This book provides a wide-ranging review of the European rules relating to distribution: exclusive purchase and exclusive supply, exclusive and selective distribution, motor vehicle distribution, franchises, commercial agents.

French Distribution Law

In 2003, the European Commission launched a vast action plan for the harmonization of European contract law. It gave rise to two sub-projects; the first one, known as “Acquis” classifies all existing directives in matter of contract law and the second, which aims to establish and is developing a Common Frame of Reference (CFR) for contract law that parties are free to consult, following the exampl …

Towards a common European law of distribution.

At first sight the question posed may seem surprising. The law of distribution has been the subject of various teachings and a number of textbooks, and professional lawyers practice it on a daily basis. The existence of such a law should therefore be indisputable. However, the field is a tricky one to define. Taking a broad view, the law of distribution could bring together all the legal rules governing activities relating to the provision of goods and services to end-users between the production and the consumption stage. Such a wide view would have to include all employment law rules pertaining to sales staff, consumer law, the rules on urban commercial planning and commercial centres and many more. This wide-reaching concept does have definite drawbacks; all those areas are individual disciplines in their own right and have their own specialists and concern issues which are not necessarily specific to distribution. The risk in bringing them together under one umbrella leads to a list that lacks coherence and is difficult to manage. There is thus not one, but several distribution laws depending on how the boundaries are defined. We favor the aspect of distribution law that is central and strategic, i.e. the distribution networks and will not therefore be discussing major retail outlet contracts which tend to fall more within the ambit of competition law  than within distribution law. Such contracts, in their various forms, often in practice show how major distributors are able to exert buyer power over dependent suppliers .

A distribution network is defined as the organization by the company heading the network - usually a supplier - of a set of undertakings linked by strong, coherent and stable contractual relations, from supplier to distributor, with a view to ensuring a growth in sales in an efficient and lasting manner. In respect thereof, distribution law constitutes an eminently practical science. Its purpose is to ensure that the undertaking at the head of the network can choose the system of distribution that is best adapted for the marketing of its products or services, that it can organize and manage relations with its network, ensuring its proper functioning and development, and handle in the best way possible any disputes and the ending of business relations with distributors that may occur or the reorganization of the whole of a network. Even by restricting ourselves to the core of the subject - the distribution networks - the discipline remains rich and complex since it borrows from various branches of the law to ensure a synthesis in the service of the efficient functioning of those networks. Distribution law requires that commercial contract law and national and/or EU competition law be simultaneously applied at all times, while taking into account the constraints of employment law, tax law, the rules pertaining to bankruptcy proceedings, criminal law and the rules of procedure. Practicing the law of distribution is a dangerous game both for undertakings and their legal departments and for their legal counsel. The purpose of this work is to prepare them as comprehensively as possible in their decision making and to guide them in their actions, by removing, as far as possible, the legal risks. To bring clarity to company directors and their advisors, both in-house and external, in the choices they must make, we have focused our analysis on the main type of distribution networks that undertakings resort to in practice.

Faced with the issue of the establishment or the evolution of a distribution network, the company head and its advisors have the choice between a wide range of solutions ranging from the more flexible forms (exclusive supply, exclusive distribution, selective distribution) to the more integrated forms (franchises, agents, tenant-managers), or contractual arrangements based on a relationship of subordination, as in the case of sales reps.

See L. VOGEL, French Competition Law, LawLex/Bruylant, 2014; European Competition Law, LawLex/Bruylant, 2014.

This type of agreement is generally examined under European competition law in respect of the vertical effects that may be created due to a horizontal concentration between major distributors. Where the distribution and procurement markets are closely inter-dependent, there can be a spiral effect and the existence of a dominant position on one market may lead to the further strengthening or the creation of a dominant position on the other. This would be the case where the concentration limits the supply sources or where the new entity's presumed dominant position is reflected by the strengthening of its purchasing power (see L. VOGEL, European Competition Law, LawLex/Bruylant, 2014). Under French competition law, those kinds of restrictive effects are also looked at in the context of merger control in the case of the disappearance of a source of supply or creation of a state of dependence (see L. VOGEL, French Competition Law, LawLex/Bruylant, 2014). More specifically, French law contains provisions for the sanctioning of abuse of dependence or abuse of economic dependence (see L. VOGEL, French Competition Law). The Commission's Guidelines on Vertical Restraints (OJEU 2010/C 130/01) of 19 May 2010 assesses the competitive effects of two practices relevant to major retail distribution: upfront access payments (pt 203 et seq.) and category management agreements (pt 209 et seq.).

Is there a law of distribution?

Traditionally, an all-powerful industry would be faced with a fractured commercial structure. However, since the 1960s the nature of this relationship has been progressively moving in favor of traders, as a result of striking changes in the structure of distribution, namely the growth of mass retailing networks, the growth of specialized integrated distribution outlets, and the disappearance of smaller downtown outlets. Industries have found themselves increasingly in a position of economic weakness and dependence in the face of certain of their clients. 

Unlike supplier networks, which are based on the direct relationship between supplier and distributor, distributor networks place a legal structure - the central purchasing facility - between distributor network members and third parties.

Central purchasing services, which are the intermediaries for large retail distributors, may be limited to bringing together suppliers and network members after negotiating and obtaining a good price for the distributor. In that sense, they operate as a listing service, i.e. a brokerage service. Sales are made directly between the supplier and the distributor and only the latter is bound with regard to the supplier. The central listing organization, which acts as broker, is not obliged to inform the supplier of the solvency of distributors , nor to guarantee their debts , or to pay the cost of the merchandise  unless contractually stipulated. The supplier, therefore, cannot refuse to pay a commission  or a refund owed to that body or to another distributor  by claiming non-payment of the goods by a distributor. The central listing service may not transfer sums paid by its members by way of transfer deed for the payment of delivered goods . Where a central listing body takes on personal responsibility for the recovery of sums due by its members and guarantees those amounts , the guarantee of payment given by the body does not amount to a novation by change of debtor without the consent of the supplier  and does not discharge those members from their liability to that supplier . Where no authority to collect its debts has been given by the supplier to the central body, the payment made by its members to it does not discharge the debt . Lastly, as the central agency is not the buyer, its liability cannot be incurred for failing to comply with the invoicing rules . On the other hand, if, through its role as intermediary, the central agency contributes to the marketing of referenced counterfeit goods, it will be held liable .

The central agency may also be called upon to act for the account of its members in its own name. As a commission agent within the meaning of Article L. 132-1 of the Commercial Code, the central agency then becomes an opaque intermediary, as the supplier does not know who the real buyer of its products is. There is no legal link between the supplier and the principal. The distributor pays the central agency for the products sold to it by the latter, as the sale is concluded between central agency and distributor . The central agency must therefore be regarded as a commission agent where it establishes orders in its own name without indicating that it is acting on behalf of another party . As the only seller, it is its responsibility to comply with invoicing obligations . When acting as the agent of its members for the purchase of merchandise, it may be contractually bound to pass on to them any rebates obtained from suppliers  . However, where the contract establishes no relationship of principal/agent or principal/commission agent, the central agency may keep the benefit of the discounts negotiated with suppliers   or levy a margin on products made available to franchisees . Whether or not it is acting as the representative of members in negotiations with suppliers, the agency is not obliged to disclose to its members the content of negotiations with suppliers as such negotiations are covered by business secrecy   but only the outcome of them . Similarly, a supplier may bring an action against the members of a central agency if the central agency is only acting as their agent for the purposes of the payment of invoices . The central agency also cannot be charged for account management fees for accounts opened in the name of its members .

Can members of a central purchasing agency rely on the provisions of Article L. 330-3 of the Commercial Code relative to the pre-contractual obligation to provide information? An affirmative response to this question was given by the Court of Cassation. Where members of a central purchasing agency are bound, for the products covered by the affiliation agreement, to a quasi-exclusive arrangement, they can demand the application of Article L. 330-3, even if they are able to carry out other non-competing activities . The provision of estimated figures in order to encourage applicants is not governed by Article L. 330-3. As for franchises, this is often the starting point of legal disputes, to which the same solutions apply. Thus, a term in an affiliation agreements by which a candidate with previous experience acknowledges that the forecasts provided were only of an indicative value and did not represent a decisive element governing his consent, precludes the latter from subsequently seeking to rely on a substantial error as to the profitablity of the operation .

The bringing together of traders within a central organization may be caught by Articles L. 420-1 or L. 420-2 of the Commercial Code. Central purchasing agencies in effect characterize a restrictive agreement where they hinder access to the market of some suppliers and restrict the competitive possibilities of competing distributors . The increase in the number of central purchasing consortia set up by the large retail chains has been the subject of in-depth analysis on the possible anticompetitive effects of this type of purchasing arrangement by several competition authorities. 

The legislature, aware that many mergers fell under the radar of the authorities because the control thresholds had not been reached, introduced, in 2015, an obligation to pre-notify the Competition Authority of such transactions in order to enable it to assess whether an ex officio referral was required.  Under Article L. 462-10 of the Commercial Code, “any agreement between undertakings or groups of natural or legal persons operating, directly or indirectly, one or more retail stores selling consumer products, or operating in the distribution sector as a central listing or purchasing center for retail undertakings, aimed at negotiating in a grouped manner the purchase or listing of products or the sale of services to suppliers must for information purposes be communicated to the Competition Authority, at least four months prior to its implementation”.  The EGalim Law  has added to the mechanism with an  an ex-post competitive review of the agreement. To this end, the Authority may ask the parties to the agreement to submit a report to the Authority on the effect of the agreement on competition. The Authority examines whether it is likely to cause appreciable harm to competition within the meaning of Articles L. 420-1 and L. 420-2 and assesses whether it makes a sufficient contribution to economic progress to offset any harm to competition, taking into account its impact on producers, processors and distributors as well as consumers. The Authority shall examine whether it is likely to cause appreciable harm to competition within the meaning of Articles L. 420-1 and L. 420-2 and shall assess whether it makes a sufficient contribution to economic progress to offset any harm to competition, taking into account its impact on producers, processors and distributors as well as consumers. If infringements of competition or anticompetitive effects are identified, the parties undertake to take measures to remedy them within a period set by the Competition Authority. The Competition Authority may also take action on its own initiative or be referred to it by the Minister of the Economy. It may also take precautionary measures if the infringements of competition which the agreement entails or is likely to entail immediately after its entry into force are sufficiently serious. These measures may include an injunction to the parties to return to the previous state or to modify the agreement.

As the buyer's freedom of choice is one of the major aspects of competition and the principal means by which trade stimulates productivity, improvements in the quality of products and services as well as reduced prices, negotiating referencing agreements and commercial terms related to them or, on the contrary, refusing to reference a product, do not in themselves constitute anticompetitive practices . De-listing only falls foul of Article L. 420-1 of the Commercial Code where its object is to boycott a supplier or one or several of a supplier's products .

The behavior of the central purchasing facility may also characterize an abuse of economic dependence. The prohibition of such abuse comes from the change in the balance of power between suppliers and distributors with suppliers complaining of abuse on the part of the distributors, who could not be pursued on the basis of abuse of dominant position  as the central purchasing agencies are almost never in such a position on a particular product market . To be illegal, two conditions must be fulfilled: economic dependence and harm to competition. Dependence can only be established where the supplier has no equivalent solution. A supplier who is a member of a competing structure  or a cooperative member of a central purchasing facility  is not dependent. On the other hand, where a central purchasing facility imposes unjustified commercial terms on a dependent distributor due to the difficulties involved in quickly setting up new networks, it commits an abuse . Moreover, the exclusion of a member does not constitute abuse of dependence where neither the object nor the effect of such a measure is to restrict competition .

Cass. com., 6 December 1988, LawLex200200004931JBJ.

Cass. com., 16 January 1990, LawLex200200002625JBJ.

Cass. crim., 21 July 1998, LawLex200200000134JBJ; CA Amiens, 25 May 1999, LawLex200200000402JBJ.

Cass. com., 27 February 1996, LawLex200200004915JBJ.

If it merely centralizes the orders of its members and sends them on to suppliers, checks on the punctuality of deliveries, pays suppliers and acts as del credere agent, the central purchasing facility will not be subject to the rules on agents on commission: Cass. com., 22 March 1994, LawLex200200004944JBJ.

Cass. com., 10 July 2001, LawLex200200004366JBJ.

CA Paris, 21 May 2001, LawLex200200000050JBJ.

Cass. com., 25 November 2014, LawLex201500000178JBJ. In this scenario, the central purchasing agency is required to justify the amounts received for the account of its members and to show that the sums have been passed on.

CA Lyon, 8 November 2007, LawLex200800000550JBJ; CA Paris, 4 December 2013, LawLex201300001764JBJ.

CA Paris, 12 September 2018, LawLex201800001331JBJ.

CA Paris, 23 September 2015, LawLex201500001158JBJ, upheld by Cass. com., 8 June 2017, LawLex201700001021JBJ. Cf. Cass. com., 18 October 2017, LawLex201700001748JBJ, holding that business secrecy cannot be relied on against franchisees with a legitimate interest in finding out if the franchisor has passed on to them discounts paid by the central referencing agency, from which they are required to obtain their supplies.

CA Paris, 23 September 2015, LawLex201500001158JBJ, upheld by Cass. com., 8 June 2017, LawLex201700001021JBJ; CA Paris, 27 March 2019, LawLex201900000495JBJ. Cf. Cass. com., 18 October 2017, LawLex201700001748JBJ,  which holds that business secrecy cannot be relied on against franchisees who have a legitimate interest in determining whether the franchisor has retroceded to them the rebates paid by the central purchasing body from which they are required to obtain their supplies.

Cass. com., 23 October 1990, LawLex200200004926JBJ.

Cass. com., 4 January 2000, LawLex200200004934JBJ; 22 February 2000, LawLex200200004933JBJ.

Cass. com., 25 January 2005, LawLex200500004062JBJ.

Cass. com., 19 January 2010, LawLex201000000087JBJ.

CA Angers, 5 May 2015, LawLex201500000636JBJ.

Competition Commission opinion of 14 March 1985, LawLex200300001300JBJ.

Law No 2018-938 of 30 October 2018 for balanced trade relations in the agriculture and food sector and healthy and sustainable food, OJ of 1 November 2018.

Cass. com., 16 January 1990, LawLex200200002625JBJ; Competition Council decision No 05-D-62 of 10 November 2005, LawLex200500010206JBJ.

Competition Council decision No 94-D-60 of 13 December 1994, LawLex200200003339JBJ; CA Paris, 13 December 1995, LawLex200200002662JBJ; Competition Council decision No 99-D-01 of 5 January 1999, LawLex200200002502JBJ.

The outcome might be different if the existence of a procurement services market were accepted.

The basis of the commission due to the central listing facility is made up of the entire turnover expected and not only that which is effectively achieved: Cass. com., 28 May 1991, LawLex200200004925JBJ.

CA Versailles, 27 March 1997, LawLex200200002378JBJ.

Cass. com., 4 July 2006, LawLex200600001752JBJ: the distribution relationship must take precedence over the cooperation relationship for dependence to be established.

T. com. Châlons-en-Champagne, 19 March 1998, LawLex200200002189JBJ.

Cass. com., 22 February 2000, LawLex200200002960JBJ.

Cass. com., 28 May 1991, LawLex200200004925JBJ.

Cass. com., 24 January 1995, LawLex200200004917JBJ.

CA Paris, 15 March 1993, LawLex200200004923JBJ; CA Bordeaux, 15 November 1993, LawLex200200004922JBJ.

Cass. com., 25 October 1994, LawLex200200004919JBJ.

Cass. com., 3 January 1995, LawLex200200004918JBJ.

Cass. com., 9 May 1995, LawLex200200004916JBJ; 22 April 1996, LawLex200200004914JBJ; 31 March 1998, LawLex200200004747JBJ; 11 December 2001, LawLex200300003124JBJ.

Supplier networks and distributor networks.

Distribution law is “doubly dual” insofar as national and European rules cohabit and so do the civil law and the competition law rules.

At the moment, distribution law for the most part comes from the law of obligation. Within the Member States, a specific law of distribution has developed and is itself sub-divided into various categories of agreement subject to increasingly specific rules (exclusive distribution, selective distribution, franchises, agency etc.).

Early on, EU law was forced to look at distribution agreements as they are an essential instrument of the free movement of goods within the internal market . Such agreements were assessed from two angles; firstly from the point of view of competition law and secondly in respect of the rules of the internal market.

Distribution contracts have been the main subject matter of the block exemption regulations which enabled the Commission to force economic operators to insert terms that it held to be lawful in respect of the rules pertaining to restrictive practices and to exclude those terms it considered overly harmful to competition. Going beyond competition law, the block exemption regulations sometimes went as far as defining the civil law rules to be applied to those contracts, which they imposed on undertakings seeking to benefit from the block exemption. Successive motor vehicle regulations constitute the best illustration of that method, since they resulted in the actual formatting of agreements in the sector, the fixing of the duration of agreements and notice periods, the imposing of the provision of reasons for terminations, the regulation of transferability and a reworking of their conflict resolution clauses. The Commission was not satisfied with this indirect method of harmonizing agreement through the competition laws and consequently turned to the techniques of the internal market in order to achieve a real rapprochement between the national legal systems. Under positive law, the Directive on Commercial Agents constituted the first manifestation of this new policy. More generally, the Commission set up a task force, headed by Professor von Bar, to establish propositions inter alia for the adoption of a new set of rules to be applied to distribution agreements.

See L. & J. VOGEL, European Distribution Law, LawLex/Bruylant, 2014.

The double duality of distribution law.

In 2003, the European Commission launched a vast action plan for the harmonization of European contract law. It gave rise to two sub-projects; the first one, known as “Acquis” classifies all existing directives in matter of contract law and the second, which aims to establish and is developing a Common Frame of Reference (CFR) for contract law that parties are free to consult, following the example of the Unidroit principles of international commercial agreements.

On 20 April 2010, the Commission presented its new action plan prior to publication, on 1 July 2010, of its green paper on “policy options for progress towards a European Contract Law for consumers and businesses” which proposes various options, from the publication of a set of non-binding rules to the adoption of a European Civil Code via Commission Recommendation, optional legislation or harmonization by means of a Directive or a Regulation.

To conduct its work, the Commission now has at its disposal the “Draft Common Frame of Reference” of the study group headed by Professor von Bar. In relation to distribution contracts, the current text is characterized by a highly protectionist approach and shows a clear discrepancy in relation to economic reality which is particularly evident in the definition of the conditions for terminating a contract.

Article 1-306 of the draft introduces the general principle of a right to a goodwill indemnity for the distributor when the contractual relationship comes to an end. The adoption of this principle would be a major break from the rules currently in force in most Member States - apart from under German and Belgian law - which apply the opposite principle whereby parties are always free to end a distribution contract. A general indemnity of this kind at the end of the contract compromises economic efficiency: the supplier would be reticent when it came to terminating relations with a supplier and this would favor a situation where poorly performing operators remained in place.

Article 1-302 provides that each party to a contract for an indefinite period may terminate by giving notice of reasonable length. The text then states that there is a presumption according to which reasonable notice is one month for each year that the contract has lasted. This presumption is disputable, not only in that it can lead to extremely long notice periods but also that in combining an end-of-contract indemnity with a long notice period, it upsets the balance of the distribution agreement. The directive on commercial agents which lays down the goodwill indemnity principle is much more measured and provides that where a contract has lasted more than three years, the notice period is fixed at three months - a period that the Member States can increase to six months maximum.

The principles set out in the von Bar drafts are not very operational - they compromise economic efficiency and run counter to the traditional practices of most of the Member States.

International distribution law provides for separate instruments according to type of contract: the Hague Convention of 14 March 1978 deals with contracts for intermediaries or representatives, in particular commercial agency agreements; the other types of international agreement are governed by the Rome I Regulation , which communitizes the Rome Convention of 19 June 1980 . Jurisdiction and the recognition and enforcement of judgments in civil and commercial matters are governed by Regulation No 44/2001 of 22 December 2000 (Brussels I), replaced by Regulation No 1215/2012 (Brussels I recast) of 12 December 2012 as of 10 January 2015 .

Article 3 of Rome I and Article 5 of the Hague Convention lay down the principle of the freedom of the parties to choose the law that shall govern their agreement . That choice may be express and take the form of an electio juris clause, or may be tacit and arise from the provisions of the agreement or the circumstances.

Where the parties have not selected the applicable law, the Rome I Regulation clearly defines which law is applicable according to the type of contract (Article 4(1)): - law of the country where the seller has his habitual residence for a contract for the sale of goods ; law of the country where the service provider has his habitual residence for contracts for the provision of services; law of the country where the franchisee has his habitual residence for franchise agreements; law of the country where the distributor has his habitual residence for distribution contracts. Other types of agreement are governed by the law of the country where the party required to effect the characteristic performance of the contract has his habitual residence (Article 4(2)). The choice in the regulation in favor of the law of the country of the distributor is in conflict with the current case law of the Court of Cassation which makes distribution contracts subject to the law of the place of residence of the supplier . Obligations arising out of dealings prior to the conclusion of a contract are governed by Article 12 of the Rome II Regulation , entitled “Culpa in contrahendo” and set forth the principle of jurisdiction, either of the law that applies to the contract or that would have been applicable to it had it been entered into.

Where the parties have not chosen, the Hague Convention makes agents' or intermediaries' contracts subject to the internal law of the State where, at the time of formation of the agency relationship, the agent has his business establishment or, if he has none, his habitual residence (Article 6) . However, the internal law of the State in which the agent is primarily to act must apply if the principal has his business establishment or, if he has none, his habitual residence in that State. Where the principal or the agent has more than one business establishment, the internal law of the State of the corporate headquarters with which the agency relationship is most closely connected is applicable.

The existence of overriding mandatory rules, the immediate application of which is regarded as necessary for the safeguarding of interests considered to be of major importance by Member States or the international community may prevent the application of the law chosen by the parties. Adopting Francescakis' definition, the Rome I Regulation defines the overriding mandatory provisions as “provisions the respect for which is regarded as crucial by a country for safeguarding its public interests, such as its political, social or economic organisation, to such an extent that they are applicable to any situation falling within their scope, irrespective of the law otherwise applicable to the contract under this Regulation” (Article 9). Although nothing can restrict those mandatory provisions (Article 9(2)), foreign overriding mandatory rules are subject to a special provision; the only laws applicable are those “of the country where the obligations arising out of the contract have to be or have been performed” provided that those laws “render the performance of the contract unlawful” (Article 9(3)). The first civil chamber of the Court of Cassation has adopted a conflicting approach to that of European law by excluding the application of public policy of the forum (lex fori) .

Only the rules governing public policy in respect of the supervision and organisation of the market - such as the competition rules - can overturn the will of the parties in such matters. Laws protecting purely private interests are not regarded as overriding mandatory provisions under international law. By accepting that a commercial agent receives an indemnity on the principle of freedom of choice in contractual matters in the name of the protection of “freedom of establishment and the operation of undistorted competition in the internal market”, the ECJ  thus held that Articles 17 and 18 of Directive 86/653 of 18 December 1986 on the coordination of the laws of the Member States relating to self-employed commercial agents, which guarantees certain rights to commercial agents when the agency agreement comes to an end, constitute international overriding mandatory rules, where the agent has carried on his activity in the territory of a Member State, even where the principal is established in a third country and by virtue of its terms, the contract is governed by the laws of that country. The Court of Cassation has made a contrary ruling , but as it has never since confirmed its doctrine, its position appears to be somewhat weak . If it is now established law that the protected status of commercial agents pursuant to Directive No 86/653 transposed into the laws of the Member States applies where agents carry out their activity on the territory of a Member State , it is also established that in an intra-European situation the national court may reject the national law chosen by the parties in favor of the law of the forum, owing to the mandatory nature, in the legal order of that Member State of the rules governing the situation of self-employed commercial agents. However, the law chosen by the parties can only be rejected if the court before which the case has been brought finds that, in the course of that transposition, the legislature of the State of the forum held it to be crucial, in the legal order concerned, to grant the commercial agent protection going beyond that provided for by the directive, taking account in that regard of the nature and of the objective of such mandatory provisions .

Finally, according to the public policy exception set out in Article 21 of the Regulation, “The application of a provision of the law of any country specified by this Regulation may be refused only if such application is manifestly incompatible with the public policy (ordre public) of the forum” .

Where a dispute contains foreign elements, it may be necessary to determine which State has jurisdiction to rule on it. To address conflicts of jurisdiction, the EU has for a long time adopted a body of rules designed to clarify jurisdiction and the conditions of execution of judicial decisions: the Brussels Convention of 27 September 1968 , which was replaced by Regulation No 44/2001 or “Brussels I” of 22 December 2000 , and most recently by Regulation No 1215/2012 of 12 December 2012, which replaced Regulation No 44/2001 as of January 2015.

By virtue of the principle of freedom of choice, the parties may insert a jurisdiction clause in their agreement which allows them to “confer jurisdiction on courts which would not have jurisdiction under the general or special provisions of the convention or exclude the jurisdiction of courts which would normally have jurisdiction under those rules” . The principle is established by Article 25 of Regulation No 1215/2012) according to which, “If the parties, one or more of whom is domiciled in a Member State, have agreed that a court or the courts of a Member State are to have jurisdiction to settle any disputes which have arisen or which may arise in connection with a particular legal relationship, that court or those courts shall have jurisdiction […]”. The parties can designate a court or courts of a Member State, without having to cite them by name, provided that the jurisdiction clause clearly identifies the objective factors on the basis of which the parties have agreed to choose a court or the courts to which they wish to submit disputes which have arisen or which may arise between them . Furthermore, in a case concerning a franchise agreement containing a jurisdiction clause, the Court held that the prorogation of jurisdiction is not subject to showing an objective connection between the relationship in dispute and the court designated . The parties are therefore free to agree on a place of performance for contractual obligations having no actual connection with the reality of the contract or the obligation arising from it, as long as the requirements as to form stipulated for forum selection clauses are complied with.

The clause conferring jurisdiction must be the expression of clear and precise consent. It may be in writing or verbal and evidenced in writing and concluded in a form which accords with practices which the parties have established between themselves or, “in international trade or commerce, in a form which accords with a usage of which the parties are or ought to have been aware and which in such trade or commerce is widely known to, and regularly observed by, parties to contracts of the type involved in the particular trade or commerce concerned” (Article 25).

Although in principle, only the contracting parties are bound by the jurisdiction clause, it may be asserted against or by the transferee in the case of the transfer of a distribution contract, where the rights and obligations of the transferor have been assigned by virtue of the national law applicable to the assignment . Where this is not the case, the court must verify whether it has consented to the clause with regard to the requirements of Article 25 .

Where the parties have not made any stipulation in respect of jurisdiction, Article 7 of Regulation No 1215/2012 governs the matters relating to the contract, i.e. all situations in which there is an obligation freely assumed by one party towards another . Thus, an action claiming pre-contractual liability due to the unjustified breaking-off of negotiations falls within the scope of matters relating to tort .

Article 7(1)(a) of Regulation No 1215/2012 states that a person domiciled in a Member State may, in another Member State, be sued: “in matters relating to a contract, in the courts for the place of performance of the obligation in question”. As the place is determined depending on the conflict of jurisdiction rules of the court before which the matter is brought , jurisdiction may be split . To avoid this division, the ECJ applied the accessorium sequitur principale maxim according to which where various obligations are at issue, the principal obligation will determine jurisdiction , except in cases of disputes which contain equivalent obligations arising out of the same contract . Now, Article 7(1)(b) stipulates that “unless otherwise agreed, the place of performance of the obligation in question shall be: - in the case of the sale of goods, the place in a Member State where, under the contract, the goods were delivered or should have been delivered; - in the case of the provision of services, the place in a Member State where, under the contract, the services were provided or should have been provided”. Article 7(1)(c) states that “if subparagraph (b) does not apply then subparagraph (a) applies” . Thus, where the dispute is in relation to the framework agreement, the competent court will be determined by the law applicable to the framework agreement under Article 7(1)(a). Where the dispute only relates to one of the sales contracts taken in application of the framework agreement, the competent court will automatically be that of the place in a Member State where, under the contract, the goods were delivered or should have been delivered, under the first indent of Article 7(1)(b).

For a long time the French courts applying the equivalent provisions of former Regulation No 44/2001 considered that an exclusive distribution agreement was neither a sales agreement nor a provision of services agreement and that the place of performance of the contractual obligation in question when determining jurisdiction must be fixed in application of (present) Article 7(1)(a) . The obligation in question referred to in Article 7(1)(a) had to be determined by virtue of the rule of conflict pursuant to Article 4 of the Rome Convention of 19 June 1980 on the law applicable to contractual obligations, replaced by current Article 4 of Regulation No 593/2008 of 17 June 2008, known as “Rome I”, by the law of the country in which the party required to effect the characteristic performance of the contract is located. According to the Court of Cassation, this performance referred to the obligation of the supplier to guarantee his reseller the exclusive distribution of the products. The Court of Justice did not agree with that analysis, finding that an exclusive concession agreement constitutes a contract for the provision of services, the characteristic performance of which is that provided “by the distributor which, by distributing the grantor's products, is involved in increasing their distribution”. The agreement is therefore governed by the rule of jurisdiction laid down in the second indent of Article 7(1)(b) of the regulation . The Court of Cassation subsequently aligned itself to that approach. Expressly referring to the Court of Justice's ruling, it reversed its previous position regarding “a distribution agreement concluded following a selection process and containing specific terms relating to distribution on the French territory” of a supplier's products, holding that the rule of jurisdiction of the second indent of Article(5)(1)(b) of Brussels I (now Article 7 of Regulation No 1215/2012) must in principle apply, to the exclusion of the rule set out in Article (5)(1)(a) of that regulation .

 Furthermore, the provisions of Article 7(5) of Regulation No 1215/2012, which allow a defendant domiciled on the territory of one Member State, to be brought before the court in the place of performance of another Member State in the event of a dispute arising out of the operations of a branch, agency or other establishment, is not applicable to concession agreements insofar as, “when the grantee of an exclusive sales concession is subject neither to the control nor to the direction of the grantor, he cannot be regarded as being at the head of a branch, agency or other establishment” . This is also the case for independent commercial agents (intermediaries) who are free to organise their own work and hours of work and to represent at the same time several rival firms, and who do not effectively participate in the completion and execution of transactions but are restricted in principle to transmitting orders to the undertaking they represent .

EC Regulation No 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations (Rome I) OJEU of 4 July 2008 No L. 177; See also, EC Regulation No 593/2008 of 17 June 2008 on the law applicable to contractual obligations (Rome I). The Commission acknowledged the application of the Rome I Regulation to the United Kingdom as of 17 December 2009, with the exception of Article 26 which was to apply from 17 June 2008: EC Commission Decision No 2009/26 of 22 December 2008, OJEU No L 10, 15 January 2009.

Convention on the law applicable to contractual obligations opened for signature in Rome on 19 June 1980, OJEC C 27 of 26 January 1998.

Cass. com., 28 November 2000, LawLex200200004875JBJ: the French legislative provisions relative to commercial agents are internal mandatory provisions but do not constitute mandatory provisions applicable in the international legal order and able to override the application of a clause subjecting a disputed contract to the laws of another country.

See CA Paris, 12 February 2013, LawLex201300000185JBJ, aligning itself to the position of the ECJ.

ECJ Case C-184/12 Unamar NVC, Judgment of 17 October 2013, LawLex201300001533JBJ.

Likewise, Article 16 of the Hague Convention of 14 March 1978 on the Law Applicable to Agency provides, "effect may be given to the mandatory rules of any State with which the situation has a significant connection, if and in so far as, under the law of that State, those rules must be applied whatever the law specified by its choice of law rules" and in Article 21 lays down a public policy exception.

OJEC L 299 of 31 December 1972, p. 32-42.

For an example of a jurisdiction clause derogating from the special jurisdiction in matters relating to a contract set out in Article 5(1), see Case 56/79 Siegfried Zelger v Sebastiano Salinitri [1980], LawLex200900002029JBJ.

Case C-387/98 Coreck Maritime GmbH v Handelsveem BV and others [2000] ECR I-9337, LawLex200700001643JBJ, bills of lading.

Case C-269/95 Francesco Benincasa v Dentalkit Srl [1997] ECR I-3767, LawLex200900001340JBJ.

Case 71/83, Partenreederei MS. Tilly Russ v NV Haven- & Vervoerbedrijf Nova [1984] ECR 2417, LawLex200900002207JBJ, remedy in case involving a bill of lading.

Regulation No 1215/2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (recast) OJEU L 351 of 20 December 2012. The regulation will apply from 10 January 2015 (Art. 81).

Case C-387/98 Coreck Maritime GmbH v Handelsveem BV and others [2000] ECR I-9337, LawLex200700001643JBJ, matters relating to bills of lading. 

Case C-26/91 Jakob Handte v Traitements mécano-chimiques des surfaces [1992] ECR I-3967, LawLex200900002082JBJ.

Case C-334/00 Fonderie Officine Meccaniche Tacconi v Heinrich Wagner Sinto Maschinenfabrik [2002] ECR I-7357, LawLex200900000373JBJ. See, however, CA Paris, 13 January 1999, LawLex200300004042JBJ, making the breach of a promise of a franchise subject to Article 5(1).

Case 14/76 De Bloos v Bouyer [1976] ECR 1497, LawLex200900001547JBJ: the word "obligation" in Article 5(1) of Regulation 44/2001 refers to the contractual obligation forming the basis of the legal proceedings; Case 12/76 Tessili v Dunlop [1976] ECR 1473, LawLex200900001509JBJ.

Case 14/76 De Bloos v Bouyer [1976] ECR 1497, LawLex200900001547JBJ: in litigation concerning the consequences of an infringement by the grantor of an exclusive sales concession, such as the payment of damages or the dissolution of the contract, "the obligation to which reference must be made for the purposes of applying Article 5(1) of the convention is that which the contract imposes on the grantor and the non-performance of which is relied upon by the grantee in support of the application for damages or for the dissolution of the contract" whereas, "[i]n the case of actions for the payment of compensation by way of damages, it is for the national court to ascertain whether, under the law applicable to the contract, an independent contractual obligation or an obligation replacing the unperformed contractual obligation is involved".

Case 266/85 Shenavai v Kreischer [1987] ECR 239, LawLex200900001792JBJ: jurisdiction must be determined with regard to the place of performance of the principal obligation where the dispute is concerned with a number of obligations arising under the same contract and forming the basis of the proceedings commenced by the plaintiff.

Case C-420/97 Leathertex Divisione Sintetici v Bodetex [1999], LawLex200900000774JBJ: "The same court does not therefore have jurisdiction to hear the whole of an action founded on two obligations of equal rank arising from the same contract when, according to the conflict rules of the State where that court is situated, one of those obligations is to be performed in that State and the other in another Contracting State". See also, Case C-420-97 Leathertex Divisione Sintetici v Bodetex [1999], LawLex200900000774JBJ.

For an example in matters relating to commercial agency agreements, see Case C-19/09 Wood Floor Solutions Andreas Domberger GmbH v Silva Trade SA [2010], which holds that a commercial agency contract constitutes a contract for the provision of services within the meaning of the second indent of Article 5(1) (b) of the regulation and that, where services are provided in several Member States, the court having jurisdiction to hear and determine all the claims based on the commercial agency contract is the court within whose jurisdiction the place of the main provision of services is situated i.e. the place of the main provision of services by the agent, as it appears from the provisions of the contract or, in the absence of such provisions, the actual performance of that contract or, where it cannot be determined on that basis, the place where the agent is domiciled.

Cass. 1re civ., 23 January 2007, LawLex200700000184JBJ. See also on the fact that the exclusive distribution agreement is neither a sales contract nor a contract for the supply of services, Cass. 1re civ., 9 July 2008, LawLex200800001138JBJ and LawLex200800001139JBJ and Cass. 1re civ., 5 March 2008, LawLex200800000316JBJ, 

Case C-9/12 Corman-Collins SA, Judgment of 19 December 2013, LawLex201300001876JBJ.

The parties can select the law applicable to the whole or to part only of the contract and can elect several applicable laws.

Cass. 1re civ, 19 November 2014, LawLex201400001289JBJ.

Case 14/76 De Bloos v Bouyer [1976] ECR 1497, LawLex200900001547JBJ.

Case 139/80 Blanckaert & Willems PVBA v Luise Trost [1981] ECR 819, LawLex200900001546JBJ.

Article 25 of Rome I Regulation gives precedence to the Hague Convention of 1955 for the governance of all sales of goods.

Cass. 1re civ., 23 January 2007, LawLex200700000184JBJ; 16 April 2008, LawLex200800000529JBJ. 

EC Regulation No 864/2007 of 11 July 2007 on the law applicable to non-contractual obligations.

CA Lyon, 6 November 2007, LawLex200900001240JBJ; Cass. com., 27 April 2011, LawLex201100000855JBJ.

Cass. 1re civ., 6 March 2007, LawLex200700000349JBJ; See also Cass. com., 22 October 2008, LawLex200800001850JBJ, relative to the sudden breach of business relations for an exclusive concession agreement with a choice-of-law clause attributing jurisdiction to a US court. 

Case C-381/98 Ingmar GB (Ltd) v Eaton Leonard Technologies Inc. [2000] ECR I-9305, LawLex200900000602JBJ.

French Distribution Law

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4. Towards a common European law of distribution.

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