Distribution law is characterised by a high density of regulatory constraints aimed at
– protecting parties perceived by the legislator as structurally weak (e.g., commercial agents), and
– striking the right balance between
- a competition-centred approach hostile to any restraints of trade, and, on the other hand,
- recognising the need to streamline brand policies vertically along value chains.
Deep industry knowledge and vast practical experience in distribution law are key to successfully representing and advising both, principals and distributors.
Our practice focuses on commercial agency, franchise systems, and other distribution models.
Inside the EU, the law of commercial agency is harmonised through Directive 86/653/EEC which has been transposed to domestic law in all member states. Examples for transposing legislation are §§ 84 et seq. of the German Commercial Code, or Art. L.134-1 et seq. of the French Commercial Code.
Key features of the directive and the transposing domestic legislation include:
- Commercial agent’s right to remuneration even in the absence of any agreement with the principal, depending and in accordance with the customary practice in the place where he carries out his activities, or reasonably taking into account all the aspects of the transaction.
- Commercial agent’s right to commission on transactions concluded both during and after the termination of the agency contract under certain circumstances.
- Principal’s duty to indemnify or compensate the agent due to termination of the agency contract: One of which to be applied in accordance with the relevant member state’s implementation in its domestic legislation of the duty to either indemnify or compensate.
In most jurisdictions, including key civil law countries such as Germany or France, franchise law has never been codified. Courts either apply provisions crafted for commercial agency law by analogy, or have developed rules specific to franchise law based on general legal principles. Exceptionally, there are jurisdictions that have specific rules for franchising. It is the case of Brazil, which enacted over 20 years ago its Franchising Law (Law n° 8.955/1994) providing, inter alia, for specific obligations for franchisees and franchisors.
Other Distribution Models
Apart from commercial agency and franchise law, other distribution models have emerged, such as dealership, or brokerage. In many cases, the issue arises whether the dense regulatory framework for commercial agency, based chiefly on Directive 86/653/EEC, may or must be applied by analogy to such alternative distribution models. By way of illustration, it is now recognised under German law that dealers may, under certain circumstances, be entitled to an indemnity payment in case their contract is terminated, based on the principles on which such claim is based in Directive 86/653/EEC. This said, the calculation of the indemnity is considerably more complex since a dealer does not earn commission (which serves as the basis for the calculation of agent’s indemnity) but a margin which may be impacted by transaction-specific cost types.
Issues Common to All Distribution Models
Streamlined distribution systems with a top-down design have a tendency to conflict with anti-trust policy goals. Frequently arising issues concern
- purchase restrictions (“tied house” etc.),
- exclusivity clauses,
- long contractual terms and/or automatic renewals.
The legal implications may have an impact on the exact distribution model to be chosen in any given fact pattern.
BODENHEIMER HERZBERG Representative Matters as Parties’ Counsel
Represented an EU petrol company in German proceedings towards the recognition of a Turkish state court judgment against a former distributor in Germany
Advised a German food wholesaler on legal risks arising out of reimporting brand products from Turkey to Germany, under the Ankara Association Agreement and its Additional Protocol
Advised and represented an Italian music label on claims against a German distributor arising out of a commercial agency contract
Represented a collector of ancient African art in a dispute against a gallery owner, revolving around title to some 300 African art objects, before the German state courts
Advised a U.S. manufacturer of medical devices on the prospects of threatening ICC arbitration proceedings in a contentious matter against a German distributor
Represented a German fashion manufacturer in multiple parallel proceedings before the German state courts against a distributor revolving around the distribution of clothing in Russia
Represented a financial consultant in proceedings before the German state courts on commission claims against a German state-owned holding company pertaining to the negotiation of an investment in Southeast Easia
Represented a multinational online media agency in a series of ICC, DIS, and SIAC arbitrations against non-performing advertisers arising out of Insertion Orders with some 25+ advertisers from around the world; oversaw asset freezing, collection and enforcement proceedings in, inter alia, Austria, Brazil, Canada, Cyprus, the Czech Republic, France, Hong Kong, India, Israel, Ireland, Italy, Latvia, Malaysia, Portugal, Russia, Spain, Turkey, the UK, the United States, and Uruguay, in close collaboration with local correspondent counsel.
Advised a multinational online media agency on a set of contracts for a novel, innovative mobile marketing technology, involving mobile network operators, original end manufacturers, and distributors
Advised a French food retailer with a shop-in-shop concept on distribution models to be used when entering the German market; drafted and negotiated contracts with both, distributors, and retail partners
Represented a German distributor in ICC arbitral proceedings agsinst two French B2B tech companies in a matter pertaining to commercial agent’s commission and indemnity claims, under French law, and Directive 86/653/EEC
BODENHEIMER HERZBERG Representative Matters as Arbitrators
Acted as co-arbitrator in a DIS arbitration between an Austrian distributor and a U.S. manufacturer, with German Law as the governing law, and Cologne as the place of the arbitration (Dr Rouven F. Bodenheimer)
Acted as Sole Arbitrator in a DIA arbitration between a Danish manufacturer and seller against a Dutch distributor, revolving around claims arising out of contract, distribution and trademark law, with Danish Law as the governing law, and Copenhagen as the place of the arbitration (Dr Rouven F. Bodenheimer)
Acted as co-Arbitrator in a DIS arbitration between a Turkish commercial agent and a German principal, revolving around claims arising out of a commercial agency contract, with German Law as the governing law and Cologne as the place of the arbitration (Dr Rouven F. Bodenheimer).
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