Lamadrid de Pablo and L Oritz Blanco’s study Nullity/Voidness, found substantial divergence in how national courts within the EU implement severability, due to diverging approaches and the discretion enjoyed by the courts.įor example, UK courts tend to be quite permissive of severing remaining terms. contracts between a business and its customers). Courts must decide, not only whether any parts of the agreement can be saved, but also any effect on closely related contracts that do not fall foul of competition law but whose function relies on the prohibited clauses (e.g. How the principle of severability works in practice varies considerably between jurisdictions and is a question for national courts within the EU. This goes further than the common law severance principles that would otherwise apply and which simply permit severance. In Australia, severability is set out in the Competition and Consumer Act, s.4L, which requires remaining terms to be valid and enforceable to the greatest extent possible. The principle of severance is considered important because it means that an illegality affecting only a small or secondary obligation within the contract, does not result in the uncertainty and cost of complete contractual voidness. This is generally the approach in competition law regimes around the world. The contract will only therefore be void as a whole if the remaining terms cannot be executed without the prohibited clauses, or if the two sets of terms are not severable. In Société Technique Minière it was held that nullity affects only the clauses in the agreement that are prohibited. Nullity brought about by a breach of competition law does not necessarily render the contract void in its entirety. In the EU case of Courage v Crehan, the Court of Justice of the European Union established that any contracting party can invoke nullity in relation to a contract that breaches Article 101(1) TFEU. For example, Article 101(2) TFEU states, ‘Any agreements or decisions prohibited pursuant to this Article shall be automatically void’. In many jurisdictions, nullity is explicitly set out in the prohibition of anti-competitive agreements and applies regardless of whether the competition authority has delivered a prior decision relating to that agreement. This is consistent with the general principle of contract law that when a contract cannot be performed without engaging in something illegal, it is void. The principle of nullity prevents parties from enforcing a contract that amounts to a breach of competition law.
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