Grasp All, Lose All

The Court of Milan dismissed the interim relief requests of ordering a party to continue the business relationships, when it already replaced the counterparty with another business partner.

Recently, the Court of Milan has addressed the following issue: whether a party may react to the counterparty’s termination of a number of agreements by seeking, through interim reliefs, a Court’s order staying the effects of the termination, thus imposing to the contractual parties to continue their business relationship.

The defendant (or also ‟Contractor”) entered into a service agreement with a leading Italian supermarket chain (the principal) regarding the daily handling and transportation of fruits and vegetables to the various stores situated within the Italian territory.

The defendant sub-contracted most of the services to the claimant (or also ‟Sub-Contractor”) and, for this purpose, the parties entered into no. 9 different service agreements.

At the end of October 2014, the Contractor terminated the agreements, maintaining that the Sub-Contractor had materially breached its contractual obligations. The defendant immediately replaced the claimant with a new subcontractor.

The Sub-Contractor reacted by filing with the Court of Milan an application under Article 700 of the Italian Code of Civil Procedure with the aim of having, by way of urgency, the Contractor ordered to continue the relationship that it had unilaterally terminated.

The defendant appeared within the urgency proceedings and requested the dismissal of the claimant’s application because it was inadmissible under Italian procedural law. The Court upheld in full the defendant’s argument, clarifying that an application under Article 700 of the Italian Code of Civil Procedure is inadmissible whenever it may affect a third party’s right. Indeed, the Court’s order requested by the claimant would have affected the right of the ‟new” sub-contractor, which had entered into the business relationship with the defendant meanwhile. The relief sought would have imposed the defendant to terminate the agreement with the new sub-contractor in order to restore the status quo ante and carry on the performance of the 9 service agreements previously in place with the claimant.

Furthermore, the claimant was ordered to pay the defendant’s costs for an amount of roughly EUR 40,000.00.

The Court of Milan has aligned with a previous court precedent of the Court of Turin of March 2010, which also upheld that the claimant could have at most tried to claim the compensation of the damages borne as a consequence of the (alleged) unlawful termination of the agreement, rather than resorting to the Court for a precautionary measure going far beyond the powers of any Court.

In a nutshell: in grasping it all, the claimant eventually lost all.

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