the victim of an abrupt termination of an established business relationship cannot issue proceedings based on torts in front of a court in the country where the damage occurred if there is a tacit contractual relationship with the supplier. In order to determine the competent jurisdiction in such case, it is necessary to determine whether such tacit contractual relationship consists of a supply of goods or a provision of services.
The next judgment of the Paris Court of Appeal and those of the Cour de cassation to come need to be followed very closely.
When negotiating contracts, parties typically focus on the key commercial terms of their agreement. The clauses that govern the term of the agreement (i.e., the duration, or how long the contract remains in force), the renewal of the term, and how the agreement can be terminated, however, merit careful consideration.
Under Québec law, contracts typically have terms that are either fixed (e.g., 5 years, 10 years etc.), or are for an indeterminate period of time (i.e., no specific term is provided for). Contracts with fixed terms may also contain automatic renewal clauses. In the case of an indeterminate term contract, a party to the contract can generally, absent specific terms or a notice provision to the contrary in the contract, terminate it, without cause, by providing reasonable notice of termination (what constitutes «reasonable notice» depends on a number of factors and is decided on the facts of each case). A third category of contracts are contracts with a potentially perpetual term. An example of a potentially perpetual contract is a contract that contains a renewal clause that is entirely under the control of only one of the parties who can, effectively, unilaterally decide whether the contract will go on indefinitely. In such a contract, the other contracting party does not have a right to terminate the contract by providing reasonable notice of termination. The validity of perpetual term contracts was precisely the issue before the Supreme Court of Canada in its July 28, 2017 decision in Uniprix inc. v. Gestion Gosselin et Bérubé inc. https://scc-csc.lexum.com/scc-csc/scc-csc/en/item/16746/index.do («Uniprix«).
In Uniprix, the pharmacy chain entered into an affiliation agreement with various members of a pharmacists’ group pursuant to which said members operated a pharmacy under the Uniprix banner. The term of the contract was for a fixed term of 5 years and the renewal clause allowed members to provide a notice within a certain period of time, failing which the contract would automatically be renewed for an additional 5 years:
Regardless of any written or verbal provisions to the contrary, this agreement shall commence on the day of its signing and shall remain in effect for a period of sixty (60) months, or for a period equal to the term of the lease for the premises where the pharmacy is located. [The member pharmacist] shall, six (6) months before the expiration of the agreement, notify [Uniprix] of its intention to leave [Uniprix] or to renew the agreement;
Should [the member pharmacist] fail to send the prescribed notice by registered mail, the agreement shall be deemed to have been renewed in accordance with the terms and conditions then in effect, as prescribed by the board of directors, except with regard to the fee.[Translation]
The Uniprix agreement did not provide any say to Uniprix in connection with its renewal and there were no limits on the number of times that the members could renew the agreement. As such, the contract could remain in force perpetually based entirely on the members’ decision. After the contract had been renewed twice, Uniprix sent the members a notice of non-renewal and purported to terminate the agreement. The members contested Uniprix’s decision based on the fact that under the affiliation agreement, the renewal clause could only be exercised by the members and, unless the members gave notice to the contrary, the contract was automatically renewed. Uniprix argued that the effect of the members’ position, which would bind the parties in perpetuity, was contrary to public order (i.e., it violated a fundamental societal value) and unlawful and, as such, the term of the agreement should be considered to be for an indeterminate period, which would allow either party to terminate it on reasonable notice.
In a 6-3 decision, the Supreme Court of Canada held (in upholding the decisions of the majority of the Québec Court of Appeal and of the Superior Court of Québec) that there was nothing under Québec law that prohibited a contract of affiliation from having a perpetual term and that this did not, in and of itself and in the context of corporate and commercial agreements, offend any fundamental societal values. The Court’s holding would equally apply to many other types of contracts such as, for example, franchise agreements and licensing agreements. The Court held, accordingly, that the affiliation agreement was not for an indeterminate term and, therefore, could be not be terminated by Uniprix by providing reasonable notice.
With respect to the holding in Uniprix , the following points should be kept in mind:
- The Supreme Court of Canada expressly noted that in certain circumstances, such as where an individual’sperson and freedom are affected (e.g., a contract of employment), a perpetual obligation could offend public order.
- In certain specific cases set out in the Civil Code of Québec, the legislator has provided maximum terms for certain types of contracts (e.g., a commercial lease cannot exceed 100 years, the duration of payment of an annuity is 100 years).
- In the case of a contract of adhesion (which is generally defined as a contract where one of the parties was unable to negotiate its terms), the adhering or vulnerable party can argue that a perpetual term is abusive and, therefore, null.
- The Court’s decision in Uniprixapplied to Uniprix’s ability to terminate the contract without cause. A party always retains the right to terminate a contract for cause. What constitutes «cause» is decided on a case by case basis and may also be governed by the terms of the contract.
When drafting contracts, parties are generally, subject to limitations imposed by the legislator or public order, permitted to structure their relationship as they see fit. Parties should carefully consider whether they truly intend the duration of their agreement to be entirely under the control of one of the parties to the agreement for an indefinite period of time because, as is made clear in Uniprix, perpetual commercial contracts are enforceable under Québec law.
The author of this post is David Stolow.
Some places are good to go to for arbitration, some places are better avoided. It is not this blog’s aim to hail the former and blame the latter but, rather, to outline why Switzerland certainly is a good choice when it comes to arbitration.
Arbitration clauses are sometimes called “Midnight Clauses”. They are called “Midnight Clauses” because they tend to be the very last clause that parties will negotiate on when trying to contractually finalize a business transaction. If the parties are looking for an excellent dispute resolution mechanism or are having last-minute difficulties in finding a suitable compromise, arbitration in Switzerland might be a valuable alternative. Why? There are a handful of unique selling propositions.
First of all, Switzerland has a long tradition of hosting international arbitrations of all kinds (both ad-hoc and institutional). The tradition dates back more than hundred years. As a consequence of this history and experience, you will find easy access to a great number of excellent legal practitioners, both counsel and arbitrators.
Second, Switzerland is politically neutral and is the seat of many international organizations (WTO, WIPO, IOC, etc.). This ensures an openness of mind to different cultures and values and makes Switzerland a great place for an international arbitration.
Third, Swiss substantive law offers a very liberal, clearly defined and predictable legal framework to its users. As a consequence, Arbitration in Switzerland is ideally combined with a choice of law clause in favour of Swiss substantive law.
Fourth and importantly, Switzerland offers both a very stable legal system and an excellent legal framework. Switzerland’s international arbitration law follows an efficient regime and is comprised of only 18 very concise articles. Furthermore, the Swiss judiciary applies a very arbitration-friendly approach in dealing with challenges of arbitral awards and only interferes in exceptional circumstances. There is only one challenge available and this challenge goes right to the Swiss Federal Supreme Court, Switzerland’s highest court. The Supreme Court will not review the merits of the award. It will, however, ensure that the most basic legal principles (public policy) are safe-guarded. Consequently, there are no cost-intense multi step annulment proceedings before state courts. Challenges are generally dealt with within six months.
Fifth, Switzerland offers great infrastructure both in terms of travelling access, hotels, security, court reporting and translation needs.
Last but not least, arbitration in Switzerland offers you great flexibility. You can arbitrate according to the arbitration rules of all of the major institutions, i.e., ICC, Swiss Chambers of Commerce, LCIA, SCC, DIS, AAA, SIAC, HIAC, CIETAC or under Ad-Hoc Rules and will find a suitable ground for your arbitration. For all of these reasons and many more, arbitral awards originating in Switzerland will profit from a great reputation and will be easily enforceable internationally in case of need.
There is a number of dispute resolution mechanisms available for the disputes with the Chinese parties. Depending on bargaining power of the parties and few other circumstances, such as limitations of Chinese law, the dispute can be sometimes resolved outside of China. More frequently, however, the Sino-foreign disputes are resolved in China and this post offers a brief introduction to the methods available there .
As almost anything else in business, an optimal method for resolution of future disputes is worth of anticipating well in advance. Once there is a conflict, it is much more difficult for the parties to agree on the solution equally acceptable to both of them. There is a variety of options to choose from and each of them has its own advantages and disadvantages. Also, there is no “one size fits all” solution and each transaction as well as dispute should be approached individually. Of course, there is always is a default solution, which is going to state court in case the parties have not provided for any alternative mechanism, but this is not always the most optimal way to go.
Litigation
Chinese courts are commonly perceived by foreigners as rather undesirable scenario for dispute resolution. It is so due to the often mentioned problems, such as local protectionism of the Chinese courts or lack of their professionalism. However, in practice, this is not always true and especially the courts in the China’s well-developed regions, particularly in the biggest coastal cities are generally a safe harbor for disputes involving foreigners. The same holds true for the IP courts located in Beijing, Shanghai and Guangzhou. One needs to remember, however, that the jurisdiction of particular court depends on a number of factors, such as place of registration of the Chinese counterparty or place of performance of the contract and therefore, the Chinese top courts may not be the ones handling particular dispute in practice.
Arbitration
Arbitration is a common choice for foreign-related disputes in China. It happens so, because of a number of advantages of arbitration over litigation in such a context. To start with, China and the vast majority of the countries in the world are the parties to the New York Convention, which significantly streamlines the enforcement of foreign arbitral awards. There is no comparable treaty of that scale for the enforcement of state court judgements, what can cause practical problems if certain country does not have an agreement on judicial assistance with China and the enforcement of foreign court judgements is sought. Therefore, since the parties want money and not a piece of paper, the use of arbitration in the cross-border context can substantially improve the prospects for effective enforcement of arbitral award. Furthermore, in contrast to litigating in China, in arbitration English language can be used in proceeding and a party can be represented by a foreign counsel. In arbitration, the parties can also select arbitrators resolving their dispute and a foreign arbitrator is not an uncommon scenario in case of the Sino-foreign arbitration proceedings in China. The parties can also select a specific arbitration institution and rules applicable to the proceeding.
The China International Economic and Trade Arbitration Commission (CIETAC) and the Beijing Arbitration Commission (BAC) are one of the most frequently chosen arbitration institutions in China for the foreign-related disputes. Alternatively, if the circumstances of the case permit – the dispute can be taken outside of China and resolved, for instance, by the Hong Kong International Arbitration Centre (HKIAC) or the Singapore International Arbitration Centre (SIAC), which are fairly acceptable alternative choices for the Chinese parties.
Other options
One of the other methods popular in China is mediation. Mediation is typically faster, cheaper and increases the chances of preserving good relationship between the parties. However, one needs to remember that in order to mediate, the parties need to be willing to do so, since the role of mediator is to help the parties reach an agreement and not to ultimately decide their dispute. Furthermore, the product of mediation is a contract and so, the breach of mediation agreement typically equals to contractual breach.
One additional important tool frequently used in practice is engaging local lawyers for the purpose of negotiating with the Chinese party as soon as the dispute escalates. The lawyers can help the parties communicate and when the communication is impossible – they can prepare a document describing the claims and informing the Chinese party about the risk of undertaking further legal steps, such as staring court proceeding, what is made mainly for the purpose of brining the other party back to negotiation and finding a solution acceptable to both parties. This often helps save time and money, but it can be problematic if the other party ignores the actions of lawyer. Also, like in case of mediation, the problem lies in the enforcement of any agreement reached by the parties in the course of negotiation.
The main takeaways from this short post are the following:
- Think about the dispute resolution mechanism in advance. There are quite many issues that need to be taken into consideration and there is no “one size fits all” solution. There might be the situations when going to the Chinese court makes perfect sense and there also might be the situations when it makes no sense at all. What is the best option for me in particular case? Which court can potentially have jurisdiction over my case? Does the country involved have a judicial assistance agreement with China for the purpose of enforcement? What should be the language of proceeding? Which arbitration institution to choose?
- Think about hiring professionals right from the very beginning, preferably at the stage of negotiating and drafting agreements. Choosing an optimal solution for resolution of future disputes can help save a lot of time, money and energy. In case of dispute occurring already – act promptly. If the dispute escalates, think about what you can do to best preserve your rights. Should you apply for interim measures? Do you need to first negotiate before you can go for arbitration in case of multi-tier clauses? Which documents are needed to start the proceeding?
The author of this post is Monika Prusinowska.
Las controversias mercantiles en Italia pueden ser resueltas de modo eficaz ante los tribunales italianos (ya sea mediante el procedimiento ordinario o mediante el procedimiento sumario) o, si así lo acuerdan las partes, mediante el arbitraje.
Normalmente un tribunal suele tardar en dictar sentencia –en primera instancia- alrededor de tres o cuatro años y –en segunda instancia- en unos cuatro o cinco años, mientras que la duración del procedimiento de arbitraje suele ser más corta (alrededor de un año), ya que depende de las condiciones de contratación de las partes y de las reglas de arbitraje que rigen el mismo.
Por otra parte, los costes que derivan de los procedimientos de arbitraje son más elevados que los costes requeridos para los procedimientos judiciales, mientras que los plazos en los procedimientos arbitrales son generalmente más rápidos, especialmente si el arbitraje se lleva a cabo atendiendo a las reglas de una institución arbitral (por ejemplo, la Cámara Internacional de Arbitraje de Milán).
Ejecución de sentencias extranjeras y laudos arbitrales internacionales
Las sentencias extranjeras se reconocen y se ejecutan en Italia a través de diferentes procedimientos, dependiendo de que la sentencia haya sido dictada por un tribunal de un Estado miembro de Unión Europea o por un tribunal no comunitario.
En general, cualquier sentencia, decisión o medida que cumpla con determinados requisitos, que haya sido dictada por un tribunal de un Estado miembro de la UE y que sea exigible en ese Estado, es reconocida automáticamente en la jurisdicción italiana sin que se requiera ningún procedimiento especial y/o sin que se requiera una declaración de ejecución, atendiendo a los Reglamentos UE 1215/2012, 44/2001 y los Convenios de Bruselas y Lugano II, cuando puedan ser aplicables.
Además, para las sentencias dictadas por un tribunal no perteneciente a la UE, existen una serie de convenios bilaterales relativos al reconocimiento y ejecución de resoluciones judiciales en materia civil.
En relación a los laudos arbitrales internacionales, en 1969 Italia firmó la Convención de Nueva York de 1958 sobre el reconocimiento y ejecución de sentencias arbitrales internacionales. En consecuencia, Italia reconoce los laudos arbitrales extranjeros de manera vinculante y los ejecuta de conformidad con la legislación procesal italiana en las condiciones establecidas en la Convención de Nueva York.
De ese modo, para que un laudo de arbitraje extranjero pueda ejecutarse en Italia, el mismo deberá presentarse ante el Tribunal de Apelación del lugar de residencia de la parte contraria (si se encuentra en Italia) o ante la Corte de Apelaciones de Roma (si la parte contraria reside en el extranjero). En este caso, el Tribunal de Apelación solo comprobará que el laudo extranjero respete los requisitos formales, sin entrar en el fondo de la controversia, después, el tribunal emitirá una orden ejecutiva, de ese modo el laudo se convertirá en equivalente a una sentencia que pueda ser ejecutiva.
Ejecución de sentencias y laudos arbitrales italianos en otras jurisdicciones
La posibilidad de hacer valer las sentencias y los laudos arbitrales italianos en el extranjero varía en función de cada una de las jurisdicciones.
En particular, las sentencias italianas son aplicables en el extranjero de conformidad con el Reglamento de Bruselas I bis de la UE y, cuando sea aplicable, con el Convenio de Lugano.
Como ya se ha mencionado anteriormente, Italia también forma parte de la Convención de Nueva York de 1958, el cual se basa en el principio de reciprocidad para el reconocimiento y ejecución de los laudos arbitrales dictados en territorio de otro Estado parte del Convenio. Por lo tanto, un laudo dictado en Italia es ejecutable en jurisdicciones extranjeras que sean parte de la Convención de Nueva York.
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To infinity and beyond – Perpetual contracts under Québec law
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Con la reciente sentencia 16601/2017, la Corte Suprema – después de diferentes pronunciamientos contrarios – ha abierto la posibilidad de reconocer en Italia las sentencias extranjeras que contengan daños punitivos.
En este breve artículo veremos en qué consisten los daños punitivos, cuáles son las condiciones por las cuales podrían reconocerse y aplicarse en Italia y, sobretodo, qué medidas conviene tomar para afrontar este nuevo riesgo.
Los daños punitivos, en inglés punitive damages, son un instituto jurídico originario de los ordenamientos anglosajones que prevén la posibilidad de reconocer a la parte perjudicada una indemnización adicional respecto a la compensación del daño sufrido, en los casos en los que el causante del daño haya actuado con dolo o culpa grave (“malice” y “gross negligence”, respectivamente).
Con los daños punitivos, además de la función compensatoria, la indemnización del daño también asume una finalidad sancionadora, típica del derecho penal, actuando como elemento de disuasión ante otros potenciales infractores.
En los ordenamientos en los que se prevén los daños punitivos, el reconocimiento y la cuantificación de la indemnización se someten a la discrecionalidad del juez.
En los Estados Unidos de América los daños punitivos se prevén en los principios de common law, pero se disciplinan de modo diverso en cada uno de los Estados. Sin embargo, en general, se aplican siempre que la conducta del causante del daño haya sido dirigida a causar el daño intencionadamente o, se haya llevado a cabo sin tener en cuenta las normas de seguridad preestablecidas. Por lo general, no pueden reconocerse por el incumplimiento de un contrato, salvo que no se determine como un ilícito (tort) autónomo.
En algunos Estados se prevén límites máximos a los daños punitivos, a veces incorporados en los daños compensatorios, otras veces como cuantía máxima. Además, la Corte Suprema de los EEUU ha intervenido en diferentes casos para limitar el importe de condena.
En los ordenamientos de civil law, entre ellos Italia, el instituto de daños punitivos tradicionalmente no se reconoce, ya que la sanción al causante del daño se considera que queda al margen de los principios del derecho civil, basándose en la concepción de que la indemnización por daños tiene como objetivo restaurar la esfera patrimonial del perjudicado.
En consecuencia, el reconocimiento de los daños punitivos en una sentencia, se obstaculizaban por el límite de orden público y tales sentencias no tenían acceso en el espacio jurídico italiano.
La sentencia de las Secciones Unidas núm. 16601/2017, de 5 de julio de 2017 de la Corte Suprema de Casación ha girado las cartas sobre la mesa.
En el presente caso se solicitó a la Corte de Apelación de Venecia el reconocimiento (ex. Art. 64 de la Ley 218/1995) de tres sentencias de la District Court of Appeal of the State of Florida que, admitió una denuncia de garantía interpuesta por un revendedor americano de cascos contra la sociedad productora italiana, por la cual se había condenado a ésta última al pago de 1.436.136,87 USD (además de gastos e intereses) en base al resarcimiento de los daños causas por un defecto del casco utilizado en un accidente de tráfico.
La Corte de Apelación de Venecia reconoció la eficacia de la sentencia del juez extranjero, considerando que el importe era meramente indemnizatorio y no punitivo. La decisión fue recurrida en Casación por la parte condenada, que sostenía la contrariedad al orden publico de la sentencia estadunidense, en base a la orientación jurisprudencial hasta ese momento.
La Casación ha confirmado la decisión de la Corte de Apelación, considerando que el importe no es punitivo y ha declarado el reconocimiento de la sentencia estadunidense en Italia.
Las Secciones Unidas, por su parte, han aprovechado la ocasión para afrontar la cuestión inherente a la admisibilidad de los daños punitivos en Italia, cambiando la orientación histórica de la Corte Suprema (véase Cass. 1781/2012).
Según la Corte, la noción de responsabilidad civil entendida como mera reparación de los daños sufridos, se debe considerar como obsoleta dada la evolución del instituto a través de intervenciones legislativas y jurisprudenciales nacionales y europeas, que han introducido medidas indemnizatorias con finalidad sancionadora y disuasiva. De hecho, en el ordenamiento italiano es posible encontrar diversos casos de indemnización por daños con finalidad sancionadora: en materia de difamación en medios de comunicación (art. 12 L. 47/48), derechos de autor (art. 158 L 633/41), propiedad industrial (art. 125 D. Lgs 30/2005), abuso del proceso (art. 96.3 c.p.c. y art. 26.2 c.p.a.), derecho laboral (art. 18.14 c.p.c.), derecho de familia (art. 709-ter c.p.c.), etc.
De este modo, la Corte de Casación ha introducido el siguiente principio de derecho: “En el vigente ordenamiento italiano, a la responsabilidad civil no solo se le asigna el deber de restaurar la esfera patrimonial del sujeto que ha sufrido la lesión, porque se consideran incluidas en el sistema la función de disuasión y la función sancionadora de la responsabilidad civil. Por tanto, no es ontológicamente incompatible con el ordenamiento italiano el instituto de origen estadunidense de la indemnización punitiva”.
La consecuencia, a tener en muy cuenta, es que el pronunciamiento abre la puerta a posibles deliberaciones de sentencias extranjeras, que condenen a una de las partes al pago de un importe superior respecto al importe calculado para compensar el prejuicio creado a causa de un daño.
Sin embargo, a tal fin, la Corte Suprema ha dispuesto algunas condiciones para que la sentencia extranjera pueda reconocerse. La decisión ha debido ser tomada en el ordenamiento extranjero en base a:
- Garantizar la tipicidad de la condena.
- La previsibilidad de la misma.
- Los límites cuantificativos.
Los posibles efectos de la Sentencia en el ordenamiento italiano
En primer lugar, hay que tener claro que la Sentencia no ha modificado el sistema indemnizatorio interno del ordenamiento italiano. En otras palabras, la Sentencia no permitirá a los jueces italianos condenar por daños punitivos al interno de los procedimientos italianos.
En cambio, por lo que respecta a las sentencias extranjeras, ahora será posible obtener la indemnización por daños punitivos a través del reconocimiento y la ejecución en el sistema italiano de una decisión extranjera que prevea la condena de dicha tipología de daño, con la condición de que se respeten los mencionados presupuestos.
Por todo lo expuesto, las empresas que hayan invertido o que realicen negocios en países en los que se prevén los daños punitivos, tendrán que tener en consideración dicho riesgo.
Los instrumentos para tutelarse
El empresario quien opere en mercados extranjeros en los que se prevén los daños punitivos debe considerar con atención este riesgo.
La óptica debe ser necesariamente de prevención y los instrumentos a disposición son diversos: en primer lugar, la adopción de cláusulas contractuales que prevean la renuncia del perjudicado a este tipo de daño o, que acuerden un límite a la indemnización de los daños contractuales, por ejemplo limitándolos al valor de los productos o a los servicios ofrecidos.
Es además fundamental, que se conozca la legislación y la jurisprudencia de los mercados en los cuales se opera, incluso indirectamente (por ejemplo, con la distribución comercial de los productos) con el fin de escoger de modo consciente la ley aplicable al contrato y la modalidad de resolución de controversias (por ejemplo, con previsión de la exclusiva jurisdiccional del foro del país que no prevea daños punitivos).
Finalmente, este tipo de responsabilidad y riesgo puede ser objeto de valoración con pólizas aseguradoras que ofrecen una cobertura específica respecto a eventuales condenas de indemnización de daños punitivos.
[Initial note: This article is not aimed as a political article pro or con boycott movements or the Israeli government, but rather as a legal informative overview, in light of the actual and financial impact or exposure international business may have in the referred to matter.]
It is perhaps not known to many international trading players, but under Israeli law, Bill for prevention of damage to the State of Israel through boycott – 2011, affirmed by the Supreme Court in 2015 (after a slight interpretive adjustment), boycotting Israeli origin products, or deliberate avoidance of economic or academic ties, may give rise to a lawsuit for actual damages under civil law.
In light of the international BDS movement, attempting to place pressure upon the State of Israel by means of economic and cultural pressure, Israel has realized such activity, indeed, causes actual harm and damage to Israeli based business, manufacturers, importers/exporters, etc., as well as to academic students and professors, and so on, in cultural ties of many sorts – just because the origin is Israel.
This boycott movement affects the people and businesses of Israel, as opposed to Israeli leaders or politicians or the State of Israel as a state, and conveys questionable (to say the least) economic and cultural negative effects upon the people facing unprecedented obstacles in trade in the international arena – for no wrongdoing on their part.
Regardless of the political opinion one may have concerning the legitimacy, or rather the non-legitimacy, of the BDS movement or concerning the current political policy of the State of Israel – the relatively new law provides actual legal tools to deal with negative economic outcomes (damages, loss of profits, etc.) that businesses or private people encounter or suffer from boycott measures, solely because of their affiliation or relation to the State of Israel.
Regardless of any opinion of the act itself or its enactment, at the end of the day the act exists and may be used and exploited by filing civil lawsuits against anyone who called for or participated in a boycott. In that sense it creates a new civil wrong as part of the Israeli tort laws.
Moreover, even a deliberate avoidance of economic, cultural or academic ties can raise liability for the avoider towards the business or ties avoided, as well as liability for anyone who has called for the boycott or publicly expressed support of it.
The law goes even further – and also excludes the defense argument of «sufficient justification» and thus provides that anyone who has caused or led to a breach of a contract, by calling for a boycott, may be liable for damages, as well.
As for the damages that can be claimed, after the adjustment to the law according to the Supreme Court ruling of 2015 (ruling that compensation must be awarded in correspondence with the actual damages or loss of profit caused, and cancelled the clause for penal compensation) – the entity that may sue for torts is the entity that suffered the damage and what can be sued for is the actual damage according to the regular Israeli torts law.
The law also prohibits a person who calls for a boycott from participating in any public tender, but this is a different focus from the side of the state.
It is worth mentioning that the rationale for this legislation was also reviewed by the widely respected Israeli Supreme Court, that has strongly elaborated that such legislation is constitutional and, inter alia, that international entities and individuals such as the BDS movement (as opposed perhaps to states) should not be able to harm or interfere with international or domestic economic affairs without at least being accountable for the outcome of such, and that freedom of speech cannot be unlimitedly protected when it in fact calls for action (or for refraining from action) that has an actual impact on another and is not simply an expression of an opinion.
To date, it seems that the Magistrates and District Courts of Israel have yet to render judgments in actual cases based on the boycott act, indicating that the implementation of the act is still inchoate. However, it seems that instances and measures of boycotting are on the rise and the methods of boycotting are becoming increasingly overt, in a manner that is bound to lead to considerable litigation in the near future.
Needless to say, issues of jurisdiction, and other aspects of private international law, or imposing jurisdiction on foreign players, are also yet to be resolved in reference to the emergence of lawsuits under the boycott law, but these will surely find their creative legal solutions with the actual submission of lawsuits concerning real life cases.
One of the commonly discussed advantages of international commercial arbitration over litigation in the cross-border context is the enforcement issue. For the purpose of swifter enforcement of foreign arbitral awards, the vast majority of countries signed the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.
On contrary, there is no relevant international treaty of such scale for the enforcement of foreign court judgements. Normally, the special legal basis, such as agreement on judicial cooperation between two or more countries, needs to be relied upon in order to get a court judgment recognized and enforced in another country. There are quite many countries that do not have such an agreement with China. This includes, among others, US, Germany or the Netherlands.
Interestingly, however, recently the Chinese court in Wuhan enforced the US court judgement rendered by the Los Angeles Superior Court of California in the Liu Li v Tao Li and Tong Wu case. It did so despite the fact that there is no agreement between China and US providing for mutual recognition and enforcement of such judgements. The court in Wuhan found, however, that the reciprocity in recognizing and enforcing the court judgments between China and US was established because of an earlier decision of the US District Court of the Central District of California recognizing and enforcing the Chinese judgement rendered by the Higher People’s Court of Hubei in the Hubei Gezhouba Sanlian Industrial Co., Ltd et. al. v Robinson Helicopter Co., Inc. case.
Interestingly, similar course of action was taken earlier in 2016 when the Chinese Nanjing Intermediate People’s Court enforced the Singaporean judgement relying on the reciprocity principle in the Kolma v SUTEX Group case.
How much does it tell us?
Should we now feel safe when opting for own courts in the dispute resolution clauses in the China-related deals? – despite the fact there are no relevant agreements between China and our country? The recent moves of the Chinese courts are, indeed, interesting developments changing the dispute resolution landscape in a desirable direction and increasing the chances for enforcing the foreign commercial court judgements. Yet, as of today, one should not see them as the universal door-openers for the foreign court judgements in similar situations. Accordingly, rather careful approach is recommended and the other dispute resolution methods securing the safer way of enforcement, like arbitration, should be kept in mind. The further changes remain to be seen.
The author of this post is Monika Prusinowska.
If your business is related to France or you wish to develop your business in this direction, you need to be aware of one very specific provision with regards to the termination of a business relationship.
Article L. 442-6, I, 5° of the French Commercial Code protects a party to a contract who considers that the other party has terminated the existing business relationship in a sudden and abrupt way, thus causing her a damage.
This is a ‘public policy’ provision and therefore any contractual provision to the contrary will be unenforceable.
Initially, the lawmaker aimed to protect any business relationship between suppliers and major large-scale retailers delisting (ie, removing a supplier’s products that were referenced by a distributor) at the moment of contracts renegotiations or renewals.
Eventually, the article has been drafted in order to extend its scope to any business relationship, regardless of the status of the professionals involved and the nature of the commercial relationship.
The party who wishes to terminate the business relationship does not need to provide any justification for her actions but must send a sufficient prior notice to the other party.
The purpose is to allow the parties, and in particular the abandoned party, to anticipate the discharge of the contract, in particular in cases of economic dependency.
It is an accentuated obligation of loyalty.
There are only two cases strictly interpreted by case law in which the partner is exempted from sending a prior notice:
- an aggravated breach of a contractual obligation;
- a frustration or a force majeure.
There are two main requirements to be fulfilled in order to be able to invoke this provision in front of a judge – an established business relationship and an abrupt termination.
The judge will assess whether the requirements have been fulfilled on a case by case basis.
What does the term ‘established business relationship’ mean?
The most important criterion is the duration, whether a written contract exists or not.
A relationship may be considered as long-term whether there is a single contract or a few consecutive contracts.
If there is no contract in place, the judge will take into account the following criteria:
- the existence of a long-term established business relationship;
- the good faith of the parties;
- the frequency of the transactions and the importance and evolving of the turnover;
- any agreement on the prices applied and/or the discounts granted to the other party;
- any correspondence exchanged between the parties.
What does the term ‘abrupt termination’ mean?
The Courts consider the application of Article L442-6-I 5° if the termination is “unforeseeable, sudden and harsh”.
The termination must comply with the following three conditions in order to be considered as abrupt:
- with no prior notice or with insufficient prior notice;
- sudden;
- unpredictable.
To consider whether a prior notice is sufficient, a judge may consider the following criteria:
- the investments made by the victim of the termination;
- the business involved (eg seasonal fashion collections);
- a constant increase in turnover;
- the market recognition of the products sold by the victim and the difficulty of finding replacement products;
- the existence of a post-contractual non-compete undertaking ;
- the existence of exclusivity between the parties;
- the time period required for the victim to find other openings or refocus the business activity;
- the existence of any economic dependency for the victim.
The courts have decided that a partial termination may also be considered as abrupt in the following cases:
- an organisational change in the distribution structure of the supplier;
- a substantial decrease in trade flows;
- a change in pricing terms or an increase in prices without any prior notice sent by a supplier granting special prices to the buyers, or in general any unilateral and substantial change in the contract terms.
Whatever the justification for the termination, it is necessary to send a registered letter with an acknowledgment of receipt and ensure that the prior notice is sent sufficienlty in advance (some businesses have specific time periods applicable to them by law).
Compensation for a damage
The French Commercial Code provides for the award of damages in order to compensate a party for an abrupt termination of a business relationship.
The damages are calculated by multiplying the notice period which should have been applied by the average profit achieved prior to the termination. Such profit is evaluated based on the pre-tax gross margin that would have been achieved during the required notice period, had sufficient notice been given.
The courts may also award damages for incidental and consequential losses such as redundancy costs, losses of scheduled stocks, operational costs, certain unamortised investments and restructuring costs, indemnities paid to third parties or even image or reputational damage.
International law
The French supreme court competent in civil law (‘Cour de cassation’) considers that in cases where the decision to terminate the business relationship and the resulting damage take place in two different countries, it is a matter of torts and the applicable law will be the one of the country where the triggering event the most closely connected with the tort took place. Therefore the abrupt termination will be subject to French law if the business of the supplier is located in France.
However, the Court of Justice of the European Union (CJEU) has issued a preliminary ruling dated 14 July 2016 answering two questions submitted by the Paris Court of Appeal in a judgment dated 17 April 2015. A French company had been distributing in France the food products of an Italian company for the last 25 years, with no framework agreement or any exclusivity provision in place. The Italian company had terminated the business relationship with no prior notice. The French company issued proceedings against the Italian company in front of the French courts and invoked the abrupt termination of an established business relationship.
The Italian company opposed both the jurisdiction of the French courts and the legal ground for the action arguing that the Italian courts had jurisdiction as the action involved contract law and was therefore subject to the laws of the country where the commodities had been or should have been delivered, in this case Incoterm Ex-works departing from the plant in Italy.
The CJEU has considered that in case of a tacit contractual relationship and pursuant to European law, the liability will be based on contract law (in the same case, pursuant to French law, the liability will be based on torts). As a consequence, Article 5, 3° of the Regulation (EC) 44/2001, also known as Brussels I (which has been replaced by Regulation (EC) 1215/2012, also known as Brussels I bis) will not apply. Therefore, the competent judge will not be the one of the country where the damage occurred but the one of the country where the contractual obligation was being performed.
In addition and answering the second question submitted to it, the CJEU has considered that the contract is:
- a contract for the sale of goods if its purpose is the delivery of goods, in which case the competent jurisdiction will be the one of the country where the goods have been or should have been delivered; and
- a contract for services if its purpose is the provision of services, in which case the competent jurisdiction will be the one of the country where the services have been or should have been provided.
In this case, the Paris Court of Appeal will have to recharacherise the contractual relationship either as consecutive contracts for the sale of goods and deduct the jurisdiction of the Italian courts, or as a contract for services implying the participation of the distributor in the development and the distribution of the supplier’s goods and business strategy and deduct the jurisdiction of the French courts.
In summary, in case of an intra-Community dispute, the distributor who is the victim of an abrupt termination of an established business relationship cannot issue proceedings based on torts in front of a court in the country where the damage occurred if there is a tacit contractual relationship with the supplier. In order to determine the competent jurisdiction in such case, it is necessary to determine whether such tacit contractual relationship consists of a supply of goods or a provision of services.
The next judgment of the Paris Court of Appeal and those of the Cour de cassation to come need to be followed very closely.
When negotiating contracts, parties typically focus on the key commercial terms of their agreement. The clauses that govern the term of the agreement (i.e., the duration, or how long the contract remains in force), the renewal of the term, and how the agreement can be terminated, however, merit careful consideration.
Under Québec law, contracts typically have terms that are either fixed (e.g., 5 years, 10 years etc.), or are for an indeterminate period of time (i.e., no specific term is provided for). Contracts with fixed terms may also contain automatic renewal clauses. In the case of an indeterminate term contract, a party to the contract can generally, absent specific terms or a notice provision to the contrary in the contract, terminate it, without cause, by providing reasonable notice of termination (what constitutes «reasonable notice» depends on a number of factors and is decided on the facts of each case). A third category of contracts are contracts with a potentially perpetual term. An example of a potentially perpetual contract is a contract that contains a renewal clause that is entirely under the control of only one of the parties who can, effectively, unilaterally decide whether the contract will go on indefinitely. In such a contract, the other contracting party does not have a right to terminate the contract by providing reasonable notice of termination. The validity of perpetual term contracts was precisely the issue before the Supreme Court of Canada in its July 28, 2017 decision in Uniprix inc. v. Gestion Gosselin et Bérubé inc. https://scc-csc.lexum.com/scc-csc/scc-csc/en/item/16746/index.do («Uniprix«).
In Uniprix, the pharmacy chain entered into an affiliation agreement with various members of a pharmacists’ group pursuant to which said members operated a pharmacy under the Uniprix banner. The term of the contract was for a fixed term of 5 years and the renewal clause allowed members to provide a notice within a certain period of time, failing which the contract would automatically be renewed for an additional 5 years:
Regardless of any written or verbal provisions to the contrary, this agreement shall commence on the day of its signing and shall remain in effect for a period of sixty (60) months, or for a period equal to the term of the lease for the premises where the pharmacy is located. [The member pharmacist] shall, six (6) months before the expiration of the agreement, notify [Uniprix] of its intention to leave [Uniprix] or to renew the agreement;
Should [the member pharmacist] fail to send the prescribed notice by registered mail, the agreement shall be deemed to have been renewed in accordance with the terms and conditions then in effect, as prescribed by the board of directors, except with regard to the fee.[Translation]
The Uniprix agreement did not provide any say to Uniprix in connection with its renewal and there were no limits on the number of times that the members could renew the agreement. As such, the contract could remain in force perpetually based entirely on the members’ decision. After the contract had been renewed twice, Uniprix sent the members a notice of non-renewal and purported to terminate the agreement. The members contested Uniprix’s decision based on the fact that under the affiliation agreement, the renewal clause could only be exercised by the members and, unless the members gave notice to the contrary, the contract was automatically renewed. Uniprix argued that the effect of the members’ position, which would bind the parties in perpetuity, was contrary to public order (i.e., it violated a fundamental societal value) and unlawful and, as such, the term of the agreement should be considered to be for an indeterminate period, which would allow either party to terminate it on reasonable notice.
In a 6-3 decision, the Supreme Court of Canada held (in upholding the decisions of the majority of the Québec Court of Appeal and of the Superior Court of Québec) that there was nothing under Québec law that prohibited a contract of affiliation from having a perpetual term and that this did not, in and of itself and in the context of corporate and commercial agreements, offend any fundamental societal values. The Court’s holding would equally apply to many other types of contracts such as, for example, franchise agreements and licensing agreements. The Court held, accordingly, that the affiliation agreement was not for an indeterminate term and, therefore, could be not be terminated by Uniprix by providing reasonable notice.
With respect to the holding in Uniprix , the following points should be kept in mind:
- The Supreme Court of Canada expressly noted that in certain circumstances, such as where an individual’sperson and freedom are affected (e.g., a contract of employment), a perpetual obligation could offend public order.
- In certain specific cases set out in the Civil Code of Québec, the legislator has provided maximum terms for certain types of contracts (e.g., a commercial lease cannot exceed 100 years, the duration of payment of an annuity is 100 years).
- In the case of a contract of adhesion (which is generally defined as a contract where one of the parties was unable to negotiate its terms), the adhering or vulnerable party can argue that a perpetual term is abusive and, therefore, null.
- The Court’s decision in Uniprixapplied to Uniprix’s ability to terminate the contract without cause. A party always retains the right to terminate a contract for cause. What constitutes «cause» is decided on a case by case basis and may also be governed by the terms of the contract.
When drafting contracts, parties are generally, subject to limitations imposed by the legislator or public order, permitted to structure their relationship as they see fit. Parties should carefully consider whether they truly intend the duration of their agreement to be entirely under the control of one of the parties to the agreement for an indefinite period of time because, as is made clear in Uniprix, perpetual commercial contracts are enforceable under Québec law.
The author of this post is David Stolow.
Some places are good to go to for arbitration, some places are better avoided. It is not this blog’s aim to hail the former and blame the latter but, rather, to outline why Switzerland certainly is a good choice when it comes to arbitration.
Arbitration clauses are sometimes called “Midnight Clauses”. They are called “Midnight Clauses” because they tend to be the very last clause that parties will negotiate on when trying to contractually finalize a business transaction. If the parties are looking for an excellent dispute resolution mechanism or are having last-minute difficulties in finding a suitable compromise, arbitration in Switzerland might be a valuable alternative. Why? There are a handful of unique selling propositions.
First of all, Switzerland has a long tradition of hosting international arbitrations of all kinds (both ad-hoc and institutional). The tradition dates back more than hundred years. As a consequence of this history and experience, you will find easy access to a great number of excellent legal practitioners, both counsel and arbitrators.
Second, Switzerland is politically neutral and is the seat of many international organizations (WTO, WIPO, IOC, etc.). This ensures an openness of mind to different cultures and values and makes Switzerland a great place for an international arbitration.
Third, Swiss substantive law offers a very liberal, clearly defined and predictable legal framework to its users. As a consequence, Arbitration in Switzerland is ideally combined with a choice of law clause in favour of Swiss substantive law.
Fourth and importantly, Switzerland offers both a very stable legal system and an excellent legal framework. Switzerland’s international arbitration law follows an efficient regime and is comprised of only 18 very concise articles. Furthermore, the Swiss judiciary applies a very arbitration-friendly approach in dealing with challenges of arbitral awards and only interferes in exceptional circumstances. There is only one challenge available and this challenge goes right to the Swiss Federal Supreme Court, Switzerland’s highest court. The Supreme Court will not review the merits of the award. It will, however, ensure that the most basic legal principles (public policy) are safe-guarded. Consequently, there are no cost-intense multi step annulment proceedings before state courts. Challenges are generally dealt with within six months.
Fifth, Switzerland offers great infrastructure both in terms of travelling access, hotels, security, court reporting and translation needs.
Last but not least, arbitration in Switzerland offers you great flexibility. You can arbitrate according to the arbitration rules of all of the major institutions, i.e., ICC, Swiss Chambers of Commerce, LCIA, SCC, DIS, AAA, SIAC, HIAC, CIETAC or under Ad-Hoc Rules and will find a suitable ground for your arbitration. For all of these reasons and many more, arbitral awards originating in Switzerland will profit from a great reputation and will be easily enforceable internationally in case of need.
There is a number of dispute resolution mechanisms available for the disputes with the Chinese parties. Depending on bargaining power of the parties and few other circumstances, such as limitations of Chinese law, the dispute can be sometimes resolved outside of China. More frequently, however, the Sino-foreign disputes are resolved in China and this post offers a brief introduction to the methods available there .
As almost anything else in business, an optimal method for resolution of future disputes is worth of anticipating well in advance. Once there is a conflict, it is much more difficult for the parties to agree on the solution equally acceptable to both of them. There is a variety of options to choose from and each of them has its own advantages and disadvantages. Also, there is no “one size fits all” solution and each transaction as well as dispute should be approached individually. Of course, there is always is a default solution, which is going to state court in case the parties have not provided for any alternative mechanism, but this is not always the most optimal way to go.
Litigation
Chinese courts are commonly perceived by foreigners as rather undesirable scenario for dispute resolution. It is so due to the often mentioned problems, such as local protectionism of the Chinese courts or lack of their professionalism. However, in practice, this is not always true and especially the courts in the China’s well-developed regions, particularly in the biggest coastal cities are generally a safe harbor for disputes involving foreigners. The same holds true for the IP courts located in Beijing, Shanghai and Guangzhou. One needs to remember, however, that the jurisdiction of particular court depends on a number of factors, such as place of registration of the Chinese counterparty or place of performance of the contract and therefore, the Chinese top courts may not be the ones handling particular dispute in practice.
Arbitration
Arbitration is a common choice for foreign-related disputes in China. It happens so, because of a number of advantages of arbitration over litigation in such a context. To start with, China and the vast majority of the countries in the world are the parties to the New York Convention, which significantly streamlines the enforcement of foreign arbitral awards. There is no comparable treaty of that scale for the enforcement of state court judgements, what can cause practical problems if certain country does not have an agreement on judicial assistance with China and the enforcement of foreign court judgements is sought. Therefore, since the parties want money and not a piece of paper, the use of arbitration in the cross-border context can substantially improve the prospects for effective enforcement of arbitral award. Furthermore, in contrast to litigating in China, in arbitration English language can be used in proceeding and a party can be represented by a foreign counsel. In arbitration, the parties can also select arbitrators resolving their dispute and a foreign arbitrator is not an uncommon scenario in case of the Sino-foreign arbitration proceedings in China. The parties can also select a specific arbitration institution and rules applicable to the proceeding.
The China International Economic and Trade Arbitration Commission (CIETAC) and the Beijing Arbitration Commission (BAC) are one of the most frequently chosen arbitration institutions in China for the foreign-related disputes. Alternatively, if the circumstances of the case permit – the dispute can be taken outside of China and resolved, for instance, by the Hong Kong International Arbitration Centre (HKIAC) or the Singapore International Arbitration Centre (SIAC), which are fairly acceptable alternative choices for the Chinese parties.
Other options
One of the other methods popular in China is mediation. Mediation is typically faster, cheaper and increases the chances of preserving good relationship between the parties. However, one needs to remember that in order to mediate, the parties need to be willing to do so, since the role of mediator is to help the parties reach an agreement and not to ultimately decide their dispute. Furthermore, the product of mediation is a contract and so, the breach of mediation agreement typically equals to contractual breach.
One additional important tool frequently used in practice is engaging local lawyers for the purpose of negotiating with the Chinese party as soon as the dispute escalates. The lawyers can help the parties communicate and when the communication is impossible – they can prepare a document describing the claims and informing the Chinese party about the risk of undertaking further legal steps, such as staring court proceeding, what is made mainly for the purpose of brining the other party back to negotiation and finding a solution acceptable to both parties. This often helps save time and money, but it can be problematic if the other party ignores the actions of lawyer. Also, like in case of mediation, the problem lies in the enforcement of any agreement reached by the parties in the course of negotiation.
The main takeaways from this short post are the following:
- Think about the dispute resolution mechanism in advance. There are quite many issues that need to be taken into consideration and there is no “one size fits all” solution. There might be the situations when going to the Chinese court makes perfect sense and there also might be the situations when it makes no sense at all. What is the best option for me in particular case? Which court can potentially have jurisdiction over my case? Does the country involved have a judicial assistance agreement with China for the purpose of enforcement? What should be the language of proceeding? Which arbitration institution to choose?
- Think about hiring professionals right from the very beginning, preferably at the stage of negotiating and drafting agreements. Choosing an optimal solution for resolution of future disputes can help save a lot of time, money and energy. In case of dispute occurring already – act promptly. If the dispute escalates, think about what you can do to best preserve your rights. Should you apply for interim measures? Do you need to first negotiate before you can go for arbitration in case of multi-tier clauses? Which documents are needed to start the proceeding?
The author of this post is Monika Prusinowska.
Las controversias mercantiles en Italia pueden ser resueltas de modo eficaz ante los tribunales italianos (ya sea mediante el procedimiento ordinario o mediante el procedimiento sumario) o, si así lo acuerdan las partes, mediante el arbitraje.
Normalmente un tribunal suele tardar en dictar sentencia –en primera instancia- alrededor de tres o cuatro años y –en segunda instancia- en unos cuatro o cinco años, mientras que la duración del procedimiento de arbitraje suele ser más corta (alrededor de un año), ya que depende de las condiciones de contratación de las partes y de las reglas de arbitraje que rigen el mismo.
Por otra parte, los costes que derivan de los procedimientos de arbitraje son más elevados que los costes requeridos para los procedimientos judiciales, mientras que los plazos en los procedimientos arbitrales son generalmente más rápidos, especialmente si el arbitraje se lleva a cabo atendiendo a las reglas de una institución arbitral (por ejemplo, la Cámara Internacional de Arbitraje de Milán).
Ejecución de sentencias extranjeras y laudos arbitrales internacionales
Las sentencias extranjeras se reconocen y se ejecutan en Italia a través de diferentes procedimientos, dependiendo de que la sentencia haya sido dictada por un tribunal de un Estado miembro de Unión Europea o por un tribunal no comunitario.
En general, cualquier sentencia, decisión o medida que cumpla con determinados requisitos, que haya sido dictada por un tribunal de un Estado miembro de la UE y que sea exigible en ese Estado, es reconocida automáticamente en la jurisdicción italiana sin que se requiera ningún procedimiento especial y/o sin que se requiera una declaración de ejecución, atendiendo a los Reglamentos UE 1215/2012, 44/2001 y los Convenios de Bruselas y Lugano II, cuando puedan ser aplicables.
Además, para las sentencias dictadas por un tribunal no perteneciente a la UE, existen una serie de convenios bilaterales relativos al reconocimiento y ejecución de resoluciones judiciales en materia civil.
En relación a los laudos arbitrales internacionales, en 1969 Italia firmó la Convención de Nueva York de 1958 sobre el reconocimiento y ejecución de sentencias arbitrales internacionales. En consecuencia, Italia reconoce los laudos arbitrales extranjeros de manera vinculante y los ejecuta de conformidad con la legislación procesal italiana en las condiciones establecidas en la Convención de Nueva York.
De ese modo, para que un laudo de arbitraje extranjero pueda ejecutarse en Italia, el mismo deberá presentarse ante el Tribunal de Apelación del lugar de residencia de la parte contraria (si se encuentra en Italia) o ante la Corte de Apelaciones de Roma (si la parte contraria reside en el extranjero). En este caso, el Tribunal de Apelación solo comprobará que el laudo extranjero respete los requisitos formales, sin entrar en el fondo de la controversia, después, el tribunal emitirá una orden ejecutiva, de ese modo el laudo se convertirá en equivalente a una sentencia que pueda ser ejecutiva.
Ejecución de sentencias y laudos arbitrales italianos en otras jurisdicciones
La posibilidad de hacer valer las sentencias y los laudos arbitrales italianos en el extranjero varía en función de cada una de las jurisdicciones.
En particular, las sentencias italianas son aplicables en el extranjero de conformidad con el Reglamento de Bruselas I bis de la UE y, cuando sea aplicable, con el Convenio de Lugano.
Como ya se ha mencionado anteriormente, Italia también forma parte de la Convención de Nueva York de 1958, el cual se basa en el principio de reciprocidad para el reconocimiento y ejecución de los laudos arbitrales dictados en territorio de otro Estado parte del Convenio. Por lo tanto, un laudo dictado en Italia es ejecutable en jurisdicciones extranjeras que sean parte de la Convención de Nueva York.