(CASE TRANSLATION) FINVETRO S.R.L V GLASSMOBLE S.A

Transcription

1 CASE TRANSLATION OF FINVETRO S.R.L V GLASSMOBLE S.A (CASE TRANSLATION) FINVETRO S.R.L V GLASSMOBLE S.A Leandro Tripodi* CONTENTS 1 Facts Decision In Light Of the Aforementioned FACTS Finvetro S.R.L. ( Plaintiff ), a Monselice (Padua)-based company brought a claim against Glassmoble S.A. ( Defendant ), a Spanish company based in Castellon. In June 1999, the parties concluded an exclusive license and manufacturing agreement for products patented by the Plaintiff (isolating glass panes with Venetian blinds in between). The agreement was intended to last for six years from 1 January 2000 to 1 January 2006 and stated that the Plantiff was to supply the necessary components and equipment for the manufacturing of the Veltech and Flextech windowpanes, while the Defendant was to assemble and resell the goods. The agreement was for the payment of yearly royalties of EUR 51, The Plaintiff contended that, in 2004, the Defendant did not take delivery of part of the material ordered and failed to pay the tenth installment of the royalties for that year. Once the Defendant had defaulted in this regard, the Plaintiff purported to avoid the contract on 2 February The Plaintiff sought that the Court find the Defendant to have been in breach of contract and therefore that it validly avoided the * Leandro Tripodi is a law student at the University of São Paulo. He participated in the 16 th Willem C. Vis Moot (Vienna, 2009). He is the Editor-in-chief of the CISG-Brazil, < and a member of the Brazilian Arbitration Committee (CBAr). The author acknowledges Benjamin Hayward and Gaby Czarnota for revision of this paper. (2010) 14 VJ

2 LEANDRO TRIP ODI agreement. The Plaintiff also sought an order that the Defendant pay the tenth installment of the royalties of 2004 (EUR 5,164.57), the invoice no. 309 of 20 April 2004 (EUR 1,939.14), the outstanding balance of the invoice of 5 July 2004 (EUR 394,18) and the sum of EUR ,69 as a penalty for breach of contract and consequent damages. The Defendant alleged that in 2004 the Plaintiff sent a considerable amount of defective material to the dissatisfaction of the Defendant s customers. Further, the Plaintiff did not send to the Defendant the machinery required to manufacture the products which prevented the Defendant from performing its obligations. As a consequence, the Defendant suspended its payments to the Plaintiff. The Defendant argued that the Plaintiff sold 45% of its capital shares to Echeveste S.A., a Spanish competitor of the Defendant. Echeveste S.A. demanded exclusive rights to manufacture and sell the Veltech and Flextech brands in the Spanish region, which the Defendant argued evidenced that the Plaintiff was purporting to avoid its agreement with the Defendant. The Defendant claimed that the Plaintiff avoided its agreement with the Defendant by way of its gross failure to perform its obligations under the contract. The Defendant argued that this caused it significant economic damage and requests the Court to award damages. In the hearing of 27 January 2009, the parties presented their submissions and the Court handed down its decision. 2 DECISION The parties concluded a brand licensing and manufacturing agreement in Este (Padua, Italy) on 15 June The Defendant is headquartered in Castellon, Spain. Therefore, since the dispute has an evident international character, it seems convenient to remove any doubts as to the competence of the judge, having regard to the relevant rules of international procedural law. Such rules were reviewed by the EC Regulation no. 44/2001 of 22 December 2001, which concerns the jurisdictional competence and the enforcement of judgments in civil and commercial matters. 1 The requirements for application of such Regulation (the provisions of which are mandatory and directly applicable in all Member States of the European Union with the sole exception of Denmark and the territories mentioned in Article 299 (2) and (6) of the EC Treaty) are met in the present case. This is above all assured because of the territorial aspect. In fact, the present dispute was brought after 1 March 2002 and therefore after the date when, under Article 66 (1), the aforementioned Regulation has replaced the Brussels Convention of 1968 in respect of the Member States other than Denmark (where the Citation of Padua, 10 January 2006, Giur. Merito, 2006, 6, p. 93; Forlí 11 December 2008, available at < and OLG Düsseldorf, 30 January 2004, available at < See also Brussels I Regulation. (2010) 14 VJ

3 CASE TRANSLATION OF FINVETRO S.R.L V GLASSMOBLE S.A Regulation applies in virtue of an international agreement between that country and the European Union). The same conclusion appears from a ratione materiae approach. The dispute, having as its subject-matter an exclusive license and manufacturing agreement for patented products, deals with a civil and commercial issue 2 and does not concern one of the subject matters that Article 1 (2) of the Brussels I Regulation excludes from its own sphere of application. 3 There is no doubt either as to the application of the Brussels I Regulation in what concerns its subjective scope of application: the communitarian rules are relevant precisely because the Defendant is established in a Member State. 4 In light of the aforementioned, the Italian jurisdiction is applicable because the Defendant has appeared before the first instance judge and did not in any way contest his jurisdiction or competence. 5 This conduct must be evaluated as a tacit acceptance of the jurisdictional competence of the Court of Padua. 6 Additionally, considering that no hypothesis of exclusive jurisdiction 7 is at stake which would compel the Court to overlook the Defendant s silence, the Court finds itself competent to adjudicate the dispute. The determination of the law applicable to the exclusive license and manufacturing agreement for patented products falls upon the private international law of the forum, namely Italian Law; since there is no uniform law on the subject; to govern their agreement, the parties selected Italian law, which is therefore the applicable law. As a matter of fact, according to Article 3 of the Rome Convention 8, which applies also by virtue of a renvoi to Article 57 of the Law no , a judge has to take a choice of law by the parties into consideration. The dispute must then be resolved under Italian Law. It can be noticed that one would reach the same conclusion by application of the new See Art. 1 (1) of the Brussels I Regulation. See supra fn 1. See Art. 3 of the Brussels I Regulation. Citation of German Supreme Court, 1 June 2005, IPRax, 2006, pp ; Austrian Supreme Court, 17 May 2006, available at: < 02_0040OB00174_06A0000_000>; Austrian Supreme Court, 4 May 2006, available at: < 02_0010OB00073_06A0000_000>. Cass., 24 May 2007, no See Art. 22 of the Brussels I Regulation. See Art. 3 of the Rome Convention of 19 June 1980 on the Law Applicable to Contractual Obligations, enacted in Italy on 18 December 1984 and in force as of 1 April See Art. 57 of the Law no. 218 of 31 May 1995, concerns the reform of the [Italian] private international law system. (2010) 14 VJ

4 LEANDRO TRIP ODI EC 593/2008 Regulation 10 on the Law Applicable to Contractual Obligations, since this act also adopts party autonomy as a (key) connection criterion. As to the merits of this dispute, the Plaintiff s claim is founded on, and should be accepted under, the following terms. One can see that the brand license and manufacturing agreement provided that it was the Defendant s obligation to purchase from the Plaintiff Veltech and Flextech windows for a definite period of time, i.e., until termination of the agreement planned for 31 December Contrary to that contended by the Plaintiff, there is no evidence that on 2 February 2004 the Defendant placed an order which it afterwards has failed to comply with. Document 8 of the files 11, which in passing were not translated into Italian by the Plaintiff, speaks of a stock of products and does not fix a delivery date. It is then possible that, as contended by the Defendant, such communication was no more than a list of the material to be delivered to the Defendant in the course of In contrast, the Plaintiff did not invoice the material and it does not appear that it was sent to Spain. That is even though the Plaintiff was in charge of the delivery, as one can deduce from the phrase puedes enviarlo por partes [you are allowed to deliver by installments] which is contained in the aforementioned document. In document 9 12, which contains a mere list of articles and their corresponding quantities, the term stock is also mentioned and it would be meaningless if the goods were to be supplied immediately and entirely. It is therefore consequential that only on 2 February (one year after the purported order) the Plaintiff could have complained about the fact that the Defendant did not take over the goods. Additionally, it must be noted that the Defendant did not place any further order after the first half of 2004 or in In other words, the Defendant suspended performance of the agreement, refraining from completing the sale and from paying the royalties owed to its co-contractor. The reason for that behavior remains unevidenced, the same way as the insinuating declaration that the Plaintiff was after a subterfuge in order to avoid the contract so as to satisfy its new partner, Echeveste S.A. (the evidence produced with the purpose of demonstrating that Echeveste sold the Veltech window pane since 2004 is completely unable to prove the Plaintiff has deliberately purported to harm the Defendant: if that were true, the Defendant would have complained of breach of exclusiveness, which it did not). Therefore, there is no evidence that the Defendant received defective goods. Amongst the evidence introduced by the Defendant, be it letters, faxes or s, there are no See Rome I Regulation. See document 8, a fax sent to some Barbara Garbin on 2 February See document 9, a fax sent to the same aforementioned person on 27 February See document 17 attached to Plaintiff s Memorial. (2010) 14 VJ

5 CASE TRANSLATION OF FINVETRO S.R.L V GLASSMOBLE S.A notices relating to any defects, except apparently for the letter 14. However, it is not possible to confirm whether such document contains a precise notice of the defects (the document must be overlooked since it was not translated into Italian) and it is not possible either to ascertain when exactly it was sent to the Plaintiff. If the date of the letter is to be taken as 14 October 2004, one must conclude that the notice was made after expiration of the time for payment of the invoices of April and July 2004, and at that time the relationship between the parties was already spoiled (of course, not due to defects in the goods). In addition, one should recognise that the Defendant did not introduce as few as one letter by an end customer contesting the quality of the product. With regards to the proofs by witnesses, 15 they should be dismissed as excessively generic; the sole relevant declaration was that the Plaintiff failed to provide substitute material, without ascertaining the quantity and description, as well as the flaws and who allegedly did report them. As to the missing delivery of machines, the witnessing proofs refer to an order for machinery, 16 but do not demonstrate that the lack of those machines prevented the production and sale of the windowpanes. After the enquiry of March 2004, it does not appear that those machines were asked for on another occasion. In the letter of 4 June 2004, the Defendant has in fact ordered replacement pieces for the machines which it was already in possession of. In conclusion, there is no proof of a breach of contract by the Plaintiff and less proof of the fact that a purported breach was intentional, like that sustained by the Defendant. As a result, the Court finds that the behavior of the Defendant was unjustified in stopping the payments due and in not placing any new order, and hence in causing a breakdown of the commercial relationship with the Plaintiff. Such conduct represents a serious breach of the obligations which derived from the 1999 agreement. It follows that the Defendant should pay the tenth installment of the royalties of the year 2004, amounting to EUR 5,164.57, as well as the invoice 309 of 20 April 2004, at EUR 1, and the outstanding balance of the invoice of 5 July 2004, that is, EUR The breach authorised the Plaintiff to avail itself of clause no. 16 (b) of the agreement concluded on 15 June 1999, which provided for the avoidance of the agreement. According to Article 1456 of the Italian Civil Code, 17 the avoidance is effective as of March The Defendant should thus pay to the Plaintiff the penalty envisaged in See document 2, attached to Defendant s memorial. See memorial dated 1 st December See document 5. See Art Express resolutory clause: (2010) 14 VJ

6 LEANDRO TRIP ODI the agreement, equivalent to the royalties of the year 2005 (which would be due if the relationship between the parties were carried on until its expected termination). There is no proof as to any further damage, nor was further damage argued clearly or in an accurate fashion. The Defendant s counterclaims should be rejected for the aforementioned reasons, and the doubt as to their timeliness is overcome. The costs follow the rule of succumbency and are detailed in the decision. 3 IN LIGHT OF THE AFOREMENTIONED The Court of Padua, Section of Este, in monocratic composition, making a final decision on case no R.G. of 2006, brought on by the Plaintiff against the Defendant (any other claim, motion or instance left unheard), finds that: 1) The avoidance of the agreement concluded by the parties on 15 June 1999 was justified and is effective as of March 2005, in view of the Defendant s breach of contract; 2) The Defendant is ordered to pay the Plaintiff the following sums: a. EUR 5, subject to interest at the legal rate from 1 January 2005 to the date of payment; b. EUR 1, subject to interest at the legal rate from 20 May 2004 to the date of payment; c. EUR subject to interest at the legal rate from 5 August 2004 to the date of payment; 3) The Defendant is ordered to pay the Plaintiff a penalty of EUR 51, subject to interest at the legal rate from 7 March 2005 to the date of payment; 4) All other claims are rejected; 5) The Defendant is ordered to reimburse the Plaintiff its litigation expenses, assessed at EUR 5,300.00, as well as the applicable taxes The contracting parties may expressly agree that the contract should be avoided in the event that a specified obligation is not complied with in the manner agreed by them. In that case, the avoidance is directly effective as of when the interested party declares to the other party the intent of availing himself from the resolutory clause. See document 18 attached to Plaintiff s Memorial. (2010) 14 VJ