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CHOICE OF LAW AND JURISDICTION CLAUSES IN CROSS-BORDER AGENCY AND DISTRIBUTION AGREEMENTS FROM AN EU PERSPECTIVE  by Ca

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.

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CHOICE OF LAW AND JURISDICTION CLAUSES IN CROSS-BORDER AGENCY AND DISTRIBUTION AGREEMENTS FROM AN EU PERSPECTIVE  by Ca

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  1. 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

  2. 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

  3. LETTERS OF INTENT • LOI should not have any binding effect • exceptfor the clausesthat in the parties’ intentionshouldhave a bindingeffect - confidentialityof 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

  4. CHOICE OF LAW OF NON-CONTRACTUAL OBLIGATIONS Art. 14. Freedomofchoice, Reg. (EC) No 864/2007 (“Rome II”) The choiceshallbeexpressed or demonstratedwithreasonablecertaintyby the circumstancesof the case and shallnotprejudice the rightsofthirdparties. STUDIO LEGALE MASTELLONE FIRENZE MILANO ROMA VERONA

  5. 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

  6. COMMON LAW vs. CIVIL LAW • No generalrulerequiring the partiestonegotiate in goodfaith [“How can a court be expected to decide whether, subjectively, a proper reason existed for the termination of negotiations? ] • vs. partieshave a duty tobehaveaccordingtogoodfaith [and culpa in contrahendo] STUDIO LEGALE MASTELLONE FIRENZE MILANO ROMA VERONA

  7. 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, FonderieOfficineMeccanicheTacconiS.p.A. Vs., Heinrich Wagner SintoMaschinenfabrik GmbH] STUDIO LEGALE MASTELLONE FIRENZE MILANO ROMA VERONA

  8. COUNCIL REGULATION (EC) No 44/2001 Article 5 - A person domiciled in a Member State may, in another Member State, besued: … 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

  9. 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

  10. GOVERNING LAW (continued) • Absent an express choice of law (art. 14), the law applicable to a non-contractual 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

  11. 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

  12. II. LITIGATION STRATEGIES • Which are the most appropriate contractual strategies to be implemented when litigation cannot be avoided? • Arbitration or ordinarycourts? STUDIO LEGALE MASTELLONE FIRENZE MILANO ROMA VERONA

  13. 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

  14. 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

  15. 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

  16. 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

  17. JURISDICTION ABSENT A CHOICE OF COURT • Reg. (EC) No 44/2001, art. 5.1.(b) in mattersrelatingto a contract: • - in the case of the provisionof services, the court for the place in a Member State where, under the contract, the services wereprovided or shouldhavebeenprovided STUDIO LEGALE MASTELLONE FIRENZE MILANO ROMA VERONA

  18. MAKE SURE THE CHOICE OF FORUM IS EFFECTIVE • in writing or evidenced in writing • accordingtoparties’ practices • accordingwithusage the parties are or oughttohavebeenawareof and which in theirtradeiswidelyknownto, and regularlyobservedby, partiestocontractsof the typeinvolved in the particulartradeconcerned (art. 23) STUDIO LEGALE MASTELLONE FIRENZE MILANO ROMA VERONA

  19. EFFECTIVE CHOICE OF FORUM (continued) • Jurisdictionshallbeexclusive (unlessotherwiseagreed) • Durablecommunicationsby electronic means: equivalentto "writing“ • Validity of jurisdiction clause in a distributorship agreement tacitly renewed [ECJ, Ivecov Van Hool] STUDIO LEGALE MASTELLONE FIRENZE MILANO ROMA VERONA

  20. 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

  21. “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

  22. 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

  23. 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

  24. 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

  25. 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

  26. 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

  27. 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

  28. 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

  29. 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

  30. EU MEDIATION DIRECTIVE June 28, 2008 • on certainaspectsofmediation in civil and commercial matters: purpose to facilitate accessto dispute resolution and topromote the amicablesettlementofdisputesbyencouraging the useofmediation and byensuring a sound relationshipbetweenmediation and judicialproceedings. STUDIO LEGALE MASTELLONE FIRENZE MILANO ROMA VERONA

  31. 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

  32. WHAT CHOICES ARE AVAILABLE? (continued) • Principles common totwo or more specifiedlegalsystemswillgovern [“common principlesof English and Frenchlaw, and in the absenceofsuch common principles, bysuchprinciplesofinternationaltradelawashavebeenappliedbynational and internationaltribunals” ] STUDIO LEGALE MASTELLONE FIRENZE MILANO ROMA VERONA

  33. WHAT CHOICES ARE AVAILABLE? (continued) • “floatingchoiceoflawclause” • “savingclause” • “generalprinciplesoflaw”, “transnationallaw” or “international commercial law” (lexmercatoria) • CISG • UNIDROIT Principles STUDIO LEGALE MASTELLONE FIRENZE MILANO ROMA VERONA

  34. COMMON ERRORS • British Law • Law of the memberstatesof the EuropeanUnion STUDIO LEGALE MASTELLONE FIRENZE MILANO ROMA VERONA

  35. MAKE SURE THE CHOICE OF LAW IS EFFECTIVE The choicemustbe: • expressed or demonstrated with reasonable certainty by the terms of the contract or the circumstances of the case (art. 3.1 RomeConv.) • clearlydemonstrated … (art. 3.1 Reg. Rome I) STUDIO LEGALE MASTELLONE FIRENZE MILANO ROMA VERONA

  36. 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

  37. 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

  38. 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

  39. GOVERNING LAW ABSENT A CHOICE OF LAW • Law of the countrywithwhich the agreement ismostcloselyconnected • or of the countryof residence of the party whoistoeffect the performance whichischaracteristicof the contract STUDIO LEGALE MASTELLONE FIRENZE MILANO ROMA VERONA

  40. ROME I REG., ART. 4 • (b) Service contract: lawof the service provider’s countryof residence • (e) Franchisecontract: lawof the franchisee’s countryof residence • (f) Distributioncontract: lawof the distributor’s countryof residence STUDIO LEGALE MASTELLONE FIRENZE MILANO ROMA VERONA

  41. 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

  42. 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 THANK YOU FOR YOUR ATTENTION! ANY QUESTIONS? Carlo H. Mastellone, avvocato Firenze, Italia STUDIO LEGALE MASTELLONE FIRENZE MILANO ROMA VERONA

  43. STUDIO LEGALE MASTELLONE FIRENZE MILANO ROMA VERONA

  44. STUDIO LEGALE MASTELLONE FIRENZE MILANO ROMA VERONA

  45. STUDIO LEGALE MASTELLONE FIRENZE MILANO ROMA VERONA

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