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Sudden termination of established business relationships, contract subject to foreign law and victim in France

Sudden termination of established business relationships, contract subject to foreign law and victim in France

In a court judgment of 5 September 2013, the Grenoble Court of Appeal confirmed that the provisions of article L 442-6 -I- 5 of the Code de Commerce on the sudden termination of established business relationships override mandatory provisions and therefore apply when the termination occurred on the French territory. In this case, a French company bought a chemical component from a Luxembourg supplier for its production of chemicals. The contract between the two parties was subject to Luxembourg law. The Luxembourg company abruptly terminated the supply agreement and the French manufacturer brought legal proceedings against this company for sudden termination of established business relationships. The legal issue that arose in this case was whether a French law on sudden termination should apply where the law of the contract between the parties was foreign. By court judgment of 10 March 2010, the Romans Commercial Court Tribunal had dismissed the French manufacturer’s claims and this company appealed. Contrary to the Commercial Court’s judgment, the Grenoble Court of Appeal held that Article L 442-6 -I- 5 of the French Commercial Code was applicable because “it is an overriding mandatory provision” and that the supply contract between the parties designated the French territory as the place of supply, so this contract was sufficiently linked to France. The Grenoble Court of Appeal, after demonstrating that the split between the two parties was brutal, ordered the Luxembourg provider to pay damages. By that judgment, the Grenoble Court of Appeal confirmed that the French provision on the sudden termination of established business relationships are overriding mandatory provision. This provision therefore applies irrespective of the law applicable to the contract if there is a link with France. Such a solution was initiated by the Lyon Court of Appeal (Lyon CA, April 30, 2008, n°06/04.689) for a contract of commercial collaboration. The Lyon Court of Appeal held that the French legislation on sudden termination of established business relationships should apply because it is an overriding mandatory provision. The French Supreme Court, in another case, adopted the same solution but using a different argument (Cass Com, October 21, 2008, n°07-12336). The French Supreme Court had indeed considered that the fact to suddenly terminate an established relationship involves the responsibility of its author. Consequently, by applying the rules of conflict of laws, the French Supreme Court held that “the law applicable to this responsibility is that of the State of the place where the harmful event occurred“. With this solution, the connecting factor was also the place of damages, or the place of establishment of the distributor victim. By the judgment under discussion, the Grenoble Court of Appeal preferred the Lyon Court of Appeal’s reasoning based on the application of overriding mandatory provision rather than the French Supreme Court’s reasoning based on the author of tort of the termination. However, regardless of the reasoning, the solution remains the same: when the victim is domiciled in France, irrespective of the law applicable to the contract, the provisions of Article L 442-6 -I- 5 of the commercial Code are intended to apply.

CABINET FOUSSAT, Société d’Avocat, PARIS / BRUXELLES
contact@cabinetfoussat.com – Tél. : +33 (0)1 45 74 64 65bruxelles@cabinetfoussat.com Tél. : + 32 (0)2 318 18 36
 

tags: relation commerciale établie, rupture brutale