- The Principle
Under Article L.442-6 I 5° of the French Commercial Code, which is one of the « competition restrictive practices » listed in Chapter II of the Commercial Code, it is prohibited to abruptly terminate established commercial relationships, that is to say without providing the other party with a reasonable notice period that shall be computed on the overall duration of the commercial relationship at stake.
This right to be granted a reasonable notice period that is applicable, save when the termination is based on serious misconduct from the other party, has been propagated by case law to cover numerous types of commercial or contractual relationships.
Failure to award this notice period shall trigger the civil liability of the party who takes the initiative of terminating the relationship and shall fall, under authoritative precedents from the French Supreme Court, even if this was not so obvious, within the scope of tortious liability instead of contractual liability.
This legal regime also entails, as recently decided by the French Supreme Court (Cass. Com, 6 septembre 2011, n° de pourvoi 10-11975), that a third party may claim for damages personally sustained due to this failure to grant a reasonable notice period, as an indirect victim of this tortious conduct.
- The Notice Period Provided by Article L.442-6 I 5° of the French Commercial Code and Notice Periods Provided by Other Texts
It was questionable whether the reasonable period notice provided under Article L.442-6 I 5° of the French Commercial Code shall have precedence, considering its very general wording, upon any other notice periods the duration of which was legally set for certain economic activities.
In October 2011, the French Supreme Court (Cass. Com, 4 octobre 2011, n° de pourvoi 10-20240) had to decide whether Article L.442-6 I 5° was applicable to the termination of a subcontract in the road transport business for which the duration of the notice period was already provided by a specific piece of legislation. The Court eventually ruled that the duration of the notice period provided by this specific legislation shall be observed and therefore refused to apply Article L.442-6 I 5° of the French Commercial Code.
2.1 The Notice Period to be Observed When the Principal Decides to Terminate a Commercial Agency Relationship Must Only be Assessed by Reference to Article L.134-11 of the French Commercial Code
2.1.1 A Recent Decision From the French Supreme Court
The French Supreme Court had to decide in a very recent case whether Article L.442-6 I 5° of the French Commercial Code was applicable to the termination of a commercial agency agreement whenever such termination occurs at the initiative of the principal (Cass. Com, 3 avril 2012, n° de pourvoi 11-13527).
This decision was expected considering the economic significance of the commercial agency in France in the marketing of products and services.
In this matter, a commercial agent intended to achieve, by raising Article L.442-6 I 5° of the French Commercial Code, an extension of the duration of the notice period provided under Article L.134-11 of the French Commercial Code. According to this article, the duration of the notice period that shall be awarded by the principal to the commercial agent is computed with respect to the number of years during which the commercial agency agreement was implemented with a maximum period of three months. The commercial agent claimed that the notice period of two months that was granted by the principal on the basis of Article L.134-11 was insufficient and succeeded in convincing the Dijon Court of Appeals to grant him a notice period of four months by implementing Article L.442-6 I 5° of the French Commercial Code.
The Appellate judges’ decision was quashed by the French Supreme Court who ruled that, as a matter of principle, the duration of the notice period shall be solely assessed « for terminating relationships between a commercial agent and his/her principal» on the basis of Article L.134-11 of the French Commercial Code.
2.1.2 A Well-Founded Decision
- Commercial agents benefit from a very favourable regime under French law
First, it is worth reminding that the French legal regime of the commercial agency is already very favourable to the commercial agent from a financial standpoint.
Contrary to other legislations in other member states of the European Union, the indemnity to be paid under French law to the commercial agent when the commercial agency is terminated at the initiative of the principal is due even if the agent has not brought new customers to the principal and this indemnity is not limited to one year of the agent’s average remuneration over the preceding years.
Under French law, the agent is entitled to compensation for the damage that he/she actually suffers as a result of the termination of his/her relationships with his/her principal, being added that this compensation is generally set, according to authoritative precedents, to two years of remuneration.
Under these circumstances, it would have been particularly inappropriate to further extend the duration of the notice period that must be awarded to the commercial agent beyond what is already granted by Article L.134-11 of the French Commercial Code.
- A clarification of the scope of Article L.442-6 I 5° of the French Commercial Code
This recent French Supreme Court’s decision is satisfactory as it restricts the ambit of Article L.442-6 I 5° of the French Commercial Code to cases where no specific notice period is set by law or secondary legislation.
This reasoning shall also be approved considering that it is necessary for determining whether the commercial relationship is « established » within the meaning assigned by Article L.442-6 I 5° of the French Commercial Code to take into account the « legitimate expectation » of the ousted partner in the stability of the relationship which is being terminated. It is obvious that such expectation shall not be « legitimate » in the event that the duration of the notice period is specifically set by law or secondary legislation for the business or activity at stake.
There are not so many areas in French law in which the duration of the notice period is specifically imposed by law or secondary legislation even if one may note that for the last decades the French legislator has increasingly interfered in the relationships between professionals in order to protect the interests of the party which is deemed to be the weakest one from an economic point of view.
Accordingly, Article L.442-6 I 5° of the French Commercial Code, which is a typical French rule, shall continue to apply to numerous cases of termination of commercial or contractual relationships.