(Paris Court of Appeal, 4 October 2012, no. RG 11/17783)

The Paris Court of Appeal applies French law to the abrupt termination of established commercial relationships of an international nature and designates Article L. 442-6 I 5° of the French Commercial Code as a mandatory provision.

A Chilean company had entered into an exclusive distribution contract with a French manufacturer for the sale of its perfumes in Chile. Following the termination of this contract without notice by the French manufacturer, the Chilean company had brought an action for damages based on the provisions of Article L. 442-6, I, 5° of the French Commercial Code which prohibits the abrupt termination of established commercial relationships.

The Paris Court of Appeal (the "Court") rejected the arguments put forward by the French manufacturer which, in an attempt to prevent the application of these provisions, argued that only Chilean law was applicable within the context of this dispute.

On applying French law, the Court recalled that, in matters relating to tort, the applicable law is that of the place where the prejudicial act took place and notes that in this case the activity that gave rise to the loss, namely the termination of the contract, occurred in France.

The Court added that, in complex situations where the location of the act giving rise to the loss and the place where the loss actually occurred are different, the applicable law shall be that of the country which is most closely associated with the prejudicial act. On this point, the Court noted that the contract had been concluded in France and designated French law as the applicable law and French courts as the competent courts.

Finally, the Court stressed that the provisions of Article L. 442-6, I, 5º of the French Commercial Code constitute mandatory provisions which must therefore be applied to this dispute.