Austria

• Pre-contractual disclosure obligations of the franchisor

France

• Franchising: the preparation of an upcoming competing business by a franchisee does not constitute a breach of its non-compete clause
• Abrupt termination of an established commercial relationship: overview of recent case law
  
  
  

Germany

• Accessibility in franchising – what franchisors and franchisees now have to consider
  
  
  

Hungary

• Digital consumer protection in gaming: hungary’s enforcement sweep and broader strategic lessons

Netherlands

• The parallel imposition requirement of article 4(b)(i) of regulation no. 330/2010

Portugal

• Rethinking the use of agency contracts: lessons from a 2025 lisbon court ruling

United kingdom

• New rules on fake and misleading consumer reviews

France

Franchising: the preparation of an upcoming competing business by a franchisee does not constitute a breach of its non-compete clause

Court of Cassation, Commercial Chamber, 19 March 2025, No. 23-22.925
Court of Cassation, Commercial Chamber, 19 March 2025, No. 24-13.066

In two rulings dated 19 March 2025, the French Court of Cassation held that a franchisee is entitled to prepare a future competing business to that of the franchisor during the period covered by the non-competition clause, as long as the franchisee does not effectively begin operating the competing business before the expiration of the clause.

In these two cases, which involved parties from the same corporate group, a franchisee had entered into an agreement with a franchisor for the operation of a home care service for disabled and elderly persons. As is customary, the agreement imposed a non-compete obligation on the franchisee for the entire term of the agreement.

However, during the performance of the agreement, the franchisee initiated a competing project, undertaking various actions to that end.

The Court of Cassation was asked to determine whether this constituted a breach of the non-compete clause applicable to the franchisee, or more generally a breach of the franchisee’s duty of loyalty, and whether such conduct could therefore justify the termination of the franchise agreement.

The response from the Court of Cassation is clear and deserves to be quoted:

“The franchisee may, without breaching the non-compete clause contained in the franchise agreement or the loyalty and good faith duties, carry out preparatory acts for a business competing with that of the franchisor, provided that such business only effectively begins after the expiration of the franchise agreement and the non-compete obligation.”

Thus, according to the Court, it did not matter that the franchisee had filed trademarks, created several companies, and even communicated with clients by email and on Facebook concerning this upcoming business project: as long as the competing business was not effectively launched, the franchisee was free to prepare such project.

In other words, carrying out preparatory acts to launch a competing business is not a breach: the franchisee is free to prepare a competing project, even if it is still bound by a non-compete clause.

This position is consistent with the Court of Cassation’s case law (see Court of cassation, Commercial Chamber, 14 November 2018, No. 17-19.851) and should be approved in principle.

However, one aspect of the ruling raises questions: the tolerance shown by the Court in relation to the communication made by the franchisee on this competing project while still a member of the network. In our view, this specific conduct should have led the Court to consider that such behavior was contrary to the duty of loyalty and therefore wrongful.

Abrupt termination of an established commercial relationship: overview of recent case law

Court of cassation, Commercial Chamber, 26 February 2025, No. 23-50.012
Court of cassation, First Civil Chamber, 12 March 2025, No. 23-22.051
Court of cassation, First Civil Chamber, 2 April 2025, No. 23-11.456

In a series of rulings issued by the Commercial Chamber and the First Civil Chamber, the French Court of Cassation refines its case law relating to the conditions for holding a party liable for the abrupt termination of an established commercial relationship and reopens the debate regarding the nature of such actions: whether it is tort or contract law.

1. Clarification on the conditions for holding a party liable for the abrupt termination of an established commercial relationship

In a ruling dated 26 February 2025, the Commercial Chamber of the Court of Cassation clarified its case law on the abrupt termination of an established commercial relationship, reaffirming principles that are already well established regarding, on the one hand, the conditions for notifying the termination and the starting point of the notice period, and on the other hand, the identification of a situation of economic dependency.

With respect to the notification of termination, the Court of Cassation upheld a court of appeal’s ruling that had considered that the letter by which a company notifies its intention not to continue an established commercial relationship only starts the notice period granted to the victim of the termination if it specifies the date on which the relationship will end.

In that case, the lower court judges had ruled that the mere notification of a call for tenders likely to jeopardize the commercial relationship without any indication on the date on which the commercial relationship would effectively end, did not constitute a notice of termination with a notice period.

As for the characterization of the state of economic dependency, the Court of Cassation reaffirmed the principle that it is up to the party invoking a state of economic dependency to prove it. The dependency may not solely be deduced from the significance of the share of turnover generated with the company that initiated the termination.

2.  Reopening of the debate on the nature of the legal action for liability in relation to the abrupt termination of an established international commercial relationship: tort or contract law

In two rulings rendered less than a month apart, the First Civil Chamber of the Court of Cassation was asked to rule on the nature of the claim for liability in relation to the abrupt termination of an established commercial relationship in an international context.

The debate, which may appear slightly theoretical at first glance, has in fact significant practical implications for determining not only which courts have jurisdiction but also what law is applicable and, ultimately, the possibility of invoking the provisions of Article L. 442-1, II of the French Commercial Code which prohibit the abrupt termination of an established commercial relationship in international disputes.

In a first ruling dated 12 March 2025, the Court of Cassation reaffirmed its constant case law, which consists in qualifying such a legal action as tort in the international legal order, when the dispute falls outside the scope of EU law. The Court of Cassation also specified that international jurisdiction must be determined by extending the rules of domestic territorial jurisdiction.

In a second ruling dated 2 April 2025, the Court of cassation referred a question for a preliminary ruling to the Court of Justice of the European Union (CJEU) on whether a legal action for damages brought on the grounds of the abrupt termination of an established commercial relationship (in a dispute which falls within the scope of EU law) is based on tort, regardless of any contractual links that may have been established between the parties, within the meaning of the Rome I Convention (now Rome I Regulation) on the law applicable to contractual obligations and the Rome II Regulation on the law applicable to non-contractual obligations.

By doing so, the Court seems to be encouraging the CJEU to revisit its Granarolo decision (C-196/15) dated 14 July 2016, which classified the legal action as contractual as long as the commercial relationship was based on a contract, even a tacit one, between the parties.

Adopting a didactic approach, the Court of Cassation initially reiterates that, under both French domestic law and French international law, outside the scope of EU law, the legal action based on the abrupt termination of an established commercial relationship, which constitutes a restrictive trade practice, is classified as tort law and refers, in this respect, to the ruling issued on 12 March 2025.

Secondly, the Court seeks to present the CJEU's case law, in particular:

• The Granarolo ruling, according to which, in the presence of a tacit contractual relationship, a legal action for liability for abrupt termination must be classified as contract law;

• The Wikingerhof ruling (C-59/19) rendered by the Grand Chamber of the CJEU on 24 November 2020, according to which, where the claimant relies on the violation of an obligation imposed by law, without it being necessary to examine the content of the agreement to assess the lawfulness or unlawfulness of the conduct in question, the action falls under the category of tort (in that case, the claimant invoked competition law).

Thirdly, the Court of Cassation notes that the Wikingerhof ruling did not mention the prior Granarolo ruling, raising the question of whether the CJEU might have abandoned the Granarolo case law and whether the Wikingerhof decision should apply to cases involving restrictive commercial practices under French law, including the abrupt termination of an established commercial relationship.

The Court of Cassation therefore referred the following question for a preliminary ruling:

“The Court asks whether Article 1(1) of the Rome Convention of 19 June 1980 on the law applicable to contractual obligations and the Rome II Regulation on the law applicable to non-contractual obligations must be interpreted as meaning that a claim for damages based on the abrupt termination of established commercial relationships without the reasonable notice period required, not by the contract but by legal provisions relating to restrictive commercial practices, falls under the category of tort law, as suggested by the Wikingerhof ruling, or under the category of contract law, as previously indicated by the Granarolo ruling.”

The preliminary ruling that will be rendered by the CJEU will have a major impact on international disputes based on Article L.442-1, II of the French Commercial Code, which prohibits the abrupt termination of an established commercial relationship.

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