Franchising in Venezuela: agreeing how to resolve disputes

Buying a franchise also means deciding what to do if the relationship becomes strained. A dispute resolution clause provides a structured way to handle disputed charges, breaches of contract or operational decisions without turning every disagreement into a breakdown. Within the franchise sector, protecting working relationships requires clear, accessible procedures that comply with Venezuelan law.

1. Understand which laws support your claim

Venezuela has neither a comprehensive franchise law nor a general system of mandatory pre-contractual disclosure equivalent to those in some other countries. This does not mean that the relationship is unregulated: the Civil Code and the Commercial Code provide general rules on contracts, obligations and commercial relationships. Depending on the dispute, the Industrial Property Law, the Copyright Law and competition rules may also be relevant.

There are also Guidelines for the Assessment of Franchise Agreements, issued by Procompetencia in 2000. These concern the assessment of franchise agreements from a competition perspective; they are neither a comprehensive franchisee protection law nor a general procedure for resolving franchisee claims. It is worth asking a lawyer to review their scope and current application, taking subsequent changes to the competition framework into account.

If the parties choose arbitration, the key legislation is the Commercial Arbitration Law. Simply stating that any disagreement will be referred to arbitration is not enough: the agreement must meet the legal requirements and cover matters that can legally be resolved through arbitration.

Codes of ethics issued by franchise associations are no substitute for these laws either. If you wish to incorporate an association's procedure, identify the document, its version and the specific obligations the parties accept.

2. Design a claims procedure that creates a clear record

Before discussing arbitrators or courts, agree how a breach of contract should be reported. A telephone conversation may resolve a misunderstanding, but it leaves little evidence of what was requested or how the other party responded.

The contract should specify:

• Recipients and channels: authorised representatives, postal addresses and email addresses for notices.
• Minimum content: the facts, the obligation allegedly breached, supporting documents and the remedy sought.
• Separate deadlines: time limits for acknowledging receipt, responding and, where appropriate, remedying the breach.
• Escalation: who is responsible for taking the dispute to the next level if the usual contacts cannot resolve it.

Avoid wording such as ‘a response will be provided in due course’. Use specific deadlines and state whether they are measured in working days or calendar days, and when they start to run.

For example, if an invoice includes an unrecognised charge, the procedure should allow you to identify the item, ask for its contractual basis and document the disagreement. Raising a claim does not automatically entitle you to suspend payment: the contract and the law will determine the consequences. Negotiate how disputed amounts will be handled and seek advice before unilaterally withholding payment.

3. Compare the practical accessibility of arbitration and the courts

Do not accept arbitration simply because it appears to offer greater specialist expertise. It may suit certain commercial disputes, but it involves fees and expenses that should be assessed before signing. Nor should you assume that it will always be quicker or cheaper than court proceedings.

If arbitration is proposed, review these points:

• Type: institutional arbitration, administered by a named centre, or ad hoc arbitration, organised in accordance with the agreement and the law.
• Seat and language: these can affect travel, legal advice and the management of proceedings.
• Arbitrators: their number, how they are appointed and independence requirements.
• Costs: advance payments, fees and rules on allocating expenses.
• Scope: which disputes are covered and how urgent interim measures are handled under the applicable rules.

Ask for the proposed centre's rules and fee schedule. If a foreign seat is proposed, request a specific assessment of the costs and implications of enforcing any resulting award in Venezuela.

If the parties choose the courts, a lawyer should check that the clause complies with the applicable rules on jurisdiction and which court may hear the dispute. A location that suits the franchisor may be very costly for the buyer.

4. Prevent the procedure from bringing operations to a halt

An initial negotiation stage may preserve the relationship, but it should not continue indefinitely. Define when that stage ends and when the next route becomes available. If mediation is included, agree how the mediator will be appointed and who will pay the costs.

It is also worth specifying which obligations must continue to be performed during the dispute, subject to what is legally enforceable. Do not assume that bringing a claim allows you to interrupt services or disregard commitments.

Keep contracts, annexes, invoices, correspondence and proof of delivery in an organised filing system. Documentation can be decisive in establishing what was promised, what happened and what remedy was requested.

Practical takeaway: before signing, test the clause against a hypothetical dispute. You should be able to identify whom to contact, how long to wait, where to turn next and what costs to expect. If any answer rests solely on the other party's discretion, seek a legal review and negotiate clearer terms.