CEPC warns that French rules on formalisation of trade negotiations should apply to international contracts performed in France

Written on 18 Oct 2019

On 30 August 2019, the French Commission for Examination of Unfair Commercial Practices (CEPC) released an opinion examining the application of Article L. 441-3 and L. 441-4 of the French Code of Commerce (former Article L. 441-7 of the French Code of Commerce) to a trade relationship between two foreign companies that market products in France, despite the existence of a contract provision expressly excluding the application of French law.

Articles L. 441-3 and L. 442-4 of the French Code of Commerce impose a legal framework for the formalisation of negotiations between suppliers and distributors in France and notably provide:

  • an obligation to draft a written agreement;
  • several specific obligations regarding prices and marketing services that must be included in the contract;
  • a limit to the duration of the agreement ; and
  • a specific time limit for the supplier to communicate the agreement to the distributor.

Those obligations may differ according the activity of the distributor.

In its opinion, the CEPC first underlines that provisions of Article L. 441-3 and L. 441-4 of the Code of Commerce are deemed to encourage loyalty and balance in trade relationships and must thereby be considered as overriding mandatory provision as defined by Article 9 para. 1 of the Rome I Regulation.

Therefore, according to the CEPC, those articles should be applicable to international contracts, provided that there exists a sufficient connection to the French territory. However, knowing that the violation of this obligation is punished by an administrative penalty for which Article 9 para. 1 of Rome I Regulation may not be applicable, the CEPC considers that French administration could only punish such violation if the place of performance of the commercial relationship is located on the French territory.

Depending on the particular circumstances of the trading relationship, this situation could be characterised by the combination of several factors, such as the presence on the French territory of the supplier or the distributor, or the distribution of products intended for the French market.

Opinions of the CEPC are not binding but are mostly followed by French courts and administrations. Foreign companies seeking to market products on the French territory should therefore be watchful as to French rules potentially applicable to their distribution agreements.