Will the real competent judge please stand up!

Franchising, especially hard franchising, is increasingly a mixed legal relationship. In that case, the parties not only enter into a franchise agreement, but also a (sub)lease agreement. Both agreements often refer to each other and cannot exist without each other.

Provisions including for example; the duration; the nature of the activities; the exploitation obligation; competition, et cetera, interlock and merge into each other. The line between the two agreements is blurring. If a conflict arises between the parties, then both agreements are often the subject of discussion, especially when it comes to the end thereof.

However, in disputes about a rental agreement, the subdistrict court judge is the competent court according to the law. In principle, the court is the competent court in disputes about a franchise agreement of any size. This would mean that one dispute would have to be brought before several courts. This is obviously not very effective, so that a choice is often made for one competent court.

Recently, a number of judges have expressed their opinion on the question of who that should be. The remarkable thing, however, is that the judges themselves do not always agree on this. This makes it even more difficult for the litigant to submit his case to the right court. The law stipulates that if there is a dispute in which both a so-called earth claim, such as a rental property, and a value claim, such as a monetary claim under a franchise agreement, are the subject of the dispute, the value claim follows the earth claim, so that in this example the subdistrict court judge than the competent court for the entire case. This only applies if the cases cannot actually be treated separately.

Yet there are judges who believe that the often complex franchise issues, which concern major interests, should be dealt with by the court. The argumentation is then given that the rental agreement only plays a subordinate role and no longer has an independent right to exist when the franchise agreement is terminated. This seems to be a goal-driven argument that has no support in the law itself. It can be very important, especially for weaker parties, to know which court has jurisdiction. For example, a court fee must be paid at the court, which can amount to almost € 5,000.

Furthermore, although this is often not wise, one can also litigate before the subdistrict court judge, while this is not permitted at the court. In addition to the question of which court has jurisdiction, there is also the question of which court has jurisdiction. In rental cases this is always the court of the place where the rented property is located, while in court cases this is in principle the place where the defendant is located.

A choice of law before the dispute has arisen is not even allowed in rental cases. It can also be an advantage if this means that one can litigate close to home, even though the other party is located far away. All in all, these questions are often (too) little considered and are sometimes (too) quickly summoned before the wrong court. A costly discussion then ensues about the jurisdiction of the court without the case itself being dealt with. It can also lead to thousands of euros being wasted in court fees. In case of doubt, it is therefore worthwhile to explicitly consider these questions and, if possible, to make good process agreements with the other party, so that the dispute, which is annoying enough, can be limited to the content itself as much as possible.

Ludwig & Van Dam franchise attorneys, franchise legal advice