HARMONIZATION OF HARMONIZATION OF EUROPEAN PRIVATE AND EUROPEAN PRIVATE AND

COMMERCIAL LAWCOMMERCIAL LAW

CESL Academic Conference (Beijing, 2011)CESL Academic Conference (Beijing, 2011)

Prof. Tibor Tajti ©Prof. Tibor Tajti ©

THE STARTING POSITION: THE THE STARTING POSITION: THE “LEGAL MAP” OF EUROPE“LEGAL MAP” OF EUROPE

Herein of the European Legal Families, Sub-Groups and the Differences

Wikipedia’s ClassificationWikipedia’s Classification

1

ScandinavianScandinavianlawlaw

Common law

Franco-Latin law Germanic law

Russian law Russian law (?)(?)

Mixed: Franco/Latin & Germanic

Scotland: mixed

THE AVENUES OF RAPPROCHEMENT THE AVENUES OF RAPPROCHEMENT OF EUROPEAN PRIVATE AND OF EUROPEAN PRIVATE AND COMMERCIAL LAWSCOMMERCIAL LAWS

“For the transnational lawyer indeed, the present European , the present European situation is as that of a traveler compelled to use a number of situation is as that of a traveler compelled to use a number of

different local maps each one of difficult use to foreign different local maps each one of difficult use to foreign lawyers and sometimes containing information which (due to lawyers and sometimes containing information which (due to

bias or hidden assumptions of municipal lawyers) can be bias or hidden assumptions of municipal lawyers) can be misleadingmisleading. […].”

Mauro Bussani & Ugo Mattei (eds.), The Common Core of European Private Law (Kluwer Law International, 2002), Preface:

the Context, at 1-2.

The Avenues of RapprochementThe Avenues of Rapprochement

Research Groups

1.Lando Commission2.The Acquis Group3.The Common Core Group (etc.)

ORGANICDEVELOPMENT- Popular contracts (e.g., franchise, leasing)- Regulatory competition (e.g., 2002 amendment of the French Commercial Code)

[Impact of] INTERNATIONAL EFFORTS1.The Unidroit Principles of Int’l Commercial Contracts (2010: 3rd edition)2.CISG (Uncitral)

EU Legislation

-Directive on time share agreements(etc.)

REFORMPROJECTS

EBRDEBRD – secured transactions law reform

GTZ – Serbia (mortgage law and land registries)

EU LEGISLATIONEU LEGISLATIONA FRAGMENTED APPROACH

“After a long period of specific consumer directives (1984-2001), a new phase was inaugurated in 2001, which has been defined by the redrafting and systematization of consumer regulations in the quest for an internal market with a more

organic and coherent common law. This phase is characterised by interaction between consumer regulations

and the creation of a new European Contract Law …”

Micklitz, Stuyck, Terryn and Droshout, Consumer Law (Hart, 2010, at 165.

UNDER THE AUSPICES OF THE ROME UNDER THE AUSPICES OF THE ROME TREATYTREATY

CONSUMER PROTECTIONCONSUMER PROTECTION

• Doorstep sales Doorstep sales (85/577)• Consumer Credit Directive Consumer Credit Directive

(85/102)• Directive on unfair terms in

consumer contracts (93/13)• Timeshare Directive Timeshare Directive (94/47)• Distance Selling Directive Distance Selling Directive

(97/7)• Price Indication Directive

(98/6) (etc.)

OTHEROTHER

• Primarily of administrative nature restricting freedom of contract:

- Directive 86/653 on the coordination of the law of the Member States relating to the self-employed agentself-employed agent

• Conflicts of lawConflicts of law- Regulation 44/2001 on

Jurisdiction and the Recognition of Judgments in Civil and Commercial Matters (Brussels I)

IS THERE A FUTURE FOR THE IS THERE A FUTURE FOR THE EUROPEAN CIVIL CODE?EUROPEAN CIVIL CODE?

MAURO BUSSANI: MAURO BUSSANI: “The defense of the status quo [that the time … is not ripe to enact whatever

Restatement or Civil Code] … fits perfectly with the need of the professional elite to keep the leadership over

national and transnational legal affairs … ”

Mauro Bussani, the Driving Forces behind a European Civil Code, Zbornik Prav. Fak. Sveuč. Rij. Suppl. Br. 3, xx-xx, at 11.

Reality v. WishesReality v. Wishes

REALITYREALITY

“whilst it seems that the the European contract law European contract law initiative initiative as described in the Commission communication of 11 October 2004 (COM(2004)0651) and reported on in the Commission's First Annual Progress Report (COM(2005)0456) should be seen should be seen primarily as an exercise in primarily as an exercise in better law-making at EU better law-making at EU levellevel, it is by no means clear it is by no means clear what it will lead to in terms what it will lead to in terms of practical outcomesof practical outcomes or on what legal basis any binding instrument or instruments will be adopted […]”

WHAT WOULD BE WHAT WOULD BE NEEDEDNEEDED

The European Parliament “…

reiterates its conviction, reiterates its conviction, expressed in its resolutions of 26 May 1989, 6 May 1994, 15 November 2001

and 2 September 2003, that a that a uniform internal market uniform internal market cannot be fully cannot be fully functional without functional without further steps towards further steps towards the harmonisation of the harmonisation of civil law civil law […].[…].”

WHERE TO GO FROM WHERE TO GO FROM HERE? HERE?

The Common Frame of ReferenceThe Common Frame of Reference

“ “That is a text serving as a source of inspiration for law That is a text serving as a source of inspiration for law making and law teaching at all levels.”making and law teaching at all levels.”

Christian von BarChristian von Bar, A Common Frame of Reference for European Private Law - Academic Efforts and Political Realities, Electronic Journal of Comparative Law, at 1 (< www.ejcl.org/121/art121-27.pdf  >).

The Seven Possible Avenues of DevelopmentThe Seven Possible Avenues of Development

GREEN PAPER FROM THE COMMISSIONGREEN PAPER FROM THE COMMISSIONon policy options policy options for progress towards a European Contract

Law for consumers and businesses(Brussels, 1.7.2010, COM(2010)348 final)

Option 1:Option 1: “mere” publication mere” publication of the DCFR (for legislators, teachers and private parties)

Option 2:Option 2: an “official toolbox for legislatorofficial toolbox for legislator”Option 3:Option 3: EU Commission recommendation to Member States to

incorporate the DCFR into national lawsincorporate the DCFR into national lawsOption 4:Option 4: DCFR as an alternative system to national laws that could be chosen by parties (“optional instrumentoptional instrument”)

Option 5:Option 5: EU DirectiveDirective with minimum common standardsOption 6:Option 6: EU RegulationRegulation with uniform rules replacing national laws

Option 7:Option 7: European Civil CodeEuropean Civil Code

HOW IS THE DCFR RESOLVING HOW IS THE DCFR RESOLVING TENSIONS?TENSIONS?

The Case of the doctrine of The Case of the doctrine of culpa in contrahendoculpa in contrahendo(“fault in contracting”)(“fault in contracting”)

Black’s Law Dictionary: “The principle that parties The principle that parties must act in good faith during preliminary contract must act in good faith during preliminary contract

negotiationsnegotiations.”

The DifferenceThe Difference

GERMAN LAWGERMAN LAW

“… contracting parties are under a duty, classified as contractual, to deal in to deal in good faith with each good faith with each other during the other during the negotiation stagenegotiation stage, or else or else face liabilityface liability, customarily to the extent of the wronged party’s reliance.”

ENGLISH & US LAWENGLISH & US LAW

a/ Generally accepted view: - common law does not have a counterpart

b/ Kessler & FineKessler & Fine: “… the doctrines of negligence, estoppel, and implied contract, among others, have … served many of the doctrinal functions of culpa in contrahendo.”

The Common Frame of Reference on The Common Frame of Reference on Culpa in ContrahendoCulpa in Contrahendo

Negotiation and confidentiality dutiesNegotiation and confidentiality dutiesII. – 3:301II. – 3:301: Negotiations contrary to good faith and fair : Negotiations contrary to good faith and fair

dealingdealing(1) A person is free to negotiate and is not liable for failure to reach an

agreement.

(2) A person who is engaged in negotiations has a duty to negotiate in

accordance with good faith and fair dealing and not to break off negotiations contrary to good faith and fair dealing. This duty may not be excluded or limited by contract.

(3) A person who is in breach of the duty is liable for any loss caused to the other party by the breach.

(4) It is contrary to good faith and fair dealing, in particular, for a person to enter into or continue negotiations with no real intention of reaching an agreement with the other party.

RESEARCH GROUPS ON RESEARCH GROUPS ON EUROPEAN PRIVATE LAWEUROPEAN PRIVATE LAW

‘In matters of private law, current attempts to produce a European private code or at least to establish common

principles of law are … basically in ‘German’ hands ‘German’ hands (though one must also mention the ‘Trento Project’ run mainly from the ‘Trento Project’ run mainly from

Italy.’Italy.’ […].’

Basil Markesinis (with Jörg Fedtke), Engaging with Foreign Law (Hart Publishing, 2009), p. 164.

Research Groups on European Research Groups on European [Pure] Private Law[Pure] Private Law

• Commission on European Contract Law (Lando Commission) Commission on European Contract Law (Lando Commission) [< http://www.jus.uio.no/lm/eu.principles.lando.commission/doc.html >]

• Study Group on a European Civil Code Study Group on a European Civil Code [ < http://www.sgecc.net/ > ]

• The Acquis Group – European Research Group on Existing EC Private Law The Acquis Group – European Research Group on Existing EC Private Law [ < http://www.acquis-group.org/ > ]

• The Common Core of European Private Law Project (Trento Group) The Common Core of European Private Law Project (Trento Group) [< http://www.jus.unitn.it/dsg/common-core/meeting_10_project.html > ]

• Commission on European Family Law (CEFL) [ < http://www.ceflonline.net/ >]

• European Centre of Tort and Insurance Law (ECTIL) [< http://www.ectil.org/ >]

• European Group on Tort Law (Tilburg Group) [< http://civil.udg.es/tort/ >]

• Ius Commune Casebooks for the Common Law of Europe [< http://www.casebooks.eu >]• SECOLA (Society of European Contract Law) [ < http://www.secola.org/ > ]• Joint Network on European Private Law (CoPECL) [< http://www.copecl.org/ >]

• Uniform Terminology for European Private Law [< http://www.uniformterminology.unito.it/ >]

Law Reviews:Law Reviews:• European Private Law Review [< http://www.kluwerlawonline.com/productinfo.php?

pubcode=ERPL> ]• Zeitschrift für Europäisches Privatrecht [ http://rsw.beck.de/cms/main?site=ZEuP> ]

Unorthodox yet Critical Unorthodox yet Critical QuestionsQuestions

• Is it still justified to separate private and commercial law in the 21st century?

• Why the neglect of the problems and laws of other parts of Europe [but the few main systems]?

• Why the resistance & ignorance to influences coming outside Europe (primarily United States) in the field of private and commercial law – and not in many regulatory fields (e.g., antitrust/competition law, capital markets and securities regulation)?

• Where are the concrete results of the many EU & European Projects? Why the constant rewriting?

• Is the European solution rather in minimal harmonization of private law and enactment of common ‘regulations’ to address concrete problems? (E.g., tailor-made consumer protection law).

Nothing Changed since 2003?Nothing Changed since 2003?

MAURO BUSSANI in 2003MAURO BUSSANI in 2003

“There is a strong disagreement among the experts … [s]ome of … [s]ome of them maintain that a code is absolutely necessary in order them maintain that a code is absolutely necessary in order to shape a truly common European lawto shape a truly common European law, while other believe that this project is unworkable, either because the divergences among the national systems are still too serious (and this implies that the situation may change in the future, and a code may eventually be feasible), or because legal harmony can, or or because legal harmony can, or must, be achieved by means other than a codemust, be achieved by means other than a code.”

Mauro Bussani, the Driving Forces behind a European Civil Code, in: Zbornik Pravnog Fakulteta Sveučilišta u Rijeci, [the law review of the Law School of Rijeka, Croatia], Suppl. Broj 3, xx-xx (2003), at 9.

THE COMMISSION ON THE COMMISSION ON EUROPEAN CONTRACT LAWEUROPEAN CONTRACT LAW(THE LANDO COMMISSION) (THE LANDO COMMISSION)

“The Commission on European contract law is the author of the Restatement called Principles of

European Contract Law in the framework of the Resolutions of the European Parliament on the

Codification of Private Law”

< http://www.jus.uio.no/lm/eu.principles.lando.commission/doc.html#9 >

The Aim of the Principles The Aim of the Principles

The PECL’s primary objective is “to serve as a basis for a “to serve as a basis for a European Code of Contracts. They are intended as a first European Code of Contracts. They are intended as a first step [and yet] they differ from the American Restatement on step [and yet] they differ from the American Restatement on Contracts because they require a more radical approach. Contracts because they require a more radical approach.

They do not simply select from among several solutions They do not simply select from among several solutions extant in a single legal system; as they must provide extant in a single legal system; as they must provide workable solutions for a widely divergent legal environmentworkable solutions for a widely divergent legal environment, , they are designed to embody rules that do not exist as such they are designed to embody rules that do not exist as such in any European legal systemin any European legal system.”

Ole Lando, Principles of European Contract Law: An Alternative to or a Precursor of European Legislation, 40 Am. J. Comp. L. 573, 577 (1992) (published also in RabelsZ 261 [1992]).

Achievements

1982: establishment of the commission-non-governmental body of legal scholars (mostly academics)-none appointed by a government-subsidies from the EU and various foundations and enterprises

1995: published the first part of the Principles (PECL) (with comments and notes)

1998: published the second edition of the Principles (PECL) [< http://www.jus.uio.no/lm/eu.contract.principles.1998/index.html>]

2003: part III of the PECL

However: the PECL remains soft lawsoft law

THE ACQUIS GROUPTHE ACQUIS GROUP

The ‘Principles of Existing EC Contract Law’ The ‘Principles of Existing EC Contract Law’ (Acquis Principles)(Acquis Principles)

[English text available at <http://www.acquis-group.org/>]

The Acquis Group’s Mission The Acquis Group’s Mission StatementStatement

THE REASON:THE REASON:“On 12 February 2003, the European Commission published its communication ‘A More Coherent European Contract Law - An Action Plan.’ In order to foster a transparent consultation procedure, the Commission has asked stakeholders to comment on the issues raised. One of the most important fields of discussion concerns the intention of the Commission to form a ‘Common Frame of Reference.’

THE MISSION:THE MISSION:“The Acquis Group intends to contribute to the task of providing material for the Commission to build the Common Frame of material for the Commission to build the Common Frame of Reference. Reference. Its task is to derive common "Principles of the Existing EC Private Law" following a new approach by focusing upon the genuine EC Law itself instead of comparing different national legal orders. Its research, which will be published as "Principles of the "Principles of the Existing EC Contract Law",Existing EC Contract Law", can serve as building material for the Common Frame of Reference.” See <http://www.acquis-group.org/>

THE TRENTO THE TRENTO PROJECTPROJECT

““Stating it in very simple terms, we are seeking to unearth the Stating it in very simple terms, we are seeking to unearth the common core of the bulk of European private law, i.e., of what common core of the bulk of European private law, i.e., of what

is already common, if anything, among the different legal is already common, if anything, among the different legal systems of European Union member states.” systems of European Union member states.”

Mauro Bussani & Ugo Mattei, the Common Core Approach Mauro Bussani & Ugo Mattei, the Common Core Approach

Goals – Legal Cartography Goals – Legal Cartography < < http://www.jus.unitn.it/dsg/common-core/approach.html > >

The ‘Combined’ MethodThe ‘Combined’ Method

HOW? - Schlesinger’s HOW? - Schlesinger’s Factual ApproachFactual Approach

• Hypotheticals (series of facts constituting hypothetical cases) used to allow for dialogue among legal scholars with different cultural background.

• Questionnaires; Questionnaires;

Rudolf b. Schlesinger & P. Bonassies (gen. eds.), Formation of Contracts: A Study of the Common Core of Legal Systems (Dobbs Ferry, N.Y., Oceana, London, 1968.

WHAT? - Sacco’s Analysis WHAT? - Sacco’s Analysis of Legal Formantsof Legal Formants

• Presumption that statutory (written) law, scholarly analysis & court decisions do notnot provide a full picture of what full picture of what makes lawmakes law

• Domestic lawyers presume many ‘legal & meta-legal ‘legal & meta-legal formantsformants’ which are invisible to foreigners

• E.g., the same rule in the Civil Codes of two countries may produce radically different outcomes

Rodolfo Sacco, Legal Formants (1991), American Journal of Comparative Law.

The Questionnaires: THE The Questionnaires: THE MORTGAGE GROUPMORTGAGE GROUP

FIRST PART - General questions:

Please provide an overview of the basic features of the law an overview of the basic features of the law in your country as it relates to security rights over immovable assets. Your overview should contain an outline of the following features of your system:

i) The range of immovable assets which may be subjected to security rights;

ii) The range of types of security which may be held over immovable assets;

iii) The range of methods by which security rights are created and the role of registration;

iv) The extent to which the major form of security right is accessory to the loan it secures (nature and degree of accessority) and the extent to which the major form of security right is specific to the immovable assets over which it is held (nature and degree of specificity);

[…].

The Questionnaires: THE The Questionnaires: THE MORTGAGE GROUPMORTGAGE GROUP

SECOND PART – Hypothetical cases:E.g., “Case 15E.g., “Case 15 Daniel granted bank B a security over his house for a loan. Five

years later Daniel defaults on the loan.

The bank wants to enforce its security by availing itself of a clause of the security agreement whereby, if Daniel defaults, bank B automatically becomes absolute owner of the house.

Daniel claims that such a clause is invalid and unenforceable.”

[US: strict foreclosure – Civilian systems: lex commissoria]

The Questionnaires: THE The Questionnaires: THE MORTGAGE GROUPMORTGAGE GROUP

THIRD PART – Meta-Legal Formants:“[…] Finally, the level called “Metalegal Formants” asks the

reporter to provide any other information that she considers provide any other information that she considers relevant and that affect the operative and descriptive levelsrelevant and that affect the operative and descriptive levels, such as

- policy considerations,- economic factors, - social context and values, - reform proposals, - as well as the structure of the legal process (organization of

courts, administrative structure and practice, etc.)

when it is relevant for the solution of a given problem.”

Common Core PublicationsCommon Core Publications• Published Books Reinhard Zimmermann and Simon Whittaker, Good Faith in European

Contract Law, Cambridge University Press, 2000 (ISBN 0-521-77190-0)• James Gordley, The Enforceability of Promises in European Contract Law, Cambridge University

Press, 2001 (ISBN 0-521-79021-2)• Mauro Bussani and Vernon V. Palmer, Pure Economic Loss in Europe, Cambridge University

Press, 2003 (ISBN 0-521-82464-8)• Eva-Maria Kieninger, Security Rights in Movable. Property in European Private Law, Cambridge

University Press, 2004 (ISBN 0-521-83967-X) and 2009 (ISBN-13: 9780521104142)• Franz Werro and Vernon V. Palmer, The Boundaries of Strict Liability in European Tort Law, “,

Stämpfli-Carolina Academic Press, 2004 (ISBN 1-59460-005-8 / 978-1-59460-004-3)• Ruth Sefton-Green, Mistake, Fraud and Duties to Inform in European Contract Law, “Cambridge

University Press, 2005 (ISBN 0-521-84423-1) and 2009 (ISBN-13: 9780521844239)• Michele Graziadei, Ugo Mattei, Lionel Smith, Commercial Trusts in European Private Law,

Cambridge University Press, 2005 (ISBN 0-521-84919-5) and 2009 (ISBN-13: 9780521849197)• Barbara Pozzo, Property and Environment -.Old and New Remedies to Protect Natural

Resources in the European Context, Stämpfli-Carolina Academic Press, 2007 (ISBN 978-3-7272-2030-2)

• Thomas MÖllers and Andreas Heinemann, The Enforcement of Competition Law in Europe “Cambridge University Press, 2008 (ISBN-13: 9780521881104)

• Monika Hinteregger , Environmental Liability and Ecological Damage in European Law, “Cambridge University Press, 2008 (ISBN-13: 9780521889971)

• J. Cartwright and M. Hesselink, Precontractual Liability in European Private Law, Cambridge University Press, 2009 (ISBN-13: 9780521516013)

• G. Brüggemeier, A. Colombi Ciacchi and P. O’Callaghan (eds), Personality Rights in European Tort Law, Cambridge University Press, 2010 (ISBN-13: 9780511685989).

THE EBRD SECURED THE EBRD SECURED TRANSACTIONS REFORM TRANSACTIONS REFORM PROJECTPROJECT

“Recognising the potential role of security in easing the chronic shortage of credit in the former communist countries,

the EBRD selected secured transactions laws for its first major legal transition project in 1992. Since then, it has been

constantly working to achieve improvement in this area.”

John Simpson & Joachim Menze, Ten Years of Secured Transactions Reforms (Law in Transition, 2000), at 20.

The EBRD Model Law

1994: 1994: Final Draft of the EBRD Model Law on Secured Final Draft of the EBRD Model Law on Secured Transactions (accepted on the Annual Meeting in St. Petersburg/Russia)

- compatible with UCC Article 9 as well as with the Australian, Canadian and New Zealand’s Personal Property Security Acts

- tried to find the balance between the registration-based common law systems and the registration-hostile German law (yet more influenced by common law solutions)

Later:Later: - Core Principles for a Secured Transactions Law (<

http://www.ebrd.com/pages/sector/legal/secured/core.shtml >)

- - Guiding principles for the development of a charges registry

ORGANIC DEVELOPMENT ILLUSTRATED

THE FATE OF NEWCOMER ADVANCED CONTRACTS IN CENTRAL AND EASTERN

EUROPE: FRANCHISE CONTRACTS

How Do Courts Shape Development in How Do Courts Shape Development in CEE?CEE?

• 1

1990

Beginning oftransition tocapitalism

1995

New transaction

appears

1998

Firstdisputes

& problems- Court proceedings

2003

Supreme (or high) Court decision

- Voluntary adherence -

2009?2009?

If the local parliament not “too busy” with

other things – will become regulated

FRANCHISE IN HUNGARY (1)FRANCHISE IN HUNGARY (1)• More than 500 businesses claim to be a ‘franchise system’ on the Hungarian

Franchise Associations’ website;

• Irrespective of the importance, ‘franchise’ is not a ‘nominated’ (i.e., regulated) contract in Hungary;

- plan: to include it into the new Civil Code (IN THE MEANTIME BECAME EGULATED BY THE CIVIL CODE, BECAME A NOMINATED CONTRACT)

- [earlier] in case of dispute, the courts could choose to apply the rules on one of the following nominated contracts:

1. ‘sales’ (“adásvétel”) or 2. ‘commission’ (“megbízási szerződés”) or 3. undertaking contract (“vállalkozási szerződés”) or 4. licensing.

• PRICE:PRICE: UNCERTAINTY AS TO THE RIGHTS AND DUTIES OF PARTIES UNCERTAINTY AS TO THE RIGHTS AND DUTIES OF PARTIES

Nagy Csongor István & Zsófia Oláh, Chapter on Hungary, volume I, p. 289, in: Messmann & Tajti, the Case Law of Central and Eastern Europe – Enforcement of Contracts (EUP, 2010).

FRANCHISE IN HUNGARY (2)

The problem of CHARACTERIZATION:The problem of CHARACTERIZATION:- In case of ‘franchise’ agreements, the court has to apply the

rules of that nominated contract, which DOMINATES in the given contract (LEVEL OF SUBJECTIVITY?);

- E.g., the obligations of the FRANCHISEE:

a/ If rules on commission contracts commission contracts are applied:

- due diligence but NOT achieving a particular result

b/ If rules on undertaking contracts undertaking contracts are applied:

- due diligence INSUFFICIENT – particular result must be achieved (e.g., establishing a clientele of a certain level)

FRANCHISE IN POLAND: CAN THE FRANCHISE IN POLAND: CAN THE ASYMMETRIC NATURE ASYMMETRIC NATURE OF FRANCHISE OF FRANCHISE

BE TOLERATED? BE TOLERATED?

Decision of the Appeal Court in Katowice (4 March 1998, 1 ACa 636/98)

- Franchisees wanted to get out of franchise as the scheme has proved to be unprofitable to them;

- Have tried to rely on the argument that the franchise contract was asymmetric and their business failed because franchisor dictated everything;

- Argument:Argument: the franchise contract cannot be enforced as its asymmetric nature is against the principles of the freedom of contract and good morals;

- First instance courts ruled for the plaintiffs (franchisee) – yet the Appeal Court ruled against the application of “inherited old concepts of morals”;

FRANCHISE IN POLANDFRANCHISE IN POLANDExcerpts from the Judgment (2)Excerpts from the Judgment (2)

A. Nature of the newcomer ‘franchise’:A. Nature of the newcomer ‘franchise’:““There cannot be any doubt that [franchise] is an There cannot be any doubt that [franchise] is an innominate innominate contractcontract, typified by , typified by mixed contentmixed content, merging elements of such , merging elements of such nominated contracts as lease of rights, sale, mandate, license nominated contracts as lease of rights, sale, mandate, license and agency.”and agency.”

B. The asymmetric nature:B. The asymmetric nature:““Distributive franchise is usually featured by strong dependence, even Distributive franchise is usually featured by strong dependence, even subordination, to the person organizing the distribution network. subordination, to the person organizing the distribution network. Charging Charging uniform prices for given types of products is also a feature this way of doing uniform prices for given types of products is also a feature this way of doing business. Granting the network partners a free hand to decide on prices could business. Granting the network partners a free hand to decide on prices could constitute a hold on development of the distributive network. […].constitute a hold on development of the distributive network. […].

There are no grounds to share the plaintiff’s view that only they were There are no grounds to share the plaintiff’s view that only they were burdened with the commercial risks of the business undertaking. burdened with the commercial risks of the business undertaking. It is the It is the franchisor who shares with their partners its schemes of conducting business franchisor who shares with their partners its schemes of conducting business activity, allows the use of its business name, trademark, logotypes, professional activity, allows the use of its business name, trademark, logotypes, professional experience etcexperience etc. . Failures in the pursuit of such activity cannot remain without Failures in the pursuit of such activity cannot remain without any impact on the general image of the franchisor on the market, its any impact on the general image of the franchisor on the market, its

commercial standing, competitiveness commercial standing, competitiveness …” …” .”.” (Messmann & Tajti, p. 656-57.)(Messmann & Tajti, p. 656-57.)

FRANCHISE IN POLANDFRANCHISE IN POLANDExcerpts from the Judgment (3)Excerpts from the Judgment (3)

C. Can the franchisor charge royalties in addition to fees (or C. Can the franchisor charge royalties in addition to fees (or charging two ‘fees’)?charging two ‘fees’)?

“The Circuit Court did not pay sufficient attention to the scope of scope of the respective obligations of the franchisorthe respective obligations of the franchisor and to the nature of the contract concluded by the parties. [Yet to do so would have been important given that by the virtue of this contract] the franchisor granted to its partners not just access to a complex network but also to its intellectual property rights, [and on top of that it obliged itself to] provide on-going help [to franchisees] in realization of the commercial undertaking. There are, therefore, no grounds to conclude, as the Circuit Court did, that the two types of fees overlap and that the that the two types of fees overlap and that the provision regarding the obligation to pay the initial fees provision regarding the obligation to pay the initial fees violates good moralsviolates good morals..” Messmann & Tajti, at 659.

Thank you for your attention and Thank you for your attention and questions!questions!