THAI AIRWAYS (principal) and TOP AIRWAYS (agent) signed an exclusive agency agreement in 1987 with the intention to promote the selling of airplane tickets in a specific territory in Spain and Andorra. The agreement contained an ICC arbitration clause.
According to TOP, both companies also agreed a verbal distribution contract according to which TOP sold the tickets and paid THAI the price less a margin.
TOP started a lawsuit against THAI based on three different actions: (i) a goodwill compensation claim under the Agency agreement, (ii) a breaching of the Distribution agreement and (iii) an unfair competition claim. First Instance court condemned THAI to pay more than 325.000 euros and for the counterclaim condemned TOP to pay 8.800 euros.
First Instance court refused the arbitration clause with the argument that it was only contained in the Agency contract, was not included in the alleged verbal distribution agreement and was not applicable to the unfair competition claim. According to the court, and since all the actions were close connected, all of them should be decided by the judge who rejected the arbitration clause.
The Court of Appeal (Provincial Court) of Barcelona has revoked such judgement. According to this Court the clause was valid and the joint claims were, in fact, a procedural strategy to avoid the applicability of the arbitral clause. In fact, what the claimant pretended with the joint claims was to obtain an indemnity from the agreement really signed in 1987 with the general purpose of distributing transport services. The fact that the relationship did change during this period and that it could be seen more as a distribution agreement instead of an agency one, did not change that conclusion. The Court of Appeal has also considered that both contracts (agency and distribution) are close in their regulation and, therefore, all the controversies between the Parties should be governed by the arbitral clause. The unfair competition claim did not change this conclusion because it only pretended the recognition of such unfairness, its principles are not excluded from arbitration, and was considered by the Court as having the same purposes of the main claim.
For these reasons the Court of Appeal revoked the First Instance judgement, accepted the arbitral clause and declared its lack of jurisdiction to decide on the controversy.
Ignacio Alonso, IDI agency & distribution expert for Spain