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Vol 10 (2012) - Issue 3

Changes to Chinese franchise law: An improved balance between the interests of franchisors and franchisees

Ren Yanling, Partner, Tian Yuan Law Firm, Beijing

The amended Measures for the Administration of Disclosure of Commercial Franchise Information issued by the Chinese Ministry of Commerce attempt to strike a more equitable balance between the obligations of franchisors and franchisees. These changes to the Chinese Franchise Law reflect the importance of pre-contractual disclosure to the development of the franchise sector in China which has grown rapidly in recent years. This article analyses the main provisions of the new Measures.

In which EU jurisdictions is franchising most heavily regulated and how effective/appropriate is that regulation?

Dr. Mark Abell, Partner, Field Fisher Waterhouse LLP, London

Franchising in the EU is regulated by franchise specific laws in eight member states, as discussed in a previous article. However, when they are considered on both a quantitative and qualitative basis, one is led to conclude that the heaviest regulatory burden in the EU is placed upon franchisors, not by the franchise laws in those member states, but by those member states that do not have franchise laws and follow the Germanic approach of treating franchisees as quasi-consumers, quasi-employees and commercial agents, and imposing a strict duty of good faith upon franchisors. This article analyses the regulation of franchising in all 27 EU member states and compares and contrasts each member state’s law from both a quantitative and qualitative perspective. It does this by using Franchising Regulation Evaluation Data (“FRED”) collected by research undertaken by the author.

Litigation of franchise disputes in the United States: A brief overview for non-US attorneys

Robert A. Lauer, Partner and Emma R. Harker, Associate, Haynes and Boone, LLP, Austin, Texas

While most international franchise agreements call for the parties to resolve disputes through international arbitration due to the extraterritorial enforcement preferences given to international arbitration awards, some US franchisors prefer the US court system because it is a known factor, whereas some foreign franchisors and franchisees prefer the US court system because of its speed and consistency and the rule of law. This article provides a brief overview of the franchise litigation process in the US to non-US lawyers and attempts to dispel some common misperceptions about litigating in US courts, but also to warn that US litigation is not for the faint-hearted.

State franchise regulation and the Contract Clause of the U.S. Constitution (part 2): Reliable v Deere

Alexander M. Meiklejohn, Professor of Law, Quinnipiac University School of Law, Hamden, Connecticut

In the U.S., franchise sales and franchise relationships are regulated at both the federal level and the state level. A number of states maintain franchise or dealership laws that purport to apply to agreements formed before their effective dates. “Retroactive” application of state regulatory laws is subject to challenge under the Contract Clause of the U.S. Constitution. That Clause limits the authority of the states to enact laws that impair contractual obligations that exist when the laws take effect. This article analyses the complex interaction between U.S. federal and state law in cases decided under the Clause in the context of the Reliable v Deere litigation.