Arbitration clause in franchise agreement sometimes inconvenient
On 20 July 2016, the District Court of Gelderland, ECLI:NL:RBGEL:2016:4868, ruled on the validity of an agreement in a franchise agreement, whereby disputes would be settled by means of arbitration instead of by the “ordinary” court. This ruling shows that when opting for an arbitration clause in a franchise agreement, there are sometimes negative practical consequences that may not have been thought through in advance.
A franchisee has sued a franchisor for breach of obligations under the franchise agreement. In addition to the franchisor, the direct director and the indirect director of the franchisor have also been summoned. They are charged with liability on the basis of an independent unlawful act, or directors’ liability.
The franchisor opposes the jurisdiction of the ordinary court and points out that the franchise agreement stipulates that disputes are settled by means of arbitration. The court considers that the franchise agreement contains an arbitration clause and that the franchisor is therefore only bound by the arbitration clause with regard to those disputes. There is no arbitration clause with regard to the liability of the direct and indirect director. The main rule applies to this. This, despite the fact that the arbitration clause pertains to disputes “as a result of” the franchise agreement.
The conclusion is that with regard to the dispute against the franchisor, the court has no jurisdiction and the court can rule with regard to the direct and indirect director. This may lead to the unforeseen event that the disputes are, as it were, split and the factual bases may be the same, but the judgment of the court and the judgment of the arbitrator may differ.
When drawing up an arbitration clause, it is worth taking into account any related or analogous disputes that could not be brought before the same arbitral tribunal at the same time. In the present case, the court ruled that the arbitration clause cannot be broken, because splitting the case would lead to inefficient litigation.
mr. AW Dolphijn – Franchise lawyer
Ludwig & Van Dam Franchise attorneys, franchise legal advice. Do you want to respond? Go to dolphijn@ludwigvandam.nl .
Other messages
Agency: some outlines
In practice, questions are asked with some regularity regarding the legal nature
Rental price change
Following on from earlier published articles of my hand, I will once again deal with a tenancy law issue below.
Franchise Fees
An extremely important subject for both the franchisee and the franchisor that is invariably included in the franchise agreement concerns the franchise fees, often referred to as the term
Insured and well
Occasionally, a franchise agreement contains a clause that obliges the franchisee to take out legal expenses insurance.
Rayon protection II: limitation of the exclusive area.
As a follow-up to the contribution in the previous Newsletter, this time the (possibilities of) curtailment of the exclusive franchise area will be discussed. In most franchise agreements
Franchise Agreements and Terms and Conditions
Franchise agreements often include concise arrangements with regard to delivery and payment conditions.