International Franchise Lawyers Association e.V.
 
 
Franchising in Latvia
 
For further details please contact:

Jerņeva, Jūlija
 

Vilgerts Lawfirm

Vesetas str. 7

LV 1013 Riga

Latvia

Phone +371 67 32 00 00

Fax +371 67 32 00 65

www.vilgerts.com

julija.jerneva@vilgerts.com

 

Definition. Under Latvian law the franchising agreement is defined as a vertical agreement whereby the franchiser transfers to the franchisee, at direct or indirect financial compensation, rights of usage of intellectual property (especially – firms, trade marks, signboards, objects of design, know-how, knowledge and patents) for usage or sale of goods.

The form of the agreement. There is no specific requirement for the franchising agreement to be entered into in writing. In accordance with the general rule, the parties to an agreement are free to choose the form of their agreement and this means that also the oral form is, in principle, possible. However, there is a peculiar norm in the Civil Law[1] of Latvia, pursuant to which, the written for of the agreement is the pre-condition for the submission of the claim to the court. Therefore, in order to secure the adequate protection of the both parties it is advisable to enter into the franchising agreement in writing.

The nature of the agreement. Certain difficulties arise when defining the nature of the franchising agreement under Latvian laws. The franchising agreement has elements of different agreements such as purchase, licensing, tax, agency, lease, etc. Therefore, we can conclude that the franchising agreement has the complicated structure and cannot therefore be defined under only one type of the agreements. However, the most recognised approach is that the general conditions of the franchising agreement are mainly subject to the legal prescriptions of the Civil Law, regulating lease agreements with any exceptions and/or additional norms applicable due to the sophisticated nature thereof.

The very nature of the rights and obligations of the parties under the franchising agreement proves the above statement: by entering into the franchising agreement one party – the franchiser – transfers to other party the franchisee rights to use franchiser’s name to perform specific commercial activities whereas the franchisee undertakes to compensate for usage of such rights. Indeed, this definitions includes several characteristic criteria that fit under the lease agreement criteria, since according to the Civil Law, also rights can be the subject of transfer.

Non-competition. It is a general rule that no agreement between the parties can be contrary to the competition law. However, the Latvian law has been harmonised with the prescriptions of the EU legislation and, namely, the provisions of the Regulation (EC) 4087/88. The transposing act are the The regulations by the Cabinet of Ministers No 434 On the release of the vertical agreements from the prohibition set out in Clause 11 of the Competition law[2].

The binding force of the agreement. All rights and obligations set out by franchising agreement are binding to parties and their successors unless such agreement has been terminated by any and/or both parties under other terms and conditions.

Other. Pursuant to the Civil Law, the parties also can append ancillary provisions to the principal agreement, which then is regulated according to the articles of the Civil law on ancillary provisions to the purchase agreement. All the other issues related to the franchising agreement shall be examined specifically on each case and depending on the specific elements of the franchising agreement in question and may include copyright, trademark and consumer protection issues, property rights, etc. 

 

[1] The Civil Law (in Latvian: Civillikums). In force as of 01.09.1992, as amended on 20.12.2002.

[2] The regulations by the Cabinet of Ministers nr. 434 “On the release of the vertical agreements from the prohibition set out in Clause 11 of the Competition law” (in Latvian: Par vertikālo vienošanos atbrīvošanu no Konkurences likuma 11.panta pirmajā daļā noteiktā vienošanās aizlieguma). In force as of 02.05.2004.