Introduction
Scenario Summary
A Belgian company (BEL) appointed a UAE company (DUB) as its exclusive distributor of luxury watches in Italy. Their agreement was governed by Italian law, with disputes to be resolved in Antwerp, Belgium.
BEL terminated the contract early and sued DUB in the Antwerp Commercial Court, claiming 2,000,000 AED in unpaid invoices. DUB counterclaimed for 4,000,000 AED in damages for wrongful termination, citing a Belgian Commercial Code provision that penalizes abrupt business termination without adequate notice.
DUB also challenged the validity of BEL’s invoices, arguing they were issued in Italian instead of Dutch, violating Flemish language laws that require businesses based in Dutch-speaking Belgium to use Dutch in cross-border documents. The court confirmed the invoices were void, despite BEL later providing Dutch translations. BEL admitted non-compliance with local law but claimed the invoices were valid under the Italian law agreed upon in the contract.
Problem Definition
International contracts pose a challenge for companies and courts due to their complexity and the need to compromise between vastly different frameworks. In this case, two firms from Dubai and the Dutch region in Belgium present a reason behind their actions that led to the dissolution of their partnership. The positions of these organizations contain feasible arguments in favor of their claims, making it essential to analyze them for greater clarity due to the possibility of partial satisfaction of both sides’ demands.
The Position of the UAE Company
The DUB entity’s claim relies on the fact that the binding document has been signed in a language other than Dutch and was terminated without notice. The UAE organization can claim that Italian law must be applicable in this situation. Shehata (2017) writes that “the courts are required to apply forum mandatory rules” in such cases (p. 383).
However, the issue with this fact begins when one includes the nature of international contracts and their recent history. The states within the European Union do not consider forum selection clauses within agreements to be enforceable (Mayer, 2016). Thus, the claim regarding the language selection in invoices made by the BEL company does not override the second part of the problem.
However, the termination of this contract requires an indemnity from the agent. It is vital to involve mandatory rules in the forum as they are applicable in this situation (Mayer, 2016). Therefore, the UAE company possesses a valid claim to its demand to compensate for the agreement nullification. The firm needs to consider addressing this issue in the Italian court since it was set to be governed by this entity.
The Position of the BEL Company
The unpaid invoices present a significant challenge for the BEL partner due to its accounting errors. The Kingdom of Belgium’s law requires cross-national contracts to be signed in the language of the region where the local company is located, which makes it possible for the BEL firm to leverage this requirement (GorĂ©, 2023). Indeed, the organization broke this rule and does not deny this fact. However, the invoices provide substantial proof of the existing relationship between companies.
Despite their language, these documents serve as a way to convince the court to interpret domestic standards while accounting for foreign international law under which the agreement is made (Buxbaum, 2008). The basis for the argument relies on the fact that the concession agreement was set to be governed by Italian law, which makes the claims by the BEL company valid. It is essential to ensure that judicial cooperation between the involved sides includes the notions outlined within the initial contract and is negotiated by its statements.
Conclusion
In summary, both businesses possess a reason to demand compensation from their ex-partner. The company from Dubai has a reasonable claim that should be satisfied by the court since the agreement was made under the forum’s mandatory rules and caused an indemnity for an agent. In turn, the termination of the contract by the Belgian firm is based on the fiscal losses due to the unpaid invoices. The language-related local rule does not override the concession agreement that requires both companies to follow Italian law. Thus, these businesses need to have their issue reviewed through the lens of the appointed entity.
References
Buxbaum, H. (2008). Mandatory rules in civil litigation: Status of the doctrine post-globalization. Articles by Maurer Faculty, 292, 21-36. Web.
Goré, M. (2023). International Contracts. SAILS-LLM.
Mayer, C. A. (2016). Agency and distribution contracts, choice of law, and arbitration in Europe. ASA Bulletin, 34(3), 629-633. Web.
Shehata, I. (2017). Application of overriding mandatory rules in international commercial arbitration: An empirical analysis. World Arbitration & Mediation Review, 11(4), 383-418. Web.