Abrupt termination: The impact of economic dependence on notice

A business relationship can last for years before being terminated. If this termination occurs without sufficient written notice, French law allows for compensation to be obtained for the abrupt termination of the business relationship (rupture brutale de relations commerciales établies).

The state of economic dependence (dépendance économique) can play an important role in assessing the length of sufficient notice. Not because it conditions the action, but because it can lead the judge to require a longer notice period, thereby increasing the compensation.

I. The legal framework

A. The concept of abrupt termination of established commercial relations

Today, the abrupt termination of established commercial relations is governed by Article L. 442-1, II of the French Commercial Code (formerly Article L. 442-6, I, 5° of the French Commercial Code).

It penalizes the termination, even partial, of an established commercial relationship without giving written notice that takes into account, in particular, the duration of the relationship, commercial practices, and interprofessional agreements.

Two important points:

• The law provides for a ceiling: in the event of a dispute over duration, the party responsible for the termination cannot be held liable if it has given 18 months' notice.
• Termination without notice: This remains possible in cases of serious non-performance or force majeure.

B. The concept of economic dependence

In the context of sudden termination, economic dependence is defined as the inability of a company to find a technically and economically equivalent solution to the relationship established with its partner at the time of termination.

This definition is similar to that used in cases of abuse of economic dependence, but the objective is not the same. Here, the aim is not to penalize a market infringement. Instead, a concrete assessment is made of the time needed to reorganize after the termination.

Note: A high proportion of turnover generated with a partner is a strong indicator, but it is not sufficient on its own. Judges look above all for the existence of realistic alternatives (other customers, other suppliers, other networks, other brands) under comparable conditions.

II. The impact of economic dependence in the event of sudden termination

A. Increasing the length of the notice period

To compensate the victim of sudden termination, the judge first determines the notice period that should have been granted. They conduct a concrete analysis of the commercial relationship. They take into account the duration, the volume of business, the sector, the time needed to find a new partner, and the degree of economic dependence.

Practical consequence: the greater the dependence, the longer the notice period tends to be (up to a maximum of 18 months at present).

B. Increase in the amount of compensation

In the event of insufficient notice, the damage corresponds in principle to the margin that the victim could have expected during the missing notice period. The longer the “theoretical” notice period, the higher the compensation base.

In practice, a scale of approximately one month's notice per year of the relationship is often used. However, judges may adjust this. They may increase (dependence, exclusivity, specific investments, closed market) or reduce (low dependence, available alternatives, already precarious relationship) the amount.

III. What indicators do judges use (or disregard) to characterize dependence?

A. Frequently used indicators

Decisions and doctrine converge towards a set of indicators, including:

• Share of turnover generated with the partner (over several financial years).
• Contractual or de facto exclusivity (or restrictions preventing work with competitors).
• Demonstrable difficulty in finding an alternative partner offering an equivalent solution (technical and economic).
• Specificity of products, customers, or market (e.g., narrow market, rare network, structuring brand).
• Specific non-reusable investments (inventory, tools, dedicated teams, marketing).

B. What is not sufficient, taken in isolation

• A very high percentage of turnover, if the company does not prove the absence of an equivalent alternative.
• A “chosen” or insufficiently justified dependency, where the company has voluntarily locked itself into a single relationship without demonstrating objective constraints.

IV. The EGH v. Xylem ruling (CA Paris 2023, Cassation 2025)

A. The facts of the case

EGH, a hydraulic machinery distributor, had been working with the Xylem group since 1997, in a relationship that included exclusive distribution rights in certain territories (the Maghreb and French-speaking Africa).

Xylem terminated the exclusivity agreement effective January 1, 2020. EGH considered that this loss of exclusivity, without sufficient notice, constituted a partial abrupt termination.

B. The Court of Appeal's assessment of the notice period

The Court of Appeal held that:

• EGH had built its business model on exclusivity since 1997.
• Nearly 80% of its turnover was based on the products concerned.
• The loss of exclusivity meant a total reorganization and made it hard to offer competing products after 23 years of promoting a brand.

It set the required notice period at 12 months. Since EGH only got 6 months' notice about losing exclusivity, the court ruled it was a sudden and partial breach.

Reference of the decision: CA Paris September 6, 2023, No. 21/05268.

C. The decision of the French Supreme Court

EGH appealed to the French Supreme Court (Cour de cassation), clearly dissatisfied with the length of the notice period set by the Court of Appeal. In particular, it argued that the Court of Appeal had not taken into account its state of economic dependence when setting the length of the notice period.

The French Supreme Court points out that sufficient notice is assessed on the basis of a concrete analysis, taking into account, in particular, the state of economic dependence, defined as the impossibility of finding a technically and economically equivalent solution.

However, the Court dismissed the appellant's complaint, considering that the Court of Appeal had indeed taken into account a state of dependence in view of the grounds for the contested decision (long-term exclusivity, high concentration of turnover, major reorganization). As for the length of the sufficient notice period, it pointed out that this was a matter for the discretion of the trial judges.

The Court therefore upheld the decision of the Court of Appeal.

Reference of the decision: Cass. com., December 3, 2025, No. 23-23.997 (ECLI:FR:CCASS:2025:CO00625).

V. Conclusion

Economic dependence alone does not entitle you to compensation. However, it weighs heavily in the assessment of sufficient notice. If you can demonstrate this, you increase your chances of obtaining a longer notice period and, therefore, more significant compensation.

Conversely, if you terminate a relationship and your partner appears to be dependent, too short a notice period becomes a major risk of litigation. The right strategy is to anticipate, document, and calibrate a credible notice period, taking into account the real constraints of retraining.

Need assistance with the termination of an established business relationship? Contact Grelier Avocat today.