France – Abrupt termination of contract

26 Settembre 2017

  • Francia
  • Contratti
  • Distribuzione
  • Contenzioso

Poland has recently become quite famous for its skilled and resourceful IT specialists. Each year thousands of new computer engineers (programmers, developers, testers, designers etc.) enter into the market, warmly welcomed by domestic and multinational companies. A big part of these young talents open their own firm or business as free lancers developing software for clients from European countries as well as from US, Canada, Japan, China, etc.

However, companies who want to cooperate with these partners and assign software development to a Polish IT company or freelancer should be aware that the copyright law in Poland is very strict, as it mainly protects the creator and not the client. Therefore, to be on a safe side, it is better to follow these 7 basic rules:

  1. Never start cooperation with an IT specialist or an IT company without a formal agreement. And I mean a real agreement, in a written form, with signatures of persons who can validly contract on behalf of the companies. The form is very important because – under Polish law – copyrights transfer and exclusive license agreements not fulfilling form conditions are null and void. Moreover, if there is no agreement, Polish copyright rules will apply to all intellectual property matters.
  2. Please remember that software is a creation protected by copyright law. Therefore you should consider whether you want to acquire the entire intellectual property rights or you just need a license. If you need a full IP transfer, you need to put it expressly in the agreement; otherwise you will only get a non-exclusive licence. And these, in several cases, will not be useful from a business point of view. If a license is enough, it is advisable to agree if it will be exclusive or non-exclusive.
  3. When drafting an IP clause, be detailed and clear. If you want to be able to decompile and disassembly the binary code, specify it in the IP clause. If you want to be able to introduce modifications to the source code, specify it in the IP clause. If you want to sublicense the software, specify it in the IP clause. The IP clause shall contain the description of any way you want to use the software, whether on mobile devices or on personal computers, any other electronic device or via internet (e.g. cloud computing). And believe me, when I write “specify it in the IP clause” it means that you really, really have to put it there. Otherwise it will be null and void and you may face a situation where your smart IT engineer, after getting paid, will sue you for the IP infringement.
  4. Remember that you should indicate the timeframe and the geographical scope of the license or IP transfer. If you do not specify it expressly in the agreement, you will only be entitled to a 5-year license, automatically expiring afterwards.
  5. Draft carefully a clause related to termination of the agreement. Under Polish law the licensor may terminate the license agreement granted for an indefinite period of time upon 1-year notice. If you do not want to find yourself in a situation where you lose the software IP rights in the middle of a big project, make sure that from the very beginning you are on a safe side.
  6. Make sure that your partner is obliged to transfer you upon request all software documentation and the source code.
  7. Make sure that you have a good indemnification clause with no limitation of liability. Often Polish IT companies subcontract some part of the development work to free lancers. You never know if they will conclude proper agreements with their subcontractors and if they will legally acquire the IP of the software that they will later sell you. There is always the risk that in the future some Polish IT engineer you never met will raise IP infringement claims against you, trying to prove that he/she actually developed the software. In such a situation an indemnification clause will help you recovering the costs from your partner.

Based on our experience in many years advising and representing companies in the commercial distribution (in Spanish jurisdiction but with foreign manufacturers or distributors), the following are the six key essential elements for manufacturers (suppliers) and retailers (distributors) when establishing a distribution relationship.

These ideas are relevant when companies intend to start their commercial relationship but they should not be neglected and verified even when there are already existing contacts.

The signature of the contract

Although it could seem obvious, the signature of a distribution agreement is less common than it might seem. It often happens that along the extended relationship, the corporate structures change and what once was signed with an entity, has not been renewed, adapted, modified or replaced when the situation has been transformed. It is very convenient to have well documented the relationship at every moment of its existence and to be sure that what has been covered legally is also enforceable y the day-to-day commercial relationship. It is advisable this work to be carried out by legal specialists closely with the commercial department of the company. Perfectly drafted clauses from a legal standpoint will be useless if overtaken or not understood by the day-to-day activity. And, of course, no contract is signed as a “mere formality” and then modified by verbal agreements or practices.

The proper choice of contract

If the signature of the distribution contract is important, the choice of the correct type is essential. Many of the conflicts that occur, especially in long-term relationships, begin with the interpretation of the type of relationship that has been signed. Even with a written text (and with an express title), the intention of the parties remains often unclear (and so the agreement). Is the “distributor” really so? Does he buy and resell or there are only sporadic supply relationships? Is there just a representative activity (ie, the distributor is actually an “agent“)? Is there a mixed relationship (sometimes represents, sometimes buys and resells)? The list could continue indefinitely. Even in many of the relationships that currently exist I am sure that the interpretation given by the Supplier and the Distributor could be different.

Monitoring of legal and business relations

If it is quite frequent not to have a clear written contract, it happens in almost all the distribution relationships than once the agreement has been signed, the day-to-day commercial activity modifies what has been agreed. Why commercial relations seem to neglect what has been written in an agreement? It is quite frequent contracts in which certain obligations for distributors are included (reporting on the market, customers, minimum purchases), but which in practice are not respected (it seems complicated, there is a good relationship between the parties, and nobody remembers what was agreed by people no longer working at the company…). However, it is also quite frequent to try to use these (real?) defaults later on when the relationship starts having problems. At that moment, parties try to hide behind these violations to terminate the contracts although these practices were, in a sort of way, accepted as a new procedure. Of course no agreement can last forever and for that reason is highly recommendable a joint and periodical monitoring between the legal adviser (preferably an independent one with the support of the general managers) and the commercial department to take into account new practices and to have a provision in the contractual documents.

Evidences about customers

In distribution contracts, evidences about customers will be essential in case of termination. Parties (mainly the supplier) are quite interested in showing evidences on who (supplier or distributor) procured the customers. Are they a result of the distributor activity or are they obtained as a consequence of the reputation of the trademark? Evidences on customers could simplify or even avoid future conflicts. The importance of the clientele and its possible future activity will be a key element to define the compensation to which the distributor will pretend to be eligible.

Evidences on purchases and sales

Another essential element and quite often forgotten is the justification of purchases to the supplier and subsequent sales by distributors. In any distribution agreement distributors acquire the products and resell them to the final customers. A future compensation to the distributor will consider the difference between the purchase prices and resale prices (the margin). It is therefore advisable to be able to establish the correspondent evidence on such information in order to better prepare a possible claim.

Damages in case of termination of contracts

Similarly, it would be convenient to justify what damages have been suffered as a result of the termination of a contract: has the distributor made investments by indication of the supplier that are still to be amortized? Has the distributor hired new employees for a line of business that have to be dismissed because of the termination of the contract (costs of compensation)? Has the distributor rented new premises signing long-term contracts due to the expectations on the agreement? Please, take into account that the Distributor is an independent trader and, as such, he assumes the risks of his activity. But to the extent he is acting on a distribution network he shall be subject to the directions, suggestions and expectations created by the supplier. These may be relevant to later determine the damages caused by the termination of the contract.

Influencer marketing is the trend in today’s world of advertising. Even though it is obvious that influencer marketing must observe the framework of applicable statutory provisions, the market has long been uncertain about how influencer posts are to be drafted in order to be legally compliant. The current decision of Celle Higher Regional Court (June 08, 2017 – Case 13 U 53/17) offers at least some clarity.

The judgment was issued in relation to an action for injunction by the German Association for Social Competition (Verband Sozialer Wettbewerb) against a German drugstore chain. A 20-year-old Instagram star with 1.3 million followers had advertised the drugstore chain in one of her posts. The post was only marked as advertisement at the bottom with the hashtag “#ad,” which additionally only came second in a list of six hashtags.

Celle Higher Regional Court adjudged that this type of marking was insufficient. The court requested that the commercial purpose of an Instagram post would have to be apparent at first sight. It did not consider use of the hashtag “#ad” in a “hashtag cloud” to be sufficient to mark the post as advertising.

The court left expressly open, however, whether the use of the hashtag “#ad” is generally suitable to mark advertising posts.

The state media authorities (Landesmedienanstalten) already reacted to the judgment, however, and revised their joint guide on advertising issues in social media. It now reads: “When marking a post as PROMOTION (Werbung) or ADVERTISING (Anzeige), you will be on the safe side – that much is certain. […] At the current time, we cannot recommend marking posts as #ad, #sponsored by, or #powered by.” In the future, Instagram itself intends to provide for more transparency on the platform by comprehensibly identifying advertising posts. It is currently testing the introduction of a branded content tool in Germany to make it easier for users to recognize posts as paid advertising.

Practical tip

Advertising posts in social media should always be marked as “promotion” or “advertising” at the beginning of the posts unless their commercial purpose arises directly from the circumstances. Advertisers are also advised to obligate influencers contractually to such legally compliant marking of posts, since the influencers’ behavior may be attributed to the company, as is clearly shown by the recent judgment of Celle Higher Regional Court against the drugstore chain.

The author of this post is Ilja Czernik.

Con la recente sentenza 16601/2017 la Suprema Corte – dopo svariate pronunce contrarie – ha aperto alla possibilità di riconoscere in Italia i provvedimenti stranieri contenenti punitive damages. In questo breve post vedremo in cosa consistono i punitive damages, a che condizioni potranno essere riconosciuti ed eseguiti in Italia e, soprattutto, che contromisure conviene adottare per affrontare questo nuovo rischio.

I danni puntivi, in inglese punitive damages, sono un istituto giuridico originario degli ordinamenti di common law che prevede la possibilità di riconoscere al danneggiato un risarcimento ulteriore rispetto alla compensazione del pregiudizio subito, nel caso in cui il danneggiante abbia agito con dolo o la colpa grave (rispettivamente “malice” e “gross negligence”).

Con i danni puntivi, cioè, oltre alla funzione compensatoria, il risarcimento del danno assume anche una finalità sanzionatoria, tipica del diritto penale, fungendo anche da deterrente nei confronti di ulteriori potenziali trasgressori.

Negli ordinamenti che prevedono i danni punitivi, il riconoscimento e la quantificazione del maggior risarcimento sono rimessi per lo più alla discrezionalità del giudice.

Negli Stati Uniti d’America i danni punitivi sono previsti dai principi di common law, ma disciplinati in maniera diversa in ogni Stato. Generalmente, tuttavia, si applicano ove la condotta del danneggiante sia intenzionalmente diretta a causare un danno o sia posta in essere senza avere riguardo delle norme a tutela della sicurezza. Solitamente non possono essere concessi per l’inadempimento di un contratto, salvo che non determini anche un illecito (tort) autonomo.

In alcuni Stati sono previsti dei limiti massimi ai punitive damages, a volte sotto forma di rapporto con i danni compensativi, a volte come tetto massimo. Inoltre, la Suprema Corte degli Stati Uniti è intervenuta in diversi casi per limitare le somme di condanna. Si consideri, ad esempio, il caso relativo all’azienda produttrice di automobili BMW, nel quale, a fronte di un danno compensativo di 4.000 USD, la Suprema Corte dell’Alabama aveva condannato BMW a 2.000.000 USD a titolo di danno punitivo. La Corte Suprema ha ritenuto tale condanna manifestamente eccessiva (“grossly excessive”) e ha rimesso nuovamente il caso alla Corte Suprema dell’Alabama, che ha in seguito ridotto a 50.000 USD i punitive damages (BMW of North America, Inc. v. Gore, 517 U.S. 559, 1996).

Non sempre, però, i punitive damages vengono ridotti. Nel 2011 i giudici del Montana hanno condannato il produttore di automobili Hyundai al pagamento della somma di 72 milioni di USD a titolo di danni punitivi per un incidente causato dal difetto allo sterzo di una vettura, che aveva causato il decesso di due giovani.

Negli ordinamenti di civil law, tra i quali l’Italia, l’istituto dei danni punitivi non viene tradizionalmente riconosciuto, in quanto la sanzione del danneggiante viene generalmente ritenuta estranea ai principi del diritto civile, ancorati alla concezione del risarcimento danni come mera restaurazione della sfera patrimoniale del danneggiato.

Di conseguenza, il riconoscimento dei danni punitivi statuiti in una pronuncia straniera era ostacolato dal limite dell’ordine pubblico e le sentenze che li prevedevano non avevano accesso allo spazio giuridico italiano.

La sentenza a Sezioni Unite n. 16601/2017 del 5 luglio 2017 della Suprema Corte di Cassazione, però, ha cambiato le carte in tavola.

Nel caso di specie veniva richiesto alla Corte di Appello di Venezia il riconoscimento (ex art. 64, legge 218/1995) di tre sentenze della District Court of Appeal of the State of Florida che, accogliendo una domanda di garanzia azionata da un rivenditore americano di caschi nei confronti della società italiana produttrice, avevano condannato quest’ultima al pagamento di 1.436.136,87 USD (oltre spese e interessi) a titolo di risarcimento dei danni causati da un difetto del casco utilizzato in occasione di un sinistro stradale.

La Corte d’Appello di Venezia aveva riconosciuto l’efficacia del provvedimento del giudice straniero considerando la somma meramente risarcitoria e non punitiva. La decisione era stata impugnata in Cassazione dalla parte soccombente, che sosteneva la contrarietà all’ordine pubblico della sentenza statunitense, in forza dell’orientamento giurisprudenziale sino a quel momento costante.

La Cassazione ha confermato la valutazione della Corte d’Appello, ritenendo la somma non punitiva, e ha dichiarato il riconoscimento della pronuncia statunitense in Italia.

Le Sezioni Unite, però, hanno colto l’occasione per affrontare la questione inerente l’ammissibilità dei danni punitivi in Italia, cambiando l’orientamento storico della Suprema Corte (si veda Cass. 1781/2012).

Secondo la Corte, la nozione di responsabilità civile intesa come mera riparazione dei danni subiti è da considerarsi ormai desueta, data l’evoluzione di tale istituto attraverso interventi legislativi e giurisprudenziali nazionali ed europei che hanno introdotto mezzi risarcitori a funzione sanzionatoria e deterrente. Nel nostro ordinamento, infatti, è possibile trovare diversi casi di risarcimenti danni con funzione sanzionatoria: in materia di diffamazione a mezzo di stampa (art. 12 L.47/48), diritto d’autore (art. 158 L. 633/41), proprietà industriale (art. 125 D. Lgs 30/2005), abuso del processo (art. 96 comma 3 c.p.c. e art. 26 comma 2 c.p.a.), diritto del lavoro (art. 18, comma 14), diritto di famiglia (art. 709-ter c.p.c.) e altri.

La Corte di Cassazione ha, quindi, affermato il seguente principio di diritto: “Nel vigente ordinamento italiano, alla responsabilità civile non è assegnato solo il compito di restaurare la sfera patrimoniale del soggetto che ha subito la lesione, perché sono interne al sistema la funzione di deterrenza e quella sanzionatoria della responsabilità civile. Non è, perciò, ontologicamente incompatibile con l’ordinamento italiano l’istituto di origine statunitense dei risarcimenti punitivi”.

La conseguenza, molto importante, è che la pronuncia apre la porta alla possibile delibazione di sentenze straniere che condannano una parte al pagamento di una somma superiore rispetto quella sufficiente a compensare il pregiudizio subito in seguito al danno.

A tale scopo, tuttavia, la Suprema Corte ha disposto alcune condizioni affinché la sentenza straniera possa essere delibata, ossia che la decisione sia resa nell’ordinamento straniero su basi normative che:

  1. garantiscano la tipicità delle ipotesi di condanna;
  2. la prevedibilità della stessa; e
  3. i limiti quantitativi.

I possibili effetti della Sentenza nell’ordinamento italiano

In primo luogo, va chiarito che la Sentenza non ha modificato il sistema risarcitorio interno dell’ordinamento italiano. In altre parole, la Sentenza non permetterà ai giudici nazionali di comminare danni punitivi all’interno di procedimenti italiani.

Per quanto riguarda invece le sentenze straniere, invece, sarà ora possibile ottenere il risarcimento dei danni punitivi attraverso il riconoscimento e l’esecuzione nel sistema italiano di una decisione straniera che prevede la condanna a tale tipologia di danno, a condizione che siano rispettati i presupposti sopra indicati.

In considerazione di ciò, le imprese italiane che hanno investito o fanno affari in paesi che prevedono i danni punitivi dovranno tenere in considerazione questo nuovo rischio.

Gli strumenti per tutelarsi

L’imprenditore italiano che opera su mercati stranieri nei quali sono previsti i danni punitivi deve considerare con attenzione questo rischio, che sino ad oggi, come visto, non aveva accesso allo spazio giuridico italiano.

L’ottica deve essere necessariamente quella di prevenzione e gli strumenti a disposizione in tal senso sono diversi: in primo luogo l’adozione di clausole contrattuali che prevedano la rinuncia del danneggiato a questo tipo di danno o pongano un limite alla risarcibilità dei danni contrattuali, ad esempio ancorandola al valore dei prodotti o servizi forniti.

E’ poi fondamentale che si abbia conoscenza della legislazione e della giurisprudenza dei mercati in cui si opera, anche indirettamente (ad esempio, con la distribuzione commerciale dei prodotti) al fine di scegliere in modo consapevole la legge applicabile al contratto e la modalità di risoluzione delle controversie (ad esempio, con previsione dell’esclusiva giurisdizione del foro di un paese  che non preveda i danni punitivi.

Infine, questo tipo di responsabilità e di rischio può essere oggetto di valutazione con polizze assicurative che offrano una copertura specifica rispetto ad eventuali condanne al risarcimento di danni punitivi.

In this clip I briefly introduce the main options to consider when doing business in Iran.
You can read more on this topic in my articles An introduction to Iran Corporations  and Obtaining a Foreign Investment License and browse Legalmondo’s blog for some other  posts on doing business in the region.

If your business is related to France or you wish to develop your business in this direction, you need to be aware of one very specific provision with regards to the termination of a business relationship.

Article L. 442-6, I, 5° of the French Commercial Code protects a party to a contract who considers that the other party has terminated the existing business relationship in a sudden and abrupt way, thus causing her a damage.

This is a ‘public policy’ provision and therefore any contractual provision to the contrary will be unenforceable.

Initially, the lawmaker aimed to protect any business relationship between suppliers and major large-scale retailers delisting (ie, removing a supplier’s products that were referenced by a distributor) at the moment of contracts renegotiations or renewals.

Eventually, the article has been drafted in order to extend its scope to any business relationship, regardless of the status of the professionals involved and the nature of the commercial relationship.

The party who wishes to terminate the business relationship does not need to provide any justification for her actions but must send a sufficient prior notice to the other party.

The purpose is to allow the parties, and in particular the abandoned party, to anticipate the discharge of the contract, in particular in cases of economic dependency.

It is an accentuated obligation of loyalty.

There are only two cases strictly interpreted by case law in which the partner is exempted from sending a prior notice:

  • an aggravated breach of a contractual obligation;
  • a frustration or a force majeure.

There are two main requirements to be fulfilled in order to be able to invoke this provision in front of a judge – an established business relationship and an abrupt termination.

The judge will assess whether the requirements have been fulfilled on a case by case basis.

What does the term ‘established business relationship’ mean?

The most important criterion is the duration, whether a written contract exists or not.

A relationship may be considered as long-term whether there is a single contract or a few consecutive contracts.

If there is no contract in place, the judge will take into account the following criteria:

  • the existence of a long-term established business relationship;
  • the good faith of the parties;
  • the frequency of the transactions and the importance and evolving of the turnover;
  • any agreement on the prices applied and/or the discounts granted to the other party;
  • any correspondence exchanged between the parties.

What does the term ‘abrupt termination’ mean?

The Courts consider the application of Article L442-6-I 5° if the termination is “unforeseeable, sudden and harsh”.

The termination must comply with the following three conditions in order to be considered as abrupt:

  • with no prior notice or with insufficient prior notice;
  • sudden;
  • unpredictable.

To consider whether a prior notice is sufficient, a judge may consider the following criteria:

  • the investments made by the victim of the termination;
  • the business involved (eg seasonal fashion collections);
  • a constant increase in turnover;
  • the market recognition of the products sold by the victim and the difficulty of finding replacement products;
  • the existence of a post-contractual non-compete undertaking ;
  • the existence of exclusivity between the parties;
  • the time period required for the victim to find other openings or refocus the business activity;
  • the existence of any economic dependency for the victim.

The courts have decided that a partial termination may also be considered as abrupt in the following cases:

  • an organisational change in the distribution structure of the supplier;
  • a substantial decrease in trade flows;
  • a change in pricing terms or an increase in prices without any prior notice sent by a supplier granting special prices to the buyers, or in general any unilateral and substantial change in the contract terms.

Whatever the justification for the termination, it is necessary to send a registered letter with an acknowledgment of receipt and ensure that the prior notice is sent sufficienlty in advance (some businesses have specific time periods applicable to them by law).

Compensation for a damage

The French Commercial Code provides for the award of damages in order to compensate a party for an abrupt termination of a business relationship.

The damages are calculated by multiplying the notice period which should have been applied by the average profit achieved prior to the termination. Such profit is evaluated based on the pre-tax gross margin that would have been achieved during the required notice period, had sufficient notice been given.

The courts may also award damages for incidental and consequential losses such as redundancy costs, losses of scheduled stocks, operational costs, certain unamortised investments and restructuring costs, indemnities paid to third parties or even image or reputational damage.

International law

The French supreme court competent in civil law (‘Cour de cassation’) considers that in cases where the decision to terminate the business relationship and the resulting damage take place in two different countries, it is a matter of torts and the applicable law will be the one of the country where the triggering event the most closely connected with the tort took place. Therefore the abrupt termination will be subject to French law if the business of the supplier is located in France.

However, the Court of Justice of the European Union (CJEU) has issued a preliminary ruling dated 14 July 2016 answering two questions submitted by the Paris Court of Appeal in a judgment dated 17 April 2015. A French company had been distributing in France the food products of an Italian company for the last 25 years, with no framework agreement or any exclusivity provision in place. The Italian company had terminated the business relationship with no prior notice. The French company issued proceedings against the Italian company in front of the French courts and invoked the abrupt termination of an established business relationship.

The Italian company opposed both the jurisdiction of the French courts and the legal ground for the action arguing that the Italian courts had jurisdiction as the action involved contract law and was therefore subject to the laws of the country where the commodities had been or should have been delivered, in this case Incoterm Ex-works departing from the plant in Italy.

The CJEU has considered that in case of a tacit contractual relationship and pursuant to European law, the liability will be based on contract law (in the same case, pursuant to French law, the liability will be based on torts). As a consequence, Article 5, 3° of the Regulation (EC) 44/2001, also known as Brussels I (which has been replaced by Regulation (EC) 1215/2012, also known as Brussels I bis) will not apply. Therefore, the competent judge will not be the one of the country where the damage occurred but the one of the country where the contractual obligation was being performed.

In addition and answering the second question submitted to it, the CJEU has considered that the contract is:

  • a contract for the sale of goods if its purpose is the delivery of goods, in which case the competent jurisdiction will be the one of the country where the goods have been or should have been delivered; and
  • a contract for services if its purpose is the provision of services, in which case the competent jurisdiction will be the one of the country where the services have been or should have been provided.

In this case, the Paris Court of Appeal will have to recharacherise the contractual relationship either as consecutive contracts for the sale of goods and deduct the jurisdiction of the Italian courts, or as a contract for services implying the participation of the distributor in the development and the distribution of the supplier’s goods and business strategy and deduct the jurisdiction of the French courts.

In summary, in case of an intra-Community dispute, the distributor who is the victim of an abrupt termination of an established business relationship cannot issue proceedings based on torts in front of a court in the country where the damage occurred if there is a tacit contractual relationship with the supplier. In order to determine the competent jurisdiction in such case, it is necessary to determine whether such tacit contractual relationship consists of a supply of goods or a provision of services.

The next judgment of the Paris Court of Appeal and those of the Cour de cassation to come need to be followed very closely.

When negotiating contracts, parties typically focus on the key commercial terms of their agreement. The clauses that govern the term of the agreement (i.e., the duration, or how long the contract remains in force), the renewal of the term, and how the agreement can be terminated, however, merit careful consideration.

Under Québec law, contracts typically have terms that are either fixed (e.g., 5 years, 10 years etc.), or are for an indeterminate period of time (i.e., no specific term is provided for). Contracts with fixed terms may also contain automatic renewal clauses. In the case of an indeterminate term contract, a party to the contract can generally, absent specific terms or a notice provision to the contrary in the contract, terminate it, without cause, by providing reasonable notice of termination (what constitutes “reasonable notice” depends on a number of factors and is decided on the facts of each case). A third category of contracts are contracts with a potentially perpetual term. An example of a potentially perpetual contract is a contract that contains a renewal clause that is entirely under the control of only one of the parties who can, effectively, unilaterally decide whether the contract will go on indefinitely. In such a contract, the other contracting party does not have a right to terminate the contract by providing reasonable notice of termination. The validity of perpetual term contracts was precisely the issue before the Supreme Court of Canada in its July 28, 2017 decision in Uniprix inc. v. Gestion Gosselin et Bérubé inc. https://scc-csc.lexum.com/scc-csc/scc-csc/en/item/16746/index.do (“Uniprix“).

In Uniprix, the pharmacy chain entered into an affiliation agreement with various members of a pharmacists’ group pursuant to which said members operated a pharmacy under the Uniprix banner. The term of the contract was for a fixed term of 5 years and the renewal clause allowed members to provide a notice within a certain period of time, failing which the contract would automatically be renewed for an additional 5 years:

Regardless of any written or verbal provisions to the contrary, this agreement shall commence on the day of its signing and shall remain in effect for a period of sixty (60) months, or for a period equal to the term of the lease for the premises where the pharmacy is located. [The member pharmacist] shall, six (6) months before the expiration of the agreement, notify [Uniprix] of its intention to leave [Uniprix] or to renew the agreement; 

Should [the member pharmacist] fail to send the prescribed notice by registered mail, the agreement shall be deemed to have been renewed in accordance with the terms and conditions then in effect, as prescribed by the board of directors, except with regard to the fee.[Translation]

The Uniprix agreement did not provide any say to Uniprix in connection with its renewal and there were no limits on the number of times that the members could renew the agreement. As such, the contract could remain in force perpetually based entirely on the members’ decision. After the contract had been renewed twice, Uniprix sent the members a notice of non-renewal and purported to terminate the agreement. The members contested Uniprix’s decision based on the fact that under the affiliation agreement, the renewal clause could only be exercised by the members and, unless the members gave notice to the contrary, the contract was automatically renewed. Uniprix argued that the effect of the members’ position, which would bind the parties in perpetuity, was contrary to public order (i.e., it violated a fundamental societal value) and unlawful and, as such, the term of the agreement should be considered to be for an indeterminate period, which would allow either party to terminate it on reasonable notice.

In a 6-3 decision, the Supreme Court of Canada held (in upholding the decisions of the majority of the Québec Court of Appeal and of the Superior Court of Québec) that there was nothing under Québec law that prohibited a contract of affiliation from having a perpetual term and that this did not, in and of itself and in the context of corporate and commercial agreements, offend any fundamental societal values. The Court’s holding would equally apply to many other types of contracts such as, for example, franchise agreements and licensing agreements. The Court held, accordingly, that the affiliation agreement was not for an indeterminate term and, therefore, could be not be terminated by Uniprix by providing reasonable notice.

With respect to the holding in Uniprix , the following points should be kept in mind:

  1. The Supreme Court of Canada expressly noted that in certain circumstances, such as where an individual’sperson and freedom are affected (e.g., a contract of employment), a perpetual obligation could offend public order.
  2. In certain specific cases set out in the Civil Code of Québec, the legislator has provided maximum terms for certain types of contracts (e.g., a commercial lease cannot exceed 100 years, the duration of payment of an annuity is 100 years).
  3. In the case of a contract of adhesion (which is generally defined as a contract where one of the parties was unable to negotiate its terms), the adhering or vulnerable party can argue that a perpetual term is abusive and, therefore, null.
  4. The Court’s decision in Uniprixapplied to Uniprix’s ability to terminate the contract without cause. A party always retains the right to terminate a contract for cause. What constitutes “cause” is decided on a case by case basis and may also be governed by the terms of the contract.

When drafting contracts, parties are generally, subject to limitations imposed by the legislator or public order, permitted to structure their relationship as they see fit. Parties should carefully consider whether they truly intend the duration of their agreement to be entirely under the control of one of the parties to the agreement for an indefinite period of time because, as is made clear in Uniprix, perpetual commercial contracts are enforceable under Québec law.

The author of this post is David Stolow.

Exchange controls

The existing Venezuelan foreign currency regulations significantly restrict the ability of private sector companies and individuals to convert the local currency (“Bolivars” or “Bs”) into foreign currency. Because of these restrictions, it is extremely difficult for companies in Venezuela to repatriate profits generated in Bolivars by converting those Bolivars into foreign currency, or otherwise to convert Bolivars into foreign currency to purchase foreign supplies, to pay debt in foreign currency, etc.

The result of these restrictions is the continued generation of trapped cash in Bolivars that cannot be converted into foreign currency. The foreign currency restrictions can also affect the operations of Venezuelan companies if such operations depend on foreign supplies, unless the shareholders or other affiliates of such Venezuelan company are willing to support its operations with foreign currency generated abroad. Also, because of these restrictions Venezuelan companies may not be able to convert Bolivars into foreign currency to pay intercompany debt in foreign currency.

There are currently three different official exchange rates in Venezuela: (a) the Cencoex rate, fixed by the Venezuelan government from time to time, currently at Bs.6.30 per USD (the “Cencoex Rate”), (b) the Sicad rate, fixed by the Venezuelan government from time to time, currently at Bs.13.5 per USD (the “Sicad Rate”) and (c) the Simadi rate, which is in practice fixed by the Venezuelan government on a daily basis, currently at approximately Bs.200 per USD (the “Simadi Rate”). Given the significant restrictions to convert Bolivars into foreign currency, there also exists a parallel or black market, currently at several times the Simadi rate. The Cencoex Rate (Bs.6.30 per USD) appears as hugely overvalued, if compared to the other official rates (the Sicad Rate or the Simadi Rate) or to the black market rate.

Given the existing Venezuelan exchange controls, many Venezuelan companies have accumulated over the years significant amounts of excess cash in Bolivars that cannot be converted into Dollars.

Foreign Investment Regulations

The only areas currently reserved to companies owned or controlled by Venezuelan investors are open-air television, radio broadcasting, newspapers in Spanish and professional services regulated by law. There are other areas, such as oil, that are reserved to the Venezuelan government in which foreign investors may participate only through minority participations in joint venture companies with the Republic or Venezuelan state-owned companies.

Foreign investors (i.e., foreign companies (head offices), foreign shareholders or foreign partners) must register their direct foreign investments in a Venezuelan company (branch, corporation or partnership) with the Venezuelan foreign investment authority within 60 days following the date on which investment was made (the “foreign investment registration”). The foreign investment registration is one of the documents required to purchase foreign currency through Cadivi to repatriate dividends, branch profits, and proceeds from sales of investment, liquidation of the company or capital reductions.

Several documents must be submitted to the Venezuelan foreign investment authority by the foreign investor to obtain the foreign investment registration, including evidence that the capital of the company was paid with foreign currency or contribution in kind that entered Venezuela. To obtain such evidence, the foreign investor must (a) in case of payment in cash, order a wire transfer to the Venezuelan bank account of the company from an account of the foreign investor located outside Venezuela (as a result of the wire transfer, foreign currency transferred out of the offshore account of the investor will be converted into bolivars at the official exchange rate and deposited in bolivars in the Venezuelan bank account), and (b) in the case of contribution in kind, demonstrate that the asset being contributed to the capital of the company was imported into Venezuela (copies of the import manifest, commercial invoice and other custom documents).

The foreign investment registration must be updated annually by the foreign investor within 120 days of the end of the fiscal year.

Price Controls

The Fair Prices Decree with rank, value, and strength of Organic Law (the “Fair Prices Law”), provides for the possibility of the government to set the prices of any type of good or service sold in Venezuela. The Fair Prices Law creates the Single Registry of People which Develop Economic Activities (RUPDAE) in which all persons and companies that perform commercial activities in Venezuela must be registered. The National Superintendence to Defend Economic Rights (the “Superintendence”), created by this law, has established fixed prices for food, personal hygiene products among other products. Once a list of products is published, their price is frozen until the Superintendence sets the new price (in every level of the commercial chain). In cases in which the Superintendence does not set maximum retail prices, companies should self-regulate their prices, and in no case the maximum profit margin will exceed 30% for manufacturers and 20% for importers. The Superintendence may also establish the obligation to label the maximum selling prices in the body of the product. The Fair Prices Law has also created the following crimes related to commercial activities in Venezuela: (i) sale of expired food or products; (ii) import of unhealthy products; (iii) fraudulent alteration; (iv) hoarding; (v) boycotting; (vi) destabilization of the economy; (vii) resale of products of first necessity; (viii) conditioned sales; (ix) extraction smuggling; (x) usury; (xi) alteration of goods and services; (xii) speculation; (xiii) fraudulent alteration of prices; and (xiv) corruption between private parties. Sanctions are extremely onerous and may include: closure, confiscation of assets, fines and imprisonment.

Filings with the Commercial Registry

All Venezuelan companies must be registered with a Commercial Registry. The Commercial Registry contains copies of the company’s articles of incorporation and by-laws, information on its standing (i.e. annual financial statements, liquidation or bankruptcy proceedings), registered address, directors and officers, the existence of branches, and other information. All information filed with the Commercial Registries is public. Companies must notify the Commercial Registry of changes to their articles of incorporation and by-laws and update other information filed with the registry. Companies must also file annual financial statements and periodically file minutes of shareholders appointing directors and officers.

 

The author of this post is Fulvio Italiani

Marika Devaux

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    To infinity and beyond – Perpetual contracts under Québec law

    9 Agosto 2017

    • Canada
    • Contratti
    • Contenzioso

    Poland has recently become quite famous for its skilled and resourceful IT specialists. Each year thousands of new computer engineers (programmers, developers, testers, designers etc.) enter into the market, warmly welcomed by domestic and multinational companies. A big part of these young talents open their own firm or business as free lancers developing software for clients from European countries as well as from US, Canada, Japan, China, etc.

    However, companies who want to cooperate with these partners and assign software development to a Polish IT company or freelancer should be aware that the copyright law in Poland is very strict, as it mainly protects the creator and not the client. Therefore, to be on a safe side, it is better to follow these 7 basic rules:

    1. Never start cooperation with an IT specialist or an IT company without a formal agreement. And I mean a real agreement, in a written form, with signatures of persons who can validly contract on behalf of the companies. The form is very important because – under Polish law – copyrights transfer and exclusive license agreements not fulfilling form conditions are null and void. Moreover, if there is no agreement, Polish copyright rules will apply to all intellectual property matters.
    2. Please remember that software is a creation protected by copyright law. Therefore you should consider whether you want to acquire the entire intellectual property rights or you just need a license. If you need a full IP transfer, you need to put it expressly in the agreement; otherwise you will only get a non-exclusive licence. And these, in several cases, will not be useful from a business point of view. If a license is enough, it is advisable to agree if it will be exclusive or non-exclusive.
    3. When drafting an IP clause, be detailed and clear. If you want to be able to decompile and disassembly the binary code, specify it in the IP clause. If you want to be able to introduce modifications to the source code, specify it in the IP clause. If you want to sublicense the software, specify it in the IP clause. The IP clause shall contain the description of any way you want to use the software, whether on mobile devices or on personal computers, any other electronic device or via internet (e.g. cloud computing). And believe me, when I write “specify it in the IP clause” it means that you really, really have to put it there. Otherwise it will be null and void and you may face a situation where your smart IT engineer, after getting paid, will sue you for the IP infringement.
    4. Remember that you should indicate the timeframe and the geographical scope of the license or IP transfer. If you do not specify it expressly in the agreement, you will only be entitled to a 5-year license, automatically expiring afterwards.
    5. Draft carefully a clause related to termination of the agreement. Under Polish law the licensor may terminate the license agreement granted for an indefinite period of time upon 1-year notice. If you do not want to find yourself in a situation where you lose the software IP rights in the middle of a big project, make sure that from the very beginning you are on a safe side.
    6. Make sure that your partner is obliged to transfer you upon request all software documentation and the source code.
    7. Make sure that you have a good indemnification clause with no limitation of liability. Often Polish IT companies subcontract some part of the development work to free lancers. You never know if they will conclude proper agreements with their subcontractors and if they will legally acquire the IP of the software that they will later sell you. There is always the risk that in the future some Polish IT engineer you never met will raise IP infringement claims against you, trying to prove that he/she actually developed the software. In such a situation an indemnification clause will help you recovering the costs from your partner.

    Based on our experience in many years advising and representing companies in the commercial distribution (in Spanish jurisdiction but with foreign manufacturers or distributors), the following are the six key essential elements for manufacturers (suppliers) and retailers (distributors) when establishing a distribution relationship.

    These ideas are relevant when companies intend to start their commercial relationship but they should not be neglected and verified even when there are already existing contacts.

    The signature of the contract

    Although it could seem obvious, the signature of a distribution agreement is less common than it might seem. It often happens that along the extended relationship, the corporate structures change and what once was signed with an entity, has not been renewed, adapted, modified or replaced when the situation has been transformed. It is very convenient to have well documented the relationship at every moment of its existence and to be sure that what has been covered legally is also enforceable y the day-to-day commercial relationship. It is advisable this work to be carried out by legal specialists closely with the commercial department of the company. Perfectly drafted clauses from a legal standpoint will be useless if overtaken or not understood by the day-to-day activity. And, of course, no contract is signed as a “mere formality” and then modified by verbal agreements or practices.

    The proper choice of contract

    If the signature of the distribution contract is important, the choice of the correct type is essential. Many of the conflicts that occur, especially in long-term relationships, begin with the interpretation of the type of relationship that has been signed. Even with a written text (and with an express title), the intention of the parties remains often unclear (and so the agreement). Is the “distributor” really so? Does he buy and resell or there are only sporadic supply relationships? Is there just a representative activity (ie, the distributor is actually an “agent“)? Is there a mixed relationship (sometimes represents, sometimes buys and resells)? The list could continue indefinitely. Even in many of the relationships that currently exist I am sure that the interpretation given by the Supplier and the Distributor could be different.

    Monitoring of legal and business relations

    If it is quite frequent not to have a clear written contract, it happens in almost all the distribution relationships than once the agreement has been signed, the day-to-day commercial activity modifies what has been agreed. Why commercial relations seem to neglect what has been written in an agreement? It is quite frequent contracts in which certain obligations for distributors are included (reporting on the market, customers, minimum purchases), but which in practice are not respected (it seems complicated, there is a good relationship between the parties, and nobody remembers what was agreed by people no longer working at the company…). However, it is also quite frequent to try to use these (real?) defaults later on when the relationship starts having problems. At that moment, parties try to hide behind these violations to terminate the contracts although these practices were, in a sort of way, accepted as a new procedure. Of course no agreement can last forever and for that reason is highly recommendable a joint and periodical monitoring between the legal adviser (preferably an independent one with the support of the general managers) and the commercial department to take into account new practices and to have a provision in the contractual documents.

    Evidences about customers

    In distribution contracts, evidences about customers will be essential in case of termination. Parties (mainly the supplier) are quite interested in showing evidences on who (supplier or distributor) procured the customers. Are they a result of the distributor activity or are they obtained as a consequence of the reputation of the trademark? Evidences on customers could simplify or even avoid future conflicts. The importance of the clientele and its possible future activity will be a key element to define the compensation to which the distributor will pretend to be eligible.

    Evidences on purchases and sales

    Another essential element and quite often forgotten is the justification of purchases to the supplier and subsequent sales by distributors. In any distribution agreement distributors acquire the products and resell them to the final customers. A future compensation to the distributor will consider the difference between the purchase prices and resale prices (the margin). It is therefore advisable to be able to establish the correspondent evidence on such information in order to better prepare a possible claim.

    Damages in case of termination of contracts

    Similarly, it would be convenient to justify what damages have been suffered as a result of the termination of a contract: has the distributor made investments by indication of the supplier that are still to be amortized? Has the distributor hired new employees for a line of business that have to be dismissed because of the termination of the contract (costs of compensation)? Has the distributor rented new premises signing long-term contracts due to the expectations on the agreement? Please, take into account that the Distributor is an independent trader and, as such, he assumes the risks of his activity. But to the extent he is acting on a distribution network he shall be subject to the directions, suggestions and expectations created by the supplier. These may be relevant to later determine the damages caused by the termination of the contract.

    Influencer marketing is the trend in today’s world of advertising. Even though it is obvious that influencer marketing must observe the framework of applicable statutory provisions, the market has long been uncertain about how influencer posts are to be drafted in order to be legally compliant. The current decision of Celle Higher Regional Court (June 08, 2017 – Case 13 U 53/17) offers at least some clarity.

    The judgment was issued in relation to an action for injunction by the German Association for Social Competition (Verband Sozialer Wettbewerb) against a German drugstore chain. A 20-year-old Instagram star with 1.3 million followers had advertised the drugstore chain in one of her posts. The post was only marked as advertisement at the bottom with the hashtag “#ad,” which additionally only came second in a list of six hashtags.

    Celle Higher Regional Court adjudged that this type of marking was insufficient. The court requested that the commercial purpose of an Instagram post would have to be apparent at first sight. It did not consider use of the hashtag “#ad” in a “hashtag cloud” to be sufficient to mark the post as advertising.

    The court left expressly open, however, whether the use of the hashtag “#ad” is generally suitable to mark advertising posts.

    The state media authorities (Landesmedienanstalten) already reacted to the judgment, however, and revised their joint guide on advertising issues in social media. It now reads: “When marking a post as PROMOTION (Werbung) or ADVERTISING (Anzeige), you will be on the safe side – that much is certain. […] At the current time, we cannot recommend marking posts as #ad, #sponsored by, or #powered by.” In the future, Instagram itself intends to provide for more transparency on the platform by comprehensibly identifying advertising posts. It is currently testing the introduction of a branded content tool in Germany to make it easier for users to recognize posts as paid advertising.

    Practical tip

    Advertising posts in social media should always be marked as “promotion” or “advertising” at the beginning of the posts unless their commercial purpose arises directly from the circumstances. Advertisers are also advised to obligate influencers contractually to such legally compliant marking of posts, since the influencers’ behavior may be attributed to the company, as is clearly shown by the recent judgment of Celle Higher Regional Court against the drugstore chain.

    The author of this post is Ilja Czernik.

    Con la recente sentenza 16601/2017 la Suprema Corte – dopo svariate pronunce contrarie – ha aperto alla possibilità di riconoscere in Italia i provvedimenti stranieri contenenti punitive damages. In questo breve post vedremo in cosa consistono i punitive damages, a che condizioni potranno essere riconosciuti ed eseguiti in Italia e, soprattutto, che contromisure conviene adottare per affrontare questo nuovo rischio.

    I danni puntivi, in inglese punitive damages, sono un istituto giuridico originario degli ordinamenti di common law che prevede la possibilità di riconoscere al danneggiato un risarcimento ulteriore rispetto alla compensazione del pregiudizio subito, nel caso in cui il danneggiante abbia agito con dolo o la colpa grave (rispettivamente “malice” e “gross negligence”).

    Con i danni puntivi, cioè, oltre alla funzione compensatoria, il risarcimento del danno assume anche una finalità sanzionatoria, tipica del diritto penale, fungendo anche da deterrente nei confronti di ulteriori potenziali trasgressori.

    Negli ordinamenti che prevedono i danni punitivi, il riconoscimento e la quantificazione del maggior risarcimento sono rimessi per lo più alla discrezionalità del giudice.

    Negli Stati Uniti d’America i danni punitivi sono previsti dai principi di common law, ma disciplinati in maniera diversa in ogni Stato. Generalmente, tuttavia, si applicano ove la condotta del danneggiante sia intenzionalmente diretta a causare un danno o sia posta in essere senza avere riguardo delle norme a tutela della sicurezza. Solitamente non possono essere concessi per l’inadempimento di un contratto, salvo che non determini anche un illecito (tort) autonomo.

    In alcuni Stati sono previsti dei limiti massimi ai punitive damages, a volte sotto forma di rapporto con i danni compensativi, a volte come tetto massimo. Inoltre, la Suprema Corte degli Stati Uniti è intervenuta in diversi casi per limitare le somme di condanna. Si consideri, ad esempio, il caso relativo all’azienda produttrice di automobili BMW, nel quale, a fronte di un danno compensativo di 4.000 USD, la Suprema Corte dell’Alabama aveva condannato BMW a 2.000.000 USD a titolo di danno punitivo. La Corte Suprema ha ritenuto tale condanna manifestamente eccessiva (“grossly excessive”) e ha rimesso nuovamente il caso alla Corte Suprema dell’Alabama, che ha in seguito ridotto a 50.000 USD i punitive damages (BMW of North America, Inc. v. Gore, 517 U.S. 559, 1996).

    Non sempre, però, i punitive damages vengono ridotti. Nel 2011 i giudici del Montana hanno condannato il produttore di automobili Hyundai al pagamento della somma di 72 milioni di USD a titolo di danni punitivi per un incidente causato dal difetto allo sterzo di una vettura, che aveva causato il decesso di due giovani.

    Negli ordinamenti di civil law, tra i quali l’Italia, l’istituto dei danni punitivi non viene tradizionalmente riconosciuto, in quanto la sanzione del danneggiante viene generalmente ritenuta estranea ai principi del diritto civile, ancorati alla concezione del risarcimento danni come mera restaurazione della sfera patrimoniale del danneggiato.

    Di conseguenza, il riconoscimento dei danni punitivi statuiti in una pronuncia straniera era ostacolato dal limite dell’ordine pubblico e le sentenze che li prevedevano non avevano accesso allo spazio giuridico italiano.

    La sentenza a Sezioni Unite n. 16601/2017 del 5 luglio 2017 della Suprema Corte di Cassazione, però, ha cambiato le carte in tavola.

    Nel caso di specie veniva richiesto alla Corte di Appello di Venezia il riconoscimento (ex art. 64, legge 218/1995) di tre sentenze della District Court of Appeal of the State of Florida che, accogliendo una domanda di garanzia azionata da un rivenditore americano di caschi nei confronti della società italiana produttrice, avevano condannato quest’ultima al pagamento di 1.436.136,87 USD (oltre spese e interessi) a titolo di risarcimento dei danni causati da un difetto del casco utilizzato in occasione di un sinistro stradale.

    La Corte d’Appello di Venezia aveva riconosciuto l’efficacia del provvedimento del giudice straniero considerando la somma meramente risarcitoria e non punitiva. La decisione era stata impugnata in Cassazione dalla parte soccombente, che sosteneva la contrarietà all’ordine pubblico della sentenza statunitense, in forza dell’orientamento giurisprudenziale sino a quel momento costante.

    La Cassazione ha confermato la valutazione della Corte d’Appello, ritenendo la somma non punitiva, e ha dichiarato il riconoscimento della pronuncia statunitense in Italia.

    Le Sezioni Unite, però, hanno colto l’occasione per affrontare la questione inerente l’ammissibilità dei danni punitivi in Italia, cambiando l’orientamento storico della Suprema Corte (si veda Cass. 1781/2012).

    Secondo la Corte, la nozione di responsabilità civile intesa come mera riparazione dei danni subiti è da considerarsi ormai desueta, data l’evoluzione di tale istituto attraverso interventi legislativi e giurisprudenziali nazionali ed europei che hanno introdotto mezzi risarcitori a funzione sanzionatoria e deterrente. Nel nostro ordinamento, infatti, è possibile trovare diversi casi di risarcimenti danni con funzione sanzionatoria: in materia di diffamazione a mezzo di stampa (art. 12 L.47/48), diritto d’autore (art. 158 L. 633/41), proprietà industriale (art. 125 D. Lgs 30/2005), abuso del processo (art. 96 comma 3 c.p.c. e art. 26 comma 2 c.p.a.), diritto del lavoro (art. 18, comma 14), diritto di famiglia (art. 709-ter c.p.c.) e altri.

    La Corte di Cassazione ha, quindi, affermato il seguente principio di diritto: “Nel vigente ordinamento italiano, alla responsabilità civile non è assegnato solo il compito di restaurare la sfera patrimoniale del soggetto che ha subito la lesione, perché sono interne al sistema la funzione di deterrenza e quella sanzionatoria della responsabilità civile. Non è, perciò, ontologicamente incompatibile con l’ordinamento italiano l’istituto di origine statunitense dei risarcimenti punitivi”.

    La conseguenza, molto importante, è che la pronuncia apre la porta alla possibile delibazione di sentenze straniere che condannano una parte al pagamento di una somma superiore rispetto quella sufficiente a compensare il pregiudizio subito in seguito al danno.

    A tale scopo, tuttavia, la Suprema Corte ha disposto alcune condizioni affinché la sentenza straniera possa essere delibata, ossia che la decisione sia resa nell’ordinamento straniero su basi normative che:

    1. garantiscano la tipicità delle ipotesi di condanna;
    2. la prevedibilità della stessa; e
    3. i limiti quantitativi.

    I possibili effetti della Sentenza nell’ordinamento italiano

    In primo luogo, va chiarito che la Sentenza non ha modificato il sistema risarcitorio interno dell’ordinamento italiano. In altre parole, la Sentenza non permetterà ai giudici nazionali di comminare danni punitivi all’interno di procedimenti italiani.

    Per quanto riguarda invece le sentenze straniere, invece, sarà ora possibile ottenere il risarcimento dei danni punitivi attraverso il riconoscimento e l’esecuzione nel sistema italiano di una decisione straniera che prevede la condanna a tale tipologia di danno, a condizione che siano rispettati i presupposti sopra indicati.

    In considerazione di ciò, le imprese italiane che hanno investito o fanno affari in paesi che prevedono i danni punitivi dovranno tenere in considerazione questo nuovo rischio.

    Gli strumenti per tutelarsi

    L’imprenditore italiano che opera su mercati stranieri nei quali sono previsti i danni punitivi deve considerare con attenzione questo rischio, che sino ad oggi, come visto, non aveva accesso allo spazio giuridico italiano.

    L’ottica deve essere necessariamente quella di prevenzione e gli strumenti a disposizione in tal senso sono diversi: in primo luogo l’adozione di clausole contrattuali che prevedano la rinuncia del danneggiato a questo tipo di danno o pongano un limite alla risarcibilità dei danni contrattuali, ad esempio ancorandola al valore dei prodotti o servizi forniti.

    E’ poi fondamentale che si abbia conoscenza della legislazione e della giurisprudenza dei mercati in cui si opera, anche indirettamente (ad esempio, con la distribuzione commerciale dei prodotti) al fine di scegliere in modo consapevole la legge applicabile al contratto e la modalità di risoluzione delle controversie (ad esempio, con previsione dell’esclusiva giurisdizione del foro di un paese  che non preveda i danni punitivi.

    Infine, questo tipo di responsabilità e di rischio può essere oggetto di valutazione con polizze assicurative che offrano una copertura specifica rispetto ad eventuali condanne al risarcimento di danni punitivi.

    In this clip I briefly introduce the main options to consider when doing business in Iran.
    You can read more on this topic in my articles An introduction to Iran Corporations  and Obtaining a Foreign Investment License and browse Legalmondo’s blog for some other  posts on doing business in the region.

    If your business is related to France or you wish to develop your business in this direction, you need to be aware of one very specific provision with regards to the termination of a business relationship.

    Article L. 442-6, I, 5° of the French Commercial Code protects a party to a contract who considers that the other party has terminated the existing business relationship in a sudden and abrupt way, thus causing her a damage.

    This is a ‘public policy’ provision and therefore any contractual provision to the contrary will be unenforceable.

    Initially, the lawmaker aimed to protect any business relationship between suppliers and major large-scale retailers delisting (ie, removing a supplier’s products that were referenced by a distributor) at the moment of contracts renegotiations or renewals.

    Eventually, the article has been drafted in order to extend its scope to any business relationship, regardless of the status of the professionals involved and the nature of the commercial relationship.

    The party who wishes to terminate the business relationship does not need to provide any justification for her actions but must send a sufficient prior notice to the other party.

    The purpose is to allow the parties, and in particular the abandoned party, to anticipate the discharge of the contract, in particular in cases of economic dependency.

    It is an accentuated obligation of loyalty.

    There are only two cases strictly interpreted by case law in which the partner is exempted from sending a prior notice:

    • an aggravated breach of a contractual obligation;
    • a frustration or a force majeure.

    There are two main requirements to be fulfilled in order to be able to invoke this provision in front of a judge – an established business relationship and an abrupt termination.

    The judge will assess whether the requirements have been fulfilled on a case by case basis.

    What does the term ‘established business relationship’ mean?

    The most important criterion is the duration, whether a written contract exists or not.

    A relationship may be considered as long-term whether there is a single contract or a few consecutive contracts.

    If there is no contract in place, the judge will take into account the following criteria:

    • the existence of a long-term established business relationship;
    • the good faith of the parties;
    • the frequency of the transactions and the importance and evolving of the turnover;
    • any agreement on the prices applied and/or the discounts granted to the other party;
    • any correspondence exchanged between the parties.

    What does the term ‘abrupt termination’ mean?

    The Courts consider the application of Article L442-6-I 5° if the termination is “unforeseeable, sudden and harsh”.

    The termination must comply with the following three conditions in order to be considered as abrupt:

    • with no prior notice or with insufficient prior notice;
    • sudden;
    • unpredictable.

    To consider whether a prior notice is sufficient, a judge may consider the following criteria:

    • the investments made by the victim of the termination;
    • the business involved (eg seasonal fashion collections);
    • a constant increase in turnover;
    • the market recognition of the products sold by the victim and the difficulty of finding replacement products;
    • the existence of a post-contractual non-compete undertaking ;
    • the existence of exclusivity between the parties;
    • the time period required for the victim to find other openings or refocus the business activity;
    • the existence of any economic dependency for the victim.

    The courts have decided that a partial termination may also be considered as abrupt in the following cases:

    • an organisational change in the distribution structure of the supplier;
    • a substantial decrease in trade flows;
    • a change in pricing terms or an increase in prices without any prior notice sent by a supplier granting special prices to the buyers, or in general any unilateral and substantial change in the contract terms.

    Whatever the justification for the termination, it is necessary to send a registered letter with an acknowledgment of receipt and ensure that the prior notice is sent sufficienlty in advance (some businesses have specific time periods applicable to them by law).

    Compensation for a damage

    The French Commercial Code provides for the award of damages in order to compensate a party for an abrupt termination of a business relationship.

    The damages are calculated by multiplying the notice period which should have been applied by the average profit achieved prior to the termination. Such profit is evaluated based on the pre-tax gross margin that would have been achieved during the required notice period, had sufficient notice been given.

    The courts may also award damages for incidental and consequential losses such as redundancy costs, losses of scheduled stocks, operational costs, certain unamortised investments and restructuring costs, indemnities paid to third parties or even image or reputational damage.

    International law

    The French supreme court competent in civil law (‘Cour de cassation’) considers that in cases where the decision to terminate the business relationship and the resulting damage take place in two different countries, it is a matter of torts and the applicable law will be the one of the country where the triggering event the most closely connected with the tort took place. Therefore the abrupt termination will be subject to French law if the business of the supplier is located in France.

    However, the Court of Justice of the European Union (CJEU) has issued a preliminary ruling dated 14 July 2016 answering two questions submitted by the Paris Court of Appeal in a judgment dated 17 April 2015. A French company had been distributing in France the food products of an Italian company for the last 25 years, with no framework agreement or any exclusivity provision in place. The Italian company had terminated the business relationship with no prior notice. The French company issued proceedings against the Italian company in front of the French courts and invoked the abrupt termination of an established business relationship.

    The Italian company opposed both the jurisdiction of the French courts and the legal ground for the action arguing that the Italian courts had jurisdiction as the action involved contract law and was therefore subject to the laws of the country where the commodities had been or should have been delivered, in this case Incoterm Ex-works departing from the plant in Italy.

    The CJEU has considered that in case of a tacit contractual relationship and pursuant to European law, the liability will be based on contract law (in the same case, pursuant to French law, the liability will be based on torts). As a consequence, Article 5, 3° of the Regulation (EC) 44/2001, also known as Brussels I (which has been replaced by Regulation (EC) 1215/2012, also known as Brussels I bis) will not apply. Therefore, the competent judge will not be the one of the country where the damage occurred but the one of the country where the contractual obligation was being performed.

    In addition and answering the second question submitted to it, the CJEU has considered that the contract is:

    • a contract for the sale of goods if its purpose is the delivery of goods, in which case the competent jurisdiction will be the one of the country where the goods have been or should have been delivered; and
    • a contract for services if its purpose is the provision of services, in which case the competent jurisdiction will be the one of the country where the services have been or should have been provided.

    In this case, the Paris Court of Appeal will have to recharacherise the contractual relationship either as consecutive contracts for the sale of goods and deduct the jurisdiction of the Italian courts, or as a contract for services implying the participation of the distributor in the development and the distribution of the supplier’s goods and business strategy and deduct the jurisdiction of the French courts.

    In summary, in case of an intra-Community dispute, the distributor who is the victim of an abrupt termination of an established business relationship cannot issue proceedings based on torts in front of a court in the country where the damage occurred if there is a tacit contractual relationship with the supplier. In order to determine the competent jurisdiction in such case, it is necessary to determine whether such tacit contractual relationship consists of a supply of goods or a provision of services.

    The next judgment of the Paris Court of Appeal and those of the Cour de cassation to come need to be followed very closely.

    When negotiating contracts, parties typically focus on the key commercial terms of their agreement. The clauses that govern the term of the agreement (i.e., the duration, or how long the contract remains in force), the renewal of the term, and how the agreement can be terminated, however, merit careful consideration.

    Under Québec law, contracts typically have terms that are either fixed (e.g., 5 years, 10 years etc.), or are for an indeterminate period of time (i.e., no specific term is provided for). Contracts with fixed terms may also contain automatic renewal clauses. In the case of an indeterminate term contract, a party to the contract can generally, absent specific terms or a notice provision to the contrary in the contract, terminate it, without cause, by providing reasonable notice of termination (what constitutes “reasonable notice” depends on a number of factors and is decided on the facts of each case). A third category of contracts are contracts with a potentially perpetual term. An example of a potentially perpetual contract is a contract that contains a renewal clause that is entirely under the control of only one of the parties who can, effectively, unilaterally decide whether the contract will go on indefinitely. In such a contract, the other contracting party does not have a right to terminate the contract by providing reasonable notice of termination. The validity of perpetual term contracts was precisely the issue before the Supreme Court of Canada in its July 28, 2017 decision in Uniprix inc. v. Gestion Gosselin et Bérubé inc. https://scc-csc.lexum.com/scc-csc/scc-csc/en/item/16746/index.do (“Uniprix“).

    In Uniprix, the pharmacy chain entered into an affiliation agreement with various members of a pharmacists’ group pursuant to which said members operated a pharmacy under the Uniprix banner. The term of the contract was for a fixed term of 5 years and the renewal clause allowed members to provide a notice within a certain period of time, failing which the contract would automatically be renewed for an additional 5 years:

    Regardless of any written or verbal provisions to the contrary, this agreement shall commence on the day of its signing and shall remain in effect for a period of sixty (60) months, or for a period equal to the term of the lease for the premises where the pharmacy is located. [The member pharmacist] shall, six (6) months before the expiration of the agreement, notify [Uniprix] of its intention to leave [Uniprix] or to renew the agreement; 

    Should [the member pharmacist] fail to send the prescribed notice by registered mail, the agreement shall be deemed to have been renewed in accordance with the terms and conditions then in effect, as prescribed by the board of directors, except with regard to the fee.[Translation]

    The Uniprix agreement did not provide any say to Uniprix in connection with its renewal and there were no limits on the number of times that the members could renew the agreement. As such, the contract could remain in force perpetually based entirely on the members’ decision. After the contract had been renewed twice, Uniprix sent the members a notice of non-renewal and purported to terminate the agreement. The members contested Uniprix’s decision based on the fact that under the affiliation agreement, the renewal clause could only be exercised by the members and, unless the members gave notice to the contrary, the contract was automatically renewed. Uniprix argued that the effect of the members’ position, which would bind the parties in perpetuity, was contrary to public order (i.e., it violated a fundamental societal value) and unlawful and, as such, the term of the agreement should be considered to be for an indeterminate period, which would allow either party to terminate it on reasonable notice.

    In a 6-3 decision, the Supreme Court of Canada held (in upholding the decisions of the majority of the Québec Court of Appeal and of the Superior Court of Québec) that there was nothing under Québec law that prohibited a contract of affiliation from having a perpetual term and that this did not, in and of itself and in the context of corporate and commercial agreements, offend any fundamental societal values. The Court’s holding would equally apply to many other types of contracts such as, for example, franchise agreements and licensing agreements. The Court held, accordingly, that the affiliation agreement was not for an indeterminate term and, therefore, could be not be terminated by Uniprix by providing reasonable notice.

    With respect to the holding in Uniprix , the following points should be kept in mind:

    1. The Supreme Court of Canada expressly noted that in certain circumstances, such as where an individual’sperson and freedom are affected (e.g., a contract of employment), a perpetual obligation could offend public order.
    2. In certain specific cases set out in the Civil Code of Québec, the legislator has provided maximum terms for certain types of contracts (e.g., a commercial lease cannot exceed 100 years, the duration of payment of an annuity is 100 years).
    3. In the case of a contract of adhesion (which is generally defined as a contract where one of the parties was unable to negotiate its terms), the adhering or vulnerable party can argue that a perpetual term is abusive and, therefore, null.
    4. The Court’s decision in Uniprixapplied to Uniprix’s ability to terminate the contract without cause. A party always retains the right to terminate a contract for cause. What constitutes “cause” is decided on a case by case basis and may also be governed by the terms of the contract.

    When drafting contracts, parties are generally, subject to limitations imposed by the legislator or public order, permitted to structure their relationship as they see fit. Parties should carefully consider whether they truly intend the duration of their agreement to be entirely under the control of one of the parties to the agreement for an indefinite period of time because, as is made clear in Uniprix, perpetual commercial contracts are enforceable under Québec law.

    The author of this post is David Stolow.

    Exchange controls

    The existing Venezuelan foreign currency regulations significantly restrict the ability of private sector companies and individuals to convert the local currency (“Bolivars” or “Bs”) into foreign currency. Because of these restrictions, it is extremely difficult for companies in Venezuela to repatriate profits generated in Bolivars by converting those Bolivars into foreign currency, or otherwise to convert Bolivars into foreign currency to purchase foreign supplies, to pay debt in foreign currency, etc.

    The result of these restrictions is the continued generation of trapped cash in Bolivars that cannot be converted into foreign currency. The foreign currency restrictions can also affect the operations of Venezuelan companies if such operations depend on foreign supplies, unless the shareholders or other affiliates of such Venezuelan company are willing to support its operations with foreign currency generated abroad. Also, because of these restrictions Venezuelan companies may not be able to convert Bolivars into foreign currency to pay intercompany debt in foreign currency.

    There are currently three different official exchange rates in Venezuela: (a) the Cencoex rate, fixed by the Venezuelan government from time to time, currently at Bs.6.30 per USD (the “Cencoex Rate”), (b) the Sicad rate, fixed by the Venezuelan government from time to time, currently at Bs.13.5 per USD (the “Sicad Rate”) and (c) the Simadi rate, which is in practice fixed by the Venezuelan government on a daily basis, currently at approximately Bs.200 per USD (the “Simadi Rate”). Given the significant restrictions to convert Bolivars into foreign currency, there also exists a parallel or black market, currently at several times the Simadi rate. The Cencoex Rate (Bs.6.30 per USD) appears as hugely overvalued, if compared to the other official rates (the Sicad Rate or the Simadi Rate) or to the black market rate.

    Given the existing Venezuelan exchange controls, many Venezuelan companies have accumulated over the years significant amounts of excess cash in Bolivars that cannot be converted into Dollars.

    Foreign Investment Regulations

    The only areas currently reserved to companies owned or controlled by Venezuelan investors are open-air television, radio broadcasting, newspapers in Spanish and professional services regulated by law. There are other areas, such as oil, that are reserved to the Venezuelan government in which foreign investors may participate only through minority participations in joint venture companies with the Republic or Venezuelan state-owned companies.

    Foreign investors (i.e., foreign companies (head offices), foreign shareholders or foreign partners) must register their direct foreign investments in a Venezuelan company (branch, corporation or partnership) with the Venezuelan foreign investment authority within 60 days following the date on which investment was made (the “foreign investment registration”). The foreign investment registration is one of the documents required to purchase foreign currency through Cadivi to repatriate dividends, branch profits, and proceeds from sales of investment, liquidation of the company or capital reductions.

    Several documents must be submitted to the Venezuelan foreign investment authority by the foreign investor to obtain the foreign investment registration, including evidence that the capital of the company was paid with foreign currency or contribution in kind that entered Venezuela. To obtain such evidence, the foreign investor must (a) in case of payment in cash, order a wire transfer to the Venezuelan bank account of the company from an account of the foreign investor located outside Venezuela (as a result of the wire transfer, foreign currency transferred out of the offshore account of the investor will be converted into bolivars at the official exchange rate and deposited in bolivars in the Venezuelan bank account), and (b) in the case of contribution in kind, demonstrate that the asset being contributed to the capital of the company was imported into Venezuela (copies of the import manifest, commercial invoice and other custom documents).

    The foreign investment registration must be updated annually by the foreign investor within 120 days of the end of the fiscal year.

    Price Controls

    The Fair Prices Decree with rank, value, and strength of Organic Law (the “Fair Prices Law”), provides for the possibility of the government to set the prices of any type of good or service sold in Venezuela. The Fair Prices Law creates the Single Registry of People which Develop Economic Activities (RUPDAE) in which all persons and companies that perform commercial activities in Venezuela must be registered. The National Superintendence to Defend Economic Rights (the “Superintendence”), created by this law, has established fixed prices for food, personal hygiene products among other products. Once a list of products is published, their price is frozen until the Superintendence sets the new price (in every level of the commercial chain). In cases in which the Superintendence does not set maximum retail prices, companies should self-regulate their prices, and in no case the maximum profit margin will exceed 30% for manufacturers and 20% for importers. The Superintendence may also establish the obligation to label the maximum selling prices in the body of the product. The Fair Prices Law has also created the following crimes related to commercial activities in Venezuela: (i) sale of expired food or products; (ii) import of unhealthy products; (iii) fraudulent alteration; (iv) hoarding; (v) boycotting; (vi) destabilization of the economy; (vii) resale of products of first necessity; (viii) conditioned sales; (ix) extraction smuggling; (x) usury; (xi) alteration of goods and services; (xii) speculation; (xiii) fraudulent alteration of prices; and (xiv) corruption between private parties. Sanctions are extremely onerous and may include: closure, confiscation of assets, fines and imprisonment.

    Filings with the Commercial Registry

    All Venezuelan companies must be registered with a Commercial Registry. The Commercial Registry contains copies of the company’s articles of incorporation and by-laws, information on its standing (i.e. annual financial statements, liquidation or bankruptcy proceedings), registered address, directors and officers, the existence of branches, and other information. All information filed with the Commercial Registries is public. Companies must notify the Commercial Registry of changes to their articles of incorporation and by-laws and update other information filed with the registry. Companies must also file annual financial statements and periodically file minutes of shareholders appointing directors and officers.

     

    The author of this post is Fulvio Italiani

    Foreign currency regulations and price controls in Venezuela

    5 Aprile 2017

    • Venezuela
    • Contratti

    Poland has recently become quite famous for its skilled and resourceful IT specialists. Each year thousands of new computer engineers (programmers, developers, testers, designers etc.) enter into the market, warmly welcomed by domestic and multinational companies. A big part of these young talents open their own firm or business as free lancers developing software for clients from European countries as well as from US, Canada, Japan, China, etc.

    However, companies who want to cooperate with these partners and assign software development to a Polish IT company or freelancer should be aware that the copyright law in Poland is very strict, as it mainly protects the creator and not the client. Therefore, to be on a safe side, it is better to follow these 7 basic rules:

    1. Never start cooperation with an IT specialist or an IT company without a formal agreement. And I mean a real agreement, in a written form, with signatures of persons who can validly contract on behalf of the companies. The form is very important because – under Polish law – copyrights transfer and exclusive license agreements not fulfilling form conditions are null and void. Moreover, if there is no agreement, Polish copyright rules will apply to all intellectual property matters.
    2. Please remember that software is a creation protected by copyright law. Therefore you should consider whether you want to acquire the entire intellectual property rights or you just need a license. If you need a full IP transfer, you need to put it expressly in the agreement; otherwise you will only get a non-exclusive licence. And these, in several cases, will not be useful from a business point of view. If a license is enough, it is advisable to agree if it will be exclusive or non-exclusive.
    3. When drafting an IP clause, be detailed and clear. If you want to be able to decompile and disassembly the binary code, specify it in the IP clause. If you want to be able to introduce modifications to the source code, specify it in the IP clause. If you want to sublicense the software, specify it in the IP clause. The IP clause shall contain the description of any way you want to use the software, whether on mobile devices or on personal computers, any other electronic device or via internet (e.g. cloud computing). And believe me, when I write “specify it in the IP clause” it means that you really, really have to put it there. Otherwise it will be null and void and you may face a situation where your smart IT engineer, after getting paid, will sue you for the IP infringement.
    4. Remember that you should indicate the timeframe and the geographical scope of the license or IP transfer. If you do not specify it expressly in the agreement, you will only be entitled to a 5-year license, automatically expiring afterwards.
    5. Draft carefully a clause related to termination of the agreement. Under Polish law the licensor may terminate the license agreement granted for an indefinite period of time upon 1-year notice. If you do not want to find yourself in a situation where you lose the software IP rights in the middle of a big project, make sure that from the very beginning you are on a safe side.
    6. Make sure that your partner is obliged to transfer you upon request all software documentation and the source code.
    7. Make sure that you have a good indemnification clause with no limitation of liability. Often Polish IT companies subcontract some part of the development work to free lancers. You never know if they will conclude proper agreements with their subcontractors and if they will legally acquire the IP of the software that they will later sell you. There is always the risk that in the future some Polish IT engineer you never met will raise IP infringement claims against you, trying to prove that he/she actually developed the software. In such a situation an indemnification clause will help you recovering the costs from your partner.

    Based on our experience in many years advising and representing companies in the commercial distribution (in Spanish jurisdiction but with foreign manufacturers or distributors), the following are the six key essential elements for manufacturers (suppliers) and retailers (distributors) when establishing a distribution relationship.

    These ideas are relevant when companies intend to start their commercial relationship but they should not be neglected and verified even when there are already existing contacts.

    The signature of the contract

    Although it could seem obvious, the signature of a distribution agreement is less common than it might seem. It often happens that along the extended relationship, the corporate structures change and what once was signed with an entity, has not been renewed, adapted, modified or replaced when the situation has been transformed. It is very convenient to have well documented the relationship at every moment of its existence and to be sure that what has been covered legally is also enforceable y the day-to-day commercial relationship. It is advisable this work to be carried out by legal specialists closely with the commercial department of the company. Perfectly drafted clauses from a legal standpoint will be useless if overtaken or not understood by the day-to-day activity. And, of course, no contract is signed as a “mere formality” and then modified by verbal agreements or practices.

    The proper choice of contract

    If the signature of the distribution contract is important, the choice of the correct type is essential. Many of the conflicts that occur, especially in long-term relationships, begin with the interpretation of the type of relationship that has been signed. Even with a written text (and with an express title), the intention of the parties remains often unclear (and so the agreement). Is the “distributor” really so? Does he buy and resell or there are only sporadic supply relationships? Is there just a representative activity (ie, the distributor is actually an “agent“)? Is there a mixed relationship (sometimes represents, sometimes buys and resells)? The list could continue indefinitely. Even in many of the relationships that currently exist I am sure that the interpretation given by the Supplier and the Distributor could be different.

    Monitoring of legal and business relations

    If it is quite frequent not to have a clear written contract, it happens in almost all the distribution relationships than once the agreement has been signed, the day-to-day commercial activity modifies what has been agreed. Why commercial relations seem to neglect what has been written in an agreement? It is quite frequent contracts in which certain obligations for distributors are included (reporting on the market, customers, minimum purchases), but which in practice are not respected (it seems complicated, there is a good relationship between the parties, and nobody remembers what was agreed by people no longer working at the company…). However, it is also quite frequent to try to use these (real?) defaults later on when the relationship starts having problems. At that moment, parties try to hide behind these violations to terminate the contracts although these practices were, in a sort of way, accepted as a new procedure. Of course no agreement can last forever and for that reason is highly recommendable a joint and periodical monitoring between the legal adviser (preferably an independent one with the support of the general managers) and the commercial department to take into account new practices and to have a provision in the contractual documents.

    Evidences about customers

    In distribution contracts, evidences about customers will be essential in case of termination. Parties (mainly the supplier) are quite interested in showing evidences on who (supplier or distributor) procured the customers. Are they a result of the distributor activity or are they obtained as a consequence of the reputation of the trademark? Evidences on customers could simplify or even avoid future conflicts. The importance of the clientele and its possible future activity will be a key element to define the compensation to which the distributor will pretend to be eligible.

    Evidences on purchases and sales

    Another essential element and quite often forgotten is the justification of purchases to the supplier and subsequent sales by distributors. In any distribution agreement distributors acquire the products and resell them to the final customers. A future compensation to the distributor will consider the difference between the purchase prices and resale prices (the margin). It is therefore advisable to be able to establish the correspondent evidence on such information in order to better prepare a possible claim.

    Damages in case of termination of contracts

    Similarly, it would be convenient to justify what damages have been suffered as a result of the termination of a contract: has the distributor made investments by indication of the supplier that are still to be amortized? Has the distributor hired new employees for a line of business that have to be dismissed because of the termination of the contract (costs of compensation)? Has the distributor rented new premises signing long-term contracts due to the expectations on the agreement? Please, take into account that the Distributor is an independent trader and, as such, he assumes the risks of his activity. But to the extent he is acting on a distribution network he shall be subject to the directions, suggestions and expectations created by the supplier. These may be relevant to later determine the damages caused by the termination of the contract.

    Influencer marketing is the trend in today’s world of advertising. Even though it is obvious that influencer marketing must observe the framework of applicable statutory provisions, the market has long been uncertain about how influencer posts are to be drafted in order to be legally compliant. The current decision of Celle Higher Regional Court (June 08, 2017 – Case 13 U 53/17) offers at least some clarity.

    The judgment was issued in relation to an action for injunction by the German Association for Social Competition (Verband Sozialer Wettbewerb) against a German drugstore chain. A 20-year-old Instagram star with 1.3 million followers had advertised the drugstore chain in one of her posts. The post was only marked as advertisement at the bottom with the hashtag “#ad,” which additionally only came second in a list of six hashtags.

    Celle Higher Regional Court adjudged that this type of marking was insufficient. The court requested that the commercial purpose of an Instagram post would have to be apparent at first sight. It did not consider use of the hashtag “#ad” in a “hashtag cloud” to be sufficient to mark the post as advertising.

    The court left expressly open, however, whether the use of the hashtag “#ad” is generally suitable to mark advertising posts.

    The state media authorities (Landesmedienanstalten) already reacted to the judgment, however, and revised their joint guide on advertising issues in social media. It now reads: “When marking a post as PROMOTION (Werbung) or ADVERTISING (Anzeige), you will be on the safe side – that much is certain. […] At the current time, we cannot recommend marking posts as #ad, #sponsored by, or #powered by.” In the future, Instagram itself intends to provide for more transparency on the platform by comprehensibly identifying advertising posts. It is currently testing the introduction of a branded content tool in Germany to make it easier for users to recognize posts as paid advertising.

    Practical tip

    Advertising posts in social media should always be marked as “promotion” or “advertising” at the beginning of the posts unless their commercial purpose arises directly from the circumstances. Advertisers are also advised to obligate influencers contractually to such legally compliant marking of posts, since the influencers’ behavior may be attributed to the company, as is clearly shown by the recent judgment of Celle Higher Regional Court against the drugstore chain.

    The author of this post is Ilja Czernik.

    Con la recente sentenza 16601/2017 la Suprema Corte – dopo svariate pronunce contrarie – ha aperto alla possibilità di riconoscere in Italia i provvedimenti stranieri contenenti punitive damages. In questo breve post vedremo in cosa consistono i punitive damages, a che condizioni potranno essere riconosciuti ed eseguiti in Italia e, soprattutto, che contromisure conviene adottare per affrontare questo nuovo rischio.

    I danni puntivi, in inglese punitive damages, sono un istituto giuridico originario degli ordinamenti di common law che prevede la possibilità di riconoscere al danneggiato un risarcimento ulteriore rispetto alla compensazione del pregiudizio subito, nel caso in cui il danneggiante abbia agito con dolo o la colpa grave (rispettivamente “malice” e “gross negligence”).

    Con i danni puntivi, cioè, oltre alla funzione compensatoria, il risarcimento del danno assume anche una finalità sanzionatoria, tipica del diritto penale, fungendo anche da deterrente nei confronti di ulteriori potenziali trasgressori.

    Negli ordinamenti che prevedono i danni punitivi, il riconoscimento e la quantificazione del maggior risarcimento sono rimessi per lo più alla discrezionalità del giudice.

    Negli Stati Uniti d’America i danni punitivi sono previsti dai principi di common law, ma disciplinati in maniera diversa in ogni Stato. Generalmente, tuttavia, si applicano ove la condotta del danneggiante sia intenzionalmente diretta a causare un danno o sia posta in essere senza avere riguardo delle norme a tutela della sicurezza. Solitamente non possono essere concessi per l’inadempimento di un contratto, salvo che non determini anche un illecito (tort) autonomo.

    In alcuni Stati sono previsti dei limiti massimi ai punitive damages, a volte sotto forma di rapporto con i danni compensativi, a volte come tetto massimo. Inoltre, la Suprema Corte degli Stati Uniti è intervenuta in diversi casi per limitare le somme di condanna. Si consideri, ad esempio, il caso relativo all’azienda produttrice di automobili BMW, nel quale, a fronte di un danno compensativo di 4.000 USD, la Suprema Corte dell’Alabama aveva condannato BMW a 2.000.000 USD a titolo di danno punitivo. La Corte Suprema ha ritenuto tale condanna manifestamente eccessiva (“grossly excessive”) e ha rimesso nuovamente il caso alla Corte Suprema dell’Alabama, che ha in seguito ridotto a 50.000 USD i punitive damages (BMW of North America, Inc. v. Gore, 517 U.S. 559, 1996).

    Non sempre, però, i punitive damages vengono ridotti. Nel 2011 i giudici del Montana hanno condannato il produttore di automobili Hyundai al pagamento della somma di 72 milioni di USD a titolo di danni punitivi per un incidente causato dal difetto allo sterzo di una vettura, che aveva causato il decesso di due giovani.

    Negli ordinamenti di civil law, tra i quali l’Italia, l’istituto dei danni punitivi non viene tradizionalmente riconosciuto, in quanto la sanzione del danneggiante viene generalmente ritenuta estranea ai principi del diritto civile, ancorati alla concezione del risarcimento danni come mera restaurazione della sfera patrimoniale del danneggiato.

    Di conseguenza, il riconoscimento dei danni punitivi statuiti in una pronuncia straniera era ostacolato dal limite dell’ordine pubblico e le sentenze che li prevedevano non avevano accesso allo spazio giuridico italiano.

    La sentenza a Sezioni Unite n. 16601/2017 del 5 luglio 2017 della Suprema Corte di Cassazione, però, ha cambiato le carte in tavola.

    Nel caso di specie veniva richiesto alla Corte di Appello di Venezia il riconoscimento (ex art. 64, legge 218/1995) di tre sentenze della District Court of Appeal of the State of Florida che, accogliendo una domanda di garanzia azionata da un rivenditore americano di caschi nei confronti della società italiana produttrice, avevano condannato quest’ultima al pagamento di 1.436.136,87 USD (oltre spese e interessi) a titolo di risarcimento dei danni causati da un difetto del casco utilizzato in occasione di un sinistro stradale.

    La Corte d’Appello di Venezia aveva riconosciuto l’efficacia del provvedimento del giudice straniero considerando la somma meramente risarcitoria e non punitiva. La decisione era stata impugnata in Cassazione dalla parte soccombente, che sosteneva la contrarietà all’ordine pubblico della sentenza statunitense, in forza dell’orientamento giurisprudenziale sino a quel momento costante.

    La Cassazione ha confermato la valutazione della Corte d’Appello, ritenendo la somma non punitiva, e ha dichiarato il riconoscimento della pronuncia statunitense in Italia.

    Le Sezioni Unite, però, hanno colto l’occasione per affrontare la questione inerente l’ammissibilità dei danni punitivi in Italia, cambiando l’orientamento storico della Suprema Corte (si veda Cass. 1781/2012).

    Secondo la Corte, la nozione di responsabilità civile intesa come mera riparazione dei danni subiti è da considerarsi ormai desueta, data l’evoluzione di tale istituto attraverso interventi legislativi e giurisprudenziali nazionali ed europei che hanno introdotto mezzi risarcitori a funzione sanzionatoria e deterrente. Nel nostro ordinamento, infatti, è possibile trovare diversi casi di risarcimenti danni con funzione sanzionatoria: in materia di diffamazione a mezzo di stampa (art. 12 L.47/48), diritto d’autore (art. 158 L. 633/41), proprietà industriale (art. 125 D. Lgs 30/2005), abuso del processo (art. 96 comma 3 c.p.c. e art. 26 comma 2 c.p.a.), diritto del lavoro (art. 18, comma 14), diritto di famiglia (art. 709-ter c.p.c.) e altri.

    La Corte di Cassazione ha, quindi, affermato il seguente principio di diritto: “Nel vigente ordinamento italiano, alla responsabilità civile non è assegnato solo il compito di restaurare la sfera patrimoniale del soggetto che ha subito la lesione, perché sono interne al sistema la funzione di deterrenza e quella sanzionatoria della responsabilità civile. Non è, perciò, ontologicamente incompatibile con l’ordinamento italiano l’istituto di origine statunitense dei risarcimenti punitivi”.

    La conseguenza, molto importante, è che la pronuncia apre la porta alla possibile delibazione di sentenze straniere che condannano una parte al pagamento di una somma superiore rispetto quella sufficiente a compensare il pregiudizio subito in seguito al danno.

    A tale scopo, tuttavia, la Suprema Corte ha disposto alcune condizioni affinché la sentenza straniera possa essere delibata, ossia che la decisione sia resa nell’ordinamento straniero su basi normative che:

    1. garantiscano la tipicità delle ipotesi di condanna;
    2. la prevedibilità della stessa; e
    3. i limiti quantitativi.

    I possibili effetti della Sentenza nell’ordinamento italiano

    In primo luogo, va chiarito che la Sentenza non ha modificato il sistema risarcitorio interno dell’ordinamento italiano. In altre parole, la Sentenza non permetterà ai giudici nazionali di comminare danni punitivi all’interno di procedimenti italiani.

    Per quanto riguarda invece le sentenze straniere, invece, sarà ora possibile ottenere il risarcimento dei danni punitivi attraverso il riconoscimento e l’esecuzione nel sistema italiano di una decisione straniera che prevede la condanna a tale tipologia di danno, a condizione che siano rispettati i presupposti sopra indicati.

    In considerazione di ciò, le imprese italiane che hanno investito o fanno affari in paesi che prevedono i danni punitivi dovranno tenere in considerazione questo nuovo rischio.

    Gli strumenti per tutelarsi

    L’imprenditore italiano che opera su mercati stranieri nei quali sono previsti i danni punitivi deve considerare con attenzione questo rischio, che sino ad oggi, come visto, non aveva accesso allo spazio giuridico italiano.

    L’ottica deve essere necessariamente quella di prevenzione e gli strumenti a disposizione in tal senso sono diversi: in primo luogo l’adozione di clausole contrattuali che prevedano la rinuncia del danneggiato a questo tipo di danno o pongano un limite alla risarcibilità dei danni contrattuali, ad esempio ancorandola al valore dei prodotti o servizi forniti.

    E’ poi fondamentale che si abbia conoscenza della legislazione e della giurisprudenza dei mercati in cui si opera, anche indirettamente (ad esempio, con la distribuzione commerciale dei prodotti) al fine di scegliere in modo consapevole la legge applicabile al contratto e la modalità di risoluzione delle controversie (ad esempio, con previsione dell’esclusiva giurisdizione del foro di un paese  che non preveda i danni punitivi.

    Infine, questo tipo di responsabilità e di rischio può essere oggetto di valutazione con polizze assicurative che offrano una copertura specifica rispetto ad eventuali condanne al risarcimento di danni punitivi.

    In this clip I briefly introduce the main options to consider when doing business in Iran.
    You can read more on this topic in my articles An introduction to Iran Corporations  and Obtaining a Foreign Investment License and browse Legalmondo’s blog for some other  posts on doing business in the region.

    If your business is related to France or you wish to develop your business in this direction, you need to be aware of one very specific provision with regards to the termination of a business relationship.

    Article L. 442-6, I, 5° of the French Commercial Code protects a party to a contract who considers that the other party has terminated the existing business relationship in a sudden and abrupt way, thus causing her a damage.

    This is a ‘public policy’ provision and therefore any contractual provision to the contrary will be unenforceable.

    Initially, the lawmaker aimed to protect any business relationship between suppliers and major large-scale retailers delisting (ie, removing a supplier’s products that were referenced by a distributor) at the moment of contracts renegotiations or renewals.

    Eventually, the article has been drafted in order to extend its scope to any business relationship, regardless of the status of the professionals involved and the nature of the commercial relationship.

    The party who wishes to terminate the business relationship does not need to provide any justification for her actions but must send a sufficient prior notice to the other party.

    The purpose is to allow the parties, and in particular the abandoned party, to anticipate the discharge of the contract, in particular in cases of economic dependency.

    It is an accentuated obligation of loyalty.

    There are only two cases strictly interpreted by case law in which the partner is exempted from sending a prior notice:

    • an aggravated breach of a contractual obligation;
    • a frustration or a force majeure.

    There are two main requirements to be fulfilled in order to be able to invoke this provision in front of a judge – an established business relationship and an abrupt termination.

    The judge will assess whether the requirements have been fulfilled on a case by case basis.

    What does the term ‘established business relationship’ mean?

    The most important criterion is the duration, whether a written contract exists or not.

    A relationship may be considered as long-term whether there is a single contract or a few consecutive contracts.

    If there is no contract in place, the judge will take into account the following criteria:

    • the existence of a long-term established business relationship;
    • the good faith of the parties;
    • the frequency of the transactions and the importance and evolving of the turnover;
    • any agreement on the prices applied and/or the discounts granted to the other party;
    • any correspondence exchanged between the parties.

    What does the term ‘abrupt termination’ mean?

    The Courts consider the application of Article L442-6-I 5° if the termination is “unforeseeable, sudden and harsh”.

    The termination must comply with the following three conditions in order to be considered as abrupt:

    • with no prior notice or with insufficient prior notice;
    • sudden;
    • unpredictable.

    To consider whether a prior notice is sufficient, a judge may consider the following criteria:

    • the investments made by the victim of the termination;
    • the business involved (eg seasonal fashion collections);
    • a constant increase in turnover;
    • the market recognition of the products sold by the victim and the difficulty of finding replacement products;
    • the existence of a post-contractual non-compete undertaking ;
    • the existence of exclusivity between the parties;
    • the time period required for the victim to find other openings or refocus the business activity;
    • the existence of any economic dependency for the victim.

    The courts have decided that a partial termination may also be considered as abrupt in the following cases:

    • an organisational change in the distribution structure of the supplier;
    • a substantial decrease in trade flows;
    • a change in pricing terms or an increase in prices without any prior notice sent by a supplier granting special prices to the buyers, or in general any unilateral and substantial change in the contract terms.

    Whatever the justification for the termination, it is necessary to send a registered letter with an acknowledgment of receipt and ensure that the prior notice is sent sufficienlty in advance (some businesses have specific time periods applicable to them by law).

    Compensation for a damage

    The French Commercial Code provides for the award of damages in order to compensate a party for an abrupt termination of a business relationship.

    The damages are calculated by multiplying the notice period which should have been applied by the average profit achieved prior to the termination. Such profit is evaluated based on the pre-tax gross margin that would have been achieved during the required notice period, had sufficient notice been given.

    The courts may also award damages for incidental and consequential losses such as redundancy costs, losses of scheduled stocks, operational costs, certain unamortised investments and restructuring costs, indemnities paid to third parties or even image or reputational damage.

    International law

    The French supreme court competent in civil law (‘Cour de cassation’) considers that in cases where the decision to terminate the business relationship and the resulting damage take place in two different countries, it is a matter of torts and the applicable law will be the one of the country where the triggering event the most closely connected with the tort took place. Therefore the abrupt termination will be subject to French law if the business of the supplier is located in France.

    However, the Court of Justice of the European Union (CJEU) has issued a preliminary ruling dated 14 July 2016 answering two questions submitted by the Paris Court of Appeal in a judgment dated 17 April 2015. A French company had been distributing in France the food products of an Italian company for the last 25 years, with no framework agreement or any exclusivity provision in place. The Italian company had terminated the business relationship with no prior notice. The French company issued proceedings against the Italian company in front of the French courts and invoked the abrupt termination of an established business relationship.

    The Italian company opposed both the jurisdiction of the French courts and the legal ground for the action arguing that the Italian courts had jurisdiction as the action involved contract law and was therefore subject to the laws of the country where the commodities had been or should have been delivered, in this case Incoterm Ex-works departing from the plant in Italy.

    The CJEU has considered that in case of a tacit contractual relationship and pursuant to European law, the liability will be based on contract law (in the same case, pursuant to French law, the liability will be based on torts). As a consequence, Article 5, 3° of the Regulation (EC) 44/2001, also known as Brussels I (which has been replaced by Regulation (EC) 1215/2012, also known as Brussels I bis) will not apply. Therefore, the competent judge will not be the one of the country where the damage occurred but the one of the country where the contractual obligation was being performed.

    In addition and answering the second question submitted to it, the CJEU has considered that the contract is:

    • a contract for the sale of goods if its purpose is the delivery of goods, in which case the competent jurisdiction will be the one of the country where the goods have been or should have been delivered; and
    • a contract for services if its purpose is the provision of services, in which case the competent jurisdiction will be the one of the country where the services have been or should have been provided.

    In this case, the Paris Court of Appeal will have to recharacherise the contractual relationship either as consecutive contracts for the sale of goods and deduct the jurisdiction of the Italian courts, or as a contract for services implying the participation of the distributor in the development and the distribution of the supplier’s goods and business strategy and deduct the jurisdiction of the French courts.

    In summary, in case of an intra-Community dispute, the distributor who is the victim of an abrupt termination of an established business relationship cannot issue proceedings based on torts in front of a court in the country where the damage occurred if there is a tacit contractual relationship with the supplier. In order to determine the competent jurisdiction in such case, it is necessary to determine whether such tacit contractual relationship consists of a supply of goods or a provision of services.

    The next judgment of the Paris Court of Appeal and those of the Cour de cassation to come need to be followed very closely.

    When negotiating contracts, parties typically focus on the key commercial terms of their agreement. The clauses that govern the term of the agreement (i.e., the duration, or how long the contract remains in force), the renewal of the term, and how the agreement can be terminated, however, merit careful consideration.

    Under Québec law, contracts typically have terms that are either fixed (e.g., 5 years, 10 years etc.), or are for an indeterminate period of time (i.e., no specific term is provided for). Contracts with fixed terms may also contain automatic renewal clauses. In the case of an indeterminate term contract, a party to the contract can generally, absent specific terms or a notice provision to the contrary in the contract, terminate it, without cause, by providing reasonable notice of termination (what constitutes “reasonable notice” depends on a number of factors and is decided on the facts of each case). A third category of contracts are contracts with a potentially perpetual term. An example of a potentially perpetual contract is a contract that contains a renewal clause that is entirely under the control of only one of the parties who can, effectively, unilaterally decide whether the contract will go on indefinitely. In such a contract, the other contracting party does not have a right to terminate the contract by providing reasonable notice of termination. The validity of perpetual term contracts was precisely the issue before the Supreme Court of Canada in its July 28, 2017 decision in Uniprix inc. v. Gestion Gosselin et Bérubé inc. https://scc-csc.lexum.com/scc-csc/scc-csc/en/item/16746/index.do (“Uniprix“).

    In Uniprix, the pharmacy chain entered into an affiliation agreement with various members of a pharmacists’ group pursuant to which said members operated a pharmacy under the Uniprix banner. The term of the contract was for a fixed term of 5 years and the renewal clause allowed members to provide a notice within a certain period of time, failing which the contract would automatically be renewed for an additional 5 years:

    Regardless of any written or verbal provisions to the contrary, this agreement shall commence on the day of its signing and shall remain in effect for a period of sixty (60) months, or for a period equal to the term of the lease for the premises where the pharmacy is located. [The member pharmacist] shall, six (6) months before the expiration of the agreement, notify [Uniprix] of its intention to leave [Uniprix] or to renew the agreement; 

    Should [the member pharmacist] fail to send the prescribed notice by registered mail, the agreement shall be deemed to have been renewed in accordance with the terms and conditions then in effect, as prescribed by the board of directors, except with regard to the fee.[Translation]

    The Uniprix agreement did not provide any say to Uniprix in connection with its renewal and there were no limits on the number of times that the members could renew the agreement. As such, the contract could remain in force perpetually based entirely on the members’ decision. After the contract had been renewed twice, Uniprix sent the members a notice of non-renewal and purported to terminate the agreement. The members contested Uniprix’s decision based on the fact that under the affiliation agreement, the renewal clause could only be exercised by the members and, unless the members gave notice to the contrary, the contract was automatically renewed. Uniprix argued that the effect of the members’ position, which would bind the parties in perpetuity, was contrary to public order (i.e., it violated a fundamental societal value) and unlawful and, as such, the term of the agreement should be considered to be for an indeterminate period, which would allow either party to terminate it on reasonable notice.

    In a 6-3 decision, the Supreme Court of Canada held (in upholding the decisions of the majority of the Québec Court of Appeal and of the Superior Court of Québec) that there was nothing under Québec law that prohibited a contract of affiliation from having a perpetual term and that this did not, in and of itself and in the context of corporate and commercial agreements, offend any fundamental societal values. The Court’s holding would equally apply to many other types of contracts such as, for example, franchise agreements and licensing agreements. The Court held, accordingly, that the affiliation agreement was not for an indeterminate term and, therefore, could be not be terminated by Uniprix by providing reasonable notice.

    With respect to the holding in Uniprix , the following points should be kept in mind:

    1. The Supreme Court of Canada expressly noted that in certain circumstances, such as where an individual’sperson and freedom are affected (e.g., a contract of employment), a perpetual obligation could offend public order.
    2. In certain specific cases set out in the Civil Code of Québec, the legislator has provided maximum terms for certain types of contracts (e.g., a commercial lease cannot exceed 100 years, the duration of payment of an annuity is 100 years).
    3. In the case of a contract of adhesion (which is generally defined as a contract where one of the parties was unable to negotiate its terms), the adhering or vulnerable party can argue that a perpetual term is abusive and, therefore, null.
    4. The Court’s decision in Uniprixapplied to Uniprix’s ability to terminate the contract without cause. A party always retains the right to terminate a contract for cause. What constitutes “cause” is decided on a case by case basis and may also be governed by the terms of the contract.

    When drafting contracts, parties are generally, subject to limitations imposed by the legislator or public order, permitted to structure their relationship as they see fit. Parties should carefully consider whether they truly intend the duration of their agreement to be entirely under the control of one of the parties to the agreement for an indefinite period of time because, as is made clear in Uniprix, perpetual commercial contracts are enforceable under Québec law.

    The author of this post is David Stolow.

    Exchange controls

    The existing Venezuelan foreign currency regulations significantly restrict the ability of private sector companies and individuals to convert the local currency (“Bolivars” or “Bs”) into foreign currency. Because of these restrictions, it is extremely difficult for companies in Venezuela to repatriate profits generated in Bolivars by converting those Bolivars into foreign currency, or otherwise to convert Bolivars into foreign currency to purchase foreign supplies, to pay debt in foreign currency, etc.

    The result of these restrictions is the continued generation of trapped cash in Bolivars that cannot be converted into foreign currency. The foreign currency restrictions can also affect the operations of Venezuelan companies if such operations depend on foreign supplies, unless the shareholders or other affiliates of such Venezuelan company are willing to support its operations with foreign currency generated abroad. Also, because of these restrictions Venezuelan companies may not be able to convert Bolivars into foreign currency to pay intercompany debt in foreign currency.

    There are currently three different official exchange rates in Venezuela: (a) the Cencoex rate, fixed by the Venezuelan government from time to time, currently at Bs.6.30 per USD (the “Cencoex Rate”), (b) the Sicad rate, fixed by the Venezuelan government from time to time, currently at Bs.13.5 per USD (the “Sicad Rate”) and (c) the Simadi rate, which is in practice fixed by the Venezuelan government on a daily basis, currently at approximately Bs.200 per USD (the “Simadi Rate”). Given the significant restrictions to convert Bolivars into foreign currency, there also exists a parallel or black market, currently at several times the Simadi rate. The Cencoex Rate (Bs.6.30 per USD) appears as hugely overvalued, if compared to the other official rates (the Sicad Rate or the Simadi Rate) or to the black market rate.

    Given the existing Venezuelan exchange controls, many Venezuelan companies have accumulated over the years significant amounts of excess cash in Bolivars that cannot be converted into Dollars.

    Foreign Investment Regulations

    The only areas currently reserved to companies owned or controlled by Venezuelan investors are open-air television, radio broadcasting, newspapers in Spanish and professional services regulated by law. There are other areas, such as oil, that are reserved to the Venezuelan government in which foreign investors may participate only through minority participations in joint venture companies with the Republic or Venezuelan state-owned companies.

    Foreign investors (i.e., foreign companies (head offices), foreign shareholders or foreign partners) must register their direct foreign investments in a Venezuelan company (branch, corporation or partnership) with the Venezuelan foreign investment authority within 60 days following the date on which investment was made (the “foreign investment registration”). The foreign investment registration is one of the documents required to purchase foreign currency through Cadivi to repatriate dividends, branch profits, and proceeds from sales of investment, liquidation of the company or capital reductions.

    Several documents must be submitted to the Venezuelan foreign investment authority by the foreign investor to obtain the foreign investment registration, including evidence that the capital of the company was paid with foreign currency or contribution in kind that entered Venezuela. To obtain such evidence, the foreign investor must (a) in case of payment in cash, order a wire transfer to the Venezuelan bank account of the company from an account of the foreign investor located outside Venezuela (as a result of the wire transfer, foreign currency transferred out of the offshore account of the investor will be converted into bolivars at the official exchange rate and deposited in bolivars in the Venezuelan bank account), and (b) in the case of contribution in kind, demonstrate that the asset being contributed to the capital of the company was imported into Venezuela (copies of the import manifest, commercial invoice and other custom documents).

    The foreign investment registration must be updated annually by the foreign investor within 120 days of the end of the fiscal year.

    Price Controls

    The Fair Prices Decree with rank, value, and strength of Organic Law (the “Fair Prices Law”), provides for the possibility of the government to set the prices of any type of good or service sold in Venezuela. The Fair Prices Law creates the Single Registry of People which Develop Economic Activities (RUPDAE) in which all persons and companies that perform commercial activities in Venezuela must be registered. The National Superintendence to Defend Economic Rights (the “Superintendence”), created by this law, has established fixed prices for food, personal hygiene products among other products. Once a list of products is published, their price is frozen until the Superintendence sets the new price (in every level of the commercial chain). In cases in which the Superintendence does not set maximum retail prices, companies should self-regulate their prices, and in no case the maximum profit margin will exceed 30% for manufacturers and 20% for importers. The Superintendence may also establish the obligation to label the maximum selling prices in the body of the product. The Fair Prices Law has also created the following crimes related to commercial activities in Venezuela: (i) sale of expired food or products; (ii) import of unhealthy products; (iii) fraudulent alteration; (iv) hoarding; (v) boycotting; (vi) destabilization of the economy; (vii) resale of products of first necessity; (viii) conditioned sales; (ix) extraction smuggling; (x) usury; (xi) alteration of goods and services; (xii) speculation; (xiii) fraudulent alteration of prices; and (xiv) corruption between private parties. Sanctions are extremely onerous and may include: closure, confiscation of assets, fines and imprisonment.

    Filings with the Commercial Registry

    All Venezuelan companies must be registered with a Commercial Registry. The Commercial Registry contains copies of the company’s articles of incorporation and by-laws, information on its standing (i.e. annual financial statements, liquidation or bankruptcy proceedings), registered address, directors and officers, the existence of branches, and other information. All information filed with the Commercial Registries is public. Companies must notify the Commercial Registry of changes to their articles of incorporation and by-laws and update other information filed with the registry. Companies must also file annual financial statements and periodically file minutes of shareholders appointing directors and officers.

     

    The author of this post is Fulvio Italiani

    Enforcement of foreign decisions and arbitral awards in Venezuela

    21 Marzo 2017

    • Venezuela
    • Arbitrato
    • Contratti
    • Contenzioso

    Poland has recently become quite famous for its skilled and resourceful IT specialists. Each year thousands of new computer engineers (programmers, developers, testers, designers etc.) enter into the market, warmly welcomed by domestic and multinational companies. A big part of these young talents open their own firm or business as free lancers developing software for clients from European countries as well as from US, Canada, Japan, China, etc.

    However, companies who want to cooperate with these partners and assign software development to a Polish IT company or freelancer should be aware that the copyright law in Poland is very strict, as it mainly protects the creator and not the client. Therefore, to be on a safe side, it is better to follow these 7 basic rules:

    1. Never start cooperation with an IT specialist or an IT company without a formal agreement. And I mean a real agreement, in a written form, with signatures of persons who can validly contract on behalf of the companies. The form is very important because – under Polish law – copyrights transfer and exclusive license agreements not fulfilling form conditions are null and void. Moreover, if there is no agreement, Polish copyright rules will apply to all intellectual property matters.
    2. Please remember that software is a creation protected by copyright law. Therefore you should consider whether you want to acquire the entire intellectual property rights or you just need a license. If you need a full IP transfer, you need to put it expressly in the agreement; otherwise you will only get a non-exclusive licence. And these, in several cases, will not be useful from a business point of view. If a license is enough, it is advisable to agree if it will be exclusive or non-exclusive.
    3. When drafting an IP clause, be detailed and clear. If you want to be able to decompile and disassembly the binary code, specify it in the IP clause. If you want to be able to introduce modifications to the source code, specify it in the IP clause. If you want to sublicense the software, specify it in the IP clause. The IP clause shall contain the description of any way you want to use the software, whether on mobile devices or on personal computers, any other electronic device or via internet (e.g. cloud computing). And believe me, when I write “specify it in the IP clause” it means that you really, really have to put it there. Otherwise it will be null and void and you may face a situation where your smart IT engineer, after getting paid, will sue you for the IP infringement.
    4. Remember that you should indicate the timeframe and the geographical scope of the license or IP transfer. If you do not specify it expressly in the agreement, you will only be entitled to a 5-year license, automatically expiring afterwards.
    5. Draft carefully a clause related to termination of the agreement. Under Polish law the licensor may terminate the license agreement granted for an indefinite period of time upon 1-year notice. If you do not want to find yourself in a situation where you lose the software IP rights in the middle of a big project, make sure that from the very beginning you are on a safe side.
    6. Make sure that your partner is obliged to transfer you upon request all software documentation and the source code.
    7. Make sure that you have a good indemnification clause with no limitation of liability. Often Polish IT companies subcontract some part of the development work to free lancers. You never know if they will conclude proper agreements with their subcontractors and if they will legally acquire the IP of the software that they will later sell you. There is always the risk that in the future some Polish IT engineer you never met will raise IP infringement claims against you, trying to prove that he/she actually developed the software. In such a situation an indemnification clause will help you recovering the costs from your partner.

    Based on our experience in many years advising and representing companies in the commercial distribution (in Spanish jurisdiction but with foreign manufacturers or distributors), the following are the six key essential elements for manufacturers (suppliers) and retailers (distributors) when establishing a distribution relationship.

    These ideas are relevant when companies intend to start their commercial relationship but they should not be neglected and verified even when there are already existing contacts.

    The signature of the contract

    Although it could seem obvious, the signature of a distribution agreement is less common than it might seem. It often happens that along the extended relationship, the corporate structures change and what once was signed with an entity, has not been renewed, adapted, modified or replaced when the situation has been transformed. It is very convenient to have well documented the relationship at every moment of its existence and to be sure that what has been covered legally is also enforceable y the day-to-day commercial relationship. It is advisable this work to be carried out by legal specialists closely with the commercial department of the company. Perfectly drafted clauses from a legal standpoint will be useless if overtaken or not understood by the day-to-day activity. And, of course, no contract is signed as a “mere formality” and then modified by verbal agreements or practices.

    The proper choice of contract

    If the signature of the distribution contract is important, the choice of the correct type is essential. Many of the conflicts that occur, especially in long-term relationships, begin with the interpretation of the type of relationship that has been signed. Even with a written text (and with an express title), the intention of the parties remains often unclear (and so the agreement). Is the “distributor” really so? Does he buy and resell or there are only sporadic supply relationships? Is there just a representative activity (ie, the distributor is actually an “agent“)? Is there a mixed relationship (sometimes represents, sometimes buys and resells)? The list could continue indefinitely. Even in many of the relationships that currently exist I am sure that the interpretation given by the Supplier and the Distributor could be different.

    Monitoring of legal and business relations

    If it is quite frequent not to have a clear written contract, it happens in almost all the distribution relationships than once the agreement has been signed, the day-to-day commercial activity modifies what has been agreed. Why commercial relations seem to neglect what has been written in an agreement? It is quite frequent contracts in which certain obligations for distributors are included (reporting on the market, customers, minimum purchases), but which in practice are not respected (it seems complicated, there is a good relationship between the parties, and nobody remembers what was agreed by people no longer working at the company…). However, it is also quite frequent to try to use these (real?) defaults later on when the relationship starts having problems. At that moment, parties try to hide behind these violations to terminate the contracts although these practices were, in a sort of way, accepted as a new procedure. Of course no agreement can last forever and for that reason is highly recommendable a joint and periodical monitoring between the legal adviser (preferably an independent one with the support of the general managers) and the commercial department to take into account new practices and to have a provision in the contractual documents.

    Evidences about customers

    In distribution contracts, evidences about customers will be essential in case of termination. Parties (mainly the supplier) are quite interested in showing evidences on who (supplier or distributor) procured the customers. Are they a result of the distributor activity or are they obtained as a consequence of the reputation of the trademark? Evidences on customers could simplify or even avoid future conflicts. The importance of the clientele and its possible future activity will be a key element to define the compensation to which the distributor will pretend to be eligible.

    Evidences on purchases and sales

    Another essential element and quite often forgotten is the justification of purchases to the supplier and subsequent sales by distributors. In any distribution agreement distributors acquire the products and resell them to the final customers. A future compensation to the distributor will consider the difference between the purchase prices and resale prices (the margin). It is therefore advisable to be able to establish the correspondent evidence on such information in order to better prepare a possible claim.

    Damages in case of termination of contracts

    Similarly, it would be convenient to justify what damages have been suffered as a result of the termination of a contract: has the distributor made investments by indication of the supplier that are still to be amortized? Has the distributor hired new employees for a line of business that have to be dismissed because of the termination of the contract (costs of compensation)? Has the distributor rented new premises signing long-term contracts due to the expectations on the agreement? Please, take into account that the Distributor is an independent trader and, as such, he assumes the risks of his activity. But to the extent he is acting on a distribution network he shall be subject to the directions, suggestions and expectations created by the supplier. These may be relevant to later determine the damages caused by the termination of the contract.

    Influencer marketing is the trend in today’s world of advertising. Even though it is obvious that influencer marketing must observe the framework of applicable statutory provisions, the market has long been uncertain about how influencer posts are to be drafted in order to be legally compliant. The current decision of Celle Higher Regional Court (June 08, 2017 – Case 13 U 53/17) offers at least some clarity.

    The judgment was issued in relation to an action for injunction by the German Association for Social Competition (Verband Sozialer Wettbewerb) against a German drugstore chain. A 20-year-old Instagram star with 1.3 million followers had advertised the drugstore chain in one of her posts. The post was only marked as advertisement at the bottom with the hashtag “#ad,” which additionally only came second in a list of six hashtags.

    Celle Higher Regional Court adjudged that this type of marking was insufficient. The court requested that the commercial purpose of an Instagram post would have to be apparent at first sight. It did not consider use of the hashtag “#ad” in a “hashtag cloud” to be sufficient to mark the post as advertising.

    The court left expressly open, however, whether the use of the hashtag “#ad” is generally suitable to mark advertising posts.

    The state media authorities (Landesmedienanstalten) already reacted to the judgment, however, and revised their joint guide on advertising issues in social media. It now reads: “When marking a post as PROMOTION (Werbung) or ADVERTISING (Anzeige), you will be on the safe side – that much is certain. […] At the current time, we cannot recommend marking posts as #ad, #sponsored by, or #powered by.” In the future, Instagram itself intends to provide for more transparency on the platform by comprehensibly identifying advertising posts. It is currently testing the introduction of a branded content tool in Germany to make it easier for users to recognize posts as paid advertising.

    Practical tip

    Advertising posts in social media should always be marked as “promotion” or “advertising” at the beginning of the posts unless their commercial purpose arises directly from the circumstances. Advertisers are also advised to obligate influencers contractually to such legally compliant marking of posts, since the influencers’ behavior may be attributed to the company, as is clearly shown by the recent judgment of Celle Higher Regional Court against the drugstore chain.

    The author of this post is Ilja Czernik.

    Con la recente sentenza 16601/2017 la Suprema Corte – dopo svariate pronunce contrarie – ha aperto alla possibilità di riconoscere in Italia i provvedimenti stranieri contenenti punitive damages. In questo breve post vedremo in cosa consistono i punitive damages, a che condizioni potranno essere riconosciuti ed eseguiti in Italia e, soprattutto, che contromisure conviene adottare per affrontare questo nuovo rischio.

    I danni puntivi, in inglese punitive damages, sono un istituto giuridico originario degli ordinamenti di common law che prevede la possibilità di riconoscere al danneggiato un risarcimento ulteriore rispetto alla compensazione del pregiudizio subito, nel caso in cui il danneggiante abbia agito con dolo o la colpa grave (rispettivamente “malice” e “gross negligence”).

    Con i danni puntivi, cioè, oltre alla funzione compensatoria, il risarcimento del danno assume anche una finalità sanzionatoria, tipica del diritto penale, fungendo anche da deterrente nei confronti di ulteriori potenziali trasgressori.

    Negli ordinamenti che prevedono i danni punitivi, il riconoscimento e la quantificazione del maggior risarcimento sono rimessi per lo più alla discrezionalità del giudice.

    Negli Stati Uniti d’America i danni punitivi sono previsti dai principi di common law, ma disciplinati in maniera diversa in ogni Stato. Generalmente, tuttavia, si applicano ove la condotta del danneggiante sia intenzionalmente diretta a causare un danno o sia posta in essere senza avere riguardo delle norme a tutela della sicurezza. Solitamente non possono essere concessi per l’inadempimento di un contratto, salvo che non determini anche un illecito (tort) autonomo.

    In alcuni Stati sono previsti dei limiti massimi ai punitive damages, a volte sotto forma di rapporto con i danni compensativi, a volte come tetto massimo. Inoltre, la Suprema Corte degli Stati Uniti è intervenuta in diversi casi per limitare le somme di condanna. Si consideri, ad esempio, il caso relativo all’azienda produttrice di automobili BMW, nel quale, a fronte di un danno compensativo di 4.000 USD, la Suprema Corte dell’Alabama aveva condannato BMW a 2.000.000 USD a titolo di danno punitivo. La Corte Suprema ha ritenuto tale condanna manifestamente eccessiva (“grossly excessive”) e ha rimesso nuovamente il caso alla Corte Suprema dell’Alabama, che ha in seguito ridotto a 50.000 USD i punitive damages (BMW of North America, Inc. v. Gore, 517 U.S. 559, 1996).

    Non sempre, però, i punitive damages vengono ridotti. Nel 2011 i giudici del Montana hanno condannato il produttore di automobili Hyundai al pagamento della somma di 72 milioni di USD a titolo di danni punitivi per un incidente causato dal difetto allo sterzo di una vettura, che aveva causato il decesso di due giovani.

    Negli ordinamenti di civil law, tra i quali l’Italia, l’istituto dei danni punitivi non viene tradizionalmente riconosciuto, in quanto la sanzione del danneggiante viene generalmente ritenuta estranea ai principi del diritto civile, ancorati alla concezione del risarcimento danni come mera restaurazione della sfera patrimoniale del danneggiato.

    Di conseguenza, il riconoscimento dei danni punitivi statuiti in una pronuncia straniera era ostacolato dal limite dell’ordine pubblico e le sentenze che li prevedevano non avevano accesso allo spazio giuridico italiano.

    La sentenza a Sezioni Unite n. 16601/2017 del 5 luglio 2017 della Suprema Corte di Cassazione, però, ha cambiato le carte in tavola.

    Nel caso di specie veniva richiesto alla Corte di Appello di Venezia il riconoscimento (ex art. 64, legge 218/1995) di tre sentenze della District Court of Appeal of the State of Florida che, accogliendo una domanda di garanzia azionata da un rivenditore americano di caschi nei confronti della società italiana produttrice, avevano condannato quest’ultima al pagamento di 1.436.136,87 USD (oltre spese e interessi) a titolo di risarcimento dei danni causati da un difetto del casco utilizzato in occasione di un sinistro stradale.

    La Corte d’Appello di Venezia aveva riconosciuto l’efficacia del provvedimento del giudice straniero considerando la somma meramente risarcitoria e non punitiva. La decisione era stata impugnata in Cassazione dalla parte soccombente, che sosteneva la contrarietà all’ordine pubblico della sentenza statunitense, in forza dell’orientamento giurisprudenziale sino a quel momento costante.

    La Cassazione ha confermato la valutazione della Corte d’Appello, ritenendo la somma non punitiva, e ha dichiarato il riconoscimento della pronuncia statunitense in Italia.

    Le Sezioni Unite, però, hanno colto l’occasione per affrontare la questione inerente l’ammissibilità dei danni punitivi in Italia, cambiando l’orientamento storico della Suprema Corte (si veda Cass. 1781/2012).

    Secondo la Corte, la nozione di responsabilità civile intesa come mera riparazione dei danni subiti è da considerarsi ormai desueta, data l’evoluzione di tale istituto attraverso interventi legislativi e giurisprudenziali nazionali ed europei che hanno introdotto mezzi risarcitori a funzione sanzionatoria e deterrente. Nel nostro ordinamento, infatti, è possibile trovare diversi casi di risarcimenti danni con funzione sanzionatoria: in materia di diffamazione a mezzo di stampa (art. 12 L.47/48), diritto d’autore (art. 158 L. 633/41), proprietà industriale (art. 125 D. Lgs 30/2005), abuso del processo (art. 96 comma 3 c.p.c. e art. 26 comma 2 c.p.a.), diritto del lavoro (art. 18, comma 14), diritto di famiglia (art. 709-ter c.p.c.) e altri.

    La Corte di Cassazione ha, quindi, affermato il seguente principio di diritto: “Nel vigente ordinamento italiano, alla responsabilità civile non è assegnato solo il compito di restaurare la sfera patrimoniale del soggetto che ha subito la lesione, perché sono interne al sistema la funzione di deterrenza e quella sanzionatoria della responsabilità civile. Non è, perciò, ontologicamente incompatibile con l’ordinamento italiano l’istituto di origine statunitense dei risarcimenti punitivi”.

    La conseguenza, molto importante, è che la pronuncia apre la porta alla possibile delibazione di sentenze straniere che condannano una parte al pagamento di una somma superiore rispetto quella sufficiente a compensare il pregiudizio subito in seguito al danno.

    A tale scopo, tuttavia, la Suprema Corte ha disposto alcune condizioni affinché la sentenza straniera possa essere delibata, ossia che la decisione sia resa nell’ordinamento straniero su basi normative che:

    1. garantiscano la tipicità delle ipotesi di condanna;
    2. la prevedibilità della stessa; e
    3. i limiti quantitativi.

    I possibili effetti della Sentenza nell’ordinamento italiano

    In primo luogo, va chiarito che la Sentenza non ha modificato il sistema risarcitorio interno dell’ordinamento italiano. In altre parole, la Sentenza non permetterà ai giudici nazionali di comminare danni punitivi all’interno di procedimenti italiani.

    Per quanto riguarda invece le sentenze straniere, invece, sarà ora possibile ottenere il risarcimento dei danni punitivi attraverso il riconoscimento e l’esecuzione nel sistema italiano di una decisione straniera che prevede la condanna a tale tipologia di danno, a condizione che siano rispettati i presupposti sopra indicati.

    In considerazione di ciò, le imprese italiane che hanno investito o fanno affari in paesi che prevedono i danni punitivi dovranno tenere in considerazione questo nuovo rischio.

    Gli strumenti per tutelarsi

    L’imprenditore italiano che opera su mercati stranieri nei quali sono previsti i danni punitivi deve considerare con attenzione questo rischio, che sino ad oggi, come visto, non aveva accesso allo spazio giuridico italiano.

    L’ottica deve essere necessariamente quella di prevenzione e gli strumenti a disposizione in tal senso sono diversi: in primo luogo l’adozione di clausole contrattuali che prevedano la rinuncia del danneggiato a questo tipo di danno o pongano un limite alla risarcibilità dei danni contrattuali, ad esempio ancorandola al valore dei prodotti o servizi forniti.

    E’ poi fondamentale che si abbia conoscenza della legislazione e della giurisprudenza dei mercati in cui si opera, anche indirettamente (ad esempio, con la distribuzione commerciale dei prodotti) al fine di scegliere in modo consapevole la legge applicabile al contratto e la modalità di risoluzione delle controversie (ad esempio, con previsione dell’esclusiva giurisdizione del foro di un paese  che non preveda i danni punitivi.

    Infine, questo tipo di responsabilità e di rischio può essere oggetto di valutazione con polizze assicurative che offrano una copertura specifica rispetto ad eventuali condanne al risarcimento di danni punitivi.

    In this clip I briefly introduce the main options to consider when doing business in Iran.
    You can read more on this topic in my articles An introduction to Iran Corporations  and Obtaining a Foreign Investment License and browse Legalmondo’s blog for some other  posts on doing business in the region.

    If your business is related to France or you wish to develop your business in this direction, you need to be aware of one very specific provision with regards to the termination of a business relationship.

    Article L. 442-6, I, 5° of the French Commercial Code protects a party to a contract who considers that the other party has terminated the existing business relationship in a sudden and abrupt way, thus causing her a damage.

    This is a ‘public policy’ provision and therefore any contractual provision to the contrary will be unenforceable.

    Initially, the lawmaker aimed to protect any business relationship between suppliers and major large-scale retailers delisting (ie, removing a supplier’s products that were referenced by a distributor) at the moment of contracts renegotiations or renewals.

    Eventually, the article has been drafted in order to extend its scope to any business relationship, regardless of the status of the professionals involved and the nature of the commercial relationship.

    The party who wishes to terminate the business relationship does not need to provide any justification for her actions but must send a sufficient prior notice to the other party.

    The purpose is to allow the parties, and in particular the abandoned party, to anticipate the discharge of the contract, in particular in cases of economic dependency.

    It is an accentuated obligation of loyalty.

    There are only two cases strictly interpreted by case law in which the partner is exempted from sending a prior notice:

    • an aggravated breach of a contractual obligation;
    • a frustration or a force majeure.

    There are two main requirements to be fulfilled in order to be able to invoke this provision in front of a judge – an established business relationship and an abrupt termination.

    The judge will assess whether the requirements have been fulfilled on a case by case basis.

    What does the term ‘established business relationship’ mean?

    The most important criterion is the duration, whether a written contract exists or not.

    A relationship may be considered as long-term whether there is a single contract or a few consecutive contracts.

    If there is no contract in place, the judge will take into account the following criteria:

    • the existence of a long-term established business relationship;
    • the good faith of the parties;
    • the frequency of the transactions and the importance and evolving of the turnover;
    • any agreement on the prices applied and/or the discounts granted to the other party;
    • any correspondence exchanged between the parties.

    What does the term ‘abrupt termination’ mean?

    The Courts consider the application of Article L442-6-I 5° if the termination is “unforeseeable, sudden and harsh”.

    The termination must comply with the following three conditions in order to be considered as abrupt:

    • with no prior notice or with insufficient prior notice;
    • sudden;
    • unpredictable.

    To consider whether a prior notice is sufficient, a judge may consider the following criteria:

    • the investments made by the victim of the termination;
    • the business involved (eg seasonal fashion collections);
    • a constant increase in turnover;
    • the market recognition of the products sold by the victim and the difficulty of finding replacement products;
    • the existence of a post-contractual non-compete undertaking ;
    • the existence of exclusivity between the parties;
    • the time period required for the victim to find other openings or refocus the business activity;
    • the existence of any economic dependency for the victim.

    The courts have decided that a partial termination may also be considered as abrupt in the following cases:

    • an organisational change in the distribution structure of the supplier;
    • a substantial decrease in trade flows;
    • a change in pricing terms or an increase in prices without any prior notice sent by a supplier granting special prices to the buyers, or in general any unilateral and substantial change in the contract terms.

    Whatever the justification for the termination, it is necessary to send a registered letter with an acknowledgment of receipt and ensure that the prior notice is sent sufficienlty in advance (some businesses have specific time periods applicable to them by law).

    Compensation for a damage

    The French Commercial Code provides for the award of damages in order to compensate a party for an abrupt termination of a business relationship.

    The damages are calculated by multiplying the notice period which should have been applied by the average profit achieved prior to the termination. Such profit is evaluated based on the pre-tax gross margin that would have been achieved during the required notice period, had sufficient notice been given.

    The courts may also award damages for incidental and consequential losses such as redundancy costs, losses of scheduled stocks, operational costs, certain unamortised investments and restructuring costs, indemnities paid to third parties or even image or reputational damage.

    International law

    The French supreme court competent in civil law (‘Cour de cassation’) considers that in cases where the decision to terminate the business relationship and the resulting damage take place in two different countries, it is a matter of torts and the applicable law will be the one of the country where the triggering event the most closely connected with the tort took place. Therefore the abrupt termination will be subject to French law if the business of the supplier is located in France.

    However, the Court of Justice of the European Union (CJEU) has issued a preliminary ruling dated 14 July 2016 answering two questions submitted by the Paris Court of Appeal in a judgment dated 17 April 2015. A French company had been distributing in France the food products of an Italian company for the last 25 years, with no framework agreement or any exclusivity provision in place. The Italian company had terminated the business relationship with no prior notice. The French company issued proceedings against the Italian company in front of the French courts and invoked the abrupt termination of an established business relationship.

    The Italian company opposed both the jurisdiction of the French courts and the legal ground for the action arguing that the Italian courts had jurisdiction as the action involved contract law and was therefore subject to the laws of the country where the commodities had been or should have been delivered, in this case Incoterm Ex-works departing from the plant in Italy.

    The CJEU has considered that in case of a tacit contractual relationship and pursuant to European law, the liability will be based on contract law (in the same case, pursuant to French law, the liability will be based on torts). As a consequence, Article 5, 3° of the Regulation (EC) 44/2001, also known as Brussels I (which has been replaced by Regulation (EC) 1215/2012, also known as Brussels I bis) will not apply. Therefore, the competent judge will not be the one of the country where the damage occurred but the one of the country where the contractual obligation was being performed.

    In addition and answering the second question submitted to it, the CJEU has considered that the contract is:

    • a contract for the sale of goods if its purpose is the delivery of goods, in which case the competent jurisdiction will be the one of the country where the goods have been or should have been delivered; and
    • a contract for services if its purpose is the provision of services, in which case the competent jurisdiction will be the one of the country where the services have been or should have been provided.

    In this case, the Paris Court of Appeal will have to recharacherise the contractual relationship either as consecutive contracts for the sale of goods and deduct the jurisdiction of the Italian courts, or as a contract for services implying the participation of the distributor in the development and the distribution of the supplier’s goods and business strategy and deduct the jurisdiction of the French courts.

    In summary, in case of an intra-Community dispute, the distributor who is the victim of an abrupt termination of an established business relationship cannot issue proceedings based on torts in front of a court in the country where the damage occurred if there is a tacit contractual relationship with the supplier. In order to determine the competent jurisdiction in such case, it is necessary to determine whether such tacit contractual relationship consists of a supply of goods or a provision of services.

    The next judgment of the Paris Court of Appeal and those of the Cour de cassation to come need to be followed very closely.

    When negotiating contracts, parties typically focus on the key commercial terms of their agreement. The clauses that govern the term of the agreement (i.e., the duration, or how long the contract remains in force), the renewal of the term, and how the agreement can be terminated, however, merit careful consideration.

    Under Québec law, contracts typically have terms that are either fixed (e.g., 5 years, 10 years etc.), or are for an indeterminate period of time (i.e., no specific term is provided for). Contracts with fixed terms may also contain automatic renewal clauses. In the case of an indeterminate term contract, a party to the contract can generally, absent specific terms or a notice provision to the contrary in the contract, terminate it, without cause, by providing reasonable notice of termination (what constitutes “reasonable notice” depends on a number of factors and is decided on the facts of each case). A third category of contracts are contracts with a potentially perpetual term. An example of a potentially perpetual contract is a contract that contains a renewal clause that is entirely under the control of only one of the parties who can, effectively, unilaterally decide whether the contract will go on indefinitely. In such a contract, the other contracting party does not have a right to terminate the contract by providing reasonable notice of termination. The validity of perpetual term contracts was precisely the issue before the Supreme Court of Canada in its July 28, 2017 decision in Uniprix inc. v. Gestion Gosselin et Bérubé inc. https://scc-csc.lexum.com/scc-csc/scc-csc/en/item/16746/index.do (“Uniprix“).

    In Uniprix, the pharmacy chain entered into an affiliation agreement with various members of a pharmacists’ group pursuant to which said members operated a pharmacy under the Uniprix banner. The term of the contract was for a fixed term of 5 years and the renewal clause allowed members to provide a notice within a certain period of time, failing which the contract would automatically be renewed for an additional 5 years:

    Regardless of any written or verbal provisions to the contrary, this agreement shall commence on the day of its signing and shall remain in effect for a period of sixty (60) months, or for a period equal to the term of the lease for the premises where the pharmacy is located. [The member pharmacist] shall, six (6) months before the expiration of the agreement, notify [Uniprix] of its intention to leave [Uniprix] or to renew the agreement; 

    Should [the member pharmacist] fail to send the prescribed notice by registered mail, the agreement shall be deemed to have been renewed in accordance with the terms and conditions then in effect, as prescribed by the board of directors, except with regard to the fee.[Translation]

    The Uniprix agreement did not provide any say to Uniprix in connection with its renewal and there were no limits on the number of times that the members could renew the agreement. As such, the contract could remain in force perpetually based entirely on the members’ decision. After the contract had been renewed twice, Uniprix sent the members a notice of non-renewal and purported to terminate the agreement. The members contested Uniprix’s decision based on the fact that under the affiliation agreement, the renewal clause could only be exercised by the members and, unless the members gave notice to the contrary, the contract was automatically renewed. Uniprix argued that the effect of the members’ position, which would bind the parties in perpetuity, was contrary to public order (i.e., it violated a fundamental societal value) and unlawful and, as such, the term of the agreement should be considered to be for an indeterminate period, which would allow either party to terminate it on reasonable notice.

    In a 6-3 decision, the Supreme Court of Canada held (in upholding the decisions of the majority of the Québec Court of Appeal and of the Superior Court of Québec) that there was nothing under Québec law that prohibited a contract of affiliation from having a perpetual term and that this did not, in and of itself and in the context of corporate and commercial agreements, offend any fundamental societal values. The Court’s holding would equally apply to many other types of contracts such as, for example, franchise agreements and licensing agreements. The Court held, accordingly, that the affiliation agreement was not for an indeterminate term and, therefore, could be not be terminated by Uniprix by providing reasonable notice.

    With respect to the holding in Uniprix , the following points should be kept in mind:

    1. The Supreme Court of Canada expressly noted that in certain circumstances, such as where an individual’sperson and freedom are affected (e.g., a contract of employment), a perpetual obligation could offend public order.
    2. In certain specific cases set out in the Civil Code of Québec, the legislator has provided maximum terms for certain types of contracts (e.g., a commercial lease cannot exceed 100 years, the duration of payment of an annuity is 100 years).
    3. In the case of a contract of adhesion (which is generally defined as a contract where one of the parties was unable to negotiate its terms), the adhering or vulnerable party can argue that a perpetual term is abusive and, therefore, null.
    4. The Court’s decision in Uniprixapplied to Uniprix’s ability to terminate the contract without cause. A party always retains the right to terminate a contract for cause. What constitutes “cause” is decided on a case by case basis and may also be governed by the terms of the contract.

    When drafting contracts, parties are generally, subject to limitations imposed by the legislator or public order, permitted to structure their relationship as they see fit. Parties should carefully consider whether they truly intend the duration of their agreement to be entirely under the control of one of the parties to the agreement for an indefinite period of time because, as is made clear in Uniprix, perpetual commercial contracts are enforceable under Québec law.

    The author of this post is David Stolow.

    Exchange controls

    The existing Venezuelan foreign currency regulations significantly restrict the ability of private sector companies and individuals to convert the local currency (“Bolivars” or “Bs”) into foreign currency. Because of these restrictions, it is extremely difficult for companies in Venezuela to repatriate profits generated in Bolivars by converting those Bolivars into foreign currency, or otherwise to convert Bolivars into foreign currency to purchase foreign supplies, to pay debt in foreign currency, etc.

    The result of these restrictions is the continued generation of trapped cash in Bolivars that cannot be converted into foreign currency. The foreign currency restrictions can also affect the operations of Venezuelan companies if such operations depend on foreign supplies, unless the shareholders or other affiliates of such Venezuelan company are willing to support its operations with foreign currency generated abroad. Also, because of these restrictions Venezuelan companies may not be able to convert Bolivars into foreign currency to pay intercompany debt in foreign currency.

    There are currently three different official exchange rates in Venezuela: (a) the Cencoex rate, fixed by the Venezuelan government from time to time, currently at Bs.6.30 per USD (the “Cencoex Rate”), (b) the Sicad rate, fixed by the Venezuelan government from time to time, currently at Bs.13.5 per USD (the “Sicad Rate”) and (c) the Simadi rate, which is in practice fixed by the Venezuelan government on a daily basis, currently at approximately Bs.200 per USD (the “Simadi Rate”). Given the significant restrictions to convert Bolivars into foreign currency, there also exists a parallel or black market, currently at several times the Simadi rate. The Cencoex Rate (Bs.6.30 per USD) appears as hugely overvalued, if compared to the other official rates (the Sicad Rate or the Simadi Rate) or to the black market rate.

    Given the existing Venezuelan exchange controls, many Venezuelan companies have accumulated over the years significant amounts of excess cash in Bolivars that cannot be converted into Dollars.

    Foreign Investment Regulations

    The only areas currently reserved to companies owned or controlled by Venezuelan investors are open-air television, radio broadcasting, newspapers in Spanish and professional services regulated by law. There are other areas, such as oil, that are reserved to the Venezuelan government in which foreign investors may participate only through minority participations in joint venture companies with the Republic or Venezuelan state-owned companies.

    Foreign investors (i.e., foreign companies (head offices), foreign shareholders or foreign partners) must register their direct foreign investments in a Venezuelan company (branch, corporation or partnership) with the Venezuelan foreign investment authority within 60 days following the date on which investment was made (the “foreign investment registration”). The foreign investment registration is one of the documents required to purchase foreign currency through Cadivi to repatriate dividends, branch profits, and proceeds from sales of investment, liquidation of the company or capital reductions.

    Several documents must be submitted to the Venezuelan foreign investment authority by the foreign investor to obtain the foreign investment registration, including evidence that the capital of the company was paid with foreign currency or contribution in kind that entered Venezuela. To obtain such evidence, the foreign investor must (a) in case of payment in cash, order a wire transfer to the Venezuelan bank account of the company from an account of the foreign investor located outside Venezuela (as a result of the wire transfer, foreign currency transferred out of the offshore account of the investor will be converted into bolivars at the official exchange rate and deposited in bolivars in the Venezuelan bank account), and (b) in the case of contribution in kind, demonstrate that the asset being contributed to the capital of the company was imported into Venezuela (copies of the import manifest, commercial invoice and other custom documents).

    The foreign investment registration must be updated annually by the foreign investor within 120 days of the end of the fiscal year.

    Price Controls

    The Fair Prices Decree with rank, value, and strength of Organic Law (the “Fair Prices Law”), provides for the possibility of the government to set the prices of any type of good or service sold in Venezuela. The Fair Prices Law creates the Single Registry of People which Develop Economic Activities (RUPDAE) in which all persons and companies that perform commercial activities in Venezuela must be registered. The National Superintendence to Defend Economic Rights (the “Superintendence”), created by this law, has established fixed prices for food, personal hygiene products among other products. Once a list of products is published, their price is frozen until the Superintendence sets the new price (in every level of the commercial chain). In cases in which the Superintendence does not set maximum retail prices, companies should self-regulate their prices, and in no case the maximum profit margin will exceed 30% for manufacturers and 20% for importers. The Superintendence may also establish the obligation to label the maximum selling prices in the body of the product. The Fair Prices Law has also created the following crimes related to commercial activities in Venezuela: (i) sale of expired food or products; (ii) import of unhealthy products; (iii) fraudulent alteration; (iv) hoarding; (v) boycotting; (vi) destabilization of the economy; (vii) resale of products of first necessity; (viii) conditioned sales; (ix) extraction smuggling; (x) usury; (xi) alteration of goods and services; (xii) speculation; (xiii) fraudulent alteration of prices; and (xiv) corruption between private parties. Sanctions are extremely onerous and may include: closure, confiscation of assets, fines and imprisonment.

    Filings with the Commercial Registry

    All Venezuelan companies must be registered with a Commercial Registry. The Commercial Registry contains copies of the company’s articles of incorporation and by-laws, information on its standing (i.e. annual financial statements, liquidation or bankruptcy proceedings), registered address, directors and officers, the existence of branches, and other information. All information filed with the Commercial Registries is public. Companies must notify the Commercial Registry of changes to their articles of incorporation and by-laws and update other information filed with the registry. Companies must also file annual financial statements and periodically file minutes of shareholders appointing directors and officers.

     

    The author of this post is Fulvio Italiani

    Null contract of international sale of goods. Which Jurisdiction?

    11 Luglio 2016

    • Italia
    • Diritto internazionale
    • Contratti
    • Commercio internazionale

    Poland has recently become quite famous for its skilled and resourceful IT specialists. Each year thousands of new computer engineers (programmers, developers, testers, designers etc.) enter into the market, warmly welcomed by domestic and multinational companies. A big part of these young talents open their own firm or business as free lancers developing software for clients from European countries as well as from US, Canada, Japan, China, etc.

    However, companies who want to cooperate with these partners and assign software development to a Polish IT company or freelancer should be aware that the copyright law in Poland is very strict, as it mainly protects the creator and not the client. Therefore, to be on a safe side, it is better to follow these 7 basic rules:

    1. Never start cooperation with an IT specialist or an IT company without a formal agreement. And I mean a real agreement, in a written form, with signatures of persons who can validly contract on behalf of the companies. The form is very important because – under Polish law – copyrights transfer and exclusive license agreements not fulfilling form conditions are null and void. Moreover, if there is no agreement, Polish copyright rules will apply to all intellectual property matters.
    2. Please remember that software is a creation protected by copyright law. Therefore you should consider whether you want to acquire the entire intellectual property rights or you just need a license. If you need a full IP transfer, you need to put it expressly in the agreement; otherwise you will only get a non-exclusive licence. And these, in several cases, will not be useful from a business point of view. If a license is enough, it is advisable to agree if it will be exclusive or non-exclusive.
    3. When drafting an IP clause, be detailed and clear. If you want to be able to decompile and disassembly the binary code, specify it in the IP clause. If you want to be able to introduce modifications to the source code, specify it in the IP clause. If you want to sublicense the software, specify it in the IP clause. The IP clause shall contain the description of any way you want to use the software, whether on mobile devices or on personal computers, any other electronic device or via internet (e.g. cloud computing). And believe me, when I write “specify it in the IP clause” it means that you really, really have to put it there. Otherwise it will be null and void and you may face a situation where your smart IT engineer, after getting paid, will sue you for the IP infringement.
    4. Remember that you should indicate the timeframe and the geographical scope of the license or IP transfer. If you do not specify it expressly in the agreement, you will only be entitled to a 5-year license, automatically expiring afterwards.
    5. Draft carefully a clause related to termination of the agreement. Under Polish law the licensor may terminate the license agreement granted for an indefinite period of time upon 1-year notice. If you do not want to find yourself in a situation where you lose the software IP rights in the middle of a big project, make sure that from the very beginning you are on a safe side.
    6. Make sure that your partner is obliged to transfer you upon request all software documentation and the source code.
    7. Make sure that you have a good indemnification clause with no limitation of liability. Often Polish IT companies subcontract some part of the development work to free lancers. You never know if they will conclude proper agreements with their subcontractors and if they will legally acquire the IP of the software that they will later sell you. There is always the risk that in the future some Polish IT engineer you never met will raise IP infringement claims against you, trying to prove that he/she actually developed the software. In such a situation an indemnification clause will help you recovering the costs from your partner.

    Based on our experience in many years advising and representing companies in the commercial distribution (in Spanish jurisdiction but with foreign manufacturers or distributors), the following are the six key essential elements for manufacturers (suppliers) and retailers (distributors) when establishing a distribution relationship.

    These ideas are relevant when companies intend to start their commercial relationship but they should not be neglected and verified even when there are already existing contacts.

    The signature of the contract

    Although it could seem obvious, the signature of a distribution agreement is less common than it might seem. It often happens that along the extended relationship, the corporate structures change and what once was signed with an entity, has not been renewed, adapted, modified or replaced when the situation has been transformed. It is very convenient to have well documented the relationship at every moment of its existence and to be sure that what has been covered legally is also enforceable y the day-to-day commercial relationship. It is advisable this work to be carried out by legal specialists closely with the commercial department of the company. Perfectly drafted clauses from a legal standpoint will be useless if overtaken or not understood by the day-to-day activity. And, of course, no contract is signed as a “mere formality” and then modified by verbal agreements or practices.

    The proper choice of contract

    If the signature of the distribution contract is important, the choice of the correct type is essential. Many of the conflicts that occur, especially in long-term relationships, begin with the interpretation of the type of relationship that has been signed. Even with a written text (and with an express title), the intention of the parties remains often unclear (and so the agreement). Is the “distributor” really so? Does he buy and resell or there are only sporadic supply relationships? Is there just a representative activity (ie, the distributor is actually an “agent“)? Is there a mixed relationship (sometimes represents, sometimes buys and resells)? The list could continue indefinitely. Even in many of the relationships that currently exist I am sure that the interpretation given by the Supplier and the Distributor could be different.

    Monitoring of legal and business relations

    If it is quite frequent not to have a clear written contract, it happens in almost all the distribution relationships than once the agreement has been signed, the day-to-day commercial activity modifies what has been agreed. Why commercial relations seem to neglect what has been written in an agreement? It is quite frequent contracts in which certain obligations for distributors are included (reporting on the market, customers, minimum purchases), but which in practice are not respected (it seems complicated, there is a good relationship between the parties, and nobody remembers what was agreed by people no longer working at the company…). However, it is also quite frequent to try to use these (real?) defaults later on when the relationship starts having problems. At that moment, parties try to hide behind these violations to terminate the contracts although these practices were, in a sort of way, accepted as a new procedure. Of course no agreement can last forever and for that reason is highly recommendable a joint and periodical monitoring between the legal adviser (preferably an independent one with the support of the general managers) and the commercial department to take into account new practices and to have a provision in the contractual documents.

    Evidences about customers

    In distribution contracts, evidences about customers will be essential in case of termination. Parties (mainly the supplier) are quite interested in showing evidences on who (supplier or distributor) procured the customers. Are they a result of the distributor activity or are they obtained as a consequence of the reputation of the trademark? Evidences on customers could simplify or even avoid future conflicts. The importance of the clientele and its possible future activity will be a key element to define the compensation to which the distributor will pretend to be eligible.

    Evidences on purchases and sales

    Another essential element and quite often forgotten is the justification of purchases to the supplier and subsequent sales by distributors. In any distribution agreement distributors acquire the products and resell them to the final customers. A future compensation to the distributor will consider the difference between the purchase prices and resale prices (the margin). It is therefore advisable to be able to establish the correspondent evidence on such information in order to better prepare a possible claim.

    Damages in case of termination of contracts

    Similarly, it would be convenient to justify what damages have been suffered as a result of the termination of a contract: has the distributor made investments by indication of the supplier that are still to be amortized? Has the distributor hired new employees for a line of business that have to be dismissed because of the termination of the contract (costs of compensation)? Has the distributor rented new premises signing long-term contracts due to the expectations on the agreement? Please, take into account that the Distributor is an independent trader and, as such, he assumes the risks of his activity. But to the extent he is acting on a distribution network he shall be subject to the directions, suggestions and expectations created by the supplier. These may be relevant to later determine the damages caused by the termination of the contract.

    Influencer marketing is the trend in today’s world of advertising. Even though it is obvious that influencer marketing must observe the framework of applicable statutory provisions, the market has long been uncertain about how influencer posts are to be drafted in order to be legally compliant. The current decision of Celle Higher Regional Court (June 08, 2017 – Case 13 U 53/17) offers at least some clarity.

    The judgment was issued in relation to an action for injunction by the German Association for Social Competition (Verband Sozialer Wettbewerb) against a German drugstore chain. A 20-year-old Instagram star with 1.3 million followers had advertised the drugstore chain in one of her posts. The post was only marked as advertisement at the bottom with the hashtag “#ad,” which additionally only came second in a list of six hashtags.

    Celle Higher Regional Court adjudged that this type of marking was insufficient. The court requested that the commercial purpose of an Instagram post would have to be apparent at first sight. It did not consider use of the hashtag “#ad” in a “hashtag cloud” to be sufficient to mark the post as advertising.

    The court left expressly open, however, whether the use of the hashtag “#ad” is generally suitable to mark advertising posts.

    The state media authorities (Landesmedienanstalten) already reacted to the judgment, however, and revised their joint guide on advertising issues in social media. It now reads: “When marking a post as PROMOTION (Werbung) or ADVERTISING (Anzeige), you will be on the safe side – that much is certain. […] At the current time, we cannot recommend marking posts as #ad, #sponsored by, or #powered by.” In the future, Instagram itself intends to provide for more transparency on the platform by comprehensibly identifying advertising posts. It is currently testing the introduction of a branded content tool in Germany to make it easier for users to recognize posts as paid advertising.

    Practical tip

    Advertising posts in social media should always be marked as “promotion” or “advertising” at the beginning of the posts unless their commercial purpose arises directly from the circumstances. Advertisers are also advised to obligate influencers contractually to such legally compliant marking of posts, since the influencers’ behavior may be attributed to the company, as is clearly shown by the recent judgment of Celle Higher Regional Court against the drugstore chain.

    The author of this post is Ilja Czernik.

    Con la recente sentenza 16601/2017 la Suprema Corte – dopo svariate pronunce contrarie – ha aperto alla possibilità di riconoscere in Italia i provvedimenti stranieri contenenti punitive damages. In questo breve post vedremo in cosa consistono i punitive damages, a che condizioni potranno essere riconosciuti ed eseguiti in Italia e, soprattutto, che contromisure conviene adottare per affrontare questo nuovo rischio.

    I danni puntivi, in inglese punitive damages, sono un istituto giuridico originario degli ordinamenti di common law che prevede la possibilità di riconoscere al danneggiato un risarcimento ulteriore rispetto alla compensazione del pregiudizio subito, nel caso in cui il danneggiante abbia agito con dolo o la colpa grave (rispettivamente “malice” e “gross negligence”).

    Con i danni puntivi, cioè, oltre alla funzione compensatoria, il risarcimento del danno assume anche una finalità sanzionatoria, tipica del diritto penale, fungendo anche da deterrente nei confronti di ulteriori potenziali trasgressori.

    Negli ordinamenti che prevedono i danni punitivi, il riconoscimento e la quantificazione del maggior risarcimento sono rimessi per lo più alla discrezionalità del giudice.

    Negli Stati Uniti d’America i danni punitivi sono previsti dai principi di common law, ma disciplinati in maniera diversa in ogni Stato. Generalmente, tuttavia, si applicano ove la condotta del danneggiante sia intenzionalmente diretta a causare un danno o sia posta in essere senza avere riguardo delle norme a tutela della sicurezza. Solitamente non possono essere concessi per l’inadempimento di un contratto, salvo che non determini anche un illecito (tort) autonomo.

    In alcuni Stati sono previsti dei limiti massimi ai punitive damages, a volte sotto forma di rapporto con i danni compensativi, a volte come tetto massimo. Inoltre, la Suprema Corte degli Stati Uniti è intervenuta in diversi casi per limitare le somme di condanna. Si consideri, ad esempio, il caso relativo all’azienda produttrice di automobili BMW, nel quale, a fronte di un danno compensativo di 4.000 USD, la Suprema Corte dell’Alabama aveva condannato BMW a 2.000.000 USD a titolo di danno punitivo. La Corte Suprema ha ritenuto tale condanna manifestamente eccessiva (“grossly excessive”) e ha rimesso nuovamente il caso alla Corte Suprema dell’Alabama, che ha in seguito ridotto a 50.000 USD i punitive damages (BMW of North America, Inc. v. Gore, 517 U.S. 559, 1996).

    Non sempre, però, i punitive damages vengono ridotti. Nel 2011 i giudici del Montana hanno condannato il produttore di automobili Hyundai al pagamento della somma di 72 milioni di USD a titolo di danni punitivi per un incidente causato dal difetto allo sterzo di una vettura, che aveva causato il decesso di due giovani.

    Negli ordinamenti di civil law, tra i quali l’Italia, l’istituto dei danni punitivi non viene tradizionalmente riconosciuto, in quanto la sanzione del danneggiante viene generalmente ritenuta estranea ai principi del diritto civile, ancorati alla concezione del risarcimento danni come mera restaurazione della sfera patrimoniale del danneggiato.

    Di conseguenza, il riconoscimento dei danni punitivi statuiti in una pronuncia straniera era ostacolato dal limite dell’ordine pubblico e le sentenze che li prevedevano non avevano accesso allo spazio giuridico italiano.

    La sentenza a Sezioni Unite n. 16601/2017 del 5 luglio 2017 della Suprema Corte di Cassazione, però, ha cambiato le carte in tavola.

    Nel caso di specie veniva richiesto alla Corte di Appello di Venezia il riconoscimento (ex art. 64, legge 218/1995) di tre sentenze della District Court of Appeal of the State of Florida che, accogliendo una domanda di garanzia azionata da un rivenditore americano di caschi nei confronti della società italiana produttrice, avevano condannato quest’ultima al pagamento di 1.436.136,87 USD (oltre spese e interessi) a titolo di risarcimento dei danni causati da un difetto del casco utilizzato in occasione di un sinistro stradale.

    La Corte d’Appello di Venezia aveva riconosciuto l’efficacia del provvedimento del giudice straniero considerando la somma meramente risarcitoria e non punitiva. La decisione era stata impugnata in Cassazione dalla parte soccombente, che sosteneva la contrarietà all’ordine pubblico della sentenza statunitense, in forza dell’orientamento giurisprudenziale sino a quel momento costante.

    La Cassazione ha confermato la valutazione della Corte d’Appello, ritenendo la somma non punitiva, e ha dichiarato il riconoscimento della pronuncia statunitense in Italia.

    Le Sezioni Unite, però, hanno colto l’occasione per affrontare la questione inerente l’ammissibilità dei danni punitivi in Italia, cambiando l’orientamento storico della Suprema Corte (si veda Cass. 1781/2012).

    Secondo la Corte, la nozione di responsabilità civile intesa come mera riparazione dei danni subiti è da considerarsi ormai desueta, data l’evoluzione di tale istituto attraverso interventi legislativi e giurisprudenziali nazionali ed europei che hanno introdotto mezzi risarcitori a funzione sanzionatoria e deterrente. Nel nostro ordinamento, infatti, è possibile trovare diversi casi di risarcimenti danni con funzione sanzionatoria: in materia di diffamazione a mezzo di stampa (art. 12 L.47/48), diritto d’autore (art. 158 L. 633/41), proprietà industriale (art. 125 D. Lgs 30/2005), abuso del processo (art. 96 comma 3 c.p.c. e art. 26 comma 2 c.p.a.), diritto del lavoro (art. 18, comma 14), diritto di famiglia (art. 709-ter c.p.c.) e altri.

    La Corte di Cassazione ha, quindi, affermato il seguente principio di diritto: “Nel vigente ordinamento italiano, alla responsabilità civile non è assegnato solo il compito di restaurare la sfera patrimoniale del soggetto che ha subito la lesione, perché sono interne al sistema la funzione di deterrenza e quella sanzionatoria della responsabilità civile. Non è, perciò, ontologicamente incompatibile con l’ordinamento italiano l’istituto di origine statunitense dei risarcimenti punitivi”.

    La conseguenza, molto importante, è che la pronuncia apre la porta alla possibile delibazione di sentenze straniere che condannano una parte al pagamento di una somma superiore rispetto quella sufficiente a compensare il pregiudizio subito in seguito al danno.

    A tale scopo, tuttavia, la Suprema Corte ha disposto alcune condizioni affinché la sentenza straniera possa essere delibata, ossia che la decisione sia resa nell’ordinamento straniero su basi normative che:

    1. garantiscano la tipicità delle ipotesi di condanna;
    2. la prevedibilità della stessa; e
    3. i limiti quantitativi.

    I possibili effetti della Sentenza nell’ordinamento italiano

    In primo luogo, va chiarito che la Sentenza non ha modificato il sistema risarcitorio interno dell’ordinamento italiano. In altre parole, la Sentenza non permetterà ai giudici nazionali di comminare danni punitivi all’interno di procedimenti italiani.

    Per quanto riguarda invece le sentenze straniere, invece, sarà ora possibile ottenere il risarcimento dei danni punitivi attraverso il riconoscimento e l’esecuzione nel sistema italiano di una decisione straniera che prevede la condanna a tale tipologia di danno, a condizione che siano rispettati i presupposti sopra indicati.

    In considerazione di ciò, le imprese italiane che hanno investito o fanno affari in paesi che prevedono i danni punitivi dovranno tenere in considerazione questo nuovo rischio.

    Gli strumenti per tutelarsi

    L’imprenditore italiano che opera su mercati stranieri nei quali sono previsti i danni punitivi deve considerare con attenzione questo rischio, che sino ad oggi, come visto, non aveva accesso allo spazio giuridico italiano.

    L’ottica deve essere necessariamente quella di prevenzione e gli strumenti a disposizione in tal senso sono diversi: in primo luogo l’adozione di clausole contrattuali che prevedano la rinuncia del danneggiato a questo tipo di danno o pongano un limite alla risarcibilità dei danni contrattuali, ad esempio ancorandola al valore dei prodotti o servizi forniti.

    E’ poi fondamentale che si abbia conoscenza della legislazione e della giurisprudenza dei mercati in cui si opera, anche indirettamente (ad esempio, con la distribuzione commerciale dei prodotti) al fine di scegliere in modo consapevole la legge applicabile al contratto e la modalità di risoluzione delle controversie (ad esempio, con previsione dell’esclusiva giurisdizione del foro di un paese  che non preveda i danni punitivi.

    Infine, questo tipo di responsabilità e di rischio può essere oggetto di valutazione con polizze assicurative che offrano una copertura specifica rispetto ad eventuali condanne al risarcimento di danni punitivi.

    In this clip I briefly introduce the main options to consider when doing business in Iran.
    You can read more on this topic in my articles An introduction to Iran Corporations  and Obtaining a Foreign Investment License and browse Legalmondo’s blog for some other  posts on doing business in the region.

    If your business is related to France or you wish to develop your business in this direction, you need to be aware of one very specific provision with regards to the termination of a business relationship.

    Article L. 442-6, I, 5° of the French Commercial Code protects a party to a contract who considers that the other party has terminated the existing business relationship in a sudden and abrupt way, thus causing her a damage.

    This is a ‘public policy’ provision and therefore any contractual provision to the contrary will be unenforceable.

    Initially, the lawmaker aimed to protect any business relationship between suppliers and major large-scale retailers delisting (ie, removing a supplier’s products that were referenced by a distributor) at the moment of contracts renegotiations or renewals.

    Eventually, the article has been drafted in order to extend its scope to any business relationship, regardless of the status of the professionals involved and the nature of the commercial relationship.

    The party who wishes to terminate the business relationship does not need to provide any justification for her actions but must send a sufficient prior notice to the other party.

    The purpose is to allow the parties, and in particular the abandoned party, to anticipate the discharge of the contract, in particular in cases of economic dependency.

    It is an accentuated obligation of loyalty.

    There are only two cases strictly interpreted by case law in which the partner is exempted from sending a prior notice:

    • an aggravated breach of a contractual obligation;
    • a frustration or a force majeure.

    There are two main requirements to be fulfilled in order to be able to invoke this provision in front of a judge – an established business relationship and an abrupt termination.

    The judge will assess whether the requirements have been fulfilled on a case by case basis.

    What does the term ‘established business relationship’ mean?

    The most important criterion is the duration, whether a written contract exists or not.

    A relationship may be considered as long-term whether there is a single contract or a few consecutive contracts.

    If there is no contract in place, the judge will take into account the following criteria:

    • the existence of a long-term established business relationship;
    • the good faith of the parties;
    • the frequency of the transactions and the importance and evolving of the turnover;
    • any agreement on the prices applied and/or the discounts granted to the other party;
    • any correspondence exchanged between the parties.

    What does the term ‘abrupt termination’ mean?

    The Courts consider the application of Article L442-6-I 5° if the termination is “unforeseeable, sudden and harsh”.

    The termination must comply with the following three conditions in order to be considered as abrupt:

    • with no prior notice or with insufficient prior notice;
    • sudden;
    • unpredictable.

    To consider whether a prior notice is sufficient, a judge may consider the following criteria:

    • the investments made by the victim of the termination;
    • the business involved (eg seasonal fashion collections);
    • a constant increase in turnover;
    • the market recognition of the products sold by the victim and the difficulty of finding replacement products;
    • the existence of a post-contractual non-compete undertaking ;
    • the existence of exclusivity between the parties;
    • the time period required for the victim to find other openings or refocus the business activity;
    • the existence of any economic dependency for the victim.

    The courts have decided that a partial termination may also be considered as abrupt in the following cases:

    • an organisational change in the distribution structure of the supplier;
    • a substantial decrease in trade flows;
    • a change in pricing terms or an increase in prices without any prior notice sent by a supplier granting special prices to the buyers, or in general any unilateral and substantial change in the contract terms.

    Whatever the justification for the termination, it is necessary to send a registered letter with an acknowledgment of receipt and ensure that the prior notice is sent sufficienlty in advance (some businesses have specific time periods applicable to them by law).

    Compensation for a damage

    The French Commercial Code provides for the award of damages in order to compensate a party for an abrupt termination of a business relationship.

    The damages are calculated by multiplying the notice period which should have been applied by the average profit achieved prior to the termination. Such profit is evaluated based on the pre-tax gross margin that would have been achieved during the required notice period, had sufficient notice been given.

    The courts may also award damages for incidental and consequential losses such as redundancy costs, losses of scheduled stocks, operational costs, certain unamortised investments and restructuring costs, indemnities paid to third parties or even image or reputational damage.

    International law

    The French supreme court competent in civil law (‘Cour de cassation’) considers that in cases where the decision to terminate the business relationship and the resulting damage take place in two different countries, it is a matter of torts and the applicable law will be the one of the country where the triggering event the most closely connected with the tort took place. Therefore the abrupt termination will be subject to French law if the business of the supplier is located in France.

    However, the Court of Justice of the European Union (CJEU) has issued a preliminary ruling dated 14 July 2016 answering two questions submitted by the Paris Court of Appeal in a judgment dated 17 April 2015. A French company had been distributing in France the food products of an Italian company for the last 25 years, with no framework agreement or any exclusivity provision in place. The Italian company had terminated the business relationship with no prior notice. The French company issued proceedings against the Italian company in front of the French courts and invoked the abrupt termination of an established business relationship.

    The Italian company opposed both the jurisdiction of the French courts and the legal ground for the action arguing that the Italian courts had jurisdiction as the action involved contract law and was therefore subject to the laws of the country where the commodities had been or should have been delivered, in this case Incoterm Ex-works departing from the plant in Italy.

    The CJEU has considered that in case of a tacit contractual relationship and pursuant to European law, the liability will be based on contract law (in the same case, pursuant to French law, the liability will be based on torts). As a consequence, Article 5, 3° of the Regulation (EC) 44/2001, also known as Brussels I (which has been replaced by Regulation (EC) 1215/2012, also known as Brussels I bis) will not apply. Therefore, the competent judge will not be the one of the country where the damage occurred but the one of the country where the contractual obligation was being performed.

    In addition and answering the second question submitted to it, the CJEU has considered that the contract is:

    • a contract for the sale of goods if its purpose is the delivery of goods, in which case the competent jurisdiction will be the one of the country where the goods have been or should have been delivered; and
    • a contract for services if its purpose is the provision of services, in which case the competent jurisdiction will be the one of the country where the services have been or should have been provided.

    In this case, the Paris Court of Appeal will have to recharacherise the contractual relationship either as consecutive contracts for the sale of goods and deduct the jurisdiction of the Italian courts, or as a contract for services implying the participation of the distributor in the development and the distribution of the supplier’s goods and business strategy and deduct the jurisdiction of the French courts.

    In summary, in case of an intra-Community dispute, the distributor who is the victim of an abrupt termination of an established business relationship cannot issue proceedings based on torts in front of a court in the country where the damage occurred if there is a tacit contractual relationship with the supplier. In order to determine the competent jurisdiction in such case, it is necessary to determine whether such tacit contractual relationship consists of a supply of goods or a provision of services.

    The next judgment of the Paris Court of Appeal and those of the Cour de cassation to come need to be followed very closely.

    When negotiating contracts, parties typically focus on the key commercial terms of their agreement. The clauses that govern the term of the agreement (i.e., the duration, or how long the contract remains in force), the renewal of the term, and how the agreement can be terminated, however, merit careful consideration.

    Under Québec law, contracts typically have terms that are either fixed (e.g., 5 years, 10 years etc.), or are for an indeterminate period of time (i.e., no specific term is provided for). Contracts with fixed terms may also contain automatic renewal clauses. In the case of an indeterminate term contract, a party to the contract can generally, absent specific terms or a notice provision to the contrary in the contract, terminate it, without cause, by providing reasonable notice of termination (what constitutes “reasonable notice” depends on a number of factors and is decided on the facts of each case). A third category of contracts are contracts with a potentially perpetual term. An example of a potentially perpetual contract is a contract that contains a renewal clause that is entirely under the control of only one of the parties who can, effectively, unilaterally decide whether the contract will go on indefinitely. In such a contract, the other contracting party does not have a right to terminate the contract by providing reasonable notice of termination. The validity of perpetual term contracts was precisely the issue before the Supreme Court of Canada in its July 28, 2017 decision in Uniprix inc. v. Gestion Gosselin et Bérubé inc. https://scc-csc.lexum.com/scc-csc/scc-csc/en/item/16746/index.do (“Uniprix“).

    In Uniprix, the pharmacy chain entered into an affiliation agreement with various members of a pharmacists’ group pursuant to which said members operated a pharmacy under the Uniprix banner. The term of the contract was for a fixed term of 5 years and the renewal clause allowed members to provide a notice within a certain period of time, failing which the contract would automatically be renewed for an additional 5 years:

    Regardless of any written or verbal provisions to the contrary, this agreement shall commence on the day of its signing and shall remain in effect for a period of sixty (60) months, or for a period equal to the term of the lease for the premises where the pharmacy is located. [The member pharmacist] shall, six (6) months before the expiration of the agreement, notify [Uniprix] of its intention to leave [Uniprix] or to renew the agreement; 

    Should [the member pharmacist] fail to send the prescribed notice by registered mail, the agreement shall be deemed to have been renewed in accordance with the terms and conditions then in effect, as prescribed by the board of directors, except with regard to the fee.[Translation]

    The Uniprix agreement did not provide any say to Uniprix in connection with its renewal and there were no limits on the number of times that the members could renew the agreement. As such, the contract could remain in force perpetually based entirely on the members’ decision. After the contract had been renewed twice, Uniprix sent the members a notice of non-renewal and purported to terminate the agreement. The members contested Uniprix’s decision based on the fact that under the affiliation agreement, the renewal clause could only be exercised by the members and, unless the members gave notice to the contrary, the contract was automatically renewed. Uniprix argued that the effect of the members’ position, which would bind the parties in perpetuity, was contrary to public order (i.e., it violated a fundamental societal value) and unlawful and, as such, the term of the agreement should be considered to be for an indeterminate period, which would allow either party to terminate it on reasonable notice.

    In a 6-3 decision, the Supreme Court of Canada held (in upholding the decisions of the majority of the Québec Court of Appeal and of the Superior Court of Québec) that there was nothing under Québec law that prohibited a contract of affiliation from having a perpetual term and that this did not, in and of itself and in the context of corporate and commercial agreements, offend any fundamental societal values. The Court’s holding would equally apply to many other types of contracts such as, for example, franchise agreements and licensing agreements. The Court held, accordingly, that the affiliation agreement was not for an indeterminate term and, therefore, could be not be terminated by Uniprix by providing reasonable notice.

    With respect to the holding in Uniprix , the following points should be kept in mind:

    1. The Supreme Court of Canada expressly noted that in certain circumstances, such as where an individual’sperson and freedom are affected (e.g., a contract of employment), a perpetual obligation could offend public order.
    2. In certain specific cases set out in the Civil Code of Québec, the legislator has provided maximum terms for certain types of contracts (e.g., a commercial lease cannot exceed 100 years, the duration of payment of an annuity is 100 years).
    3. In the case of a contract of adhesion (which is generally defined as a contract where one of the parties was unable to negotiate its terms), the adhering or vulnerable party can argue that a perpetual term is abusive and, therefore, null.
    4. The Court’s decision in Uniprixapplied to Uniprix’s ability to terminate the contract without cause. A party always retains the right to terminate a contract for cause. What constitutes “cause” is decided on a case by case basis and may also be governed by the terms of the contract.

    When drafting contracts, parties are generally, subject to limitations imposed by the legislator or public order, permitted to structure their relationship as they see fit. Parties should carefully consider whether they truly intend the duration of their agreement to be entirely under the control of one of the parties to the agreement for an indefinite period of time because, as is made clear in Uniprix, perpetual commercial contracts are enforceable under Québec law.

    The author of this post is David Stolow.

    Exchange controls

    The existing Venezuelan foreign currency regulations significantly restrict the ability of private sector companies and individuals to convert the local currency (“Bolivars” or “Bs”) into foreign currency. Because of these restrictions, it is extremely difficult for companies in Venezuela to repatriate profits generated in Bolivars by converting those Bolivars into foreign currency, or otherwise to convert Bolivars into foreign currency to purchase foreign supplies, to pay debt in foreign currency, etc.

    The result of these restrictions is the continued generation of trapped cash in Bolivars that cannot be converted into foreign currency. The foreign currency restrictions can also affect the operations of Venezuelan companies if such operations depend on foreign supplies, unless the shareholders or other affiliates of such Venezuelan company are willing to support its operations with foreign currency generated abroad. Also, because of these restrictions Venezuelan companies may not be able to convert Bolivars into foreign currency to pay intercompany debt in foreign currency.

    There are currently three different official exchange rates in Venezuela: (a) the Cencoex rate, fixed by the Venezuelan government from time to time, currently at Bs.6.30 per USD (the “Cencoex Rate”), (b) the Sicad rate, fixed by the Venezuelan government from time to time, currently at Bs.13.5 per USD (the “Sicad Rate”) and (c) the Simadi rate, which is in practice fixed by the Venezuelan government on a daily basis, currently at approximately Bs.200 per USD (the “Simadi Rate”). Given the significant restrictions to convert Bolivars into foreign currency, there also exists a parallel or black market, currently at several times the Simadi rate. The Cencoex Rate (Bs.6.30 per USD) appears as hugely overvalued, if compared to the other official rates (the Sicad Rate or the Simadi Rate) or to the black market rate.

    Given the existing Venezuelan exchange controls, many Venezuelan companies have accumulated over the years significant amounts of excess cash in Bolivars that cannot be converted into Dollars.

    Foreign Investment Regulations

    The only areas currently reserved to companies owned or controlled by Venezuelan investors are open-air television, radio broadcasting, newspapers in Spanish and professional services regulated by law. There are other areas, such as oil, that are reserved to the Venezuelan government in which foreign investors may participate only through minority participations in joint venture companies with the Republic or Venezuelan state-owned companies.

    Foreign investors (i.e., foreign companies (head offices), foreign shareholders or foreign partners) must register their direct foreign investments in a Venezuelan company (branch, corporation or partnership) with the Venezuelan foreign investment authority within 60 days following the date on which investment was made (the “foreign investment registration”). The foreign investment registration is one of the documents required to purchase foreign currency through Cadivi to repatriate dividends, branch profits, and proceeds from sales of investment, liquidation of the company or capital reductions.

    Several documents must be submitted to the Venezuelan foreign investment authority by the foreign investor to obtain the foreign investment registration, including evidence that the capital of the company was paid with foreign currency or contribution in kind that entered Venezuela. To obtain such evidence, the foreign investor must (a) in case of payment in cash, order a wire transfer to the Venezuelan bank account of the company from an account of the foreign investor located outside Venezuela (as a result of the wire transfer, foreign currency transferred out of the offshore account of the investor will be converted into bolivars at the official exchange rate and deposited in bolivars in the Venezuelan bank account), and (b) in the case of contribution in kind, demonstrate that the asset being contributed to the capital of the company was imported into Venezuela (copies of the import manifest, commercial invoice and other custom documents).

    The foreign investment registration must be updated annually by the foreign investor within 120 days of the end of the fiscal year.

    Price Controls

    The Fair Prices Decree with rank, value, and strength of Organic Law (the “Fair Prices Law”), provides for the possibility of the government to set the prices of any type of good or service sold in Venezuela. The Fair Prices Law creates the Single Registry of People which Develop Economic Activities (RUPDAE) in which all persons and companies that perform commercial activities in Venezuela must be registered. The National Superintendence to Defend Economic Rights (the “Superintendence”), created by this law, has established fixed prices for food, personal hygiene products among other products. Once a list of products is published, their price is frozen until the Superintendence sets the new price (in every level of the commercial chain). In cases in which the Superintendence does not set maximum retail prices, companies should self-regulate their prices, and in no case the maximum profit margin will exceed 30% for manufacturers and 20% for importers. The Superintendence may also establish the obligation to label the maximum selling prices in the body of the product. The Fair Prices Law has also created the following crimes related to commercial activities in Venezuela: (i) sale of expired food or products; (ii) import of unhealthy products; (iii) fraudulent alteration; (iv) hoarding; (v) boycotting; (vi) destabilization of the economy; (vii) resale of products of first necessity; (viii) conditioned sales; (ix) extraction smuggling; (x) usury; (xi) alteration of goods and services; (xii) speculation; (xiii) fraudulent alteration of prices; and (xiv) corruption between private parties. Sanctions are extremely onerous and may include: closure, confiscation of assets, fines and imprisonment.

    Filings with the Commercial Registry

    All Venezuelan companies must be registered with a Commercial Registry. The Commercial Registry contains copies of the company’s articles of incorporation and by-laws, information on its standing (i.e. annual financial statements, liquidation or bankruptcy proceedings), registered address, directors and officers, the existence of branches, and other information. All information filed with the Commercial Registries is public. Companies must notify the Commercial Registry of changes to their articles of incorporation and by-laws and update other information filed with the registry. Companies must also file annual financial statements and periodically file minutes of shareholders appointing directors and officers.

     

    The author of this post is Fulvio Italiani

    China Contract – Jurisdiction, Arbitration and applicable law

    10 Maggio 2016

    • Cina
    • Diritto internazionale
    • Contratti

    Poland has recently become quite famous for its skilled and resourceful IT specialists. Each year thousands of new computer engineers (programmers, developers, testers, designers etc.) enter into the market, warmly welcomed by domestic and multinational companies. A big part of these young talents open their own firm or business as free lancers developing software for clients from European countries as well as from US, Canada, Japan, China, etc.

    However, companies who want to cooperate with these partners and assign software development to a Polish IT company or freelancer should be aware that the copyright law in Poland is very strict, as it mainly protects the creator and not the client. Therefore, to be on a safe side, it is better to follow these 7 basic rules:

    1. Never start cooperation with an IT specialist or an IT company without a formal agreement. And I mean a real agreement, in a written form, with signatures of persons who can validly contract on behalf of the companies. The form is very important because – under Polish law – copyrights transfer and exclusive license agreements not fulfilling form conditions are null and void. Moreover, if there is no agreement, Polish copyright rules will apply to all intellectual property matters.
    2. Please remember that software is a creation protected by copyright law. Therefore you should consider whether you want to acquire the entire intellectual property rights or you just need a license. If you need a full IP transfer, you need to put it expressly in the agreement; otherwise you will only get a non-exclusive licence. And these, in several cases, will not be useful from a business point of view. If a license is enough, it is advisable to agree if it will be exclusive or non-exclusive.
    3. When drafting an IP clause, be detailed and clear. If you want to be able to decompile and disassembly the binary code, specify it in the IP clause. If you want to be able to introduce modifications to the source code, specify it in the IP clause. If you want to sublicense the software, specify it in the IP clause. The IP clause shall contain the description of any way you want to use the software, whether on mobile devices or on personal computers, any other electronic device or via internet (e.g. cloud computing). And believe me, when I write “specify it in the IP clause” it means that you really, really have to put it there. Otherwise it will be null and void and you may face a situation where your smart IT engineer, after getting paid, will sue you for the IP infringement.
    4. Remember that you should indicate the timeframe and the geographical scope of the license or IP transfer. If you do not specify it expressly in the agreement, you will only be entitled to a 5-year license, automatically expiring afterwards.
    5. Draft carefully a clause related to termination of the agreement. Under Polish law the licensor may terminate the license agreement granted for an indefinite period of time upon 1-year notice. If you do not want to find yourself in a situation where you lose the software IP rights in the middle of a big project, make sure that from the very beginning you are on a safe side.
    6. Make sure that your partner is obliged to transfer you upon request all software documentation and the source code.
    7. Make sure that you have a good indemnification clause with no limitation of liability. Often Polish IT companies subcontract some part of the development work to free lancers. You never know if they will conclude proper agreements with their subcontractors and if they will legally acquire the IP of the software that they will later sell you. There is always the risk that in the future some Polish IT engineer you never met will raise IP infringement claims against you, trying to prove that he/she actually developed the software. In such a situation an indemnification clause will help you recovering the costs from your partner.

    Based on our experience in many years advising and representing companies in the commercial distribution (in Spanish jurisdiction but with foreign manufacturers or distributors), the following are the six key essential elements for manufacturers (suppliers) and retailers (distributors) when establishing a distribution relationship.

    These ideas are relevant when companies intend to start their commercial relationship but they should not be neglected and verified even when there are already existing contacts.

    The signature of the contract

    Although it could seem obvious, the signature of a distribution agreement is less common than it might seem. It often happens that along the extended relationship, the corporate structures change and what once was signed with an entity, has not been renewed, adapted, modified or replaced when the situation has been transformed. It is very convenient to have well documented the relationship at every moment of its existence and to be sure that what has been covered legally is also enforceable y the day-to-day commercial relationship. It is advisable this work to be carried out by legal specialists closely with the commercial department of the company. Perfectly drafted clauses from a legal standpoint will be useless if overtaken or not understood by the day-to-day activity. And, of course, no contract is signed as a “mere formality” and then modified by verbal agreements or practices.

    The proper choice of contract

    If the signature of the distribution contract is important, the choice of the correct type is essential. Many of the conflicts that occur, especially in long-term relationships, begin with the interpretation of the type of relationship that has been signed. Even with a written text (and with an express title), the intention of the parties remains often unclear (and so the agreement). Is the “distributor” really so? Does he buy and resell or there are only sporadic supply relationships? Is there just a representative activity (ie, the distributor is actually an “agent“)? Is there a mixed relationship (sometimes represents, sometimes buys and resells)? The list could continue indefinitely. Even in many of the relationships that currently exist I am sure that the interpretation given by the Supplier and the Distributor could be different.

    Monitoring of legal and business relations

    If it is quite frequent not to have a clear written contract, it happens in almost all the distribution relationships than once the agreement has been signed, the day-to-day commercial activity modifies what has been agreed. Why commercial relations seem to neglect what has been written in an agreement? It is quite frequent contracts in which certain obligations for distributors are included (reporting on the market, customers, minimum purchases), but which in practice are not respected (it seems complicated, there is a good relationship between the parties, and nobody remembers what was agreed by people no longer working at the company…). However, it is also quite frequent to try to use these (real?) defaults later on when the relationship starts having problems. At that moment, parties try to hide behind these violations to terminate the contracts although these practices were, in a sort of way, accepted as a new procedure. Of course no agreement can last forever and for that reason is highly recommendable a joint and periodical monitoring between the legal adviser (preferably an independent one with the support of the general managers) and the commercial department to take into account new practices and to have a provision in the contractual documents.

    Evidences about customers

    In distribution contracts, evidences about customers will be essential in case of termination. Parties (mainly the supplier) are quite interested in showing evidences on who (supplier or distributor) procured the customers. Are they a result of the distributor activity or are they obtained as a consequence of the reputation of the trademark? Evidences on customers could simplify or even avoid future conflicts. The importance of the clientele and its possible future activity will be a key element to define the compensation to which the distributor will pretend to be eligible.

    Evidences on purchases and sales

    Another essential element and quite often forgotten is the justification of purchases to the supplier and subsequent sales by distributors. In any distribution agreement distributors acquire the products and resell them to the final customers. A future compensation to the distributor will consider the difference between the purchase prices and resale prices (the margin). It is therefore advisable to be able to establish the correspondent evidence on such information in order to better prepare a possible claim.

    Damages in case of termination of contracts

    Similarly, it would be convenient to justify what damages have been suffered as a result of the termination of a contract: has the distributor made investments by indication of the supplier that are still to be amortized? Has the distributor hired new employees for a line of business that have to be dismissed because of the termination of the contract (costs of compensation)? Has the distributor rented new premises signing long-term contracts due to the expectations on the agreement? Please, take into account that the Distributor is an independent trader and, as such, he assumes the risks of his activity. But to the extent he is acting on a distribution network he shall be subject to the directions, suggestions and expectations created by the supplier. These may be relevant to later determine the damages caused by the termination of the contract.

    Influencer marketing is the trend in today’s world of advertising. Even though it is obvious that influencer marketing must observe the framework of applicable statutory provisions, the market has long been uncertain about how influencer posts are to be drafted in order to be legally compliant. The current decision of Celle Higher Regional Court (June 08, 2017 – Case 13 U 53/17) offers at least some clarity.

    The judgment was issued in relation to an action for injunction by the German Association for Social Competition (Verband Sozialer Wettbewerb) against a German drugstore chain. A 20-year-old Instagram star with 1.3 million followers had advertised the drugstore chain in one of her posts. The post was only marked as advertisement at the bottom with the hashtag “#ad,” which additionally only came second in a list of six hashtags.

    Celle Higher Regional Court adjudged that this type of marking was insufficient. The court requested that the commercial purpose of an Instagram post would have to be apparent at first sight. It did not consider use of the hashtag “#ad” in a “hashtag cloud” to be sufficient to mark the post as advertising.

    The court left expressly open, however, whether the use of the hashtag “#ad” is generally suitable to mark advertising posts.

    The state media authorities (Landesmedienanstalten) already reacted to the judgment, however, and revised their joint guide on advertising issues in social media. It now reads: “When marking a post as PROMOTION (Werbung) or ADVERTISING (Anzeige), you will be on the safe side – that much is certain. […] At the current time, we cannot recommend marking posts as #ad, #sponsored by, or #powered by.” In the future, Instagram itself intends to provide for more transparency on the platform by comprehensibly identifying advertising posts. It is currently testing the introduction of a branded content tool in Germany to make it easier for users to recognize posts as paid advertising.

    Practical tip

    Advertising posts in social media should always be marked as “promotion” or “advertising” at the beginning of the posts unless their commercial purpose arises directly from the circumstances. Advertisers are also advised to obligate influencers contractually to such legally compliant marking of posts, since the influencers’ behavior may be attributed to the company, as is clearly shown by the recent judgment of Celle Higher Regional Court against the drugstore chain.

    The author of this post is Ilja Czernik.

    Con la recente sentenza 16601/2017 la Suprema Corte – dopo svariate pronunce contrarie – ha aperto alla possibilità di riconoscere in Italia i provvedimenti stranieri contenenti punitive damages. In questo breve post vedremo in cosa consistono i punitive damages, a che condizioni potranno essere riconosciuti ed eseguiti in Italia e, soprattutto, che contromisure conviene adottare per affrontare questo nuovo rischio.

    I danni puntivi, in inglese punitive damages, sono un istituto giuridico originario degli ordinamenti di common law che prevede la possibilità di riconoscere al danneggiato un risarcimento ulteriore rispetto alla compensazione del pregiudizio subito, nel caso in cui il danneggiante abbia agito con dolo o la colpa grave (rispettivamente “malice” e “gross negligence”).

    Con i danni puntivi, cioè, oltre alla funzione compensatoria, il risarcimento del danno assume anche una finalità sanzionatoria, tipica del diritto penale, fungendo anche da deterrente nei confronti di ulteriori potenziali trasgressori.

    Negli ordinamenti che prevedono i danni punitivi, il riconoscimento e la quantificazione del maggior risarcimento sono rimessi per lo più alla discrezionalità del giudice.

    Negli Stati Uniti d’America i danni punitivi sono previsti dai principi di common law, ma disciplinati in maniera diversa in ogni Stato. Generalmente, tuttavia, si applicano ove la condotta del danneggiante sia intenzionalmente diretta a causare un danno o sia posta in essere senza avere riguardo delle norme a tutela della sicurezza. Solitamente non possono essere concessi per l’inadempimento di un contratto, salvo che non determini anche un illecito (tort) autonomo.

    In alcuni Stati sono previsti dei limiti massimi ai punitive damages, a volte sotto forma di rapporto con i danni compensativi, a volte come tetto massimo. Inoltre, la Suprema Corte degli Stati Uniti è intervenuta in diversi casi per limitare le somme di condanna. Si consideri, ad esempio, il caso relativo all’azienda produttrice di automobili BMW, nel quale, a fronte di un danno compensativo di 4.000 USD, la Suprema Corte dell’Alabama aveva condannato BMW a 2.000.000 USD a titolo di danno punitivo. La Corte Suprema ha ritenuto tale condanna manifestamente eccessiva (“grossly excessive”) e ha rimesso nuovamente il caso alla Corte Suprema dell’Alabama, che ha in seguito ridotto a 50.000 USD i punitive damages (BMW of North America, Inc. v. Gore, 517 U.S. 559, 1996).

    Non sempre, però, i punitive damages vengono ridotti. Nel 2011 i giudici del Montana hanno condannato il produttore di automobili Hyundai al pagamento della somma di 72 milioni di USD a titolo di danni punitivi per un incidente causato dal difetto allo sterzo di una vettura, che aveva causato il decesso di due giovani.

    Negli ordinamenti di civil law, tra i quali l’Italia, l’istituto dei danni punitivi non viene tradizionalmente riconosciuto, in quanto la sanzione del danneggiante viene generalmente ritenuta estranea ai principi del diritto civile, ancorati alla concezione del risarcimento danni come mera restaurazione della sfera patrimoniale del danneggiato.

    Di conseguenza, il riconoscimento dei danni punitivi statuiti in una pronuncia straniera era ostacolato dal limite dell’ordine pubblico e le sentenze che li prevedevano non avevano accesso allo spazio giuridico italiano.

    La sentenza a Sezioni Unite n. 16601/2017 del 5 luglio 2017 della Suprema Corte di Cassazione, però, ha cambiato le carte in tavola.

    Nel caso di specie veniva richiesto alla Corte di Appello di Venezia il riconoscimento (ex art. 64, legge 218/1995) di tre sentenze della District Court of Appeal of the State of Florida che, accogliendo una domanda di garanzia azionata da un rivenditore americano di caschi nei confronti della società italiana produttrice, avevano condannato quest’ultima al pagamento di 1.436.136,87 USD (oltre spese e interessi) a titolo di risarcimento dei danni causati da un difetto del casco utilizzato in occasione di un sinistro stradale.

    La Corte d’Appello di Venezia aveva riconosciuto l’efficacia del provvedimento del giudice straniero considerando la somma meramente risarcitoria e non punitiva. La decisione era stata impugnata in Cassazione dalla parte soccombente, che sosteneva la contrarietà all’ordine pubblico della sentenza statunitense, in forza dell’orientamento giurisprudenziale sino a quel momento costante.

    La Cassazione ha confermato la valutazione della Corte d’Appello, ritenendo la somma non punitiva, e ha dichiarato il riconoscimento della pronuncia statunitense in Italia.

    Le Sezioni Unite, però, hanno colto l’occasione per affrontare la questione inerente l’ammissibilità dei danni punitivi in Italia, cambiando l’orientamento storico della Suprema Corte (si veda Cass. 1781/2012).

    Secondo la Corte, la nozione di responsabilità civile intesa come mera riparazione dei danni subiti è da considerarsi ormai desueta, data l’evoluzione di tale istituto attraverso interventi legislativi e giurisprudenziali nazionali ed europei che hanno introdotto mezzi risarcitori a funzione sanzionatoria e deterrente. Nel nostro ordinamento, infatti, è possibile trovare diversi casi di risarcimenti danni con funzione sanzionatoria: in materia di diffamazione a mezzo di stampa (art. 12 L.47/48), diritto d’autore (art. 158 L. 633/41), proprietà industriale (art. 125 D. Lgs 30/2005), abuso del processo (art. 96 comma 3 c.p.c. e art. 26 comma 2 c.p.a.), diritto del lavoro (art. 18, comma 14), diritto di famiglia (art. 709-ter c.p.c.) e altri.

    La Corte di Cassazione ha, quindi, affermato il seguente principio di diritto: “Nel vigente ordinamento italiano, alla responsabilità civile non è assegnato solo il compito di restaurare la sfera patrimoniale del soggetto che ha subito la lesione, perché sono interne al sistema la funzione di deterrenza e quella sanzionatoria della responsabilità civile. Non è, perciò, ontologicamente incompatibile con l’ordinamento italiano l’istituto di origine statunitense dei risarcimenti punitivi”.

    La conseguenza, molto importante, è che la pronuncia apre la porta alla possibile delibazione di sentenze straniere che condannano una parte al pagamento di una somma superiore rispetto quella sufficiente a compensare il pregiudizio subito in seguito al danno.

    A tale scopo, tuttavia, la Suprema Corte ha disposto alcune condizioni affinché la sentenza straniera possa essere delibata, ossia che la decisione sia resa nell’ordinamento straniero su basi normative che:

    1. garantiscano la tipicità delle ipotesi di condanna;
    2. la prevedibilità della stessa; e
    3. i limiti quantitativi.

    I possibili effetti della Sentenza nell’ordinamento italiano

    In primo luogo, va chiarito che la Sentenza non ha modificato il sistema risarcitorio interno dell’ordinamento italiano. In altre parole, la Sentenza non permetterà ai giudici nazionali di comminare danni punitivi all’interno di procedimenti italiani.

    Per quanto riguarda invece le sentenze straniere, invece, sarà ora possibile ottenere il risarcimento dei danni punitivi attraverso il riconoscimento e l’esecuzione nel sistema italiano di una decisione straniera che prevede la condanna a tale tipologia di danno, a condizione che siano rispettati i presupposti sopra indicati.

    In considerazione di ciò, le imprese italiane che hanno investito o fanno affari in paesi che prevedono i danni punitivi dovranno tenere in considerazione questo nuovo rischio.

    Gli strumenti per tutelarsi

    L’imprenditore italiano che opera su mercati stranieri nei quali sono previsti i danni punitivi deve considerare con attenzione questo rischio, che sino ad oggi, come visto, non aveva accesso allo spazio giuridico italiano.

    L’ottica deve essere necessariamente quella di prevenzione e gli strumenti a disposizione in tal senso sono diversi: in primo luogo l’adozione di clausole contrattuali che prevedano la rinuncia del danneggiato a questo tipo di danno o pongano un limite alla risarcibilità dei danni contrattuali, ad esempio ancorandola al valore dei prodotti o servizi forniti.

    E’ poi fondamentale che si abbia conoscenza della legislazione e della giurisprudenza dei mercati in cui si opera, anche indirettamente (ad esempio, con la distribuzione commerciale dei prodotti) al fine di scegliere in modo consapevole la legge applicabile al contratto e la modalità di risoluzione delle controversie (ad esempio, con previsione dell’esclusiva giurisdizione del foro di un paese  che non preveda i danni punitivi.

    Infine, questo tipo di responsabilità e di rischio può essere oggetto di valutazione con polizze assicurative che offrano una copertura specifica rispetto ad eventuali condanne al risarcimento di danni punitivi.

    In this clip I briefly introduce the main options to consider when doing business in Iran.
    You can read more on this topic in my articles An introduction to Iran Corporations  and Obtaining a Foreign Investment License and browse Legalmondo’s blog for some other  posts on doing business in the region.

    If your business is related to France or you wish to develop your business in this direction, you need to be aware of one very specific provision with regards to the termination of a business relationship.

    Article L. 442-6, I, 5° of the French Commercial Code protects a party to a contract who considers that the other party has terminated the existing business relationship in a sudden and abrupt way, thus causing her a damage.

    This is a ‘public policy’ provision and therefore any contractual provision to the contrary will be unenforceable.

    Initially, the lawmaker aimed to protect any business relationship between suppliers and major large-scale retailers delisting (ie, removing a supplier’s products that were referenced by a distributor) at the moment of contracts renegotiations or renewals.

    Eventually, the article has been drafted in order to extend its scope to any business relationship, regardless of the status of the professionals involved and the nature of the commercial relationship.

    The party who wishes to terminate the business relationship does not need to provide any justification for her actions but must send a sufficient prior notice to the other party.

    The purpose is to allow the parties, and in particular the abandoned party, to anticipate the discharge of the contract, in particular in cases of economic dependency.

    It is an accentuated obligation of loyalty.

    There are only two cases strictly interpreted by case law in which the partner is exempted from sending a prior notice:

    • an aggravated breach of a contractual obligation;
    • a frustration or a force majeure.

    There are two main requirements to be fulfilled in order to be able to invoke this provision in front of a judge – an established business relationship and an abrupt termination.

    The judge will assess whether the requirements have been fulfilled on a case by case basis.

    What does the term ‘established business relationship’ mean?

    The most important criterion is the duration, whether a written contract exists or not.

    A relationship may be considered as long-term whether there is a single contract or a few consecutive contracts.

    If there is no contract in place, the judge will take into account the following criteria:

    • the existence of a long-term established business relationship;
    • the good faith of the parties;
    • the frequency of the transactions and the importance and evolving of the turnover;
    • any agreement on the prices applied and/or the discounts granted to the other party;
    • any correspondence exchanged between the parties.

    What does the term ‘abrupt termination’ mean?

    The Courts consider the application of Article L442-6-I 5° if the termination is “unforeseeable, sudden and harsh”.

    The termination must comply with the following three conditions in order to be considered as abrupt:

    • with no prior notice or with insufficient prior notice;
    • sudden;
    • unpredictable.

    To consider whether a prior notice is sufficient, a judge may consider the following criteria:

    • the investments made by the victim of the termination;
    • the business involved (eg seasonal fashion collections);
    • a constant increase in turnover;
    • the market recognition of the products sold by the victim and the difficulty of finding replacement products;
    • the existence of a post-contractual non-compete undertaking ;
    • the existence of exclusivity between the parties;
    • the time period required for the victim to find other openings or refocus the business activity;
    • the existence of any economic dependency for the victim.

    The courts have decided that a partial termination may also be considered as abrupt in the following cases:

    • an organisational change in the distribution structure of the supplier;
    • a substantial decrease in trade flows;
    • a change in pricing terms or an increase in prices without any prior notice sent by a supplier granting special prices to the buyers, or in general any unilateral and substantial change in the contract terms.

    Whatever the justification for the termination, it is necessary to send a registered letter with an acknowledgment of receipt and ensure that the prior notice is sent sufficienlty in advance (some businesses have specific time periods applicable to them by law).

    Compensation for a damage

    The French Commercial Code provides for the award of damages in order to compensate a party for an abrupt termination of a business relationship.

    The damages are calculated by multiplying the notice period which should have been applied by the average profit achieved prior to the termination. Such profit is evaluated based on the pre-tax gross margin that would have been achieved during the required notice period, had sufficient notice been given.

    The courts may also award damages for incidental and consequential losses such as redundancy costs, losses of scheduled stocks, operational costs, certain unamortised investments and restructuring costs, indemnities paid to third parties or even image or reputational damage.

    International law

    The French supreme court competent in civil law (‘Cour de cassation’) considers that in cases where the decision to terminate the business relationship and the resulting damage take place in two different countries, it is a matter of torts and the applicable law will be the one of the country where the triggering event the most closely connected with the tort took place. Therefore the abrupt termination will be subject to French law if the business of the supplier is located in France.

    However, the Court of Justice of the European Union (CJEU) has issued a preliminary ruling dated 14 July 2016 answering two questions submitted by the Paris Court of Appeal in a judgment dated 17 April 2015. A French company had been distributing in France the food products of an Italian company for the last 25 years, with no framework agreement or any exclusivity provision in place. The Italian company had terminated the business relationship with no prior notice. The French company issued proceedings against the Italian company in front of the French courts and invoked the abrupt termination of an established business relationship.

    The Italian company opposed both the jurisdiction of the French courts and the legal ground for the action arguing that the Italian courts had jurisdiction as the action involved contract law and was therefore subject to the laws of the country where the commodities had been or should have been delivered, in this case Incoterm Ex-works departing from the plant in Italy.

    The CJEU has considered that in case of a tacit contractual relationship and pursuant to European law, the liability will be based on contract law (in the same case, pursuant to French law, the liability will be based on torts). As a consequence, Article 5, 3° of the Regulation (EC) 44/2001, also known as Brussels I (which has been replaced by Regulation (EC) 1215/2012, also known as Brussels I bis) will not apply. Therefore, the competent judge will not be the one of the country where the damage occurred but the one of the country where the contractual obligation was being performed.

    In addition and answering the second question submitted to it, the CJEU has considered that the contract is:

    • a contract for the sale of goods if its purpose is the delivery of goods, in which case the competent jurisdiction will be the one of the country where the goods have been or should have been delivered; and
    • a contract for services if its purpose is the provision of services, in which case the competent jurisdiction will be the one of the country where the services have been or should have been provided.

    In this case, the Paris Court of Appeal will have to recharacherise the contractual relationship either as consecutive contracts for the sale of goods and deduct the jurisdiction of the Italian courts, or as a contract for services implying the participation of the distributor in the development and the distribution of the supplier’s goods and business strategy and deduct the jurisdiction of the French courts.

    In summary, in case of an intra-Community dispute, the distributor who is the victim of an abrupt termination of an established business relationship cannot issue proceedings based on torts in front of a court in the country where the damage occurred if there is a tacit contractual relationship with the supplier. In order to determine the competent jurisdiction in such case, it is necessary to determine whether such tacit contractual relationship consists of a supply of goods or a provision of services.

    The next judgment of the Paris Court of Appeal and those of the Cour de cassation to come need to be followed very closely.

    When negotiating contracts, parties typically focus on the key commercial terms of their agreement. The clauses that govern the term of the agreement (i.e., the duration, or how long the contract remains in force), the renewal of the term, and how the agreement can be terminated, however, merit careful consideration.

    Under Québec law, contracts typically have terms that are either fixed (e.g., 5 years, 10 years etc.), or are for an indeterminate period of time (i.e., no specific term is provided for). Contracts with fixed terms may also contain automatic renewal clauses. In the case of an indeterminate term contract, a party to the contract can generally, absent specific terms or a notice provision to the contrary in the contract, terminate it, without cause, by providing reasonable notice of termination (what constitutes “reasonable notice” depends on a number of factors and is decided on the facts of each case). A third category of contracts are contracts with a potentially perpetual term. An example of a potentially perpetual contract is a contract that contains a renewal clause that is entirely under the control of only one of the parties who can, effectively, unilaterally decide whether the contract will go on indefinitely. In such a contract, the other contracting party does not have a right to terminate the contract by providing reasonable notice of termination. The validity of perpetual term contracts was precisely the issue before the Supreme Court of Canada in its July 28, 2017 decision in Uniprix inc. v. Gestion Gosselin et Bérubé inc. https://scc-csc.lexum.com/scc-csc/scc-csc/en/item/16746/index.do (“Uniprix“).

    In Uniprix, the pharmacy chain entered into an affiliation agreement with various members of a pharmacists’ group pursuant to which said members operated a pharmacy under the Uniprix banner. The term of the contract was for a fixed term of 5 years and the renewal clause allowed members to provide a notice within a certain period of time, failing which the contract would automatically be renewed for an additional 5 years:

    Regardless of any written or verbal provisions to the contrary, this agreement shall commence on the day of its signing and shall remain in effect for a period of sixty (60) months, or for a period equal to the term of the lease for the premises where the pharmacy is located. [The member pharmacist] shall, six (6) months before the expiration of the agreement, notify [Uniprix] of its intention to leave [Uniprix] or to renew the agreement; 

    Should [the member pharmacist] fail to send the prescribed notice by registered mail, the agreement shall be deemed to have been renewed in accordance with the terms and conditions then in effect, as prescribed by the board of directors, except with regard to the fee.[Translation]

    The Uniprix agreement did not provide any say to Uniprix in connection with its renewal and there were no limits on the number of times that the members could renew the agreement. As such, the contract could remain in force perpetually based entirely on the members’ decision. After the contract had been renewed twice, Uniprix sent the members a notice of non-renewal and purported to terminate the agreement. The members contested Uniprix’s decision based on the fact that under the affiliation agreement, the renewal clause could only be exercised by the members and, unless the members gave notice to the contrary, the contract was automatically renewed. Uniprix argued that the effect of the members’ position, which would bind the parties in perpetuity, was contrary to public order (i.e., it violated a fundamental societal value) and unlawful and, as such, the term of the agreement should be considered to be for an indeterminate period, which would allow either party to terminate it on reasonable notice.

    In a 6-3 decision, the Supreme Court of Canada held (in upholding the decisions of the majority of the Québec Court of Appeal and of the Superior Court of Québec) that there was nothing under Québec law that prohibited a contract of affiliation from having a perpetual term and that this did not, in and of itself and in the context of corporate and commercial agreements, offend any fundamental societal values. The Court’s holding would equally apply to many other types of contracts such as, for example, franchise agreements and licensing agreements. The Court held, accordingly, that the affiliation agreement was not for an indeterminate term and, therefore, could be not be terminated by Uniprix by providing reasonable notice.

    With respect to the holding in Uniprix , the following points should be kept in mind:

    1. The Supreme Court of Canada expressly noted that in certain circumstances, such as where an individual’sperson and freedom are affected (e.g., a contract of employment), a perpetual obligation could offend public order.
    2. In certain specific cases set out in the Civil Code of Québec, the legislator has provided maximum terms for certain types of contracts (e.g., a commercial lease cannot exceed 100 years, the duration of payment of an annuity is 100 years).
    3. In the case of a contract of adhesion (which is generally defined as a contract where one of the parties was unable to negotiate its terms), the adhering or vulnerable party can argue that a perpetual term is abusive and, therefore, null.
    4. The Court’s decision in Uniprixapplied to Uniprix’s ability to terminate the contract without cause. A party always retains the right to terminate a contract for cause. What constitutes “cause” is decided on a case by case basis and may also be governed by the terms of the contract.

    When drafting contracts, parties are generally, subject to limitations imposed by the legislator or public order, permitted to structure their relationship as they see fit. Parties should carefully consider whether they truly intend the duration of their agreement to be entirely under the control of one of the parties to the agreement for an indefinite period of time because, as is made clear in Uniprix, perpetual commercial contracts are enforceable under Québec law.

    The author of this post is David Stolow.

    Exchange controls

    The existing Venezuelan foreign currency regulations significantly restrict the ability of private sector companies and individuals to convert the local currency (“Bolivars” or “Bs”) into foreign currency. Because of these restrictions, it is extremely difficult for companies in Venezuela to repatriate profits generated in Bolivars by converting those Bolivars into foreign currency, or otherwise to convert Bolivars into foreign currency to purchase foreign supplies, to pay debt in foreign currency, etc.

    The result of these restrictions is the continued generation of trapped cash in Bolivars that cannot be converted into foreign currency. The foreign currency restrictions can also affect the operations of Venezuelan companies if such operations depend on foreign supplies, unless the shareholders or other affiliates of such Venezuelan company are willing to support its operations with foreign currency generated abroad. Also, because of these restrictions Venezuelan companies may not be able to convert Bolivars into foreign currency to pay intercompany debt in foreign currency.

    There are currently three different official exchange rates in Venezuela: (a) the Cencoex rate, fixed by the Venezuelan government from time to time, currently at Bs.6.30 per USD (the “Cencoex Rate”), (b) the Sicad rate, fixed by the Venezuelan government from time to time, currently at Bs.13.5 per USD (the “Sicad Rate”) and (c) the Simadi rate, which is in practice fixed by the Venezuelan government on a daily basis, currently at approximately Bs.200 per USD (the “Simadi Rate”). Given the significant restrictions to convert Bolivars into foreign currency, there also exists a parallel or black market, currently at several times the Simadi rate. The Cencoex Rate (Bs.6.30 per USD) appears as hugely overvalued, if compared to the other official rates (the Sicad Rate or the Simadi Rate) or to the black market rate.

    Given the existing Venezuelan exchange controls, many Venezuelan companies have accumulated over the years significant amounts of excess cash in Bolivars that cannot be converted into Dollars.

    Foreign Investment Regulations

    The only areas currently reserved to companies owned or controlled by Venezuelan investors are open-air television, radio broadcasting, newspapers in Spanish and professional services regulated by law. There are other areas, such as oil, that are reserved to the Venezuelan government in which foreign investors may participate only through minority participations in joint venture companies with the Republic or Venezuelan state-owned companies.

    Foreign investors (i.e., foreign companies (head offices), foreign shareholders or foreign partners) must register their direct foreign investments in a Venezuelan company (branch, corporation or partnership) with the Venezuelan foreign investment authority within 60 days following the date on which investment was made (the “foreign investment registration”). The foreign investment registration is one of the documents required to purchase foreign currency through Cadivi to repatriate dividends, branch profits, and proceeds from sales of investment, liquidation of the company or capital reductions.

    Several documents must be submitted to the Venezuelan foreign investment authority by the foreign investor to obtain the foreign investment registration, including evidence that the capital of the company was paid with foreign currency or contribution in kind that entered Venezuela. To obtain such evidence, the foreign investor must (a) in case of payment in cash, order a wire transfer to the Venezuelan bank account of the company from an account of the foreign investor located outside Venezuela (as a result of the wire transfer, foreign currency transferred out of the offshore account of the investor will be converted into bolivars at the official exchange rate and deposited in bolivars in the Venezuelan bank account), and (b) in the case of contribution in kind, demonstrate that the asset being contributed to the capital of the company was imported into Venezuela (copies of the import manifest, commercial invoice and other custom documents).

    The foreign investment registration must be updated annually by the foreign investor within 120 days of the end of the fiscal year.

    Price Controls

    The Fair Prices Decree with rank, value, and strength of Organic Law (the “Fair Prices Law”), provides for the possibility of the government to set the prices of any type of good or service sold in Venezuela. The Fair Prices Law creates the Single Registry of People which Develop Economic Activities (RUPDAE) in which all persons and companies that perform commercial activities in Venezuela must be registered. The National Superintendence to Defend Economic Rights (the “Superintendence”), created by this law, has established fixed prices for food, personal hygiene products among other products. Once a list of products is published, their price is frozen until the Superintendence sets the new price (in every level of the commercial chain). In cases in which the Superintendence does not set maximum retail prices, companies should self-regulate their prices, and in no case the maximum profit margin will exceed 30% for manufacturers and 20% for importers. The Superintendence may also establish the obligation to label the maximum selling prices in the body of the product. The Fair Prices Law has also created the following crimes related to commercial activities in Venezuela: (i) sale of expired food or products; (ii) import of unhealthy products; (iii) fraudulent alteration; (iv) hoarding; (v) boycotting; (vi) destabilization of the economy; (vii) resale of products of first necessity; (viii) conditioned sales; (ix) extraction smuggling; (x) usury; (xi) alteration of goods and services; (xii) speculation; (xiii) fraudulent alteration of prices; and (xiv) corruption between private parties. Sanctions are extremely onerous and may include: closure, confiscation of assets, fines and imprisonment.

    Filings with the Commercial Registry

    All Venezuelan companies must be registered with a Commercial Registry. The Commercial Registry contains copies of the company’s articles of incorporation and by-laws, information on its standing (i.e. annual financial statements, liquidation or bankruptcy proceedings), registered address, directors and officers, the existence of branches, and other information. All information filed with the Commercial Registries is public. Companies must notify the Commercial Registry of changes to their articles of incorporation and by-laws and update other information filed with the registry. Companies must also file annual financial statements and periodically file minutes of shareholders appointing directors and officers.

     

    The author of this post is Fulvio Italiani

    Roberto Luzi Crivellini

    Aree di attività

    • Arbitrato
    • Distribuzione
    • Commercio internazionale
    • Contenzioso
    • Real estate
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      China – Sales contract 

      11 Aprile 2016

      • Cina
      • Contratti

      Poland has recently become quite famous for its skilled and resourceful IT specialists. Each year thousands of new computer engineers (programmers, developers, testers, designers etc.) enter into the market, warmly welcomed by domestic and multinational companies. A big part of these young talents open their own firm or business as free lancers developing software for clients from European countries as well as from US, Canada, Japan, China, etc.

      However, companies who want to cooperate with these partners and assign software development to a Polish IT company or freelancer should be aware that the copyright law in Poland is very strict, as it mainly protects the creator and not the client. Therefore, to be on a safe side, it is better to follow these 7 basic rules:

      1. Never start cooperation with an IT specialist or an IT company without a formal agreement. And I mean a real agreement, in a written form, with signatures of persons who can validly contract on behalf of the companies. The form is very important because – under Polish law – copyrights transfer and exclusive license agreements not fulfilling form conditions are null and void. Moreover, if there is no agreement, Polish copyright rules will apply to all intellectual property matters.
      2. Please remember that software is a creation protected by copyright law. Therefore you should consider whether you want to acquire the entire intellectual property rights or you just need a license. If you need a full IP transfer, you need to put it expressly in the agreement; otherwise you will only get a non-exclusive licence. And these, in several cases, will not be useful from a business point of view. If a license is enough, it is advisable to agree if it will be exclusive or non-exclusive.
      3. When drafting an IP clause, be detailed and clear. If you want to be able to decompile and disassembly the binary code, specify it in the IP clause. If you want to be able to introduce modifications to the source code, specify it in the IP clause. If you want to sublicense the software, specify it in the IP clause. The IP clause shall contain the description of any way you want to use the software, whether on mobile devices or on personal computers, any other electronic device or via internet (e.g. cloud computing). And believe me, when I write “specify it in the IP clause” it means that you really, really have to put it there. Otherwise it will be null and void and you may face a situation where your smart IT engineer, after getting paid, will sue you for the IP infringement.
      4. Remember that you should indicate the timeframe and the geographical scope of the license or IP transfer. If you do not specify it expressly in the agreement, you will only be entitled to a 5-year license, automatically expiring afterwards.
      5. Draft carefully a clause related to termination of the agreement. Under Polish law the licensor may terminate the license agreement granted for an indefinite period of time upon 1-year notice. If you do not want to find yourself in a situation where you lose the software IP rights in the middle of a big project, make sure that from the very beginning you are on a safe side.
      6. Make sure that your partner is obliged to transfer you upon request all software documentation and the source code.
      7. Make sure that you have a good indemnification clause with no limitation of liability. Often Polish IT companies subcontract some part of the development work to free lancers. You never know if they will conclude proper agreements with their subcontractors and if they will legally acquire the IP of the software that they will later sell you. There is always the risk that in the future some Polish IT engineer you never met will raise IP infringement claims against you, trying to prove that he/she actually developed the software. In such a situation an indemnification clause will help you recovering the costs from your partner.

      Based on our experience in many years advising and representing companies in the commercial distribution (in Spanish jurisdiction but with foreign manufacturers or distributors), the following are the six key essential elements for manufacturers (suppliers) and retailers (distributors) when establishing a distribution relationship.

      These ideas are relevant when companies intend to start their commercial relationship but they should not be neglected and verified even when there are already existing contacts.

      The signature of the contract

      Although it could seem obvious, the signature of a distribution agreement is less common than it might seem. It often happens that along the extended relationship, the corporate structures change and what once was signed with an entity, has not been renewed, adapted, modified or replaced when the situation has been transformed. It is very convenient to have well documented the relationship at every moment of its existence and to be sure that what has been covered legally is also enforceable y the day-to-day commercial relationship. It is advisable this work to be carried out by legal specialists closely with the commercial department of the company. Perfectly drafted clauses from a legal standpoint will be useless if overtaken or not understood by the day-to-day activity. And, of course, no contract is signed as a “mere formality” and then modified by verbal agreements or practices.

      The proper choice of contract

      If the signature of the distribution contract is important, the choice of the correct type is essential. Many of the conflicts that occur, especially in long-term relationships, begin with the interpretation of the type of relationship that has been signed. Even with a written text (and with an express title), the intention of the parties remains often unclear (and so the agreement). Is the “distributor” really so? Does he buy and resell or there are only sporadic supply relationships? Is there just a representative activity (ie, the distributor is actually an “agent“)? Is there a mixed relationship (sometimes represents, sometimes buys and resells)? The list could continue indefinitely. Even in many of the relationships that currently exist I am sure that the interpretation given by the Supplier and the Distributor could be different.

      Monitoring of legal and business relations

      If it is quite frequent not to have a clear written contract, it happens in almost all the distribution relationships than once the agreement has been signed, the day-to-day commercial activity modifies what has been agreed. Why commercial relations seem to neglect what has been written in an agreement? It is quite frequent contracts in which certain obligations for distributors are included (reporting on the market, customers, minimum purchases), but which in practice are not respected (it seems complicated, there is a good relationship between the parties, and nobody remembers what was agreed by people no longer working at the company…). However, it is also quite frequent to try to use these (real?) defaults later on when the relationship starts having problems. At that moment, parties try to hide behind these violations to terminate the contracts although these practices were, in a sort of way, accepted as a new procedure. Of course no agreement can last forever and for that reason is highly recommendable a joint and periodical monitoring between the legal adviser (preferably an independent one with the support of the general managers) and the commercial department to take into account new practices and to have a provision in the contractual documents.

      Evidences about customers

      In distribution contracts, evidences about customers will be essential in case of termination. Parties (mainly the supplier) are quite interested in showing evidences on who (supplier or distributor) procured the customers. Are they a result of the distributor activity or are they obtained as a consequence of the reputation of the trademark? Evidences on customers could simplify or even avoid future conflicts. The importance of the clientele and its possible future activity will be a key element to define the compensation to which the distributor will pretend to be eligible.

      Evidences on purchases and sales

      Another essential element and quite often forgotten is the justification of purchases to the supplier and subsequent sales by distributors. In any distribution agreement distributors acquire the products and resell them to the final customers. A future compensation to the distributor will consider the difference between the purchase prices and resale prices (the margin). It is therefore advisable to be able to establish the correspondent evidence on such information in order to better prepare a possible claim.

      Damages in case of termination of contracts

      Similarly, it would be convenient to justify what damages have been suffered as a result of the termination of a contract: has the distributor made investments by indication of the supplier that are still to be amortized? Has the distributor hired new employees for a line of business that have to be dismissed because of the termination of the contract (costs of compensation)? Has the distributor rented new premises signing long-term contracts due to the expectations on the agreement? Please, take into account that the Distributor is an independent trader and, as such, he assumes the risks of his activity. But to the extent he is acting on a distribution network he shall be subject to the directions, suggestions and expectations created by the supplier. These may be relevant to later determine the damages caused by the termination of the contract.

      Influencer marketing is the trend in today’s world of advertising. Even though it is obvious that influencer marketing must observe the framework of applicable statutory provisions, the market has long been uncertain about how influencer posts are to be drafted in order to be legally compliant. The current decision of Celle Higher Regional Court (June 08, 2017 – Case 13 U 53/17) offers at least some clarity.

      The judgment was issued in relation to an action for injunction by the German Association for Social Competition (Verband Sozialer Wettbewerb) against a German drugstore chain. A 20-year-old Instagram star with 1.3 million followers had advertised the drugstore chain in one of her posts. The post was only marked as advertisement at the bottom with the hashtag “#ad,” which additionally only came second in a list of six hashtags.

      Celle Higher Regional Court adjudged that this type of marking was insufficient. The court requested that the commercial purpose of an Instagram post would have to be apparent at first sight. It did not consider use of the hashtag “#ad” in a “hashtag cloud” to be sufficient to mark the post as advertising.

      The court left expressly open, however, whether the use of the hashtag “#ad” is generally suitable to mark advertising posts.

      The state media authorities (Landesmedienanstalten) already reacted to the judgment, however, and revised their joint guide on advertising issues in social media. It now reads: “When marking a post as PROMOTION (Werbung) or ADVERTISING (Anzeige), you will be on the safe side – that much is certain. […] At the current time, we cannot recommend marking posts as #ad, #sponsored by, or #powered by.” In the future, Instagram itself intends to provide for more transparency on the platform by comprehensibly identifying advertising posts. It is currently testing the introduction of a branded content tool in Germany to make it easier for users to recognize posts as paid advertising.

      Practical tip

      Advertising posts in social media should always be marked as “promotion” or “advertising” at the beginning of the posts unless their commercial purpose arises directly from the circumstances. Advertisers are also advised to obligate influencers contractually to such legally compliant marking of posts, since the influencers’ behavior may be attributed to the company, as is clearly shown by the recent judgment of Celle Higher Regional Court against the drugstore chain.

      The author of this post is Ilja Czernik.

      Con la recente sentenza 16601/2017 la Suprema Corte – dopo svariate pronunce contrarie – ha aperto alla possibilità di riconoscere in Italia i provvedimenti stranieri contenenti punitive damages. In questo breve post vedremo in cosa consistono i punitive damages, a che condizioni potranno essere riconosciuti ed eseguiti in Italia e, soprattutto, che contromisure conviene adottare per affrontare questo nuovo rischio.

      I danni puntivi, in inglese punitive damages, sono un istituto giuridico originario degli ordinamenti di common law che prevede la possibilità di riconoscere al danneggiato un risarcimento ulteriore rispetto alla compensazione del pregiudizio subito, nel caso in cui il danneggiante abbia agito con dolo o la colpa grave (rispettivamente “malice” e “gross negligence”).

      Con i danni puntivi, cioè, oltre alla funzione compensatoria, il risarcimento del danno assume anche una finalità sanzionatoria, tipica del diritto penale, fungendo anche da deterrente nei confronti di ulteriori potenziali trasgressori.

      Negli ordinamenti che prevedono i danni punitivi, il riconoscimento e la quantificazione del maggior risarcimento sono rimessi per lo più alla discrezionalità del giudice.

      Negli Stati Uniti d’America i danni punitivi sono previsti dai principi di common law, ma disciplinati in maniera diversa in ogni Stato. Generalmente, tuttavia, si applicano ove la condotta del danneggiante sia intenzionalmente diretta a causare un danno o sia posta in essere senza avere riguardo delle norme a tutela della sicurezza. Solitamente non possono essere concessi per l’inadempimento di un contratto, salvo che non determini anche un illecito (tort) autonomo.

      In alcuni Stati sono previsti dei limiti massimi ai punitive damages, a volte sotto forma di rapporto con i danni compensativi, a volte come tetto massimo. Inoltre, la Suprema Corte degli Stati Uniti è intervenuta in diversi casi per limitare le somme di condanna. Si consideri, ad esempio, il caso relativo all’azienda produttrice di automobili BMW, nel quale, a fronte di un danno compensativo di 4.000 USD, la Suprema Corte dell’Alabama aveva condannato BMW a 2.000.000 USD a titolo di danno punitivo. La Corte Suprema ha ritenuto tale condanna manifestamente eccessiva (“grossly excessive”) e ha rimesso nuovamente il caso alla Corte Suprema dell’Alabama, che ha in seguito ridotto a 50.000 USD i punitive damages (BMW of North America, Inc. v. Gore, 517 U.S. 559, 1996).

      Non sempre, però, i punitive damages vengono ridotti. Nel 2011 i giudici del Montana hanno condannato il produttore di automobili Hyundai al pagamento della somma di 72 milioni di USD a titolo di danni punitivi per un incidente causato dal difetto allo sterzo di una vettura, che aveva causato il decesso di due giovani.

      Negli ordinamenti di civil law, tra i quali l’Italia, l’istituto dei danni punitivi non viene tradizionalmente riconosciuto, in quanto la sanzione del danneggiante viene generalmente ritenuta estranea ai principi del diritto civile, ancorati alla concezione del risarcimento danni come mera restaurazione della sfera patrimoniale del danneggiato.

      Di conseguenza, il riconoscimento dei danni punitivi statuiti in una pronuncia straniera era ostacolato dal limite dell’ordine pubblico e le sentenze che li prevedevano non avevano accesso allo spazio giuridico italiano.

      La sentenza a Sezioni Unite n. 16601/2017 del 5 luglio 2017 della Suprema Corte di Cassazione, però, ha cambiato le carte in tavola.

      Nel caso di specie veniva richiesto alla Corte di Appello di Venezia il riconoscimento (ex art. 64, legge 218/1995) di tre sentenze della District Court of Appeal of the State of Florida che, accogliendo una domanda di garanzia azionata da un rivenditore americano di caschi nei confronti della società italiana produttrice, avevano condannato quest’ultima al pagamento di 1.436.136,87 USD (oltre spese e interessi) a titolo di risarcimento dei danni causati da un difetto del casco utilizzato in occasione di un sinistro stradale.

      La Corte d’Appello di Venezia aveva riconosciuto l’efficacia del provvedimento del giudice straniero considerando la somma meramente risarcitoria e non punitiva. La decisione era stata impugnata in Cassazione dalla parte soccombente, che sosteneva la contrarietà all’ordine pubblico della sentenza statunitense, in forza dell’orientamento giurisprudenziale sino a quel momento costante.

      La Cassazione ha confermato la valutazione della Corte d’Appello, ritenendo la somma non punitiva, e ha dichiarato il riconoscimento della pronuncia statunitense in Italia.

      Le Sezioni Unite, però, hanno colto l’occasione per affrontare la questione inerente l’ammissibilità dei danni punitivi in Italia, cambiando l’orientamento storico della Suprema Corte (si veda Cass. 1781/2012).

      Secondo la Corte, la nozione di responsabilità civile intesa come mera riparazione dei danni subiti è da considerarsi ormai desueta, data l’evoluzione di tale istituto attraverso interventi legislativi e giurisprudenziali nazionali ed europei che hanno introdotto mezzi risarcitori a funzione sanzionatoria e deterrente. Nel nostro ordinamento, infatti, è possibile trovare diversi casi di risarcimenti danni con funzione sanzionatoria: in materia di diffamazione a mezzo di stampa (art. 12 L.47/48), diritto d’autore (art. 158 L. 633/41), proprietà industriale (art. 125 D. Lgs 30/2005), abuso del processo (art. 96 comma 3 c.p.c. e art. 26 comma 2 c.p.a.), diritto del lavoro (art. 18, comma 14), diritto di famiglia (art. 709-ter c.p.c.) e altri.

      La Corte di Cassazione ha, quindi, affermato il seguente principio di diritto: “Nel vigente ordinamento italiano, alla responsabilità civile non è assegnato solo il compito di restaurare la sfera patrimoniale del soggetto che ha subito la lesione, perché sono interne al sistema la funzione di deterrenza e quella sanzionatoria della responsabilità civile. Non è, perciò, ontologicamente incompatibile con l’ordinamento italiano l’istituto di origine statunitense dei risarcimenti punitivi”.

      La conseguenza, molto importante, è che la pronuncia apre la porta alla possibile delibazione di sentenze straniere che condannano una parte al pagamento di una somma superiore rispetto quella sufficiente a compensare il pregiudizio subito in seguito al danno.

      A tale scopo, tuttavia, la Suprema Corte ha disposto alcune condizioni affinché la sentenza straniera possa essere delibata, ossia che la decisione sia resa nell’ordinamento straniero su basi normative che:

      1. garantiscano la tipicità delle ipotesi di condanna;
      2. la prevedibilità della stessa; e
      3. i limiti quantitativi.

      I possibili effetti della Sentenza nell’ordinamento italiano

      In primo luogo, va chiarito che la Sentenza non ha modificato il sistema risarcitorio interno dell’ordinamento italiano. In altre parole, la Sentenza non permetterà ai giudici nazionali di comminare danni punitivi all’interno di procedimenti italiani.

      Per quanto riguarda invece le sentenze straniere, invece, sarà ora possibile ottenere il risarcimento dei danni punitivi attraverso il riconoscimento e l’esecuzione nel sistema italiano di una decisione straniera che prevede la condanna a tale tipologia di danno, a condizione che siano rispettati i presupposti sopra indicati.

      In considerazione di ciò, le imprese italiane che hanno investito o fanno affari in paesi che prevedono i danni punitivi dovranno tenere in considerazione questo nuovo rischio.

      Gli strumenti per tutelarsi

      L’imprenditore italiano che opera su mercati stranieri nei quali sono previsti i danni punitivi deve considerare con attenzione questo rischio, che sino ad oggi, come visto, non aveva accesso allo spazio giuridico italiano.

      L’ottica deve essere necessariamente quella di prevenzione e gli strumenti a disposizione in tal senso sono diversi: in primo luogo l’adozione di clausole contrattuali che prevedano la rinuncia del danneggiato a questo tipo di danno o pongano un limite alla risarcibilità dei danni contrattuali, ad esempio ancorandola al valore dei prodotti o servizi forniti.

      E’ poi fondamentale che si abbia conoscenza della legislazione e della giurisprudenza dei mercati in cui si opera, anche indirettamente (ad esempio, con la distribuzione commerciale dei prodotti) al fine di scegliere in modo consapevole la legge applicabile al contratto e la modalità di risoluzione delle controversie (ad esempio, con previsione dell’esclusiva giurisdizione del foro di un paese  che non preveda i danni punitivi.

      Infine, questo tipo di responsabilità e di rischio può essere oggetto di valutazione con polizze assicurative che offrano una copertura specifica rispetto ad eventuali condanne al risarcimento di danni punitivi.

      In this clip I briefly introduce the main options to consider when doing business in Iran.
      You can read more on this topic in my articles An introduction to Iran Corporations  and Obtaining a Foreign Investment License and browse Legalmondo’s blog for some other  posts on doing business in the region.

      If your business is related to France or you wish to develop your business in this direction, you need to be aware of one very specific provision with regards to the termination of a business relationship.

      Article L. 442-6, I, 5° of the French Commercial Code protects a party to a contract who considers that the other party has terminated the existing business relationship in a sudden and abrupt way, thus causing her a damage.

      This is a ‘public policy’ provision and therefore any contractual provision to the contrary will be unenforceable.

      Initially, the lawmaker aimed to protect any business relationship between suppliers and major large-scale retailers delisting (ie, removing a supplier’s products that were referenced by a distributor) at the moment of contracts renegotiations or renewals.

      Eventually, the article has been drafted in order to extend its scope to any business relationship, regardless of the status of the professionals involved and the nature of the commercial relationship.

      The party who wishes to terminate the business relationship does not need to provide any justification for her actions but must send a sufficient prior notice to the other party.

      The purpose is to allow the parties, and in particular the abandoned party, to anticipate the discharge of the contract, in particular in cases of economic dependency.

      It is an accentuated obligation of loyalty.

      There are only two cases strictly interpreted by case law in which the partner is exempted from sending a prior notice:

      • an aggravated breach of a contractual obligation;
      • a frustration or a force majeure.

      There are two main requirements to be fulfilled in order to be able to invoke this provision in front of a judge – an established business relationship and an abrupt termination.

      The judge will assess whether the requirements have been fulfilled on a case by case basis.

      What does the term ‘established business relationship’ mean?

      The most important criterion is the duration, whether a written contract exists or not.

      A relationship may be considered as long-term whether there is a single contract or a few consecutive contracts.

      If there is no contract in place, the judge will take into account the following criteria:

      • the existence of a long-term established business relationship;
      • the good faith of the parties;
      • the frequency of the transactions and the importance and evolving of the turnover;
      • any agreement on the prices applied and/or the discounts granted to the other party;
      • any correspondence exchanged between the parties.

      What does the term ‘abrupt termination’ mean?

      The Courts consider the application of Article L442-6-I 5° if the termination is “unforeseeable, sudden and harsh”.

      The termination must comply with the following three conditions in order to be considered as abrupt:

      • with no prior notice or with insufficient prior notice;
      • sudden;
      • unpredictable.

      To consider whether a prior notice is sufficient, a judge may consider the following criteria:

      • the investments made by the victim of the termination;
      • the business involved (eg seasonal fashion collections);
      • a constant increase in turnover;
      • the market recognition of the products sold by the victim and the difficulty of finding replacement products;
      • the existence of a post-contractual non-compete undertaking ;
      • the existence of exclusivity between the parties;
      • the time period required for the victim to find other openings or refocus the business activity;
      • the existence of any economic dependency for the victim.

      The courts have decided that a partial termination may also be considered as abrupt in the following cases:

      • an organisational change in the distribution structure of the supplier;
      • a substantial decrease in trade flows;
      • a change in pricing terms or an increase in prices without any prior notice sent by a supplier granting special prices to the buyers, or in general any unilateral and substantial change in the contract terms.

      Whatever the justification for the termination, it is necessary to send a registered letter with an acknowledgment of receipt and ensure that the prior notice is sent sufficienlty in advance (some businesses have specific time periods applicable to them by law).

      Compensation for a damage

      The French Commercial Code provides for the award of damages in order to compensate a party for an abrupt termination of a business relationship.

      The damages are calculated by multiplying the notice period which should have been applied by the average profit achieved prior to the termination. Such profit is evaluated based on the pre-tax gross margin that would have been achieved during the required notice period, had sufficient notice been given.

      The courts may also award damages for incidental and consequential losses such as redundancy costs, losses of scheduled stocks, operational costs, certain unamortised investments and restructuring costs, indemnities paid to third parties or even image or reputational damage.

      International law

      The French supreme court competent in civil law (‘Cour de cassation’) considers that in cases where the decision to terminate the business relationship and the resulting damage take place in two different countries, it is a matter of torts and the applicable law will be the one of the country where the triggering event the most closely connected with the tort took place. Therefore the abrupt termination will be subject to French law if the business of the supplier is located in France.

      However, the Court of Justice of the European Union (CJEU) has issued a preliminary ruling dated 14 July 2016 answering two questions submitted by the Paris Court of Appeal in a judgment dated 17 April 2015. A French company had been distributing in France the food products of an Italian company for the last 25 years, with no framework agreement or any exclusivity provision in place. The Italian company had terminated the business relationship with no prior notice. The French company issued proceedings against the Italian company in front of the French courts and invoked the abrupt termination of an established business relationship.

      The Italian company opposed both the jurisdiction of the French courts and the legal ground for the action arguing that the Italian courts had jurisdiction as the action involved contract law and was therefore subject to the laws of the country where the commodities had been or should have been delivered, in this case Incoterm Ex-works departing from the plant in Italy.

      The CJEU has considered that in case of a tacit contractual relationship and pursuant to European law, the liability will be based on contract law (in the same case, pursuant to French law, the liability will be based on torts). As a consequence, Article 5, 3° of the Regulation (EC) 44/2001, also known as Brussels I (which has been replaced by Regulation (EC) 1215/2012, also known as Brussels I bis) will not apply. Therefore, the competent judge will not be the one of the country where the damage occurred but the one of the country where the contractual obligation was being performed.

      In addition and answering the second question submitted to it, the CJEU has considered that the contract is:

      • a contract for the sale of goods if its purpose is the delivery of goods, in which case the competent jurisdiction will be the one of the country where the goods have been or should have been delivered; and
      • a contract for services if its purpose is the provision of services, in which case the competent jurisdiction will be the one of the country where the services have been or should have been provided.

      In this case, the Paris Court of Appeal will have to recharacherise the contractual relationship either as consecutive contracts for the sale of goods and deduct the jurisdiction of the Italian courts, or as a contract for services implying the participation of the distributor in the development and the distribution of the supplier’s goods and business strategy and deduct the jurisdiction of the French courts.

      In summary, in case of an intra-Community dispute, the distributor who is the victim of an abrupt termination of an established business relationship cannot issue proceedings based on torts in front of a court in the country where the damage occurred if there is a tacit contractual relationship with the supplier. In order to determine the competent jurisdiction in such case, it is necessary to determine whether such tacit contractual relationship consists of a supply of goods or a provision of services.

      The next judgment of the Paris Court of Appeal and those of the Cour de cassation to come need to be followed very closely.

      When negotiating contracts, parties typically focus on the key commercial terms of their agreement. The clauses that govern the term of the agreement (i.e., the duration, or how long the contract remains in force), the renewal of the term, and how the agreement can be terminated, however, merit careful consideration.

      Under Québec law, contracts typically have terms that are either fixed (e.g., 5 years, 10 years etc.), or are for an indeterminate period of time (i.e., no specific term is provided for). Contracts with fixed terms may also contain automatic renewal clauses. In the case of an indeterminate term contract, a party to the contract can generally, absent specific terms or a notice provision to the contrary in the contract, terminate it, without cause, by providing reasonable notice of termination (what constitutes “reasonable notice” depends on a number of factors and is decided on the facts of each case). A third category of contracts are contracts with a potentially perpetual term. An example of a potentially perpetual contract is a contract that contains a renewal clause that is entirely under the control of only one of the parties who can, effectively, unilaterally decide whether the contract will go on indefinitely. In such a contract, the other contracting party does not have a right to terminate the contract by providing reasonable notice of termination. The validity of perpetual term contracts was precisely the issue before the Supreme Court of Canada in its July 28, 2017 decision in Uniprix inc. v. Gestion Gosselin et Bérubé inc. https://scc-csc.lexum.com/scc-csc/scc-csc/en/item/16746/index.do (“Uniprix“).

      In Uniprix, the pharmacy chain entered into an affiliation agreement with various members of a pharmacists’ group pursuant to which said members operated a pharmacy under the Uniprix banner. The term of the contract was for a fixed term of 5 years and the renewal clause allowed members to provide a notice within a certain period of time, failing which the contract would automatically be renewed for an additional 5 years:

      Regardless of any written or verbal provisions to the contrary, this agreement shall commence on the day of its signing and shall remain in effect for a period of sixty (60) months, or for a period equal to the term of the lease for the premises where the pharmacy is located. [The member pharmacist] shall, six (6) months before the expiration of the agreement, notify [Uniprix] of its intention to leave [Uniprix] or to renew the agreement; 

      Should [the member pharmacist] fail to send the prescribed notice by registered mail, the agreement shall be deemed to have been renewed in accordance with the terms and conditions then in effect, as prescribed by the board of directors, except with regard to the fee.[Translation]

      The Uniprix agreement did not provide any say to Uniprix in connection with its renewal and there were no limits on the number of times that the members could renew the agreement. As such, the contract could remain in force perpetually based entirely on the members’ decision. After the contract had been renewed twice, Uniprix sent the members a notice of non-renewal and purported to terminate the agreement. The members contested Uniprix’s decision based on the fact that under the affiliation agreement, the renewal clause could only be exercised by the members and, unless the members gave notice to the contrary, the contract was automatically renewed. Uniprix argued that the effect of the members’ position, which would bind the parties in perpetuity, was contrary to public order (i.e., it violated a fundamental societal value) and unlawful and, as such, the term of the agreement should be considered to be for an indeterminate period, which would allow either party to terminate it on reasonable notice.

      In a 6-3 decision, the Supreme Court of Canada held (in upholding the decisions of the majority of the Québec Court of Appeal and of the Superior Court of Québec) that there was nothing under Québec law that prohibited a contract of affiliation from having a perpetual term and that this did not, in and of itself and in the context of corporate and commercial agreements, offend any fundamental societal values. The Court’s holding would equally apply to many other types of contracts such as, for example, franchise agreements and licensing agreements. The Court held, accordingly, that the affiliation agreement was not for an indeterminate term and, therefore, could be not be terminated by Uniprix by providing reasonable notice.

      With respect to the holding in Uniprix , the following points should be kept in mind:

      1. The Supreme Court of Canada expressly noted that in certain circumstances, such as where an individual’sperson and freedom are affected (e.g., a contract of employment), a perpetual obligation could offend public order.
      2. In certain specific cases set out in the Civil Code of Québec, the legislator has provided maximum terms for certain types of contracts (e.g., a commercial lease cannot exceed 100 years, the duration of payment of an annuity is 100 years).
      3. In the case of a contract of adhesion (which is generally defined as a contract where one of the parties was unable to negotiate its terms), the adhering or vulnerable party can argue that a perpetual term is abusive and, therefore, null.
      4. The Court’s decision in Uniprixapplied to Uniprix’s ability to terminate the contract without cause. A party always retains the right to terminate a contract for cause. What constitutes “cause” is decided on a case by case basis and may also be governed by the terms of the contract.

      When drafting contracts, parties are generally, subject to limitations imposed by the legislator or public order, permitted to structure their relationship as they see fit. Parties should carefully consider whether they truly intend the duration of their agreement to be entirely under the control of one of the parties to the agreement for an indefinite period of time because, as is made clear in Uniprix, perpetual commercial contracts are enforceable under Québec law.

      The author of this post is David Stolow.

      Exchange controls

      The existing Venezuelan foreign currency regulations significantly restrict the ability of private sector companies and individuals to convert the local currency (“Bolivars” or “Bs”) into foreign currency. Because of these restrictions, it is extremely difficult for companies in Venezuela to repatriate profits generated in Bolivars by converting those Bolivars into foreign currency, or otherwise to convert Bolivars into foreign currency to purchase foreign supplies, to pay debt in foreign currency, etc.

      The result of these restrictions is the continued generation of trapped cash in Bolivars that cannot be converted into foreign currency. The foreign currency restrictions can also affect the operations of Venezuelan companies if such operations depend on foreign supplies, unless the shareholders or other affiliates of such Venezuelan company are willing to support its operations with foreign currency generated abroad. Also, because of these restrictions Venezuelan companies may not be able to convert Bolivars into foreign currency to pay intercompany debt in foreign currency.

      There are currently three different official exchange rates in Venezuela: (a) the Cencoex rate, fixed by the Venezuelan government from time to time, currently at Bs.6.30 per USD (the “Cencoex Rate”), (b) the Sicad rate, fixed by the Venezuelan government from time to time, currently at Bs.13.5 per USD (the “Sicad Rate”) and (c) the Simadi rate, which is in practice fixed by the Venezuelan government on a daily basis, currently at approximately Bs.200 per USD (the “Simadi Rate”). Given the significant restrictions to convert Bolivars into foreign currency, there also exists a parallel or black market, currently at several times the Simadi rate. The Cencoex Rate (Bs.6.30 per USD) appears as hugely overvalued, if compared to the other official rates (the Sicad Rate or the Simadi Rate) or to the black market rate.

      Given the existing Venezuelan exchange controls, many Venezuelan companies have accumulated over the years significant amounts of excess cash in Bolivars that cannot be converted into Dollars.

      Foreign Investment Regulations

      The only areas currently reserved to companies owned or controlled by Venezuelan investors are open-air television, radio broadcasting, newspapers in Spanish and professional services regulated by law. There are other areas, such as oil, that are reserved to the Venezuelan government in which foreign investors may participate only through minority participations in joint venture companies with the Republic or Venezuelan state-owned companies.

      Foreign investors (i.e., foreign companies (head offices), foreign shareholders or foreign partners) must register their direct foreign investments in a Venezuelan company (branch, corporation or partnership) with the Venezuelan foreign investment authority within 60 days following the date on which investment was made (the “foreign investment registration”). The foreign investment registration is one of the documents required to purchase foreign currency through Cadivi to repatriate dividends, branch profits, and proceeds from sales of investment, liquidation of the company or capital reductions.

      Several documents must be submitted to the Venezuelan foreign investment authority by the foreign investor to obtain the foreign investment registration, including evidence that the capital of the company was paid with foreign currency or contribution in kind that entered Venezuela. To obtain such evidence, the foreign investor must (a) in case of payment in cash, order a wire transfer to the Venezuelan bank account of the company from an account of the foreign investor located outside Venezuela (as a result of the wire transfer, foreign currency transferred out of the offshore account of the investor will be converted into bolivars at the official exchange rate and deposited in bolivars in the Venezuelan bank account), and (b) in the case of contribution in kind, demonstrate that the asset being contributed to the capital of the company was imported into Venezuela (copies of the import manifest, commercial invoice and other custom documents).

      The foreign investment registration must be updated annually by the foreign investor within 120 days of the end of the fiscal year.

      Price Controls

      The Fair Prices Decree with rank, value, and strength of Organic Law (the “Fair Prices Law”), provides for the possibility of the government to set the prices of any type of good or service sold in Venezuela. The Fair Prices Law creates the Single Registry of People which Develop Economic Activities (RUPDAE) in which all persons and companies that perform commercial activities in Venezuela must be registered. The National Superintendence to Defend Economic Rights (the “Superintendence”), created by this law, has established fixed prices for food, personal hygiene products among other products. Once a list of products is published, their price is frozen until the Superintendence sets the new price (in every level of the commercial chain). In cases in which the Superintendence does not set maximum retail prices, companies should self-regulate their prices, and in no case the maximum profit margin will exceed 30% for manufacturers and 20% for importers. The Superintendence may also establish the obligation to label the maximum selling prices in the body of the product. The Fair Prices Law has also created the following crimes related to commercial activities in Venezuela: (i) sale of expired food or products; (ii) import of unhealthy products; (iii) fraudulent alteration; (iv) hoarding; (v) boycotting; (vi) destabilization of the economy; (vii) resale of products of first necessity; (viii) conditioned sales; (ix) extraction smuggling; (x) usury; (xi) alteration of goods and services; (xii) speculation; (xiii) fraudulent alteration of prices; and (xiv) corruption between private parties. Sanctions are extremely onerous and may include: closure, confiscation of assets, fines and imprisonment.

      Filings with the Commercial Registry

      All Venezuelan companies must be registered with a Commercial Registry. The Commercial Registry contains copies of the company’s articles of incorporation and by-laws, information on its standing (i.e. annual financial statements, liquidation or bankruptcy proceedings), registered address, directors and officers, the existence of branches, and other information. All information filed with the Commercial Registries is public. Companies must notify the Commercial Registry of changes to their articles of incorporation and by-laws and update other information filed with the registry. Companies must also file annual financial statements and periodically file minutes of shareholders appointing directors and officers.

       

      The author of this post is Fulvio Italiani

      Roberto Luzi Crivellini

      Aree di attività

      • Arbitrato
      • Distribuzione
      • Commercio internazionale
      • Contenzioso
      • Real estate
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