UIA Seminar - “The Issues Which Really Count For Clients
In International Agency, Distribution and Franchising
Agreements - An Update For Some, An Eye Opener For
Others!”, Atlanta 1 - 2 May 2009
CHOICE OF LAW AND JURISDICTION
CLAUSES IN CROSS-BORDER
AGENCY AND DISTRIBUTION
AGREEMENTS FROM AN EU
PERSPECTIVE
by Carlo H. Mastellone, avvocato
Firenze, Italia
STUDIO LEGALE MASTELLONE
FIRENZE MILANO ROMA VERONA
I. NEGOTIATION
STRATEGIES





In addition to:
Taking into account different negotiation styles,
language and culture
Aiming to a written contract enforceable in the
countries of both parties
Avoiding conflicts by understanding respective
rights and duties
Address dispute resolution system
completely and fairly
STUDIO LEGALE MASTELLONE
FIRENZE MILANO ROMA VERONA
LETTERS OF INTENT



LOI should not have any binding effect
except for the clauses that in the
parties’ intention should have a
binding effect - confidentiality of
secret information disclosed; standstill
/ lock-out; right of first refusal
Should include a choice of forum and
choice of law clause
STUDIO LEGALE MASTELLONE
FIRENZE MILANO ROMA VERONA
CHOICE OF LAW OF NONCONTRACTUAL
OBLIGATIONS
Art. 14. Freedom of choice, Reg. (EC)
No 864/2007 (“Rome II”)
The choice shall be expressed or
demonstrated with reasonable
certainty by the circumstances of the
case and shall not prejudice the rights
of third parties.
STUDIO LEGALE MASTELLONE
FIRENZE MILANO ROMA VERONA
WHAT DOES THE
GOVERNING LAW
DETERMINE?





Duty to negotiate in good faith?
Legal content of an agreement to
negotiate?
Effect of breaking off negotiations
Liabilities for negotiating in bad-faith
Remedies available
STUDIO LEGALE MASTELLONE
FIRENZE MILANO ROMA VERONA
COMMON LAW vs. CIVIL
LAW


No general rule requiring the parties to
negotiate in good faith [“How can a
court be expected to decide whether,
subjectively, a proper reason existed
for the termination of negotiations? ]
vs. parties have a duty to behave
according to good faith [and culpa in
contrahendo]
STUDIO LEGALE MASTELLONE
FIRENZE MILANO ROMA VERONA
JURISDICTION ABSENT A
CHOICE OF COURT

An action founded on the pre-contractual
liability of the defendant is a matter
relating to tort, delict or quasi-delict
within the meaning of Article 5(3) of the
Brussels Convention [ECJ judgment
17.09.2002, in case C-334/00, Fonderie
Officine Meccaniche Tacconi S.p.A. Vs.,
Heinrich Wagner Sinto Maschinenfabrik
GmbH]
STUDIO LEGALE MASTELLONE
FIRENZE MILANO ROMA VERONA
COUNCIL REGULATION
(EC) No 44/2001
Article 5 - A person domiciled in a
Member State may, in another
Member State, be sued: …
3. in matters relating to tort, delict or
quasi-delict, in the courts for the place
where the harmful event occurred or
may occur
STUDIO LEGALE MASTELLONE
FIRENZE MILANO ROMA VERONA
GOVERNING LAW
ABSENT A CHOICE OF
LAW


Reg. (EC) No 864/2007 (“Rome II”)
applicable from Jan. 11, 2009
“Culpa in contrahendo , as an
autonomous concept , includes the
violation of the duty of disclosure and
the breakdown of contractual
negotiations (Recitals No. 30)
STUDIO LEGALE MASTELLONE
FIRENZE MILANO ROMA VERONA
GOVERNING LAW
(continued)

Absent an express choice of law (art.
14), the law applicable to a noncontractual obligation arising out of
dealings prior to the conclusion of a
contract, whether the contract is
concluded or not, is the law that
applies to the contract or that would
have been applicable had it been
entered into (art. 12)
STUDIO LEGALE MASTELLONE
FIRENZE MILANO ROMA VERONA
GOVERNING LAW
(continued)
Alternative criteria, law of the country
(a) in which the damage occurs
(b) where both parties are resident
(c) with which, having regard to all
circumstances, the contract is
manifestly more closely connected

STUDIO LEGALE MASTELLONE
FIRENZE MILANO ROMA VERONA
II. LITIGATION
STRATEGIES


Which are the most appropriate
contractual strategies to be
implemented when litigation cannot be
avoided?
Arbitration or ordinary courts?
STUDIO LEGALE MASTELLONE
FIRENZE MILANO ROMA VERONA
ADVANTAGES OF
ARBITRATION







Neutrality
Specific competences
Excluding the other party’s courts
Simple and informal
One instance only
The time element
Cost considerations
STUDIO LEGALE MASTELLONE
FIRENZE MILANO ROMA VERONA
ADVANTAGES OF
ARBITRATION (cont.)






Tailor made proceedings
Confidentiality
Good relations
Award can be based on fairness
Language of proceedings
Recognition of the foreign award
STUDIO LEGALE MASTELLONE
FIRENZE MILANO ROMA VERONA
CIRCUMSTANCES IN
FAVOUR OF ORDINARY
COURTS



Exporter in a merely defensive position
Non arbitrability of the dispute
Limited financial value of the dispute
STUDIO LEGALE MASTELLONE
FIRENZE MILANO ROMA VERONA
THE “ARBITRABILITY” OF
DISPUTES


The 1958 New York Convention
The Belgian Supreme Court judgement
of October 15, 2004 (Colvi v.
Interdica)
STUDIO LEGALE MASTELLONE
FIRENZE MILANO ROMA VERONA
JURISDICTION ABSENT A
CHOICE OF COURT


Reg. (EC) No 44/2001, art. 5.1.(b) in
matters relating to a contract:
- in the case of the provision of
services, the court for the place in a
Member State where, under the
contract, the services were provided or
should have been provided
STUDIO LEGALE MASTELLONE
FIRENZE MILANO ROMA VERONA
MAKE SURE THE CHOICE
OF FORUM IS EFFECTIVE



in writing or evidenced in writing
according to parties’ practices
according with usage the parties are
or ought to have been aware of and
which in their trade is widely known
to, and regularly observed by, parties
to contracts of the type involved in the
particular trade concerned (art. 23)
STUDIO LEGALE MASTELLONE
FIRENZE MILANO ROMA VERONA
EFFECTIVE CHOICE OF
FORUM (continued)



Jurisdiction shall be exclusive (unless
otherwise agreed)
Durable communications by electronic
means: equivalent to "writing“
Validity of jurisdiction clause in a
distributorship agreement tacitly
renewed [ECJ, Iveco v Van Hool ]
STUDIO LEGALE MASTELLONE
FIRENZE MILANO ROMA VERONA
SELECTING THE BEST
FORUM CLAUSE

“The parties agree to submit to
the [exclusive] [non-exclusive]
jurisdiction of the [English] courts”
STUDIO LEGALE MASTELLONE
FIRENZE MILANO ROMA VERONA
“Any legal proceedings instituted against the
Distributor by the Principal shall be brought in the
courts of the distributor’s country of domicile and
any legal proceedings against the Principal by the
Distributor shall be brought in the courts of the
Principal’s country of domicile and for the purposes
of such proceedings the law governing this
agreement and such proceedings shall in each case
be deemed to be the law of the country in which
the relevant proceedings have been instituted in
accordance with this clause. For the purpose of
proceedings brought against it by the other party
under this clause each party agrees to submit to
the jurisdiction of the courts of the other party’s
country of domicile”
STUDIO LEGALE MASTELLONE
FIRENZE MILANO ROMA VERONA
MAKE SURE THE
ARBITRATION CLAUSE IS
EFFECTIVE


Formal requirements under the 1958
New York Convention: very narrow
definition of “writing”, art. II(2)
Uncitral Model law, art. 7 (2): … or
other means of telecommunication
which provide a record of the
agreement

Formal requirements under national
laws STUDIO LEGALE MASTELLONE
FIRENZE MILANO ROMA VERONA
PATHOLOGICAL
ARBITRATION CLAUSES



Any dispute shall be referred to a
Queen’s Counsel of the English Bar
Arbitration by the “Official Chamber of
Commerce in Paris”
The designation of a non existent
appointing authority
STUDIO LEGALE MASTELLONE
FIRENZE MILANO ROMA VERONA
PRE-ACTION
INJUNCTIONS - THE ECJ
PERSPECTIVE


Civil law jurisdictions generally find
anti-foreign-suit injunctions offensive,
even violative of international law
Common law jurisdictions, especially
courts in the UK and US, consider an
anti-foreign-suit injunction appropriate
under some circumstances.
STUDIO LEGALE MASTELLONE
FIRENZE MILANO ROMA VERONA
NOT COMPATIBLE WITH
REG. 44/2001


Anti-suit injunction, concerning the
applicability of an arbitration
agreement, cited by a litigant in order
to contest the jurisdiction of the court
before which he is being sued:
Every court seised itself determines, under
the rules applicable to it, whether it has
jurisdiction to resolve the dispute before it
anti-suit injunction, contrary to the general
principle that every court
STUDIO LEGALE MASTELLONE
FIRENZE MILANO ROMA VERONA
NOT COMPATIBLE WITH
REG. 44/2001


An anti-suit injunction also runs
counter to the trust which the Member
States accord to one another’s legal
systems and judicial institutions
Applicant would therefore be deprived
of a form of judicial protection to
which it is entitled [ECJ judgment 10 February 2009 in
the West Tankers/Front Comor case]
STUDIO LEGALE MASTELLONE
FIRENZE MILANO ROMA VERONA
THE FUTURE: THE HAGUE
CONVENTION


Hague Convention of 30 June 2005 on
Choice of Court Agreements
Not yet in force, but signed by the EU
(April 1, 2009) and by the United
States of America (January 19, 2009)
and ratified by Mexico (October 26,
2007)
STUDIO LEGALE MASTELLONE
FIRENZE MILANO ROMA VERONA
EXCLUSIVE CHOICE OF
COURT AGREEMENT



must be concluded or documented
i) in writing; or
ii) by any other means of
communication which renders
information accessible so as to be
usable for subsequent reference;
STUDIO LEGALE MASTELLONE
FIRENZE MILANO ROMA VERONA
THREE MAIN RULES



The chosen court must hear the case
Any court seized but not chosen must
dismiss the case
Any judgment rendered by the
designated court must be recognised
and enforced in other Contracting
States
STUDIO LEGALE MASTELLONE
FIRENZE MILANO ROMA VERONA
EU MEDIATION
DIRECTIVE June 28, 2008

on certain aspects of mediation in civil
and commercial matters: purpose to
facilitate access to dispute resolution
and to promote the amicable
settlement of disputes by encouraging
the use of mediation and by ensuring
a sound relationship between
mediation and judicial proceedings.
STUDIO LEGALE MASTELLONE
FIRENZE MILANO ROMA VERONA
III. CHOICE OF LAW
STRATEGIES
What choices are available?
 Law of the country of either of the
parties to the contract
 Law of a neutral third country (Swiss
law)
 Combination of two laws, i.e. different
laws to govern different aspects of the
contract (depeçage)
STUDIO LEGALE MASTELLONE
FIRENZE MILANO ROMA VERONA
WHAT CHOICES ARE
AVAILABLE? (continued)

Principles common to two or more
specified legal systems will govern
[“common principles of English and
French law, and in the absence of
such common principles, by such
principles of international trade law as
have been applied by national and
international tribunals” ]
STUDIO LEGALE MASTELLONE
FIRENZE MILANO ROMA VERONA
WHAT CHOICES ARE
AVAILABLE? (continued)





“floating choice of law clause”
“saving clause”
“general principles of law”,
“transnational law” or “international
commercial law” (lex mercatoria)
CISG
UNIDROIT Principles
STUDIO LEGALE MASTELLONE
FIRENZE MILANO ROMA VERONA
COMMON ERRORS


British Law
Law of the member states of the
European Union
STUDIO LEGALE MASTELLONE
FIRENZE MILANO ROMA VERONA
MAKE SURE THE CHOICE
OF LAW IS EFFECTIVE
The choice must be:
 expressed or demonstrated with
reasonable certainty by the terms
of the contract or the circumstances
of the case (art. 3.1 Rome Conv.)
 clearly demonstrated … (art. 3.1
Reg. Rome I)
STUDIO LEGALE MASTELLONE
FIRENZE MILANO ROMA VERONA
LIMITS LAID BY
MANDATORY RULES OF
LAW


A national court will normally apply its
mandatory laws, whatever the
applicable substantive law it applies
mandatory law for international
arbitration: the law of the place of
arbitration, or where the contract was
to be performed or of the place of
enforcement.
STUDIO LEGALE MASTELLONE
FIRENZE MILANO ROMA VERONA
EC DIRECTIVE 86/653 ON
SELF-EMPLOYED
COMMERCIAL AGENTS


The parties may not derogate from
Articles 17 and 18 (termination
indemnity or compensation) to the
detriment of the commercial agent
before the agency contract expires
ECJ judgment 9 November 2000, case
C-381/98, Ingmar GB Ltd v. Eaton
Leonard
Technologies
Inc
STUDIO LEGALE MASTELLONE
FIRENZE MILANO ROMA VERONA
MIND YOUR BELGIAN
DISTRIBUTOR!


Belgian Law of 27 July 1961 on the
unilateral termination of exclusive
distribution agreements of indefinite
duration:
non-Belgian choice of courts or
arbitration clause + foreign law
clause: not always a watertight
solution (ex art. 7.1 Rome Conv.)
STUDIO LEGALE MASTELLONE
FIRENZE MILANO ROMA VERONA
GOVERNING LAW
ABSENT A CHOICE OF
LAW


Law of the country with which the
agreement is most closely connected
or of the country of residence of the
party who is to effect the performance
which is characteristic of the contract
STUDIO LEGALE MASTELLONE
FIRENZE MILANO ROMA VERONA
ROME I REG., ART. 4



(b) Service contract: law of the
service provider’s country of residence
(e) Franchise contract: law of the
franchisee’s country of residence
(f) Distribution contract: law of the
distributor’s country of residence
STUDIO LEGALE MASTELLONE
FIRENZE MILANO ROMA VERONA
DOES THE CISG APPLY TO
DISTRIBUTION
AGREEMENTS?

Unless CISG is the chosen governing
law: CISG applies if the Distributor
Agreement (a framework agreement
distinct from the sales contracts
concluded in the performance of the
former) can be characterized as a
contract for the sale of goods [U.S. District
Court, Southern District of New York 21 July 1997, Helen
Kaminski Pty. Ltd. v. Marketing Australian Products, Inc.]
STUDIO LEGALE MASTELLONE
FIRENZE MILANO ROMA VERONA
UIA Seminar - “The Issues Which Really Count For Clients
In International Agency, Distribution and Franchising
Agreements - An Update For Some, An Eye Opener For
Others!”, Atlanta 1 - 2 May 2009
CHOICE OF LAW AND JURISDICTION CLAUSES IN CROSSBORDER AGENCY AND DISTRIBUTION AGREEMENTS
FROM AN EU PERSPECTIVE
THANK YOU FOR YOUR ATTENTION!
ANY QUESTIONS?
Carlo H. Mastellone, avvocato
Firenze, Italia
STUDIO LEGALE MASTELLONE
FIRENZE MILANO ROMA VERONA
STUDIO LEGALE MASTELLONE
FIRENZE MILANO ROMA VERONA
STUDIO LEGALE MASTELLONE
FIRENZE MILANO ROMA VERONA
STUDIO LEGALE MASTELLONE
FIRENZE MILANO ROMA VERONA