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A WRITTEN ARBITRATION CLAUSE AGREED IN THE CONTEXT OF A WRITTEN DISTRIBUTION AGREEMENT WHICH HAD EXPIRED BUT CONTINUED AS AN ORAL DISTRIBUTION AGREEMENT REMAINS VALID AND EXCLUDES JURISDICTION OF COURTS

Thursday, October 29, 2020

In 1983 the Plaintiff distributor had been appointed by written agreement the exclusive distributor of certain contractual products and systems for various regions, including Greece. With each successor and renaming of the Supplier/ Defendant, the parties entered into a new exclusive distribution agreement, with the last written distribution agreement entered into in year 2000, for a fixed term of 5 years expiring in year 2005. This last written agreement contained an arbitration clause according to which any dispute which under Italian law could be subjected to arbitration will be referred to arbitration in Venice, Italy in accordance with the ICC Rules. If Italian law prohibited resolution through arbitration for any specific dispute, the Courts of Venice would have jurisdiction. In both cases (arbitration or courts) Italian law would govern.

After the expiration of this last written exclusive distribution agreement, the relationship continued without any further written agreement having been signed. Following the termination of the contract in 2013, Plaintiff raised a series of claims for damages in contract, in tort and based on the Commercial Agency Directive implementing Presidential Decree 219/91. Greece is one of those countries which have extended to exclusive distributors the protections afforded to commercial agents (Law 3557/2007). Indeed, goodwill indemnity and termination notice periods are deemed Greek mandatory law. On the other hand, Italian law does not recognize goodwill indemnity claims for distributors upon termination or expiration of their agreements.

The Court dealt held that the transformation of the distribution agreement into an oral indefinite term agreement didn’t affect the arbitration clause which had been agreed in writing in 2000 in the context of the expired written distribution agreement The arbitration clause remained valid. The Court ruled, that the fact that the distribution agreement had been converted into an oral indefinite term agreement did not affect the arbitration clause due to its autonomy. Consequently, the arbitration clause which had been agreed in writing in 2000, as required by Italian law which rules the validity of the clause, remained valid, and the arbitration agreement had not been terminated and continued to apply to any dispute arising from the distribution agreement.

The Court ruled that there was no evidence that the arbitration clause was invalid. It had been freely negotiated. The scope of the arbitration clause was sufficiently broad to include all claims in contract and tort and statute. The Court ultimately held that it didn’t have jurisdiction to rule on the claims and had no jurisdiction over the case whatsoever, and referred the matter to arbitration as per the arbitration clause.

Nicholas Georgiades, Senior Associate Ballas, Pelecanos & Associates LPC argued for Defendant