FranChat: July 2020

We're delighted to share the first edition of our international Franchising update. The newsletter focuses on legal developments impacting on franchise businesses across the globe.

As well as market and industry spotlights, the newsletter will also feature contributions from firms across our wider network in jurisdictions where we do not have a physical presence. In this edition, we are pleased to include contributions from Campos Mello Advogados on the new franchising law in Brazil, and Tilleke & Gibbins on the prohibition of unfair trade practices in Thailand. 

Future editions of the newsletter will also keep you informed of any upcoming webinars hosted by our Franchising team and other groups across Bird & Bird that we think may be of interest, including a Retail & Consumer COVID restart webinar that will be held in Autumn.

Keeping in touch

We would like to host some virtual social and networking events in September to say thank you for your continued support! Possible events may include online wine and cheese tastings, cocktail making, escape rooms and competitive team games. Please let us know if you'd be interested in joining us, and we hope you enjoy the summer in the meantime. 

Please do also get in touch with your usual contact if you would like to discuss any of the issues raised in these articles, or visit our webpage for more information about Bird & Bird's Franchising team.

Use the links below to navigate through our newsletter:

Global

Australia

Middle East

The Netherlands

Brazil

Thailand

Global

International franchise post-COVID restart tracker 

The COVID-19 crisis has been a human and commercial disaster of unprecedented scale. But many parts of the world are now starting to take tentative steps to get back to normal or a so-called “New Normal".

Our aim is to support our clients and contacts so they may build and implement their strategies for a fight back. To assist them, we have developed this no-cost aid – The COVID Restart Tracker.

International franchisors who operate across multiple countries are finding it difficult to keep track of local regulations as they adapt and change in response to the COVID-19 pandemic. To make this easier, we have used our international reach via our offices and local contacts to create the COVID Restart Tracker, covering over 30 countries. Click here to access the COVID Restart Tracker – we hope you find it useful.

The COVID Restart Tracker will constantly change and adapt to try and best meet the needs of our clients and contacts, and in due course will be delivering a deeper level of information and support. If you would like more information about any of the issues or jurisdictions covered by the tracker please contact us: CovidRestartTracker@twobirds.com.

Australia

Changes to the Franchising Code for new vehicle dealership franchises in Australia

Further to our earlier article here on the draft proposed regulations, on 1 June 2020, amendments to the Competition and Consumer (Industry Codes – Franchising) Regulation 2014 (Franchising Code) came into effect.

Transition provisions are in place which set out when each amending provision applies to existing agreements (for example, depending on when the franchise agreement was entered into and/or when the agreement was renewed or extended).

Parties to motor vehicle dealership agreements should take particular care to ensure compliance with the new provisions.

Middle East

Saudi Arabia franchise update: Implementing Regulations now issued

Saudi Arabia has now issued its Ministerial Decision No. 00594/1441 on the approval of the Implementing Regulation for the Commercial Franchise Law (‘Implementing Regulations’), which gives guidance and clarity surrounding the commercial franchise law which came into operation in April 2020.

Under Article 8 of the Implementing Regulations, there are terms and conditions that shall be included in the franchise agreement. These are additional to those already required under Article 11 of the Commercial Franchise Law and it is recommended that franchisors should ensure their franchise agreements incorporate these terms and conditions.

The Netherlands

Dutch Franchise Act passed by the Upper House of Parliament

On 30 June 2020, the Upper House of Parliament voted in favour of the new Franchise Act, meaning it has now passed the entire legislative process.

Content of the Franchise Act: The Franchise Act provides rules to strengthen the position of franchisees and regulates aspects of all phases of the franchise relationship, i.e. prior to, during and after the franchise agreement. The act covers, inter alia, exchange of information, mutual consultation obligations, goodwill and non-compete clauses.

Impact for international practice - mandatory application in respect of Netherlands based franchisees: At the last minute at the Lower House stage, a major amendment was included in the draft act and this has also been accepted. As a result, the act now entails important and fundamental changes in international practice, as franchisees established in the Netherlands can invoke the protection of the act, regardless of the choice of law in the franchise agreement. Contract clauses contrary to the act will not be enforceable or may even be void. However, franchise agreements subject to Dutch law as concluded with franchisees outside of the Netherlands, may deviate from the act.

Actions and timelines: Franchise agreements, both purely domestic as well as international should be reviewed and, where required, amended for compliance with this new legislation. The act will come into force on 1 January 2021 and franchise agreements will have to comply from that date. In respect of franchise agreements concluded before 1 January 2021, the statutory provisions on goodwill, non-competition and interim changes to the franchise formula will enter into force on 1 January 2023.

Brazil

New franchising law comes into force in Brazil

With thanks to Paula Mena Barreto, Partner at Campos Mello Advogados, for contributing this article.

After seven years of discussion, the Brazilian Congress approved, and the Brazilian President enacted, on December 26 2019, the new Brazilian Franchising Law (Federal Law No. 13,966/2019), which revoked and replaced the former law (Federal Law No. 8955, of December 15, 1994), and is now one of the most modern franchise laws in the world.

The new Brazilian Franchising Law maintained several rules and principles already provided for in the former franchising law, such as the broad contractual freedom and the obligation of the franchisor to provide the Franchise Disclosure Document (FDD) to the potential franchisee at least 10 days prior to the signing of the agreement or payment of the fees.

Thailand

Prohibition of unfair trade practices in franchise businesses in Thailand

With thanks to Sher Hann Chua, Consultant at Tilleke & Gibbins, for contributing this article. 

On December 6, 2019, the Trade Competition Commission of Thailand (“the “TCC”), acting under powers conferred upon it via Section 17(3) of the Trade Competition Act B.E. 2560 (2017) (the “TCA 2017”), issued a new notification on the Guidelines for the Consideration of Unfair Trade Practices in Franchise Businesses (the “Guidelines”). The Guidelines entered into force on February 4, 2020, imposing two important obligations on the franchisor. The Guidelines also prohibit the franchisor from engaging in a number of trade practices that may cause damage to the franchisee under Section 57 of the TCA 2017.