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NEWS: Sudden termination of an established commercial relationship: the French supreme Court has clarified the validity of jurisdiction clauses in the internal legal order and of arbitration clauses in the international legal order

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In the context of disputes concerning sudden termination of established commercial relationships, with a single decision of March 1, 2017, the Cour de cassation (French Supreme civil Court) confirmed its position regarding the validity of jurisdiction clauses in the internal legal order and arbitration clauses in the international legal order.

The sudden termination of established commercial relationships provided in Art. L.442-6 of the French Commercial Code is one of the most claimed restrictive practices before the French jurisdictions. The strength of this provision consists in avoiding short termination notices provided by contract, in particular in view of the overall duration of the commercial relationships between the parties. It has been stated that this provision is of public order in the internal legal order. But the question of its belonging to the international legal public order remains open and therefore is an important issue in international disputes. Indeed, the party invoking Article L.442-6 of the French Commercial Code has a direct interest in having his dispute settled before French jurisdictions.

Therefore, French courts frequently have to face lively debates between parties who sometimes try to exclude clauses giving jurisdiction to a foreign judge or arbitrator – the other party wanting to apply these clauses. The Cour de cassation recognized the validity of jurisdiction clauses regarding the sudden termination of established commercial relationships, even if “provisions of public order might be applied to the merits of this case” (1st civil chamber of the Cour de cassation, 22 October 2008, Monster Cable). When an arbitration clause is wide enough, the Cour de cassation applies the “competence-competence” principle under Article 1448 of the French Code of Civil Procedure, which gives to the arbitrator alone the ability to rule on his own competence (1st civil chamber of the Cour de cassation, 8 July 2010 HTC/Doga).

It may seem that the Cour de cassation’s opinion is now final on this matter and admits the application of arbitration and jurisdiction clauses in the international order. However, each situation is different. The decisions elaborating the case law of the French Supreme Court are therefore always followed with great interest.

In the case at stake, the dispute concerned the termination of two commercial relationships. The first relationship was based on a 2005 contract including a jurisdiction clause designating the Courts of Créteil (France); the other one was based on five contracts concluded in 2011, including a jurisdiction clause to the benefit of an arbitration Court in Casablanca (Morocco).

After observing that the Court of Appeal had decided at its sole discretion to rule on the two commercial relationships separately – which was the whole question underlying the dispute –, the Cour de cassation also examined the opposability of the clauses in the two contracts separately.

Following the “competence-competence” principle, the Cour de cassation confirmed the decision of the Paris Court of Appeal declaring the French Courts incompetent regarding the sudden termination of the established commercial relationships under the contracts dated 2011, and recognized the competence of the arbitral tribunal of Casablanca.

By contrast, in the internal order and as per the 2005 contract, the Court pointed out that a jurisdiction clause should not affect the exclusive jurisdiction of specialized courts, exhaustively listed in the Decree 2009-1384 of November 11, 2009. This is why the Court quashed the decision of the Paris Court of appeal, which unduly recognized the competence of the Court of Créteil at the expense of the Paris Commercial Court.