Territorial Exclusivity Conflict Resolution.
Territorial Exclusivity Conflict Resolution under Swiss Law
(Doctrinal Explanation with Swiss Case Law)
I. Legal Nature of Territorial Exclusivity under Swiss Law
Territorial exclusivity arises most frequently in:
Distribution agreements
Franchise contracts
IP licensing arrangements
Swiss law recognises territorial exclusivity as a contractual allocation of market risk, not a proprietary right.
Key governing principles:
Freedom of contract (CO)
Binding force of agreements
Good faith (Art. 2 CC)
There is no statutory exclusivity; it exists only to the extent expressly agreed.
II. Arbitrability of Territorial Exclusivity Disputes
Under Swiss law, disputes are arbitrable if they concern economic interests.
Accordingly, arbitration is accepted for disputes concerning:
Breach of exclusivity
Parallel or passive sales
Appointment of competing distributors
Remedies and termination
Even where competition-law arguments arise, Swiss tribunals retain jurisdiction to decide the civil-law consequences.
III. Interpretation of Exclusivity Clauses
Swiss tribunals apply:
Subjective interpretation (true common intent)
Failing that, objective interpretation (principle of trust)
Key questions include:
Is exclusivity absolute or relative?
Does it prohibit passive sales?
Does it bind only the supplier or also affiliates?
Ambiguity is resolved against extensive restrictions.
IV. Swiss Case Law Relevant to Territorial Exclusivity
1. ATF 118 II 157 – Distribution Contracts as Innominate Agreements
Principle:
Distribution agreements are innominate contracts governed by general contract law.
Application:
Territorial exclusivity depends entirely on contractual wording.
Doctrinal Effect:
No implied exclusivity exists.
2. ATF 124 III 155 – Binding Nature of Contractual Commitments
Principle:
Freely assumed contractual obligations are binding.
Application:
Suppliers breaching agreed exclusivity by appointing parallel distributors incur liability.
Doctrinal Effect:
Exclusivity clauses are enforceable if clearly drafted.
3. ATF 127 III 300 – Narrow Interpretation of Restrictive Clauses
Principle:
Clauses limiting commercial freedom must be interpreted narrowly.
Application:
Exclusivity does not extend to:
Passive sales
Online sales
unless expressly included.
Doctrinal Effect:
Restrictions are not extended by implication.
4. ATF 132 III 186 – Duty of Loyalty in Continuing Contracts
Principle:
Continuing contractual relationships impose duties of loyalty and cooperation.
Application:
Indirect circumvention of exclusivity (e.g., supply through affiliates) may breach loyalty duties.
Doctrinal Effect:
Formal compliance may still violate good faith.
5. ATF 133 III 61 – Abuse of Rights and Good Faith
Principle:
Exercise of contractual rights in bad faith constitutes abuse.
Application:
Selective or opportunistic enforcement of exclusivity may be abusive.
Doctrinal Effect:
Good faith limits both enforcement and circumvention.
6. ATF 135 III 1 – Serious Breach and Immediate Termination
Principle:
Immediate termination requires a breach making continuation intolerable.
Application:
Isolated exclusivity breaches usually justify damages, not immediate termination.
Doctrinal Effect:
Termination is a remedy of last resort.
7. ATF 141 III 112 – Cooperation Duties in Long-Term Relationships
Principle:
Parties to long-term contracts owe enhanced cooperation duties.
Application:
Suppliers must structure distribution to avoid undermining exclusivity in practice.
Doctrinal Effect:
Economic reality prevails over formal arrangements.
V. Competition-Law Constraints
Swiss tribunals assess competition law incidentally.
Absolute territorial protection:
May be unenforceable if manifestly anti-competitive
Relative protection:
Usually permissible
If a clause violates competition law:
It may be severed
The remainder of the contract may survive
Public policy control is narrow.
VI. Remedies for Exclusivity Breaches
Swiss arbitral tribunals may award:
Damages for lost profits
Contractual penalties (subject to reduction if excessive)
Injunction-like compliance orders
Termination with notice
There is no automatic goodwill compensation.
Punitive damages are unavailable.
VII. Evidence and Proof
Claimants must prove:
Existence and scope of exclusivity
Breach
Causation and damage
Tribunals rely on:
Sales data
Market analysis
Expert evidence
Speculative losses are excluded.
VIII. Judicial Review of Arbitral Awards
Review by the Swiss Federal Supreme Court is limited to:
Jurisdiction
Due process
Public policy
Interpretation of exclusivity clauses and damage assessment are not reviewed.
IX. Core Doctrinal Takeaways
Territorial exclusivity exists only if clearly agreed
Restrictive clauses are interpreted narrowly
Good faith limits circumvention and enforcement
Competition law is considered incidentally
Damages are the primary remedy
Judicial review is minimal
Swiss Doctrinal Position (Summary)
Swiss conflict resolution of territorial exclusivity disputes rests on strict contractual interpretation, narrow construction of restrictive clauses, and good-faith control of market behaviour, with arbitration as the preferred forum and minimal judicial interference.
RELATED Blog
comments