Court of Justice of the European Union (CJEU) Confirms Distribution Agreements Are Contracts For Services
The Court of Justice of the European Union (CJEU) has confirmed that distribution agreements are to be treated as agreements for the provision of services under the Brussels Regulation (44/2001), which governs the rules on jurisdiction in the European Union. This means that without an agreement to the contrary, the grantor of distribution rights can be sued in the territory where the rights have been granted.
The judgment was in relation to a request for a preliminary ruling from a Belgian court in a dispute concerning the termination of a distribution agreement. Corman-Collins SA, a company based in Belgium, had brought proceedings against La Maison du Whisky SA, a company based in France, due to La Maison’s termination of its distribution agreement with Corman, under which Corman sold La Maison’s products in Belgium.
Under Belgian law, a distributor may be entitled to claim damages on account of the termination of a distribution agreement, either before the Belgian courts or before the courts of the domicile of the supplier. La Maison challenged the jurisdiction of the Belgian courts on the basis of Article 2(1) of the Brussels Regulation (44/2001), which provides that a party should be sued in the courts of its Member State of domicile.
Corman sought to rely on Article 5(1) of the Brussels Regulation, which varies the default rule in Article 2(1). Article 5(1) provides that
A person domiciled in a Member State may, in another Member State, be sued
(a) In matters relating to a contract, in the courts for the place of performance of the obligation in question.
(b) For the purpose of this provision and unless otherwise agreed, the place of performance of the obligation in question shall be
- In the case of the sale of goods, the place in a Member State where, under the contract, the goods were delivered or should have been delivered.
- In the case of the provision of services, the place in a Member State where, under the contract, the services were provided or should have been provided.
(c) If subparagraph (b) does not apply then subparagraph (a) applies.
The Belgian court sought clarification from the CJEU as to whether or not a distribution agreement fell within Article 5(1) of the Regulation. It also sought clarification on whether national law could override the default position in Article 2(1) of the Regulation that a party should be sued in the courts of its Member State of domicile.
The CJEU began by addressing the relationship between national law and the Regulation. It noted that the purpose of the Regulation was to unify the rules of conflict of jurisdiction in civil and commercial matters across the European Union. The CJEU also noted that Article 3 of the Regulation states that the only exemptions to the rule in Article 2(1) are found in the Regulation. The CJEU therefore concluded that this implicitly excludes the application of conflicting national rules on jurisdiction. The Regulation accordingly prevails over national law.
With regard to whether or not Article 5(1) of the Regulation applied, the CJEU first had to examine the nature of a distribution agreement. As had been noted by the Advocate General in his opinion on the reference, the CJEU highlighted that “distribution agreement” was not defined in European law and could therefore have a different meaning in different Member States. The CJEU nevertheless summarised a distribution agreement as an agreement that “takes the form of a framework agreement, which lays down the general rules applicable to the future relations between grantor and the distributor as to their obligations of supply and/or provision and prepares the subsequent sale agreements”.
With this definition in mind, the CJEU then examined whether or not the relationship fell within Article 5(1)(a) or 5(1)(b). Although concerned with the supply of goods, the CJEU considered that a distribution agreement was not a contract for the sale of goods for the purpose of the Regulation. It created the framework for future sales, but a distribution agreement is more concerned with conferring benefits on a distributor that a mere reseller cannot acquire, such as the possibility of exclusivity and assistance with promotion of the products in question. Distribution agreements therefore fall within Article 5(1)(b) of the Regulation. Consequently, the courts of the Member States in which the services are provided have jurisdiction to hear claims arising from such agreements.
This decision clarifies how distribution agreements will be treated under the Regulation. The CJEU focussed on the benefits provided under a distribution agreement and treated the agreement as a framework for the sale of goods, rather than a contract for the sale of goods per se.