International Negotiations and the French gendarme [Tribune].

Debates on the reform of commercial negotiation laws are stirring in the Palais Bourbon. The government mission is conducting thorough work. Concurrently, a few recurring controversies are emerging, among them those relating to international buying groups. Some denounce the circumvention of the French legal framework, while others defend an industrial project, rational and detached from of any attempt to evade regulation.

Historically, international service buying groups have been responsible for negotiating so-called “international” services. Some of them negotiated budgets at an international level for services provided in each of the relevant territories. These negotiations complemented national negotiations. The French legislator acknowledged this practice and mandated that the details of these agreements must be included in the French summary agreement, under penalty of an administrative fine. Most of these provisions are enforced.

We are now witnessing the accelerated emergence of a new generation of international negotiations, led by foreign entities with an exclusive mandate for the entirety of commercial negotiations with the concerned manufacturers. These international entities often operate within a framework of international purchasing scheme and follow a clear logic: to raise the level of commercial negotiations between major manufacturers and retailers and to enhance mutual commitments for sales development. Such frameworks have long existed in other sectors.

In this new scenario, it is argued that French law would not be applicable, especially when there are two foreign entities involved, an initial delivery outside France, a partial resale within France, and a foreign applicable law agreed upon by the parties.

What is the real issue at stake here ?

From a general perspective, there is no doubt that the emergence of these new internationally scaled negotiation framework is prompting questions from the French public authorities. From the standpoint of the economic regulator, the situation is even considered worrying. Both the Executive and the Lawmaker invariably aim to ensure that the rules enacted by the latter are enforced in France, under the supervision of the former.

In this regard, it should be noted that two sets of rules appear to be relevant, which together now constitute French law on negotiations or commercial relations: the first pertains to the law on restrictive competition practices, and the second to the legal regulation of these commercial relations, in particular throughout the agri-food sector.

In principle, the rules governing restrictive practices are designed to preserve contractual freedom and provide for the sanctioning of abusive practices. They are intended to intervene in the event of an unequal balance of power between the parties and an abusive practice committed by the stronger party against the weaker one.

If these new schemes were to concern only large industrial groups, it is not certain that the law on restrictive practices would be applicable. The balance of power between strong parties will result in an agreement that will govern their relations. If, moreover, the manufacturer is not located in France and the flow of the concerned products is not mainly destined for French territory, is it really a problem if the French rules on restrictive competition practices do not apply ?

As for the rules related to other issues than the protection of the weaker party, which address public policy concerns such as the distribution of value within the food chain, are they so necessary in international relations, involving processed food products made from raw materials of various origins, not necessarily French, even though the seller, the buyer and product flow are essentially international, hence foreign ?

For these reasons, the potential inapplicability of French law to international negotiation schemes might not be a priority issue, unless there is a proven circumvention in purely French relationship.