Franchisor bound by its own failed dispute settlement procedure

Franchise organizations sometimes have their own dispute resolution procedure. Can a franchisor bypass an agreed own dispute settlement procedure in the event of dysfunction of the disputes committee and submit the dispute to the court? The District Court of Amsterdam, 13 July 2022, ECLI:NL:RBAMS:2022:3653, had to rule whether this is the case.

The general meeting of members of a cooperative franchise organization had established a dispute settlement procedure. This arrangement means that disputes will exclusively be settled in the first instance by binding advice from the disputes committee of the franchise organization.

A franchisee terminates the franchise agreement and is obliged to pay compensation to the franchisor under the agreement. To this end, the franchisor files a claim with the court.

It is not in dispute between the parties that the dispute settlement has been legally agreed upon and that on the basis of that settlement the claim must be submitted for binding advice to the Disputes Committee. This means that the franchisor is in principle inadmissible in its claim before the court.

The franchisor states that shortly after the settlement of disputes had been adopted, it became clear that setting up a disputes committee was not possible. The franchise organization was too small in size to set up a disputes committee. The dispute resolution scheme therefore proved to be unworkable. That is why the dispute procedure in the general meeting of members was changed and it was decided that existing disputes would be submitted to the civil court. However, the franchisee was no longer a franchisee at that time, so that, according to the court, the amended dispute settlement procedure does not apply to the franchisee in question.

According to the franchisor, the franchisee was aware of the impracticability of the dispute settlement procedure. Because the franchisee had not invoked the dispute settlement procedure, it has, according to the franchisor, forfeited its right to invoke the dispute settlement scheme. The court is of the opinion that the franchisee had in fact invoked the dispute settlement procedure.

The alleged impossibility of setting up a disputes committee does not preclude recourse to the dispute settlement procedure. According to the court, the franchisor could have formed an ad hoc committee to issue binding advice on this dispute. The franchisor is ruled against and will still have to submit the dispute to the Disputes Committee.

An internal dispute settlement procedure within a franchise organization can sometimes be a good instrument for settling disputes in-house. It is important, however, to provide for a regulation in the event that it is not possible to appoint a disputes committee.

mr. A.W. Dolphijn
Ludwig & Van Dam lawyers, franchise legal advice.
Do you want to respond? Then email to dolphijn@ludwigvandam.nl

Other messages

Infringement of exclusive service area by franchisor in connection with formula change dated February 27, 2017

On 30 January 2017, the provisional relief judge of the District Court of Noord-Holland, ECLI:NL:RBNHO:2017:688 (Intertoys/franchisee), was asked how to deal with the

By Alex Dolphijn|27-02-2017|Categories: Dispute settlement, Franchise Agreements, Statements & current affairs|Tags: , |

Forecasts at startup franchise formula

The Amsterdam Court of Appeal ruled on 14 February 2017, ECLI:NL:GHAMS:2017:455 (Tot Straks/franchisee) on the question whether the franchisor had provided an unsatisfactory prognosis and whether the

Mandatory transfer of franchise business to franchisor?

On January 23, 2017, the District Court of Amsterdam, ECLI:NL:RBAMS:2017:412 (CoffeeCompany/Dam Spirit BV) rendered a judgment on the question whether a franchisee upon termination of the cooperation

Transfer customer data to franchisor

In its judgment of 10 January 2017, ECLI:NL:GHAMS:2017:68 (OnlineAccountants.nl), the Amsterdam Court ruled, among other things, on the question of how customer data should be transferred.

Franchise Closing Sale – Who Gets the Sale Proceeds?

The judgment of the District Court of the Northern Netherlands dated 12 October 2016, ECLI:NL:RBNNE:2016:5061 (Administrator/Expert Group and Rabobank), focused on the question whether the franchisor, together with the bank,

By Alex Dolphijn|10-02-2017|Categories: Dispute settlement, Franchise Agreements, Statements & current affairs|Tags: , |

Column Franchise+ – mr. Th.R. Ludwig: “Judge: franchisor’s duty of care comparable to that of a bank”

Various judgments in 2016 made it clear how high the standard of care for a franchisor towards its franchisees is.

Go to Top