A “VICIOUS” BREAKUP OF STABLE TRADE RELATIONSHIPS

The identification of the applicable law, is of fundamental importance in the case of purchase agreements or concession contracts or, in any case, of commercial relationships with French and / or Belgian partners concerning the purchase and sales and resale, over time, of goods and / or services.

In fact, Italian law, in the event of withdrawal from a sales concession contract of indefinite duration, does not require any notice period for the exercise of the withdrawal or any compensation in favor of its contractual counterpart. On the other hand, both French law and the Belgian one imposes (provided that the withdrawal does not occur for just cause or for breach of contract) compliance with a reasonable period of notice and, above all, contemplate, in default of the same, the obligation for the withdrawing party to compensate the damage suffered from the injured party.

To be precise, as regards French law, art. 442-6, I, 5 of the Commercial Code establishes that the party who intends to withdraw, even partially, from a “stable” commercial relationship must comply with a reasonable period of notice, failing which, the termination of the relationship is considered “brutal” and, as such, obliges the withdrawing party to compensate the damage suffered by its business partner for not having had time to reorganize its business.

This provision applies to any type of commercial relationship (distribution, franchising, supply of products, provision of services, etc.), provided it is stable (that is, protracted over time or, in any case, recurring) and concerns not only registered contracts but also those concluded orally or “de facto”.

The notice must be communicated in writing, by registered letter or by certified mail, and does not need any justification, because, for the purposes of its effectiveness, it is sufficient that the intention to withdraw from the contract is communicated.

Furthermore, the notice period must be “appropriate”, otherwise the withdrawal is considered “brutal” in any case.

As regards the duration of the notice, it must take into account both the duration of the commercial relationship, as expressly provided for by the French Code, and other criteria identified by the jurisprudence, such as, for example, the presence of an exclusivity clause or, in any case, the economic dependence of one of the parties or the importance of the investments made for the execution of the contract.

Again, for example a commercial relationship between 1 and 5 years long, the French courts usually consider a 3/6-month notice to be appropriate, while the relationship lasted for 6/10 years, the notice must be equal to double, i.e. 6/12 months.

As for the amount of compensation for damages, the French Code does not provide for a specific quantification. However, as a general rule, the French courts condemn those responsible for a “brutal” withdrawal to pay a compensation equal to the gross profit that the contractor could have incurred in, for the duration of the “appropriate” notice period.

It is also essential to know that this discipline is applied even in the event that the parties have not chosen the law applicable to the relationship (or, more generally, have not concluded any written contract) or, even where a law other than the French one governs the contractual relationship.

In the first case, when the parties have not determined the law governing the relationship, the Rome Convention dated 19 June 1980 on the law applicable to contractual obligations, art. 4, establishes that, in the absence of choice on the applicable law, the law that regulates the distribution contract is that of the country in which the distributor has his habitual residence.

If, therefore, an Italian contractor intends to withdraw from a distribution relationship with a counterpart resident in France and has not agreed on the law applicable to the contract, he must know that, in the event of a dispute, the French law will apply.

The same will happen, as anticipated, where a law different from the French one governs the contractual relationship. In fact, the French Courts consider the aforementioned article 442-6 of the Commercial Code as an international “public order” rule, with the consequence that it applies even when French law does not apply to the contract.

Even in this case, therefore, the Italian commercial partner will in any case be required to comply with a reasonable period of notice, since, in default, its French counterpart may still demand the application of French law and, consequently, the immediate compensation for the damages.

The same is for Belgium governing law, where the withdrawal from a sales concession contract is subject to special protection in favor of the concessionaire, and, where it is exclusive, the withdrawing party is required to comply with a reasonable notice period, in defect of which, like the French law’s provisions, the contractor is required to pay damages.

The Belgian legislator wanted to protect the concessionaire in the event of a unilateral withdrawal from the contractual relationship, by arranging, with the Law of 27 July 1961, measures aimed at limiting the economic losses that it suffers due to the interruption of the commercial relationship.

The scope and conditions for the application of the aforementioned provisions are the same as those provided for by French law, with the further limitation that, as mentioned, it must be an exclusive concession.

A further feature of Belgian law is that, even in the case of a unilateral withdrawal, the concessionaire can claim, in addition to the aforementioned compensation, also the payment of a supplementary compensation.

This additional indemnity is however subject to the existence of three conditions altogether. Namely, that the concessionaire has increased the clientele. That he has sustained, in execution of the contract, expenses. Last, that the concessionaire must, in turn, pay severance indemnities to the dismissed personnel, due to the termination of the concession contract.

I therefore invite the Italian dealers who intend to start with a French or Belgian counterpart a sale concession contract (or, in any case, in the broadest sense of the term, a contract, not occasional, aimed at the purchase and resale of goods and / or services) to take into account the peculiarities illustrated here, both in the negotiation phase and in the interruption of the contract, so as to avoid unexpected and costly economic consequences.