The purpose of this new reform is to reduce the amount of ongoing litigation concerning abrupt terminations through codification of some judicial practices and some legal simplification. It is unlikely however that its aim will be reached.
French Ordinance No. 2019-359 of April 2019 changes the statutory provisions applicable to practices restricting competition, among which the section of the French Commercial Code on the abrupt termination of business relationships.
The key text now becomes the sect. 442-1 II of the French Commercial Code which contains the principle of liability in case of abrupt termination of commercial relationship, i.e. a termination without sufficient prior notice (“taking into account, in particular, the duration of the commercial relationship, with reference to trade practices or interprofessional agreements”).
The main changes are as follows :
1° the new text grants more freedom to the courts in order to decide whether the prior notice is sufficient, without having to focus on the sole length of the relationship (the words “in particular” have been added, which essentially amounts to consecrate a prior judicial practice to take into account all relevant elements, not only the length of the relationship).
2° have been deleted : (a) the reference to the executive orders that previously could establish minimum prior notices as well as (b) the rule according to which the duration of the notice should be doubled for products sold under the distributor’s brand.
3° The insertion of an 18 months’ maximum limit for the prior notice : “the party who terminates the relationship shall not be held liable for insufficient notice to the extent that such party has given a notice of eighteen months”.
This insertion is supposed to reduce the amount of ongoing litigation by allowing contractors to escape trials when they notify the termination 18 months in advance.
Save specific cases or some historically long relationships, it is unlikely that such a duration would be too short.
However, for a great number of commercial relationships, the 18 months’ cap might seem quite long and contractors are not likely to use the possibility offered to them in order to escape claims.
The purpose of the reform – i.e. to reduce litigation – remains hypothetical, especially given the ongoing grey areas.
First, it is not clear whether a Court may order a notice of more than 18 months (e.g. if the notice given by the party is shorter than 18 months, or when no notice is given by the party). The text does not literally bind the Courts’ powers, although a notice longer than 18 months seems contrary to the spirit of the new section. Furthermore, the rules concerning the calculation of compensation are neither unified nor harmonised, which as such is leading to further litigation.