Are EU distributors entitled to compensation on termination?

In our recent article on the Volvo case we queried how a German Volvo dealer (i.e. a re-seller, or distributor) could be regarded as a commercial agent, and thus entitled to a goodwill indemnity on termination.

It was understood that in Germany and some other EU* countries the courts had permitted distributors to claim a goodwill indemnity upon termination by “analogous application” of the Commercial Agency Directive.

However, following the decision of the ECJ in Mavrona v Delta Etaireia Symmetochon (February 2004), the legal basis for applying the Directive to distributors anywhere in the EU seemed questionable.  In Mavrona the ECJ held that the Directive could only be applied to “commercial agents” as defined by the Directive. But Member States were free to introduce national legislation “inspired by the Directive” to protect persons other than commercial agents, such as distributors, provided no other provision of EU law prevented them from doing so.

In the Volvo case, however, the ECJ (a) noted that under the settled case-law of the German courts the commercial agent’s entitlement to a goodwill indemnity applies to some distributors by analogy, and (b) seemed to have no problem with that concept.  The reason, it appears, is that under German law this kind of analogous application is seen as the legitimate application of existing legislation, rather than as the court making new law for which there is no legislative warrant.  There is no need for legislation to be passed in Germany protecting distributors, because the German courts regard the existing legislation as protecting them.

Analogous application, where permitted, will not necessarily extend to all kinds of distributors.  In Germany, for example, the key requirements are (a) that the distributor is closely integrated into the supplier’s sales organisation in a manner comparable to a commercial agent, and (b) that the supplier is entitled to the distributor’s customer list after termination.  It is mainly exclusive car dealers who are protected in this way, apparently.

The position in the EU therefore seems to be this:

• the Agency Directive does not apply to EU distributors except to the extent that the law of the relevant country permits it to be applied by analogy in some cases.  We understand this has happened in Austria, Denmark, Finland, Germany, Norway and Spain;
• Belgium is currently the only EU State with specific legislation protecting distributors.

In view of these differences between how the law works in different EU states, it is essential for both the producer and the distributor to look very carefully at what laws will govern the distribution agreement in order to have a proper understanding of what their respective rights and obligations will be.

* The Commercial Agents Directive applies to all the European Economic Area (EEA) countries – the EU member states plus Iceland, Liechtenstein and Norway.  References in this article to the ‘EU’ should therefore be read as including those other countries.