Marco De Leo Beatrice Masi October 8 2013 Considering jurisdiction in franchise agreements Studio Legale Rinaldi Associati | Franchising - Italy Marco De Leo, Beatrice Masi Franchising The Law on Franchise Agreements (129/2004) contains no provisions regulating jurisdiction for disputes. It suggests only that the franchisor and franchisee, before commencing legal proceedings, should attempt to resolve the dispute through an alternative dispute resolution (ADR) procedure before the chamber of commerce of the place where the franchisee has its office.But what happens if no such provision has been included in the franchise agreement, or if the attempt to resolve the dispute through ADR does not end positively? If the franchisor includes no provision on the competent court or arbitration in the franchise agreement, to which forum should disputes be submitted?In such case, the provisions on jurisdiction set forth in Articles 18 and following of the Civil Procedure Code will apply. According to these articles, unless otherwise provided for by law, the general jurisdiction for persons and companies is that of the place in which they have their address or registered office. Furthermore, lawsuits concerning obligations should be submitted to the jurisdiction of the place in which the obligation arose or will be carried out.However, a common problem that arises is determining the meaning of an 'obligation to carry out'. Insofar as franchise agreements are concerned, an October 25 2012 decision of the Court of Lecce clarified that in case of termination of a franchise agreement, should the franchisee challenge the franchisor's non-fulfilment of the agreement, the dispute may be submitted to the jurisdiction of the place in which the obligation must be carried out, which can be identified according to the subject matter of the franchise agreement.According to the court, the subject matter of a franchise agreement is the combination of activities (eg, any technical and commercial assistance services) provided by the franchisor to the franchisee to allow the franchisee to carry out its business according to the franchise agreement, as well as activities and services rendered by the franchisor in favour of the franchisee.In this case, the defendant franchisor alleged that the obligation to be carried out was that of payment, to be fulfilled at the creditor's location according to Article 1182 of the Civil Code. The plaintiff franchisee made reference to the obligation to deliver the products at their point of sale within the territory of the court where the lawsuit was filed. The judge accepted the argument of the franchisee.In light of this case, it is recommended that the franchisor make express provisions on jurisdiction in the franchise agreement in case any disputes arise over the agreement (including those relevant to its validity, construction, execution and termination). In case of derogation from the general principles on jurisdiction set forth in the Civil Procedure Code, the franchisor should be sure to ask the franchisee for express, clause-by-clause approval and an additional signature, pursuant to Article 1341 of the Civil Code (as a condition for the enforceability of onerous clauses), rather than generically mentioning all clauses of the agreement.For further information on this topic please contact Marco De Leo or Beatrice Masi at Rinaldi e Associati by telephone (+39 02 7600 8860), fax (+39 02 7600 6944) or email ([email protected] or [email protected]).