EU: When does a regular client become a distributor? The Corman Collins case of the European Court of Justice.

Fabio Bortolotti | EU | 2014-05-19

Fabio Bortolotti

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In the majority of countries (within and outside Europe), the distributorship contract (called in various ways in the different languages: i.e. in Italian and French, concessione di vendita/concession de vente; in German Vertragshändlervertrag) is considered differently from of purchase/sale relationship (even continuous).

Particularly, such type of contract is usually regarded as a duration contract, which cannot be terminated by the manufacturer without giving a reasonable notice to the distributor. Often the law (or case-law) provides for a goodwill indemnity in favour of the distributor, at the end of the contract. Moreover in Europe, for the purpose determining jurisdiction, the contract will be qualified as a contract for a provision of services and not as purchase/sale contract. This aspect has been examined by the European Court of Justice in the decision commented here below.

 

The case

In the abovementioned case the French company “Maison du Whisky” had commercial relationship for approximately 10 years with the Belgian company Corman-Collins, which used to buy from the former various brands of whisky, for reselling them in the Belgian market.

During such period, Corman-Collins used the appellation “Maison du Whisky Belgique” and an Internet site called www.whisky.be, without causing any reaction from the French company.

In December 2010, La Maison du Whisky informed Corman-Collins that it would confer the distribution of two whisky brands to another company and banned it from using the appellation “Maison du Whisky Belgique”. Corman-Collins sued La Maison du Whisky before the Tribunal of Vervies on the basis of the Belgian law of 1961, seeking an order for payment of compensation due to distributors under such law.

The French company challenged the jurisdiction of the Belgian court on the ground of article 2 of the EU regulation n. 44/2001 – on the jurisdiction, recognition and enforcement of judgements in civil and commercial matters – according to which persons domiciled in a Member State shall be sued before the courts of that Member State.

At this stage, the Tribunal of Verviers asked the ECJ whether the distribution contract is to be regarded as a simple contract for the sale of goods or, on the opposite, as a contract for the provision of services.

Indeed, if the distribution contract is regarded as a contract for the mere purchase and sale of goods, Article 5(1)(b), first indent of Regulation 44/2001 (applicable to sales agreements) would apply and, therefore, the competent court would be the one where the goods were delivered. If, on the contrary, one qualifies the commercial relationship as distributorship contract, where the buyer takes the role of a distributor of the seller’s products, providing therefore a service, the distributor would be entitled to sue the manufacturer before the court of the place in which the service is provided (pursuant to Article 5(1)(b), second indent, of Regulation 44/2001).

In the case at issue, the first interpretation would have forced the Belgian distributor to sue La Maison de Whisky before French courts (since delivery of goods took place in France), while the second interpretation would have allowed Corman-Collins to sue the manufacturer before Belgian courts.

 

The Court judgement

The Court answered to this question by saying, at paragraph 36, that “a classification may be applied to a long-term commercial relationship between two economic operators, where that relationship is limited to successive agreements, each having the object of the delivery and collection of goods. However, it does not correspond to the general scheme of a typical distribution agreement, characterized by a framework agreement, the aim of which is an undertaking for supply and provision concluded for the future by two economic operators, including specific contractual provisions regarding the distribution by the distributor of goods sold by the grantor”.

In other words, if the relationship is limited to the provision of products, even through a long term commercial relationship, we are in the field of a purchase and sale agreement; if, on the contrary, the reseller undertakes specific obligations concerning the distribution of products, we can consider it as a distributorship contract.

Regarding the criteria for identifying such “specific obligations”, the Court remains quite reticent, by saying at paragraph 41 that “it follows that a distribution agreement containing the typical obligations set out in paragraph 27 and 28 above may be classified as a contract for the supply of services”. However, in the referred points the Court only mentions “the general rules applicable to the future relationship between the grantor and the distributor as to their obligations of supply and/or provision” without giving any further explanation on which are the typical obligations of a distributor.

 

The importance of the Corman Collins case

In the light of the Corman-Collins decision, importers/resellers have now a further argumentation for pretending to be qualified as distributors and, therefore, being granted rights which a simple buyer would not have.

This, first of all for identifying the competent court in case of a dispute, at least in the European context (namely in the EU Member States as well as in the countries which are part of the Lugano Convention).

Let’s consider the most frequent scenario, in which the parties concluded in the course of the years purchase-and-sale contracts on a continuative basis and at the same time verbally agreed (or through exchanges of emails) a series of activities of the reseller regarding the distribution of products (promotion, advertising, technical assistance), maybe also granting an exclusivity right to the reseller (even de facto). In the absence of a written clause of derogation of jurisdiction in favour of the seller (it must be taken into account that, should a clause of this type be provided for in the seller’s general conditions of sale, it would only apply to the single sales, but not to the distributorship contract), the purchaser/distributor will be entitled to sue the seller in front of its judges.

This could entail an evident disadvantage for the seller/grantor, who will need to defend himself before a foreign tribunal.

But this is not the only relevant aspect. Indeed, if the parties do not choose the law applicable to the “framework” agreement (i.e. the distribution contract), such law should be determined on the basis of Regulation Rome I on the applicable law to contractual obligations (Regulation 593/2008). Article 4(1)(f) of such Regulation states that, in the absence of any choice by the parties, the distributorship contract is governed by the law of the country in which the distributor has its current domicile. Since the meaning of distributorship contract is not defined in the Rome I regulation, it is likely that the Corman-Collins case will be used for this purpose.

Furthermore, in many countries the distributor is granted by law or case-law a special protection at the end of the contractual relationship. In particular, letting aside Belgium, which foresees a specific protection, other countries (e.g. Germany, Spain, the Netherlands) apply analogically the rules which grant to commercial agents a goodwill indemnity at the end of the contract, also to distributors under certain conditions.

In such circumstances, distributors who are domiciled or based in countries in which the law or case-law grants them a protection at the end of the contract would have more chances (a) to sue their manufacturers/grantors before the courts of their own countries and (b) to be granted the protection possibly provided by the law/case law of their own countries.

 

This new decision will be discussed during the 2014 IDI annual conference (Turin, 13 – 14 June 2014) and two attorneys directly involved in the case before the Court of Verivers and before the ECJ will participate as speakers.

 

Fabio Bortolotti, chair IDI

 

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