Pascal HOLLANDER (Hanotiau & van den Berg – Brussels) Sina HELLER (CDH – Berlin)

1. Agreeing on jurisdiction or arbitration as a means for avoiding mandatory rules protecting the other party. Is this choice always effective? Pascal HOLLANDER (Hanotiau & van den Berg – Brussels) Sina HELLER (CDH – Berlin) Nathalie SINAVONG (Pinsent Masons LLP – Paris)

2. European Legal Framework • « Brussels I » Regulation 44/2000 (to be replaced as of 1 January 2015 by Regulation 1215/2012) on Jurisdiction and Enforcement of Civil and Commercial Decisions • Lugano Convention of 30 October 2007 • « Rome I Regulation » n° 593/2008 on the Law Applicable to Contractual Obligations • (The Hague Convention of 30 June 2005) • Arbitration: • New York Convention of 10 June 1958 on Enforcement of Foreign Arbitral Awards • Geneva Convention on Commercial Arbitration 1961

3. Brussels I – Lugano(Brussels I Recast) • Principle : Court of the place of Defendant (Art. 2) (Art.4) • Exceptions: • Contracts for delivery of goods: place of delivery (Art. 5.1 (b) 1°) (Art. 7.1.(b) 1°) • Contracts for the provision of services: place where the services are provided (Art. 5.1 (b) 2°) (Art. 7.1 (b) 2°) • Freedom of the parties to select the forum in a Member State (Art. 23) (Art. 25)

4. Rome I Principle: freedom of the parties to choose the applicable law (Art. 3.1) (also if not the law of a Member State) (Art. 2)

5. Rome I • Exceptions: • Art. 3.3 : If all other elements are located in a country other than the one whose law has been chosen, no prejudice to provisions of the law of that country which cannot be derogated • Art. 3.4 : If all other elements are located in one or more EU Member States, choice of the law of a non-Member State does not prejudice the application provisions of EU law, as implemented in the country of the forum, which cannot be derogated • N.B.: compare with Ingmar decision!

6. Rome I • Exceptions: • Art. 9: Overriding mandatory provisions: • of the lex fori (Art. 9.2) • of the law of the country where the contract must be performed (Art. 9.3): • if they render the performance unlawful • after giving regard to nature and purpose of provisions and to consequences of their application or non-application

7. New York Convention Article II.1: Each Contracting State shall recognize an agreement in writing under which the parties undertake to submit to arbitration all or any differences which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not, concerninga subject matter capable of settlement by arbitration. Article II.3: The court of a Contracting State, when seized of an action in a matter in respect of which the parties have made an agreement within the meaning of this article, shall, at the request of one of the parties, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed. Controversial issue: which law must be applied to decide if a matter is capable of being arbitrated under NY Convention Article II.1 & 3?

8. New York Convention • Article V.2: Recognition and enforcement of an arbitral award may also be refused if the competent authority in the country where recognition and enforcement is sought finds that: (a) The subject matter of the difference is not capable of settlement by arbitration under the law of that country.

9. BELGIUM • Restrictions to ability of the parties to select the forum and the applicable law: • Art. 4 Act of 27 July 1961 on Unilateral Termination of Exclusive Distribution Agreements • Art. 27 of Act of 13 April 1995 on Commercial Agency Agreements but: « without prejudice to the application of international treaties to which Belgium is a party » • Art. 9 of Act of 19 December 2005 on Pre-Contractual Information in Commercial Partnership Agreements • BUT supremacy of supranational law (« Le Ski », Cass., 25 May 1971) Forum selection clauses as per Brussels I & Lugano will be upheld (regardless of the applicable law)

10. Belgium - Arbitration:distribution agreements • Cass. 29 June 1979 « Adelin Petit/ NSU »: • Enforcement in Belgium of a foreign arbitral award (N.Y. Convention – Art. V): dispute must be arbitrable • Dispute is arbitrable under Belgian law only if arbitrators applied Belgian law • Cass. 15 October 2004, 16 November 2006, 14 January 2010: • Denial of Jurisdiction (N.Y. Convention – Art. II.1 & II.3) • Lex fori can be taken into consideration • If lex fori prohibits arbitration, courts have jurisdiction • Current lex fori : « Adelin Petit / NSU »: dispute is arbitrable only if arbitrators must apply Belgian law

11. Belgium - Arbitration:agency agreements • Cass., 3 November 2011, « Air Transat » • Canadian Principal / Belgian Agent • Arbitration in Quebec under Quebec law • Act of 13 April 1995 is mandatory • No effect can be given to an arbitration clause with application of Quebec law because dispute cannot be taken away from Belgian judge, and • Quebec law affords less protection to agent

12. Belgium - Arbitration:agency agreements • Cass., 5 April 2012, « Unamar » • Bulgarian Principal / Belgian Agent • Arbitration in Sofia under Bulgarian law • Validity of arbitration clause depends of whether the applicable law contains provisions protecting the agent (cfr Air Transat) • Both Belgium and Bulgaria implemented the EEC 1986 Directive on Commercial Agents, but Belgium extended the protection to services, while Bulgaria applies it only with regard to products

13. Belgium – Applicable law:agency agreements • Cass., 5 April 2012, « Unamar » • EC 1986 Directive is mandatory, as is Belgian 1995 Act • Art. 27 1995 Act aims at offering to agents located in Belgium the protection provided by 1995 Act, whatever is the applicable law • Art. 3 Rome Convention (3 Rome I): choice of law by the parties • Art. 7.2 Rome Convention (9.2. Rome I): mandatory rules of the forum may be applied

14. Belgium – Applicable law:agency agreements • Cass., 5 April 2012, « Unamar »: ECJ asked to interpret Rome Convention: Given the qualification of 1995 Act as mandatory law in the meaning of art. 7.2 of Rome Convention [= 9.2 Rome I Regulation], should art. 3 and 7.2 thereof, read or not in conjunction with EC 1986 Directive, be interpreted in the sense that they permit the application of mandatory national provisions of the lex fori even if the selected law is the law of another Member State that implemented the Directive?

15. ECJ: agency agreements • ECJ, « Unamar » - conclusions of Advocate General Wahl (15 May 2013) • 1986 Directive sets out minimal protection only • Belgian law of 1995 goes farther than implementing the 1986 Directive and – to that extent - must be deemed to contain national mandatory rules • Belgian judge may apply its own mandatory rules, even if they offer a larger protection than foreseen by the 1986 Directive (art. 7.2 Rome Convention = 9.2 Rome I) • If followed by ECJ: likely inarbitrability

16. German Supreme Court, 5 September 2012 – VII ZR 25/12

17. German Supreme Court, 5 September 2012 – VII ZR 25/12 District Court of Heilbronn

18. German Supreme Court, 5 September 2012 – VII ZR 25/12 District Court of Heilbronn

19. German Supreme Court, 5 September 2012 – VII ZR 25/12 Higher Regional Court of Stuttgart

20. HigherRegionalCourt Stuttgart, 16 Jan 2012, case 5 U 126/11 Ruling “A jurisdiction clause is not recognized if a stipulation of an exclusive jurisdiction of a foreign court (in this case: jurisdiction in Virginia - USA) combined with a choice of law leads to the result, that the court, which is called upon, does not apply international binding law. Articles 17 and 18 of the Directive ensures that the commercial agent is entitled, on termination of the contract, to an indemnity or to compensation for the damage he suffers as a result of the termination of his relations with the principal, which is inalienableaccording to Article 19. In Germany, these guidelines are implemented in § 89b HGB. According to the judgement of the ECJ “Ingmar v Eaton” (C 3-81/98) those provisions are not only mandatory, but their compliance within the EU is also essential to attain those Treaty objectives. It is essential for the Community legal order that a principal established in a non-member country, whose commercial agent carries on his activity within the Community, cannot evade those provisions by a choice-of-law clause.”

21. German Supreme Court, 5 September 2012 – VII ZR 25/12 • The forum-selection clause had been coupled with a choice-of-law clause designating Virginia law as governing law. • Virginia law contained no right to post-termination indemnity. • As a result, the German agent would likely lose his right to claim post-termination indemnity from the American principal.

22. German Supreme Court, 5 September 2012 – VII ZR 25/12 • In favouring their own jurisdiction over the exclusive forum-selection clause, all three courts cited the same policy reason. • This was because: • § 89b GCC, which guarantees agents’ rights to a post-termination indemnity, is Germany’s implementing legislation for Articles 17 and 18 of the Commercial Agency Directive. • In 2000, the ECJ held in its famous Ingmardecision that these rules were mandatory rules for purposes of private international law. • Articles 17 and 18 of Directive 86/653/EEC apply to contracts with EU commercial agents even if the agency agreement specifies non-EU law as governing law.

23. Higher Regional Court Munich, 17 May 2006, 7 U 1781/06 Agency contract between Californian company and German commercial agent. Contract stated that California law governed the agency agreement and contained an exclusive forum-selection clause in favour of Santa Clara courts. Court refused to enforce the forum-selection clause for the same reason as in 2012: Under Californian law the agent has no right for post-termination indemnity or compensation after termination of the contract. But these rights constitute mandatory EU rules and can not be contracted away through a forum-selection clause. Thus, the forum-selection clause had to be invalidated in the interest of EU public policy.  

24. FRANCE Examples of French rulings rendered in the context of a breach of business relationships

25. FRANCE:Context • Commercial relationship between French and foreign company • Parties have agreed on arbitration or jurisdiction clause to submit any dispute to a foreign jurisdiction • Commercial relationship is terminated by a party • The party suffering the termination (mostly French party) brings a legal action before the French Commercial Court, notwithstanding the jurisdiction clause providing for a foreign forum, claiming for damages for sudden breach of commercial relationship (“rupture brutale d’une relation commerciale établie”)

26. FRANCE:Context Legal basis “rupture brutale”: Art. L.442-6- I 5° of the French Code of Commerce: I. – Is liable and thus required to repair the damage caused thereby, any producer, merchant, business or person registered in the trade directory who: 5° suddenly terminates, even partially, an established business relationship, without written notice taking into account the duration of the business relationship and complying with the minimum notice period determined, by reference to trade practices, by inter-professional agreements . French law aims to sanction the absence or insufficiency of notice period and may eventually award damages to the party suffering the breach.

27. FRANCE:Context Wide interpretation of the notion of “established business relationship” by French Courts. Applicable to occasional contracts or fixed term contracts if the business relationship is sufficiently regular and stable • Can include: • Sudden ending of purchase orders • Sudden changes in conditions of the cooperation leading to a termination of the relationship • Partial breach such as reduction of orders, sudden increase of prices without prior notice, removal by a company of supplier’s products from the list of the products offered to end customers

28. FRANCE:Context Since 2007: termination of an established business relationship based on Article L.442-6-I 5° Code of Commerce is sanctioned on the basis of tort liability (and not contractual)  jurisdiction clause provided in the contract may be set aside by the Courts Article L.442-6-I 5° French Code of Commerce is considered to be a public order provision (as part of the anti-competitive practices) and is always applied on the French territory as it is a mandatory rule (“loi de police”) The sudden breach of a commercial relationship is not considered as a contractual breach but as a violation of a “legal” duty

29. FRANCE:Context Contradictory rulings of the French Supreme Court (“Cour de Cassation”): Commercial Chamber: • applies tort liability. May set aside the jurisdiction clause considering that the damage occurred in France Civil Chamber: • applies contractual liability and therefore gives effect to a jurisdiction clause

30. FRANCE:CASE LAWA. Rulings of French Courts refusing to give effect to a jurisdiction clause Cass. Com. 15 September 2009, Cap Sud / Replex Fashion GmbH • Uninterrupted commercial relationship for 10 years between French manufacturer and German company • Jurisdiction clause conferring jurisdiction to German Court (Neuss) provided in the German company’s orders • German company stopped ordering from French manufacturer and set up simultaneously a subsidiary in France

31. FRANCE: CASE LAWA. Rulings of French Courts refusing to give effect to a jurisdiction clause • French company filed a claim before the French commercial Court for damages for breach of business relationships based on Art. L.442-6-I 5° of French code of commerce Court of Appeal, Paris 25 October 2006 : considered the relationship as of contractual nature with reference to Art. 2 Regulation n°44/2001  gave effect to the jurisdiction clause • Supreme Court quashed the decision of the Court of Appeal: the Party at breach of the business relationship must be held liable on a tort grounds based on Art. L. 442-6-I 5° C.com and Art. 5-3 Regulation n°44/2001

32. FRANCE:CASE LAWA. Rulings of French Courts refusing to give effect to a jurisdiction clause Cass. Comm. 18 January 2011, SAFIC ALCAN / COMERCIO DI PRIMERAS MATERIAS SL • Commercial relationship between Spanish manufacturer and French exclusive distributor • Jurisdiction clause conferring jurisdiction to French Court provided in French company’s orders • Manufacturer informs the French distributor that it will distribute its products through its own network

33. FRANCE:CASE LAWA. Rulings of French Courts refusing to give effect to a jurisdiction clause • French company filed a claim before the commercial Court of Nanterre for damages for breach of commercial relationships • Court of Appeal, Versailles 10 December 2009 : considered the relationship as of contractual nature with reference to Art. 5-I b) Regulation n°44/2001 but held that there was no agreement on the jurisdiction clause  jurisdiction of Spanish Courts (Spain being the country where the goods were delivered) • Supreme Court quashed the decision of the appellate Court: party at breach must be held liable on tort grounds based on Art. L. 442-6-I 5° C.com and Art. 5-3 of Regulation n° 44/2001

34. FRANCE:CASE LAWB. Rulings from the French Supreme Court giving effect to arbitration or jurisdiction clauses Cass. Civ. 1e 6 March 2007 – FRANKONIA / BLASER JAGDWAFFEN GmbH • Distribution contract between German principal and French distributor • Jurisdiction clause to German Courts provided in orders and invoices of German company • Supreme Court applied contractual liability  gave effect to the jurisdiction clause with reference to Art. 23 Regulation n°44/2001

35. FRANCE:CASE LAWB. Rulings from the French Supreme Court giving effect to arbitration or jurisdiction clauses Cass. Civ. 1e 22 October 2008 – MONSTER CABLE PRODUCTS PRODUCTIONS INC. / AUDIO MARKETING • Exclusive distribution agreement between US principal and French distributor • Jurisdiction clause to Courts of San Francisco provided in contract • Supreme Court gave effect to the jurisdiction clause notwithstanding the applicability of imperative rules (“lois de police”)!

36. FRANCE:CASE LAWB. Rulings from the French Supreme Court giving effect to arbitration or jurisdiction clauses Cass. Civ. 1e 12 November 2009 – SAINTE GERMAINE / SAS TRIOPLAST SMS Exclusive distribution contract between Swedish principal and French company • Arbitration clause to Stockholm Arbitration Court • Supreme Court gave effect to the arbitration clause

37. FRANCE:CASE LAWB. Rulings from the French Supreme Court giving effect to arbitration or jurisdiction clauses Cass. Civ. 1e 8 July 2010 – DOGA / HTC SWEDEN AD • Exclusive distribution agreement between Swedish principal and French distributor • Arbitration clause contained in contract • Supreme Court gave effect to the arbitration clause, as it considered that request referred to the contract, no matter whether imperative rules would be applicable!

38. FRANCE:CASE LAWB. Rulings from the French Supreme Court giving effect to arbitration or jurisdiction clauses Cass. Com 20 March 2012 – SBMM / INGRID KÄNZLE • Commercial relationship between French and German company • Jurisdiction clause to German Courts • Supreme Court gave effect to the jurisdiction clause but without any reference to contractual or tortious liability

39. France: conclusion • Arbitration clauses: French Supreme Court generally in favour of arbitration clauses • Jurisdiction clauses: tendency of French Supreme Court to give effect to jurisdiction clause for foreign forum in international business relationships • Need to monitor the coming rulings of the French Supreme Court: • 2012: 2 decisions of the Courts of Appeal favourable to jurisdiction clauses; • 2013: 2 decisions favourable and 1 decision not in favour of jurisdiction clause (with reference to “loi de police”)

40. General Conclusions • Forum selection is not always effective • Outside of EU: forum selection may be disregarded if it leads to avoiding mandatory provisions • Within EU: a foreign court may apply mandatory provisions of the law of the country where the contract is performed • Arbitration: • Belgian view:upheld only if dispute is, under the lex fori, deemed arbitrable, which may depend of applicable law • French view: upheld, regardless of whether mandatory rules are applicable or not • Arbitrators may – but must not – take mandatory provisions into consideration

41. THANK YOU! • Pascal HOLLANDER HANOTIAU & VAN DEN BERG – Brussels pascal.hollander@hvdb.com • Sina HELLER CDH – Berlin Heller@cdh.de • Nathalie SINAVONG PINSENT MASONS LLP – Paris Nathalie.Sinavong@pinsentmasons.com