31 March 1993

Doc. 6805

COMMUNICATION FROM THE COMMITTEE OF MINISTERS

Interim Reply to Recommendation 1182 (1992)

on franchising

(adopted by the Committee of Ministers on 22 March 1993

at the 490th meeting of the Ministers' Deputies)

1.       The Committee of Ministers has pursued consideration of Parliamentary Assembly Recommendation 1182 (1992) on franchising and recalls its interim reply of May 1992 to this text.

2.       In connection with paragraph 6 of the recommendation, the Committee of Ministers notes that franchising agreements are undergoing rapid growth in Europe, a trend which can only intensify with the opening up of the countries of Central and Eastern Europe to free enterprise. Such contracts raise the problem of balance between the rights of the franchiser and those of the franchisee, since few states have specific legislation on franchising.

      The Committee of Ministers recalls that the International Institute for the Unification of Private Law (UNIDROIT) has since 1985 been studying franchising agreements, and has highlighted several problems which are common to the different states and which therefore might lend themselves to international treatment. UNIDROIT is therefore co-operating with the International Bar Association on the preparation of a guide to master franchise contracts, but does not rule out the possibility of also drafting a uniform law covering, inter alia, the disclosure of information to future franchisees, the selection of the applicable law and competent courts and the implied terms of master franchise contracts.

      At its June 1992 meeting, the Governing Council of UNIDROIT decided to defer to 1993 a decision on the future course of the Institute's work on franchising.

      The concerns expressed by the Parliamentary Assembly in its Recommendation 1182 (1992) are closely akin to those of UNIDROIT, concerning in particular the fairness of franchising agreements, one of the fundamental aspects of which is the disclosure of

information to future franchisees before the contract is signed.

      The Committee of Ministers consequently considers it inadvisable to start a study of franchising inside the Council of Europe until UNIDROIT had defined the scope of its future work on the subject, enabling the Council of Europe to avoid duplicating UNIDROIT activity.

3.       In connection with paragraph 7 of the recommendation, the Committee of Ministers refers to the conclusions drawn by UNIDROIT on the prospects for international harmonisation of legislation on franchising:

"Franchising agreements affect fields (legislation governing contracts, business, taxation, industrial property, etc) in which national, and sometimes international, regulations already exist. It is uncertain whether it would be realistic to plan to adopt uniform legislation in such highly regulated areas.

On the other hand, other fields would lend themselves to international regulation:

-       the information that franchisers must disclose to potential franchisees;

-       matters relating to master franchising agreements, particularly their termination (cancellation, expiry of term);

-       selection of the applicable legislation and competent courts, bearing in mind existing international instruments;

-       drafting of a uniform or universally acceptable definition of franchising.".

      The Committee of Ministers will of course inform the Assembly of any further development in this field, especially inside UNIDROIT.

4.       In connection with paragraph 8 of the recommendation, the Committee of Ministers invites the governments of member states to work in favour of the adoption of appropriate codes of conduct by professional associations, at national and international level.