In an increasingly open economic world, borders are becoming increasingly blurred. A French company may seek to conquer the German market using a local broker; a foreign investor may use an intermediary in France to find property opportunities; an individual may use an online brokerage platform based in another EU country. Using a broker in an international context has become commonplace.
While this opens doors, it also raises specific legal issues that can quickly become a headache if they are not anticipated. Imagine a disagreement with your foreign-based broker: which court should you take the case to? Or, if the contract is silent, which rules will apply - those of France, those of the broker's country, or even those of a third country?
These questions are not trivial, because the laws and procedures vary considerably from one country to another. The purpose of this article is to give you a few keys to understanding the main legal issues involved in international brokerage and, above all, to draw your attention to the importance of a well-drafted contract.
Which court has jurisdiction in the event of a dispute?
The first question that arises in the event of a dispute with a foreign partner is that of jurisdiction: where should legal action be taken? For disputes within the European Union, it is mainly Regulation (EU) No. 1215/2012 (known as "Brussels I bis") that lays down the rules.
The principle: the court of the defendant's domicile
The basic rule is simple: in principle, a person (natural or legal) must be sued in the courts of the Member State in which he or she is domiciled or has his or her registered office. This is the "defendant's forum". If your French company wishes to sue a broker domiciled in Spain for improper performance of its contract, you should normally bring the case before the Spanish courts. This rule is designed to protect the defendant by allowing him to defend himself before his "natural judges".
The contractual option: the place of performance of the service
Fortunately, the European Regulation offers a practical alternative for contracts, particularly contracts for the provision of services, a category to which the brokerage contract belongs. Article 7.1 of the Regulation allows the claimant to choose to bring proceedings in the court for the place where where the services were or should have been provided.
Where is this location for a broker? This is generally the place where the broker carries out his main activity on behalf of his client. For example, if you instruct an Italian broker to prospect the Italian market, the broker's main place of performance is likely to be in Italy. This option often makes it possible to bring the dispute closer to the place where the facts took place and where the evidence can be gathered more easily. It should be noted, however, that determining this place can sometimes be complex if the broker's activity extends over several countries.
The safest solution: the jurisdiction clause
Faced with the potential uncertainties of the default rules, the best solution is often to think ahead and agree with your broker which court will have jurisdiction in the event of a dispute. This is known as a jurisdiction clause.
Article 25 of the Brussels I bis Regulation validates such clauses in international contracts, provided that they are clear and, in principle, in writing (or in a form consistent with the habits of the parties or with international trade practice). For example, you could agree in the contract that "Any dispute relating to this contract shall be subject to the exclusive jurisdiction of the courts of Marseille".
If properly drafted, such a clause offers invaluable legal certainty: it avoids lengthy and costly debates about which court has jurisdiction and enables the parties to know in advance where any legal proceedings will take place. This is an essential point to negotiate when concluding an international brokerage contract.
Which law applies to the brokerage contract?
Once the competent court has been determined, another fundamental question arises: what law will that court apply to settle the dispute? The rules governing brokerage contracts (obligations of the parties, remuneration, termination of the contract, etc.) may differ from one country to another. Within the European Union (except Denmark), it is mainly Regulation (EC) No 593/2008 (known as "Rome I") that determines the law applicable to contractual obligations.
The fundamental principle: the choice of the parties (law of autonomy)
As with the jurisdiction of the courts, the golden rule in matters of applicable law is the autonomy of the will. Article 3 of the Rome I Regulation allows parties to explicitly choose the law that will govern their contract. You can therefore agree with your German broker that your contract will be governed by French law, or vice versa.
This choice is crucial. It makes it possible to determine in advance all the rules that will apply to your contractual relationship, once again providing essential predictability and legal certainty. The choice must be made expressly, or be the certain result of the provisions of the contract or the circumstances of the case. The simplest and safest way is to write it down in black and white in a dedicated clause: "This contract shall be governed by and interpreted in accordance with [French/German/etc.] law".
In the absence of choice: the law of characteristic performance
But what happens if the contract says nothing about the applicable law? The Rome I Regulation provides for default rules. For contracts for the provision of services (which includes brokerage), Article 4.1.b states that the law of the country where the service provider has its habitual residence.
In practical terms, this means that if you enter into a contract with a broker established in Belgium without choosing the applicable law, it is very likely that Belgian law will apply to your contract. Although this default rule has its logic (the law of the place where the main service is performed), it can lead to the application of a law that one of the parties is unfamiliar with, with all the uncertainties that this entails.
The special case of the 1978 Hague Convention
There is a specific international convention, ratified by France, on the law applicable to agency contracts and representation (Hague Convention of 14 March 1978). It contains detailed rules distinguishing between the relationship between the broker (intermediary) and his client (principal) and the relationship with third parties. These rules often designate the law of the professional establishment of the intermediary or that of the place where he carries out his activity.
The relationship between this specialised convention and the European "Rome I" regulation can be complex for lawyers. For you, the customer or broker, the essential message remains the same: the complexity of the default rules reinforces the major interest of clearly choose the applicable law in your contract.
Beware of "police laws
One final point to bear in mind: even if you have chosen a foreign law to govern your contract, certain mandatory French rules (or those of another country with a strong connection to the contract) may still apply. These are known as "overriding mandatory rules": provisions deemed so essential to safeguard the public interests (political, social or economic organisation) of a country that they apply regardless of the law normally applicable to the contract (Article 9 of the Rome I Regulation).
For example, the highly protective status of commercial agents in France, in particular their mandatory right to an indemnity on termination of the contract, could be regarded as a mandatory rule that could be applied to a contract governed by foreign law if the agent's main place of business is in France.
Practical points to watch out for
In addition to the technical rules on jurisdiction and applicable law, here are a few practical tips to help you tackle an international brokerage transaction with peace of mind:
These issues are all the more relevant for brokers specialising in areas such as real estate or financewhere cross-border transactions are frequent.
These points of vigilance are essential for all forms of brokerage, whether it is thecommercial agent or transport broker.
- Take care when drafting the contract : This is the most important point. An international contract must be even more precise than a domestic contract. Clearly define the assignment, the territories concerned, the duration, the remuneration arrangements (currency, payment terms) and the reporting obligations.
- Include clear clauses on applicable law and jurisdiction As we have seen, this is the best way to avoid uncertainty and costly procedural disputes. Make sure that these clauses are valid with regard to European regulations or applicable conventions.
- Anticipate cultural and legal differences Commercial practices and expectations in terms of communication and negotiation may vary from one country to another. Similarly, specific local regulations (authorisations, taxes, etc.) can have an impact on the broker's business. Mutual understanding and anticipation of these differences are key to success. Don't hesitate to ask for local information or advice if you need it.
- Plan the language of the contract and communications To avoid misunderstandings, it is preferable to choose a contractual language that is understood by both parties and, if necessary, to provide translations.
International brokerage is a powerful lever for development, but it introduces a legal complexity that should not be overlooked. The issues of jurisdiction and applicable law are central, and can have major consequences in the event of a dispute. The best protection lies in anticipation: a clear, precise international contract with well thought-out choice-of-law and choice-of-jurisdiction clauses is your best ally in securing your cross-border operations.
Are you developing your business internationally and using brokers or intermediaries based abroad? Are you yourself an intermediary working with foreign customers? Our firm can help you draft and negotiate your international contractsin order to best protect your interests in this specific context.
Sources
- Regulation (EU) No 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters ("Brussels I bis").
- Regulation (EC) No 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations ("Rome I").
- The Hague Convention of 14 March 1978 on the Law Applicable to Agency Contracts and Agency (reference for information on the existence of specific rules).
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