UK Supreme Court narrows the scope of the restraint of trade doctrine in landmark ruling
Out-Law Guide | 08 Apr 2020 | 8:57 am | 7 min. read
To preserve the rights of all as well as adapt to the constraints of confinement and the administration's continuity plans, the Order No. 2020-306 of 25 March 2020 provides for additional time to perform acts which, if not performed, would entail significant legal consequences for the parties to a contract or legal proceedings.
The Order specifically applies to acts:
These acts "prescribed by law or regulation" will not be considered to be late as long as they are performed within their respective legally prescribed period, within a two month time limit beginning on 24 June 2020. A hard deadline of 24 August 2020 therefore applies.
A debt has been due since 14 March 2015. A five-year limitation period for raising legal action applies under Article 2224 of the French Civil Code. This limitation period was due to expire on 14 March 2020, but it will now run until 24 August 2020 in light of the Order. This corresponds to the duration of the legally protected period plus two months.
Therefore, the business out of pocket will be able to file an action up until this date without their action being declared inadmissible because of the statute of limitations.
A judgment was served on a business on 25 February 2020. In line with most cases where the time limit for lodging an appeal is one month from the service of the judgment, the business had until 25 March to file a corresponding appeal. However, in light of the Order, the time period to file the appeal will now run until 24 July 2020,–which corresponds to the duration of the legally protected period' plus the one month additional for filing the appeal.
For judicial acts, such as the filing of a brief or an appeal, this Order provides for two main deadlines: 24 July and 24 August 2020. This may lead to the overload of jurisdictions on these dates. It is therefore recommended that, while taking into account the additional time granted, parties and their counsels organise their filing prior to that date.
Also, provisional, investigative, conciliation or mediation measures – provided that they have expired within the legally protected period – are automatically extended, until the expiry of a period of two months following the end of this protected period – i.e. to 24 August 2020 at the latest.
The Order refers only to acts prescribed "by law or regulation" and time limits "legally prescribed for acting", and to payments prescribed "by law or regulation for the acquisition or retention of a right". Some exceptions apply, however.
Firstly, contractually prescribed time limits are not affected by the Order. For instance, the time limit for exercising the option of a unilateral promise of sale, expiring during the legally protected period (12 March – 24 June 2020), is not extended by the Order.
Secondly, time limits set by a judge, such as dates of a procedural calendar, do not benefit from the Order's extension. However, judges retain the power to decide on such extensions on a case-by-case basis, taking into account the confinement's constraints.
Also, payment of contractual obligations is not suspended during the legally protected period. Contractual deadlines must still be respected, with some exceptions.
Firstly, the Order provides that the operation of certain contractual provisions – meant to penalise failure to fulfil an obligation within a specified period, such as penalty clauses, termination clauses and forfeiture clauses – is paralysed during the legally protected period (12 March – 24 June 2020), provided that their deadline was reached during this period.
These contractual provisions will be 'reactivated' on 24 July 2020, if the debtor has not fulfilled his obligation by that time.
Also, penalty payments and penalty clauses that had begun to run before 12 March 2020 will see their courses suspended during the legally protected period (12 March – 24 June 2020). They will take effect again on 25 June 2020.
A second exception in relation to contractual deadlines also applies. French law, via Article 1218 of the French Civil Code, provides for the impact of force majeure events in the context of contractual obligations. However, it does come with conditions.
An impediment constitutes an event of force majeure only if it has, for the debtor who invokes it, three characteristics: it must be unforeseeable, unavoidable and beyond his control. These characteristics will be closely examined by the courts that may reflect on previous case law in relation to recent epidemics
If it is demonstrated that performance of the contract has been prevented by a force majeure event, the defaulting party is exonerated from their contractual liability.
In French law, a force majeure event can also be relied upon to resort to the suspension of limitation periods. Indeed, a litigant can see his action, normally time-barred, admissible if he demonstrates that, for instance, he was prevented from filing it by a force majeure event.
If all conditions of the force majeure cannot be met, there remains the possibility for litigants to petition the courts in order to have the payment of the sums due postponed or staggered within a limit of two years. This option is open to litigants under Article 1343-5 of the French Civil Code.
To avoid physical contact in these times of confinement and reduced activity continuity plans, Order No. 2020-304 of 25 March 2020 lightens the functioning of civil and commercial jurisdictions.
This Order specifies the same 'legally protected period' as Order No. 2020-306, i.e. 12 March 2020 to 24 June 2020. Unless otherwise provided for in the Order, it applies in first instance courts, both civil and commercial, and on appeal.
In accordance with the continuity plans in each jurisdiction, only 'essential litigation' court hearings are to be maintained. A number of hearings that have either not been, or will not be, held must therefore be referred back at a later date.
Parties will be notified of the referral by any means, which might include through the virtual private network for lawyers (RPVA), email, simple letter or any other means of ensuring effective communication of information.
For hearings that are maintained in a context of social distancing, the Order extends the possibility of single-judge decisions.
It provides that when a case management hearing date or a pleadings' hearing is to be held during the legally protected period of 12 March – 24 June 2020, the president of the court may decide that the case be heard and decided by a single judge.
The Order also introduces flexibility in way briefs and exhibits can be exchanged between the parties to a dispute. These may be exchanged by any means provided that the judge is able to ensure compliance with the adversarial principle.
Whatever the means of communication chosen by the parties, it is nevertheless prudent for them to be able to prove that they have indeed transmitted their briefs and exhibits to the opposing party, and the date on which they did so, in order to prevent any future dispute.
Also in light of instructions on social distancing, the Order provides an exception to the general principle that judicial debates are public.
The president of each court is granted wide latitude to decide the degree of publicity for each hearing, going as far as to allow for hearings to be held in the judge's chambers.
Judicial debates could in their entirety be affected as judgments may now be rendered without pleadings. If the written portion of the proceedings comes to an end in these coming weeks of confinement, the judge may suggest that a judgment be rendered without the need for a prior hearing.
However, this is subject to the parties' consent. Parties will therefore have to communicate their refusal to forego the possibility of a hearing within 15 days of the judge's proposal to render a judgment without it.
By way of exception, the parties may not object to the court's decision to rule without a hearing in three cases:
Nevertheless, it is not all or nothing; the Order also allows for hearings to be held by means of audio-visual communication, i.e. by videoconference and, where it is technically or materially impossible to use them, by any electronic means of communication, including telephone.
Finally, should courts be significantly affected by a lack of personnel, the Order provides that the activity of courts of first instance wholly or partially unable to function may be transferred to another jurisdiction of the same nature.
The use of this provision is intended to remain exceptional.
Taken in the context of the confinement measures, these orders allow for the French judicial system to continue functioning in difficult conditions.
However, practical enforcement of these measures will prove challenging due to the backlog of hearings that will have been delayed and the disorganisation resulting from the confinement measures. The extension of time limits therefore offers litigants sufficient flexibility to see how the heath crisis will unfold over the next few weeks and adapt accordingly.
02 Apr 2020
01 Jul 2020
UK Supreme Court narrows the scope of the restraint of trade doctrine in landmark ruling