A Danish manufacturer of jewelry (the” Supplier”) and a – possibly exclusive – Belgian distributor (“Distributor”) had collaborated since 2009 and signed a distribution contract in 2021 (the “Contract”). “Charlotte B” signed the Contract on behalf of the Distributor.
Article 27 of the Contract stated the following:
27. LEGISLATION
a. This [Contract] is governed by Danish law and any dispute between the parties must be referred to a decision by the court in the place where [the Supplier] is domiciled in Denmark.
On 24 May 2023 the Supplier terminated the Contract for convenience.
A few weeks later, the Distributor’s Belgian counsel claimed over EUR 1,000,000 in a letter to the Supplier alleging abrupt termination of an exclusive distribution/concession relationship, referencing (among other documents) the Contract.
The Distributor subsequently filed a claim before a Belgian court in early 2024.
One week later, the Supplier initiated proceedings before a Danish court arguing that the parties’ dispute was subject to Danish venue and Danish law.
The Distributor argued that Article 27 of the Contract was not binding as “Charlotte B” did not have authority to sign the Contract and that the Belgian court was therefore competent to decide in the dispute. However, in light of the Supplier’s position, the Belgian court decided to stay proceedings until the Danish court had decided if Article 27 of the Contract on Danish venue and Danish choice of law was valid.
Following the above, the Danish court scheduled a separate hearing on these questions.
The Danish court held, relying on Art. 25 of the Brussels Regulation and recital 20, that where a question arises as to whether a choice-of-court agreement in favour of a court or the courts of a Member State is null and void as to its substantive validity, that question should be decided in accordance with the law of the Member State of the court or courts designated in the agreement, including the conflict-of-laws rules of that Member State.
Consequently, applying the above and Art. 3 (1) of the Rome Convention (note: the Rome I Regulation does not apply in Denmark) and substantive Danish law, the court decided that Article 27 of the Contract was valid and that the parties had made an agreement in favour of Danish venue and Danish law (also finding that Charlotte B – considering her role and tasks within the Distributor – had been authorized to sign the Contract on behalf of the Distributor). Considering that under Danish law a Distributor terminated for convenience is very unlikely to be awarded any indemnity, goodwill compensation or damages, this court decision demonstrates that venue and – particularly – choice of law provisions may be very important in distribution contracts and should be considered with the utmost care.
Peter E.P. Gregersen, IDI Country Expert for agency & distribution in Denmark
