Distribution Contracts in France: New mandatory rules under EGALIM3 Law

French lawmakers have enacted measures to tackle the strategies employed by some distributors that have bypassed regulations through the establishment of overseas purchasing hubs. These hubs have been found to engage with French-based suppliers in a manner that undermines the French distribution agreement and contract laws. To address this, the French legislators have now clearly specified that the principles stated in the initial three chapters of Title IV of Book IV of the Commercial Code are mandatory.

These principles, encompassing transparency in commercial relationships, competition restrictions, and the regulation of agricultural and food products, are applicable to all distribution contracts in France. This includes contracts between any buyer and seller pertaining to goods or services intended for sale within the French territory.

From a legislative standpoint, these principles are considered binding. Therefore, it falls upon the judiciary to authenticate them in accordance with French contract law traditions.

The French Supreme Court, Cour de Cassation, has consequently ruled that Articles L 442-6, I-2o (now Art. L 442-1), and II-d (now Art. L 442-3, b) of the Commercial Code, which respectively address the prohibition of causing a significant imbalance between contracting parties and the nullity of the clause favoring the most favored customer, are compulsory rules. It is the responsibility of the presiding judge to enforce these rules, circumventing the need to determine the conflict of laws rule that would identify the applicable law.

All disputes relating to the enforcement of provisions in Title IV of Book IV of the Commercial Code will now fall under the exclusive jurisdiction of the French courts. This is subject to compliance with EU law and international treaties that France has ratified or approved, while also providing for the possibility of arbitration.

In our opinion, this jurisdiction is particularly significant to the actions of the minister in identifying, penalizing, and halting unfair trade practices. This is especially relevant in light of a recent judgment by the Court of Justice of the European Union stating that the rules of judicial jurisdiction under the Brussels I bis regulation do not apply to his actions.