Jurisdiction over sudden terminations of established business relationships disputes: clarifications of 2017

Fifteen years have not been enough to settle all the issues arising from the application of Article L.442-6 section I. paragraph 5 of the French Commercial Code.

This legislation which, since 2001, has enabled companies to hold a business partner liable if the latter suddenly terminates a business relationship “even partially, without prior written notice commensurate with the duration of the business relationship and consistent with the minimum notice period determined by the multi-sector agreements in line with standard commercial practices,” (official Legifrance translation) is most commonly invoked by litigants.

Some court decisions rendered in 2017 have clarified the rules applicable to jurisdiction over such disputes.

According to Article D.442-3 of the French Commercial Code, cases of sudden termination of established commercial relationships may exclusively be brought to eight commercial courts specifically designated by law¹.

It additionally provides that the Paris Court of Appeal has exclusive jurisdiction over appeals against the judgements rendered by these designated commercial courts.

Given the diversity of dispute resolutions agreements, lawyers are faced with the following questions:

1. May the parties derogate by contract to article D.442-3 of the french commercial code and elect another commercial court than the one designated by law to hear their dispute?

An answer had been given in international cases², but not in domestic case.

The Court of Cassation confirmed that the applicability of Article L.442-6 does not preclude arbitration per se. However, it held that a contract may not derogate to the provisions of Article D.442-3 via a choice of jurisdiction clause (Commercial Division of the Court of Cassation, 1 March 2017, no. 15-22.675).

In this case, the parties had elected the Commercial Court of Créteil, despite the fact that it is not one of the eight courts listed under Article D.442-3.

What about a case where the parties have actually chosen one of the eight designated courts, but not the one normally competent under Article D.442-3 ?

It seems reasonable to consider that such a clause should not be deemed to derogate to Article D.442-3 strictly speaking since one of the eight designated courts will indeed hear the case, as the legislator intended.

To our knowledge, no court decision has yet been rendered on this question.

2. Which court of appeal is to hear the appeal against a judgement on an established relationship sudden termination rendered by an incompetent court?

On this particular issue, in 2017, the Court of Cassation reversed its previous position (Commercial Div, 29 March 2017 no. 15-17.659 and 15-24.241; Commercial Div, 26 April 2017 no. 15-26.780).

It now holds that the Paris Court of Appeal is the only one competent to hear the appeals against judgments rendered by the eight designated courts. Appeals against the decisions of other (non-designated) courts on established relationships sudden terminations are to be heard by the Court of Appeal normally competent under the general procedural rules³.

Such Courts of Appeal should from now on declare the appeal admissible and note that the non-designated court exceeded its authority.

Previously, the Court of Cassation ruled that the Court of Appeal of Paris had sole jurisdiction to hear any appeal lodged against rulings rendered on the basis of Article L.442-6 (including those emanating from non-designated courts) and that any violation of that sole jurisdiction constituted a situation of inadmissibility of the appeal that the non-competent Court of Appeal had to raise⁴.

The Court of Cassation explained particularly clearly the reasons why it changed its position.

Firstly, the previous solution was a source of legal uncertainty for the parties as to the determination of the court of appeal able to hear their appeals in view of the wording of Article D.442-3 of the French Commercial Code and, secondly, it resulted in rulings handed down by non-designated courts being upheld, as appeals lodged with courts of appeal other than the Paris Court of Appeal were deemed inadmissible and not heard.

We believe that the new position should be welcomed.

¹ See Annex 4-2-1 of book IV of the French Commercial Code
² See Monster Cable ruling, First Civil Division of Court of Cassation (Cour de Cassation), 22 October 2008, no. 07-15.823; First Civil Division of Court of Cassation, 18 January 2017, no. 15-26.105.
³ Article R.311-3 of France’s Judicial Organisation Code
⁴ Commercial Division of Court of Cassation, 31 March 2015, no. 14-10.016; Commercial Division, 20 October 2015, no. 14-15.851

Jurisdiction over sudden terminations of established business relationships disputes: clarifications of 2017 - Paper's Translation - Option Finance (12/02/2018)