• Marie Hindré, Partner at ADVANT Altana
• Markus P. Linnartz, Partner at ADVANT Beiten
• Filippo Federici, Counsel at ADVANT Nctm

The new “EU Inc” proposals announced last month to create one harmonized set of corporate rules for companies operating across the European Union have the potential to be a genuine gamechanger for business success and EU competitiveness. Reducing complexity and costs will make it far easier for ambitious, innovative companies to start up, raise capital and grow so they can scale just as seamlessly within the bloc as they could if they were based elsewhere in the world in countries with lower administrative burdens such as the US or China. Yet, while this move towards greater simplification represents a major step forward, several key issues could still undermine the overall success of this important initiative.

Read the full article here

welcome to the March issue of ADVANT Beiten's International Briefing.

To understand what drives business success in Europe and what general counsel expect from in-house teams, external advisers, and European policymakers, ADVANT recently launched a research project to create “ADVANT Special Report: Europe’s opportunity outlook”. We surveyed 800 GCs across France, Germany, Italy, and the US, supported by interviews with senior legal leaders. The findings reveal companies’ views on Europe’s key opportunities and challenges in today’s complex economic and geopolitical climate and offer candid insights into what works well in the European legal and regulatory framework, and where improvement is needed. The results are clear: Europe remains highly attractive for investment, with 87% of US GCs viewing it as a key market for growth. If you or your clients are looking to follow this trend and take advantage of the opportunities Europe offers, ADVANT stands ready as your one‑stop shop for all Europe‑related projects.

In this issue we will also highlight interesting developments in the European and German legal landscape, invite you to meet us at international events, and tell you about our recent deals.

You can find the newsletter by following this LINK

Kind regards,

Dr Barbara Mayer
Prof Dr Hans-Josef Vogel
Dr Christian von Wistinghausen
Moritz Kopp

When it comes to distributing products to Indian customers on the ground, German manufacturers - as always - face the choice: make or buy. While the FTA substantially enhances India’s appeal as a strategic manufacturing base - by lowering trade barriers and deepening opportunities for supply‑chain integration, thereby offering European manufacturers commercially compelling pathway to leverage the “Make in India” ecosystem - alternate lighter entry models like distributorship arrangements provide a prudent initial step. It enables manufacturers to commercially assess the Indian consumer market, understand demand dynamics, and calibrate their long‑term investment strategy before committing to on‑ground manufacturing operations. 

European manufacturers can handle distribution themselves, from their home country, to access the Indian market, build distribution networks, and assess commercial viability without the immediate complexity of setting up a full-fledged local entity. They can also establish subsidiaries, branch or liaison offices in India. While establishing a subsidiary, branch or liaison office offers greater operational control and closer supervision over market activities, it typically involves regulatory approvals, compliance with foreign investment and corporate governance requirements, and the need to build local management and operational infrastructure. 

For distributorship, European manufacturers can appoint local companies as distribution intermediaries who know the market. In this context, it is possible for the European manufacturer to agree with its contractual partner in India either that its own (e.g. German) law applies or that Indian law applies. If the contract so provides, the contractual relationships are in principle subject to the same legal rules that would apply if the products were distributed in Germany. Or better still: Section 92c of the German Commercial Code (HGB) grants manufacturers who appoint commercial agents or distributors outside the European Economic Area greater contractual freedom than usual. In such cases, it is possible to deviate from all mandatory provisions of Sections 84 et seq. HGB - at least in the case of individually negotiated contracts. For example, the statutory minimum notice periods do not necessarily apply, and the goodwill indemnity under Section 89b HGB may be excluded or modified. 

Alternatively, the parties may decide that Indian distribution law shall apply. In that case, however, European manufacturers are well advised to seek advice from Indian lawyers regarding local regulatory environment.

While the parties may designate either German or Indian law as the governing law for their distribution arrangement, they retain full autonomy to structure, negotiate, and document a sophisticated cross‑border commercial relationship for commercial flexibility. However, in the Indian context – where no dedicated statute regulates distribution relationships – the practical commercial landscape necessitates the incorporation of appropriate contractual and regulatory safeguards. These safeguards must ensure a durable and compliant business presence in India, operating within the framework of the Indian Contract Act, 1872, and aligned with the on‑ground regulatory realities of the Indian market.

India’s exchange control regime is generally business‑friendly, allowing cross‑border payments such as distributorship fees, commissions, and royalties through established regulatory channels. However, the agreement must still be drafted with care so that its commercial structure and incentive mechanisms do not raise concerns under any Indian law. A clear, balanced, and well‑structured arrangement will support the parties’ commercial objectives while remaining comfortably within India’s regulatory boundaries.

India does not curtail commercial freedom in distribution arrangements; rather, it channels that freedom through a structured compliance framework. For any end‑product to lawfully enter and circulate within the Indian market, European manufacturers must comply with certain mandatory obligations such as certification standards, quality‑control approvals, labelling rules, and sector‑specific registrations. These requirements do not restrict the parties’ commercial choices; they simply ensure that products meet India’s consumer‑protection and regulatory expectations. For European manufacturers, careful structuring at the outset will ensure that commercial flexibility is harmonized with India’s mandatory regulatory environment. Success in India therefore demands both commercial foresight and regulatory discipline.

It is also important to agree that any disputes shall be decided by an arbitral tribunal. By contrast, agreeing on German jurisdiction would have the disadvantage that enforcement of a German court judgment - while theoretically possible - would require a very time-consuming recognition procedure in India, which would, among other things, necessitate bringing a new action. Enforcement of a foreign arbitral award in India is easier, as India (like, for example, Germany) is a party to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Under this Convention, all signatory states have undertaken to enforce foreign arbitral awards within their territory without a renewed, full review of the merits.

India is an attractive enforcement jurisdiction owing to its distinctly pro‑enforcement stance toward foreign arbitral awards. Indian courts refrain from revisiting the merits or reopening factual findings, and the limited grounds for refusal are narrowly interpreted, with the burden placed squarely on the party resisting enforcement. Once enforceability is established, the award is treated as a decree of an Indian court to be executed against the opposite party in India without a fresh trial. For European manufacturers engaging Indian counterparties, this means that a well-drafted arbitration clause is a powerful risk management tool supported by an arbitration/enforcement‑friendly regime.

Oliver Korte
Sonil Singhania (Singhania & Partners LLP )
Jivesh Chandrayan (Singhania & Partners LLP)

Reform of the German Arbitration Law

On 27 January 2026, the German Federal Ministry of Justice presented a revised draft bill to modernize Germany's arbitration framework. While the 2026 version introduces two material modifications compared to the 2024 draft – notably with respect to Sections 55 and 1031 of the German Code of Civil Procedure (ZPO) (Modernisation of German Arbitration Law: Key Changes in the January 2026 Draft | ADVANT Beiten) – it retains the broader reform agenda already set out in 2024.
The overall objective of the reform remains unchanged: to strengthen Germany's position as a competitive place for arbitration, to further harmonize domestic arbitration law with prevailing international standards, and to enhance procedural efficiency in practice. To that end, the draft continues to provide for a number of structural adjustments, including the facilitation of digital proceedings, expressly permitting electronic awards and video hearings, and clearer rules on the publication of arbitral awards (subject to party consent). It also establishes a narrowly tailored retrial mechanism beyond the ordinary set-aside period and clarifies key issues such as multi-party arbitrator appointments, enforcement of foreign interim measures, judicial review of jurisdictional decisions, and the admissibility of dissenting opinions. Collectively, these measures reflect the legislator's intention to modernize German arbitration law in light of international developments and technological process. 

Within this broader framework, the 2026 draft introduces targeted refinements. The revised version of Sec. 55 ZPO now permits reliance on the principle of lex fori and habitual residence of the party concerned, rather than requiring recourse to foreign nationality‑based capacity rules. This approach aligns procedural capacity with modern principles of private international law. 
A further improvement concerns the revised wording of Sec. 1031, Subsection 1 ZPO. Under the draft, arbitration agreements shall be concluded or documented in writing or by any other means of communication that allows the information to be stored. This amendment brings German Law more closely into line with international legal standards while preserving the flexibility required in contemporary commercial practice. 
Taken together, the reform – both in its unchanged core elements and its 2026 refinements – signals a clear policy direction: Germany aims not merely to update its arbitration law, but to position itself proactively within an increasingly competitive global arbitration landscape.

Court of Arbitration for Nazi-Looted Cultural Property: First Cases Underway

The newly established Court of Arbitration for Nazi-Looted Cultural Property began its work in December 2025. It serves as an alternative dispute resolution mechanism for addressing disagreements regarding the restitution of cultural property confiscated as a result of Nazi persecution. Claimants can trigger arbitration unilaterally if public institutions in Germany refuse to return items, utilizing a "standing offer" system. It handles cases of cultural property lost between 30 January 1933 and 8 May 1945 due to persecution on racial, political, religious, or ideological grounds. The court is administered by the German Lost Art Foundation (Deutsches Zentrum Kulturgutverluste) in Magdeburg, with the arbitration office located in Berlin. The panel consists of 36 arbitrators. Its framework was negotiated with the Jewish Claims Conference and the Central Council of Jews in Germany. This institution represents a major shift in Germany's approach to restitution, aimed at providing legal certainty for both claimants and public holders of art. Something which is obviously well appreciated, given that as of February 18, 2026, already two cases have been brought before this institution.

Germany's Commercial Courts

The recent introduction of Commercial Courts in Germany, as part of the broader reform efforts surrounding German arbitration law, cannot be viewed in isolation from developments in arbitration. For decades, arbitration has been the preferred mechanism for resolving complex cross-border commercial or M&A disputes, largely due to its flexibility, international enforceability, specialized decision-makers, and the possibility of conducting proceedings in English. These advantages have increasingly shaped the expectations of multinational companies regarding dispute resolution.
Against this backdrop, the establishment of Commercial Courts represents a deliberate legislative response. By incorporating features traditionally associated with arbitration – such as English-language proceedings, procedural flexibility, specialized senates, and virtual hearings – the German legislator has sought to enhance the competitiveness of its state court system. In doing so, Germany positions its Commercial Courts not as a replacement for arbitration, but as a complementary and, in some cases, competitive alternative within the broader dispute resolution landscape.
Proceedings before Commercial Courts may be conducted in English at the level of certain Higher Regional Courts – a notable innovation within the German judicial system. 
The courts operate through specialized senates, with subject-matter expertise varying by federal state. For instance, two senates at the Hanseatic Higher Regional Court hear commercial disputes with an amount in dispute of EUR 500,000.00 or more, covering areas such as corporate law, post-M&A, banking and insurance law, transport, and shipping. Proceedings may be conducted virtually and offer enhanced confidentiality as well as verbatim transcripts – features traditionally associated with arbitration.
It is therefore unsurprising that the new Commercial Courts have been well received and are widely regarded as a success. Initial experiences suggest that both the Commercial Court and the Commercial Chambers established at certain Regional Courts, such as the Regional Court of Frankfurt am Main, are committed to conducting proceedings efficiently and resolving disputes significantly faster than is typically the case before state courts. 

AI-bitration

The rapid advancement of artificial intelligence has also reached the field of arbitration, bringing significant new developments. AI is increasingly influencing arbitral proceedings by offering transformative tools that promise greater efficiency and enhanced analytical capabilities. While it remains widely accepted that decision-making must rest with human arbitrators, AI's expanding capacity for analysis, interpretation, and drafting raises complex legal, ethical, and practical questions. 
A central issue for arbitral tribunals is whether, and to what extent, arbitration rules permit the use of AI – particularly given that neither international treaties nor most national arbitration laws expressly regulate its deployment. In the absence of legal provisions, parties and tribunals frequently look to institutional guidance. However, such guidance remains in an early stage of development. Examples include the 2024 Guidelines of the Silicon Valley Arbitration & Mediation Center, the SCC's 2024 Guide, and the CIArb's 2025 Guideline. Most recently the American Arbitration Association published its AI Arbitrator focusing on documents-only construction disputes. However, a real arbitrator remains involved and decisive in this procedure.
These initiatives seek to promote the responsible and effective use of AI in arbitration. Yet the existing guidelines remain deliberately broad and preliminary, while technological innovation continues to evolve at remarkable speed. Looking ahead to 2026, the growing relevance of AI in dispute resolution is likely to prompt further institutional guidelines and frameworks. As practical experience accumulates, existing guidelines will be tested, adjusted, and developed further to ensure that arbitral proceedings remain both technologically advanced and firmly anchored in fundamental principles of due process and fairness.

New Arbitration Laws and Rules

Across Asia, 2026, marks a year of significant regulatory reforms. China has introduced comprehensive amendments to its Arbitration Law, effective 1 March 2026. The reform constitutes a strategic step toward modernizing the domestic arbitration framework and further aligning the regime for foreign-related arbitration with international practice. Notable innovations include the nationwide introduction of ad-hoc arbitration, improvements to the recognition and enforcement of foreign arbitral awards, and the incorporation of additional internationally recognized key concepts, including a clearer statutory recognition of the separability of arbitration agreements and enhanced tribunal authority to rule on its own jurisdiction (Kompetenz-Kompetenz) – widely regarded as meaningful progress.
Pursuing a comparable objective of strengthening procedural governance and aligning its framework with internationally recognized best practices, the Asian International Arbitration Centre (AIAC) has introduced the AIAC Suite of Rules 2026. Effective from 1 January 2026, the suite comprises six new or revised sets of rules and guidelines. Key changes include an expanded scope of application, a clarification of party obligations, adjustments to procedural requirements, mandatory disclosure of third-party funding, and revisions concerning arbitrator conduct and tribunal powers.
In Korea, the 2026 version of the KCAB Rules has entered into force. Among the most notable developments are the establishment of the KCAB International Arbitration Court, the introduction of differentiated procedural tracks designed to enhance efficiency, the expansion of virtual proceedings, and the formal recognition of remote hearings.
From a European perspective, the ongoing reform of French arbitration law also merits close attention. The reform, expected to be finalized by autumn 2026, envisaged the codification of a unified and modern Arbitration Code aimed at harmonizing the legal framework and further consolidating France's position as a leading place of arbitration.

Dr. Ralf Hafner
Oliver Korte
Dr. Tobias Pörnbacher

Beyond broader trade issues, the Joint Statement specifically addresses tariffs, in line with a new protectionist US trade policy. 

Following months of what the EU expected to be a negotiation on an agreement on customs duties and related issues, the EU and the USA have published the Joint Statement, which is not a legally binding instrument, but a political document outlining the commitments of both parties on the new parameters of their trade relationships.

With specific respect to tariffs, the US will apply to the majority of EU products the higher between:

• the current US Most Favoured Nation (MFN) tariff rate; and 

• a tariff rate of 15%.

This entails that EU products already subject to MFN tariffs equal or higher than 15% will not be subject to the new tariffs announced by the US administration. This a better outcome than what the UK achieved

In addition, as from 1 September 2025, the US commits to apply only the MFN tariff to the following EU products: unavailable natural resources, aircraft and aircraft parts, generic pharmaceuticals and their ingredients and chemical precursors. The parties will consider other sectors and products for inclusion in the list of products for which only the MFN tariffs would apply.

For other products – those subject to US Section 232 of the of the Trade Expansion of 1962 (including cars, pharmaceuticals, semiconductors and lumber) – the total tariffs will be capped at 15% (after the EU eliminates its own tariffs on US industrial goods and provide preferential market access for a wide range of US seafood and agricultural goods); this may result in a reduction, for these products, of the overall tariffs currently in place.

As for steel and aluminium, the framework remains undefined. The parties agreed in principle to cooperate on protective measures against global overcapacity and to develop secure supply chains, possibly through Tariff Rate Quota (TRQ) solutions. However, previous attempts to resolve tariff issues related to aluminium and steel remained futile.

Some of these tariffs may be impacted by the recent decision of the U.S. Court of Appeals for the Federal Circuit; pending appeal to the U.S. Supreme Court, the Appeals Court has left the tariffs in place until October 14. Whether the U.S. Supreme Court sides with the Administration argument, that the imposition of broad tariffs is in keeping with the powers granted through the “International Emergency Economic Powers Act” or goes beyond that authority remains to be seen.

It should also be noted that the de-minimis rule for products sold into the U.S. at up to US$ 800 via parcels has been scrapped. This has led to a halt on shipping such products by the big European logistics companies. The repercussions on Chinese direct sales enterprises, such as Shein and Temu will be considerable and also be felt with European business in the direct sales area. To put the importance of this into context: the US Customs and Border Patrol estimates that in the last fiscal year, 1.36 billion packages were shipped to the U.S.

The Italian Government, while welcoming the Joint Statement, wishes o broaden the preferential treatments to sectors currently excluded, such as food and wine and to reach an agreement on steel and aluminium.

Apart from agriculture and wine, the Italian industry (in particular in the fashion and luxury, as well as the furniture and machinery sector) emphasize that for safeguarding the “Made in Italy” supply chains, broader exemptions or mitigating measures. are necessary. 

The German government expressed a cautious but overall positive view, stating that it is a successful effort to avert a damaging trade conflict that would have severely impacted the German export-oriented economy. Needless to say, German industry leaders have warned that even the reduced 15% tariffs on EU exports to the US will have a significant negative impact on Germany's export-driven industries, from automotive to chemical to steel products.

French politicians have roundly criticized the Joint Statement without however convincingly demonstrating that they would have achieved a better result than the EU Commission, supported by the Member States. The French President has called on the EU to mobilize all of its instruments, including anti-coercion, which is a negotiation tool but also provides for severe mechanisms to be used as a retaliatory measure, to reach a satisfactory deal.

French industry representatives have also urged the French Government and the European Commission to secure broader exemptions, namely for the wine and spirits or the luxury sectors, but overall deplore the content of the Joint Statement, which they find too unbalanced. It should however be noted that the EU did not give in on reducing non-tariff barriers. Although the wording of the Joint Statement is very vague and further development should be monitored, the agreement does not seem to provide for any modification of the EU legislative framework.

The Spanish prime minister recently said that he would support the trade agreement, "but I do so without any enthusiasm". The Spanish industries, notable those producing steel, called for clarity on critical details of the Joint Statement, especially concerning the continuing 50% U.S. tariffs on steel and aluminum, pending quota arrangements. They called for temporary aid for sectors most affected, including vehicles and steel

In conclusion, considering the non-binding nature of the Joint Statement and the need for further legal implementation, future developments should be closely monitored. In the meantime, EU companies exporting to the US – particularly French, German and Italian businesses, as three of the largest European exporters to the US – are advised to proactively review their cross-border commercial agreements, paying careful attention to clauses on pricing, allocation of duties, force majeure, hardship, and supply chain resilience, in order to mitigate risks, preserve margins, and prevent disputes. Such clauses could also be reviewed to include in their definition significant changes in international trade law.

Prof. Dr Rainer Bierwagen
Filippo Federici
Simone Gaggero
Morgane Gandaubert
Paolio Gallarati
Marie Hindré
Prof. Dr Hans-Josef Vogel

This transaction marks a major milestone in CFAO Healthcare's strategy to fully control the pharmaceutical value chain, from manufacturing to dispensing medicines to patients.

This acquisition, which follows an initial minority stake acquisition in 2022, consolidates CFAO Healthcare's presence and leadership in the healthcare sector in East Africa, reinforcing its commitment to ensuring access to quality medicines and medical products for all patients on the continent.

ADVANT Altana advised the CFAO group on this transaction with a team led by Gilles Gaillard, partner, and Margaux Ripert, associate, on corporate M&A aspects.

Key Figures of 2024: A Year of Challenges and Actions

The report clearly highlights how complex and interconnected the landscape of data protection has become:

• 2,204 data breaches were reported across both public and private sectors—evidence of increasing exposure to risk and the need for a rigorous, proactive approach from all actors, especially in light of the Authority's increasingly strict sanctions in serious cases.
• 130 inspections were carried out, focusing on highly innovative areas: digital identity systems (SPID), facial recognition, video surveillance, and artificial intelligence applications. These audits underscore how the privacy challenge is increasingly intertwined with technological innovation and cybersecurity.
• 835 collegial decisions were adopted, including 468 corrective and punitive measures—a strong signal of the Authority’s growing attention to both repressive and preventive efforts concerning the most relevant violations. Sanction-related payments amounted to €24,430,856.45.
• Over 16,000 inquiries were handled by the Authority, reflecting a growing and tangible interest in data protection and the need for clear and authoritative communication to support citizens and businesses.

Privacy and Artificial Intelligence: Assessments and Perspectives

In 2024, the Authority focused on the profound implications of adopting artificial intelligence in key sectors: from digital healthcare to age verification, digital identity management, and the risks linked to web scraping for algorithm training. The dialogue between technological evolution and legal regulation is becoming increasingly intense, leading the Authority to reaffirm the need for strict, up-to-date governance in response to emerging digital scenarios.

Audit activities and decisions also addressed the sensitive issues of automated decision-making and profiling, as well as the cybersecurity of public and private infrastructures. The report calls on all data controllers to maintain a high level of awareness and responsibility in terms of both technical and organizational security.

Culture of Compliance: Rights and Trust at the Core

The Authority’s assessment is clear: building a culture of compliance and data security is no longer a mere regulatory requirement. It is a safeguard for the fundamental rights of individuals and an essential foundation for digital trust in society and the marketplace.

A renewed call is made to all stakeholders—public and private—to invest in training, continuous process updates, and transparency, in order to strengthen a digital ecosystem that protects the dignity, freedom, and security of every individual.

The 2024 Annual Report of the Italian Data Protection Authority portrays a country where personal data protection is no longer just a technical issue, but a social, legal, and ethical matter. From managing data breaches to AI innovation, the challenge is ongoing and demands that all players rise to the occasion—working together to build a safer, more inclusive, and more transparent digital future.

Article by Marco Cappa

welcome to the June issue of ADVANT Beiten's International Briefing.

Germany remains one of the world’s most attractive destinations for foreign direct investments. This reputation is well-deserved, as the country offers a stable legal environment, a highly skilled workforce, and a dynamic industrial landscape, all of which create a robust foundation for successful business ventures. In ADVANT Beiten's newly released guide "Investing in Germany" our experts provide a comprehensive overview of the legal framework for foreign investments in Germany - practical, understandable and with extensive experience in the field of foreign direct investments.

This year our Beijing office proudly celebrates its 30^th anniversary. We are delighted to share with you an insightful interview with our Beijing team of Susanne Rademacher, Dr Jenna Wang-Metzner, and Lelu Li, highlighting their dedication and three decades expertise in the field of the inbound and outbound investments in China.

In this issue we will also highlight interesting developments in the European and German legal landscape, invite you to meet us at international events, and tell you about our recent deals.

You can find the newsletter by clicking here.

Kind regards,

Dr Barbara Mayer
Prof. Dr Hans-Josef Vogel
Dr Christian von Wistinghausen
Moritz Kopp

By order issued by the President of the United States on April 2, the U.S. government adopted new tariffs which provide for additional ad valorem duties on imports of products from all foreign countries.

The new protectionist policies adopted by the U.S. government – which took effect at midnight on April 2 – also apply to imports from the European Union.

Below are the main provisions introduced by the new measures:

• in the automotive sector, a 25 percent tariff is introduced on imports of cars, trucks and related components from all foreign countries (for components, the measures will take effect by May 3);

• imports of all goods from foreign countries into the U.S. customs territory are subject to an additional ad valorem rate of duty of 10 percent, effective April 5;

• for many countries, the rate is expected to rise from April 9. In particular, the European Union (and, consequently, Italy) will be subject to a rate of duty of 20 percent; for China, the rate goes up to 34 percent;

• certain products are currently excluded from the new tariffs. These include pharmaceuticals, lumber and semi-conductors, several precious metals (including gold, silver, platinum and copper), energy products (including oil) and critical minerals, as well as all goods subject to specific measures.

The new provisions complete an initial set of measures previously issued on February 10, whereby the U.S. government had imposed a rate of duty of 25 percent on steel and aluminum imports.

2. THE IMPACT OF CUSTOMS TARIFFS ON COMMERCIAL AGREEMENTS

Besides the clear economic and commercial impact, the introduction of additional duties may have a direct effect on all commercial agreements - whether existing or yet to be signed - involving the supply of goods to the United States.

In particular, for agreements already in place, fulfilling contractual obligations in light of the increase in tariffs may prove to be significantly more burdensome than expected – or reasonably foreseeable – at the time of signing.
First and foremost, it is advisable to conduct a preliminary review of the individual contractual clauses, checking for the presence of:

• provisions on governing law and jurisdiction, to determine whether the agreement is subject to Italian law (and, consequently, to the possible remedies provided by the Italian Civil Code);

• any delivery terms (so-called “Incoterms”) to verify the allocation between the parties for customs duties related to import/export;

• any clauses on renegotiation and/or early termination upon occurrence of certain circumstances (e.g. force majeure clauses or hardship clauses).

2.1 Remedies under the Italian Civil Code

For commercial agreements subject to Italian law – lacking specific contractual remedies agreed upon by the parties – the Italian Civil Code provides for certain legal instruments that may mitigate the impact of the new tariffs on the original contractual terms. In particular:

• supervening impossibility of performance due to causes not attributable to the debtor (pursuant to Articles 1218, 1256 and 1463 et seq. of the Italian Civil Code);

• supervening hardship (pursuant to Article 1467 et seq. of the Italian Civil Code);

• provisions on supplementary equity (pursuant to Article 1374 of the Italian Civil Code) and obligations to interpret and perform the contract in good faith (pursuant to Articles 1366, 1375 of the Italian Civil Code).

Supervening impossibility of performance refers to any situation preventing performance that cannot be foreseen and cannot be overcome with the effort that may be legitimately required of the debtor. According to the general principle laid down in Article 1218 of the Italian Civil Code, if the non-performing party proves that the default was a consequence of the impossibility of performance for “reasons not attributable to such party”, the latter may be held not liable.

In cases of definitive supervening impossibility, the contractual obligation is extinguished, resulting in the automatic termination of the agreement (either in full or partially, if the impossibility affects only part of the performance). If the impossibility is only temporary, the performance of the obligation may be legitimately suspended.

That said, while each commercial agreement should be assessed on a case-by-case basis, the new tariffs (at least in general terms) do not seem to constitute a genuine case of supervening impossibility. However, a temporary impossibility may be invoked in specific circumstances, resulting in a suspension of the contractual obligation.

It is arguably more feasible to rely on the instrument of supervening hardship. This remedy allows the termination of agreements whose balance is altered by supervening events – extraordinary and unpredictable when the agreement was entered into – which do not fall within the normal contractual risk and which make the performance of any of the obligations underlying the contract excessively burdensome or objectively debased in value and/or usefulness.

In such a case, the counterparty that is interested in maintaining the contractual commitment in place may offer to rebalance the relevant agreement within the limits of normal risk, thus avoiding termination.

In any event, it is worth noting that both remedies – aside from the option to take the contract back to fairness – often face a practical obstacle: in the context of commerce, contract termination may not be a suitable remedy, as it would completely erase the business relationship. In this regard, during the Covid-19 pandemic (an exceptional event par excellence), the Italian Supreme Court expressed support for the existence of an obligation to renegotiate the contract rather than seeking termination (see Corte di Cassazione, Ufficio del Massimario, relazione tematica no. 56/2020).

An alternative might be to invoke the application of general principles of supplementary equity and good faith in contractual performance, with respect to which scholars has already acknowledged the possibility of claiming a general duty to renegotiate the contract upon the occurrence of supervening circumstances.

2.2 Contract remedies

As discussed, the provisions of the Italian Civil Code mainly offer remedies that lead to contract termination, which often do not align with the commercial need to preserve existing business relationships.

To encourage the use of conservative remedies, one solution may lie in the prior arrangement of specific contractual renegotiation clauses.

In this regard, commercial contracts often include certain clauses that are commonly used in both domestic and international commercial practice, that contractually regulate the effects of supervening events that may impact the contractual balance.

The most common contractual provisions in business practice include:

• force majeure clauses;

• hardship clauses;

• material adverse change (MAC) clauses.

Force majeure clauses regulate cases in which the contractual obligation becomes impossible due to the occurrence of an event specified in the relevant agreement. The application of the force majeure clause results in the suspension of the affected party’s obligations and may, subsequently, lead to the termination of the contract or grant the parties the right to terminate it.

The applicability of such clauses in relation to the introduction of tariffs must be assessed in light of their precise wording, even though – as previously noted – the new customs duties generally do not result in an actual impossibility of performance. A detailed review of the specific events covered by the clause is therefore necessary.

On the other hand, hardship clauses place an obligation to renegotiate contractual terms upon the occurrence of certain circumstances that make it excessively onerous for either party to perform the contract.

This remedy seems to offer a more viable solution in the context of the newly introduced tariffs. First, hardship clauses do not strictly refer to impossibility of performance (similarly to the Italian remedy of supervening hardship). Second, the preservative nature of the remedy may represent a more suitable solution for commercial purposes.

Finally, MAC clauses entitle one party to terminate the contract upon the occurrence of a specified “material” event (unless a so-called “right to cure” is provided, allowing the other party to remedy the consequences of the supervening event. However, it is still appropriate to undertake a case-by-case assessment to determine the actual applicability of the clause.

3. CONCLUSIONS

The introduction of the new customs tariffs by the United States raises several questions regarding the future of trade relations between the United States and Italy.

Pending the developments of the policies undertaken by the U.S. government, it is advisable to consider the inclusion – in commercial agreements under negotiation – of adequate provisions aimed at mitigating the risks arising from the high degree of uncertainty in the international context, with an eye to any potential mitigants that may be adopted by the European Union – such as providing specific clauses that clearly allocate the burden of newly imposed customs duties and/or provide for price revision mechanisms.

As for commercial agreements already signed, the performance of which may be impacted by the tariffs, it will be necessary to assess on a case-by-case basis the potential triggering of legal and contractual remedies.

Paolo Gallarati

Filippo Federici

Simone Gaggero

These tariffs affect all sectors, but one of the most affected in Europe is the automobile sector, particularly in Germany: cars will now be taxed at 25%. The most affected sector in France are aeronautics, with 7.9 billion euros of exports in 2023, pharmaceuticals with 4.1 billion euros in 2023 and alcohol (especially wine) with 3,9 billion.

In addition, differentiated and higher tariff rates will apply on goods from the French overseas territories: Guadeloupe, Mayotte, Guyane and Martinique will be subject to a 10% tax in addition to the 20% levied on the rest of France, while Réunion will be subject to a total tax of 37%. Tariffs of 50% will be imposed on products from Saint-Pierre-et-Miquelon and 10% on those from French Polynesia, as these islands have not been considered part of the EU by Trump.

Commission President Ursula von der Leyen said she was ready to negotiate but was also ready for confrontation if necessary to assert the EU's interests and values. She said that the Commission is working on countermeasures. Several European heads of state are also working on measures to be adopted.

ADVANT has a team of international trade and national security attorneys, and government relations professionals ready to help European companies. Our dedicated team has decades of experience supporting clients across a range of industries – ranging from steel, chemical, rubber, mining, and agricultural products.

Prof. Dr Rainer Bierwagen
Christian Hipp
Dr Dietmar Reich
Gábor Báthory