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28 March 2017

SAPIN II LAW

MULTIANNUAL AGREEMENTS, INSTRUMENTS OF STABILITY OF THE BUSINESS RELATIONSHIPS?

Among the various provisions of the Law No 2016-1691 of the 9th December 2016 on transparency, fight against corruption and modernization of the Economy (“Sapin II Law”), the French parliament introduced what appears to be as some flexibility to article L. 441-7 of the French Commercial Code (“FCC”), allowing suppliers and retailers or service providers (article L. 441-7 of the FCC) but also suppliers and wholesalers (article L. 441-7-1 of the FCC) to conclude multiannual agreements.

Indeed, the annual framework imposed as the statutory form of the commercial negotiations since the “Dutreil” Act of 2nd August 2005 was seen as a hindrance to undertake investments as the contractual relationships were put into play each year with all the uncertainty such mechanism involved. The legislator, aware of the willingness of the economic players to establish more lasting trade relationships, has since opened up the possibility to conclude multiannual agreements but has limited their duration to three years. Articles L. 441-7 and L. 441-7-1 now provide that “the written agreement shall be concluded for a period of one year, two years or three years”.

In addition to the maximum duration of 3 years, the French parliament provides that if the parties opt for a written agreement during two or three years, it must set out the terms and conditions for price revisions. The law specifies that these terms and conditions may refer to public indexes reflecting the evolution of production costs. It should be pointed out here that the reference to one or more indexes is a faculty and not an obligation, contrary to the price renegotiation clauses required by article L. 441-8 of the FCC.

However, the selection of indexes may be risky since the Sapin II Law considers that the fact to impose a price revision or a price renegotiation clause which refers to an index not directly linked to the goods or services covered by the agreement (article L. 442-6 I 7° FCC) is a restrictive practice and is therefore punishable as such.

This is not, in itself, a new rule since article L. 112-2 of the French Monetary and Financial Code already prohibits and considers as null and void any clause providing for an indexation based “on the prices of goods, products or services” having no direct connection with the subject of the agreement. The significant change brought by article L. 442-6-I 7° is the characterization of this practice as a civil offense and therefore sanctioned by an administrative fine which maximum amount has increased from € 2 million to € 5 million.

Even if the intention or the effort is praiseworthy, the effectiveness of such reform of article L. 441-7 is uncertain as the use of indexes for price review is not mandatory and as the free renegotiation principle will ultimately leads to renegotiate the core of the contract each year. Will this half-tone measure, inspired by the need for stability in business relationships in order to allow the most vulnerable suppliers to undertake or plan investments ultimately be all for naught?

YOUR contact :

f. lecomte

Frédéric Lecomte
Partner

f.lecomte@stehlin-legal.com