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 .
![232court-min](https://www.ludwigvandam.nl/wp-content/uploads/2020/12/232court-min.jpg)
Other messages
A lower rental price
A lower rental price
Post non-compete clause
Post non-compete clause
Franchise & Law source of information 2015 no. 2 – A chronicle of franchise law over the first half of 2015 – mr. AW Dolphin
Franchise & Law source of information 2015 no. 2 - A chronicle of franchise law over the first half of 2015
Subdistrict court approval of the link between franchise and rental agreement remains necessary
A frequently recurring subject of litigation in matters between franchisors and franchisees
The set-off defense and the termination of the franchise agreement for an indefinite period
On 29 September 2015, the Arnhem-Leeuwarden Court of Appeal ruled on whether the franchisor could terminate the franchise agreement for an indefinite period.
Dutch Franchise Code bad for the franchise industry
Dutch Franchise Code bad for the franchise industry