Conflict of Representation Contract: When a European Question Blocks the Proceedings

Imagine you are in Capbreton, owner of a small business. You signed a representation contract with a German company to distribute its products in the Landes region. Everything goes well until the day the company abruptly terminates the contract, without notice or compensation. You feel wronged and decide to take the matter to the French courts. But the contract contains a jurisdiction clause in favour of Luxembourg. Suddenly, a question arises: which court has jurisdiction? And above all, what interpretation should be given to the 1968 Brussels Convention on jurisdiction? This is exactly the kind of puzzle the Court of Cassation had to resolve in 1981.

This decision, although technical, concerns anyone who signs international contracts – and even certain domestic contracts, if you deal with a representative based abroad. It reminds us that, when European law is ambiguous, French judges must sometimes put the case on hold and refer the matter to the Court of Justice of the European Union (CJEU). You thought your case would be settled in a few months? Think again, because a stay of proceedings can change everything.

So, what exactly does the judgment of 2 April 1981 say? And above all, how can you anticipate it to prevent your own case from getting bogged down? That is what we will see.

The facts: a story like any other

Mr. Rivenel, domiciled in Strasbourg, was a commercial representative for a German company. His representation contract provided that he was to canvass customers in France, particularly in the Capbreton and Mimizan area. The obligations were reciprocal: Mr. Rivenel was to develop sales, the company was to pay him commissions and indemnities.

But the German company decided to terminate the contract without respecting the statutory notice period. Mr. Rivenel found himself without income, and his clientele indemnity, notice period indemnity, and paid holiday indemnity were not paid. He sued the company before the Conseil de prud'hommes (employment tribunal) of Strasbourg, which declared itself competent. The company contested this: according to it, the place of performance of the contract was not France, but Germany, because the contract was managed from its head office.

The question put to the Court of Cassation was: how to determine, within the meaning of Article 5(1) of the Brussels Convention of 27 September 1968, the place where the obligation must be performed? For it is this place that determines the jurisdiction of the court. Mr. Rivenel argued that the principal obligation (to pay commissions and indemnities) had to be performed in Strasbourg, where he resided and carried out his activity. The company, on the other hand, argued that the obligation had to be performed at its head office in Germany.

The Court of Cassation, seised as the final court of appeal, considered that this question of interpretation of the Convention was serious. It therefore stayed proceedings and referred the matter to the Court of Justice of the European Communities (CJEC). In other words, Mr. Rivenel's case was put on hold, pending the European judges' ruling on the interpretation.

The reasoning of the court — dissected

The reasoning of the Court of Cassation is based on two fundamental texts: Article 177 of the Treaty establishing the European Economic Community (EEC) and Article 5 of the Protocol of 3 June 1971. Article 177 (now Article 267 TFEU) allows any national court to refer a preliminary question (i.e., a request for interpretation of European law) to the CJEC. But it requires national courts whose decisions are not subject to appeal (such as the Court of Cassation) to refer the matter to the CJEC as soon as a question of interpretation arises.

Here, the Court of Cassation found that the dispute concerned the performance of a representation contract with reciprocal obligations partly performed in France. The determination of the place of performance of the obligation (to fix jurisdiction) was not straightforward. It therefore considered that there was a "serious difficulty of interpretation" justifying a stay of proceedings.

This decision is not a reversal, but a strict application of the preliminary reference procedure. It confirms that national judges must not decide an ambiguous question of European law on their own: they must refer to the CJEC. This is a guarantee of uniformity in the application of European law. For the parties, this means that the trial may last longer, but the final decision will be more legally certain.

The arguments of the parties were classic: Mr. Rivenel invoked the place of his professional activity, the company invoked its head office. The Court did not take sides on the merits; it simply said: "Before deciding, we must ask the CJEC what exactly 'place of performance of the obligation' means in this type of contract."

What this means for you — practically

You own a property in Mimizan that you lease to a commercial representative? If a dispute arises over the representation contract, and the representative is based abroad, the question of jurisdiction can be crucial. If you are the landlord, you want the tenant to pay his rent in France, at the location of the property. But if the representation contract contains a jurisdiction clause in favour of a foreign country, beware: the French courts might declare themselves incompetent, and you will have to litigate abroad. If the contract is silent, Article 5(1) of the Convention applies, and the place of performance of the obligation becomes decisive.

For a commercial tenant in Capbreton who has signed a distribution contract with an Italian company: if the company breaches the contract, you can sue it in France if the obligation to pay commissions or perform services is performed in France. But if the company contests this, the French judge may stay proceedings and refer the matter to the CJEU, which lengthens the delays. In practice, expect at least 12 to 18 additional months.

Numerical example: a representative in Mimizan loses his contract and claims €50,000 in indemnities. He sues the Italian company before the court of Mont-de-Marsan. The company contests jurisdiction. If the judge considers that there is a serious difficulty, he stays the proceedings. The representative will have to wait for the CJEU's opinion, which can take 2 years. During this time, he receives nothing, unless he obtains interim payments (provisional measures).

If you are in this situation, you should: 1) check whether your contract contains a jurisdiction clause; 2) gather evidence of the place of performance of the obligations (invoices, correspondence, place of work); 3) consider asking the judge for an interim payment to avoid being left without resources during the wait.

Four tips to avoid this type of dispute

• Draft a clear jurisdiction clause: in your representation contract, specify exactly which court will have jurisdiction in case of a dispute. Avoid vague wording like "any dispute shall be brought before the competent courts." Prefer the court of the place where you carry out your activity, in France, to avoid preliminary references.
• Document the place of performance of the obligations: keep all evidence showing that your obligations (canvassing, sales, reporting) are performed in France. This may include emails, purchase orders, appointment diaries. In case of a dispute, this evidence will be decisive in determining jurisdiction.
• Include a mediation or arbitration clause: alternative dispute resolution (ADR) methods often avoid lengthy court proceedings. If you opt for arbitration, the place of arbitration can be freely chosen, which avoids questions of international jurisdiction.
• Anticipate delays in case of a preliminary reference: if you have to go to court, be aware that if a serious European question arises, the trial may be suspended for several months. Prepare financially and consider requests for interim measures (interim payment, expert appraisal) to avoid being left without a solution.

Further reading: related case law and developments

Before this decision, the Court of Cassation had already faced difficulties in interpreting the Brussels Convention. For example, in a judgment of 18 June 1975 (Tessili case), the CJEC specified that the place of performance of the obligation should be determined according to the law applicable to the contract. Here, the Court of Cassation followed the same logic: it did not decide itself, but referred the matter to the CJEC. Since then, the CJEC has rendered several judgments specifying the notion of obligation within the meaning of Article 5(1), notably in the De Bloos case (1976) and the Shenavai case (1987).

The trend of the courts is increasingly favourable to the uniformisation of European law through preliminary references. Since the 1981 decision, the Court of Cassation does not hesitate to stay proceedings as soon as a question of interpretation is serious. For practitioners, this means that one must systematically check whether the dispute involves an international element (foreign party, contract performed abroad) and anticipate a possible reference.

For the future, the entry into force of the Brussels I Regulation (recast) (No 1215/2012) has simplified certain rules, but the principle of preliminary reference remains. French judges continue to use it regularly, as it guarantees a uniform application of European law.

Key points to remember

FAQ:

• What is a stay of proceedings? It is a decision by the judge to suspend the trial pending an event, here the opinion of the CJEC.
• Can I challenge a stay of proceedings? No, the stay is a decision of judicial administration that is not subject to appeal. However, you can ask the judge not to stay if there is no serious difficulty.
• How long does a preliminary reference take? On average 12 to 18 months, sometimes longer if the case is complex.
• What if my opponent contests the jurisdiction of the French court? Gather evidence of the place of performance of the obligation in France and ask the judge not to stay if the question has already been decided by the CJEC.
• Does this decision still apply today? Yes, the principle of preliminary reference is still in force, but the texts have evolved (Article 267 TFEU, Brussels I Regulation (recast)).

Are you in a similar situation? A first 30-minute consultation with Maître Zakine (€45) could save you months of proceedings — and often much more. Book an appointment →