Services for Importers

If you’re a UK importer (whether you operate as an agent or a distributor, or both) we can help you to maximise the long term value you derive from your relationships with overseas suppliers.

UK agency and distribution

We can help you :

• review existing agency and distribution contracts;
• negotiate new agency and distribution contracts and make sure they are put in place;
• resolve the many problems and disputes that can arise between you and your suppliers in the course of agency or distribution relationships.

Brand-development projects and joint ventures

We have been involved in many different kinds of deals between producers and importers for the supply of products under newly-created brands, often jointly owned, and between producers and UK retailers for buyers’ own brands or exclusive labels.  As well as advising on appropriate structures, we can assist with negotiating and drafting the necessary documentation.

Termination of relationships

We advise agents, distributors and joint venturers in connection with the possibility of termination and its implications, and can handle all aspects of the actual termination and its consequences, in particular….

Compensation claims

We handle claims for damages and/or compensation following the termination of contracts and relationships.  We specialise in claims under the Commercial Agents Regulations.  We have been helping agents to achieve successful outcomes in commercial agency cases since the UK Regulations were first introduced in 1994.

Contact us

Address:

APP Law, Solicitors
3 Finger Post Lane, Norley, Cheshire, England, WA6 8LE

Phone: +44 (0)1928 788537

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APP Law, Solicitors is the trading name of APP Law Limited, a company registered in England. Registered office address as above. Company registration number 06459416.  We are authorised and regulated by the Solicitors Regulation Authority.

Services for Producers

UK agency, distribution and direct supply agreements

We offer a comprehensive range of specialist legal services to producers or manufacturers who export to the UK.  If you’re looking to enter the UK market for the first time, we can help you to establish and maintain profitable distribution in the UK.  We can help you to:

• Negotiate and draft contracts that will protect your interests and maximise your returns from exporting to the UK – whether it’s an agency, distribution, or direct supply agreement that you need, or a combination of these
• Review your existing contracts, assess risks and exposures, and identify opportunities to improve and protect your position

Brand-development and joint ventures

We  can help you with:

• Joint venture agreements with importers
• Licensing trade marks and other intellectual property rights for the production or distribution of branded products
• Supply agreements with UK retailers for their “exclusive labels” or “buyers own brands”.

Contract termination

Trading relationships come to an end for all sorts of reasons.  From the producer’s perspective, a frequent complaint is an importer’s poor performance, often combined with a breakdown of trust and/or a pattern of late payment.  Another common situation is where an importer has built distribution up to a certain level, but is unable to take it to the next level.

We have extensive experience of working with producers who have become dissatisfied with their UK agent, distributor, or other partner, and want to extricate themselves from the contract with least possible pain and expense.

• We can handle all aspects of the termination of any UK agency, distribution, joint venture or other contract for you
• At the same time we can help you set up and transfer to new distribution arrangements (and, in particular, ensure that problems with previous contracts are avoided in the new ones).

Compensation claims and dispute resolution

The termination of a contract can prove very costly for a producer if it isn’t handled with care.  Too often, they go ahead and terminate without taking legal advice first, and are then dismayed to discover:

• that a UK “commercial agent” may have a claim against the producer for substantial compensation on termination, based on the value of the lost agency
• that a UK distributor may be entitled to withhold money which he owes the producer for products supplied, by way of set-off against any counterclaim he makes against the producer following the termination
• that an agent who has been collecting customer payments on behalf of the producer may have a similar right of set-off.

The key to a successful termination is careful planning.  We can help you to plan how and when to terminate, and then help you to handle any resultant compensation claims, in order to minimise any negative impact on your business.

We can also help you with other kinds of problems in the UK.  For example, disputes over ownership of a brand or trade mark, or enforcing retention of title when a distributor or customer becomes insolvent while still holding stock of products that haven’t been paid for.

Regulation of commercial agents

The EU Commercial Agents Directive imposes a mandatory scheme of protection for commercial agents throughout the EEA (the EU Member States plus Iceland, Liechtenstein and Norway).  In theory the legal position should be pretty much the same in all EEA countries, but in practice there can be significant differences between them.  For example, some countries protect agents who supply goods or services, others protect only those who supply goods.  Some prescribe longer periods of notice of termination than others.  And there are important differences between EEA countries as regards a commercial agent’s entitlement to compensation on termination.

We have extensive experience of advising producers from all over the world on the legal implications of the Directive.

Regulation of supply agreements with the largest UK supermarkets

The implementation of the Groceries Supply Code of Practice 2010 (GSCOP) in the UK is potentially of great benefit to those who supply grocery products to the UK’s ten largest supermarkets (the “Designated Retailers”).  Any supplier who follows our advice and guidance in a consistent and systematic way should begin to enjoy much more stable – and profitable – business with the DRs.  See How to use the GSCOP to your advantage.

Andrew Park

APP Law Solicitors is headed by Andrew Park, a commercial lawyer with over 30 years experience in practice.   He has extensive experience of company, commercial and dispute resolution work, but specialises in advising on UK agency, distribution, brand development and joint venture matters, especially in relation to the wine trade – see our dedicated website APP Wine Law.

Previously

Andrew joined Lake, New & Hurst, Stockport, as a trainee in 1976.  Qualified as a solicitor 1978.  Became Partner 1982, Managing Partner 1984.  Established solo practice 1994, re-branded as APP Law Solicitors in 2003.

Why APP Law?

Primary motivation for establishing APP Law: to have the control that operating as a small practice offers.  To ensure that all elements of a case are handled to the highest standards, and to offer a highly responsive, personal, one-to-one service to clients.

Specialist expertise

After first taking on a commercial agency case for a wine importer in 1995, Andrew was attracted by the complex and challenging nature of wine trade matters and saw an opportunity to provide a specialist legal service that was not available elsewhere.  But much of Andrew’s expertise in the following areas is of equal value to other producers or manufacturers:

• Commercial agency
• UK distribution
• Brand development
• UK Joint ventures

Publications

See some of Andrew’s more recent media publications.

Professional bodies and associations

International Bar Association
International Wine Lawyers Association (AIDV)
Law Society of England & Wales
UK Wine and Spirits Trade Association

Personal

Andrew enjoys travel, cricket (particularly when England are thrashing the Aussies!), running, and of course…. good wine!

Contact

Email:  andrew@app-law.com
Phone: +44 (0)1928 788537

Welcome to APP Law

We are an English commercial law firm headed by solicitor Andrew Park.   Although we have built a reputation as the UK’s leading wine trade law specialist – visit our dedicated website  APP Wine Law – much of the expertise we have developed in connection with wine trade agency, distribution, brand development and joint venture matters can be of equal value to businesses in other trades.  Spirits and non-alcoholic drinks, for example.  And not just drinks – we can help virtually any exporter of products to the UK to establish, develop and maintain profitable and secure UK distribution for the long term.

Similarly, we can help UK importers (whether they operate as agents, or distributors, or both) to maximise the long term value they gain from their relationships with their overseas suppliers.

By tapping into our specialist know-how and expertise, you will be able to avoid the pitfalls and traps that we have seen so many others fall into over the years – and that we are frequently hired to extricate them from!   See our Know-how and Resources pages for useful practical guidance on the legal problems exporters and importers encounter on a daily basis.

How to use the Groceries Supply Code of Practice (GSCOP) to your advantage – FREE GUIDE

In 2006, prompted by concerns about the behaviour and power of the major UK supermarkets, the UK Competition Commission conducted an investigation and concluded that legislation was required to force them to behave more fairly towards their suppliers.  The result was the Groceries (Supply Chain Practices) Market Investigation Order 2009 , which came into effect in February 2010.

Over a year on, the UK Government has published proposals for the appointment of an Ombudsman to enforce the Groceries Supply Code of Practice (GSCOP) annexed to the Order.  Industry media commentary (this item for example) has suggested that it may be 2014 before this happens, and that the Code is unlikely to result in changes in the supermarkets behaviour in the meantime.  Does this mean that the Code is irrelevant until then?

It shouldn’t be, because it imposes on the “Designated Retailers” (the major UK supermarkets currently ten in number) a set of mandatory “fair dealing” terms that they must include in every supply contract, with every supplier, irrespective of where in the world the supplier is located.

If you would like a copy of our FREE BRIEFING on How to use the Code to your advantage  please get in touch.

How to terminate a contract on grounds of repudiation

The law concerning repudiation of contracts is important in the context of UK agency, distribution and joint venture agreements, when relationships have turned sour and one or other party is looking to bring the contract to an end.

Under English law, a party is said to have “repudiated” a contract if he either:

• commits a serious breach that goes to the very root, or heart, of the contract; or
• indicates that he does not intend to perform or abide by it.

Generally speaking, once the innocent party becomes aware of what the other has done, he must either:

• communicate his acceptance of the repudiation, in which case both parties will then usually be released from any remaining obligations under the contract, and the innocent party will be entitled to claim damages for loss caused by the other party’s breach; or
• affirm the contract, i.e. elect to continue with it (although he may be able to retain the right to sue for damages for the other party’s breach).

If he does nothing, then – after whatever is deemed to be a sufficient time, in the relevant circumstances, to make his mind up – he will be taken to have affirmed the contract.

Accrued rights

If the innocent party decides to accept the repudiation, the parties will normally retain all their accrued rights at the time of his acceptance.  For example: commission earned will still be payable, as will the price of goods supplied.  An innocent party who intends to claim damages in respect of the other party’s breach may wish to set that claim off against his liabilities to the other party.  (Whether he can do that is something we’ll look at elsewhere.)

Future rights

The party who has repudiated the contract – the guilty party – will normally lose his future rights under the contract.  For example, in the case of an agency or distribution contract:

• a right to buy (or sell) back stock on termination of a distribution contract; or
• a right to goodwill compensation upon termination of an agency contract.

Restrictive covenants

A more difficult question is whether restrictive covenants, intended to give post-termination protection to a party, will survive and be enforceable by the guilty party after his repudiation.  For example: a producer agrees to pay goodwill compensation to his distributor on termination, and in return the distributor agrees not to sell or offer to sell directly competing substitute products to former customers for a period of X months after termination.  P repudiates, D accepts the repudiation.  D will still be entitled to the goodwill compensation, but is he still bound by the restriction?

The answer is not clear.  For many years it was regarded as settled that a repudiation automatically discharged the innocent party from all further obligations.  More recently, however, there have been suggestions that this might not always be so. Restrictions protecting confidentiality, for example, could and should perhaps continue notwithstanding the guilty party’s repudiation.  At the moment, however, it is advisable to work on the basis that a party who repudiates a contract risks being unable to enforce any restrictive covenants it contained.

Highly fact-sensitive

Two of the critical questions in any case where repudiation is alleged are both highly fact-sensitive, i.e. dependent on an examination of all the relevant circumstances in that particular case.

• has one party clearly shown an intention to abandon and altogether refuse to perform the contact? – the test is whether, looking at all the circumstances objectively, from the perspective of a reasonable person in the position of the innocent party, the contract-breaker has clearly shown such intention;
• how long should the innocent party have taken to decide whether to accept the repudiation or not? – again, the length of time allowed will vary according to all the relevant circumstances.

Tread carefully!

Deciding to end a contract on grounds of the other party’s repudiation can be a very high risk strategy.  It’s a bit like Russian Roulette. If you get it wrong – or your advisers do – it will be your refusal to continue that is the repudiation, and you, not the other party, could be the one liable for damages and unable to enforce covenants designed for your protection. It really isn’t something to do lightly, or without taking the best possible advice beforehand.

Last reviewed/revised – 04.11.2011

London City Bond roof collapse – lessons for stock owners

The roof collapse at the London City Bond Purfleet warehouse in December 2010 damaged or destroyed a significant amount of bonded alcoholic beverage stock, and some stock-owners will suffer substantial losses.

In the immediate aftermath of the collapse, the priority for most stock-owners has been to establish whether their stock had been damaged and, if not, to get access to it and make it safe. LCB says it hopes to have removed all stock from the ruined warehouse by the end of January, and that it will not be in a position to assess the full extent of the damage until then.

In some cases it will have been a matter of stock being transferred, undamaged, from A to B with no significant loss or interruption of business or profit was sustained. Other stock-owners, however, will be looking at claims for stock which has been damaged or destroyed, or was considered too dangerous to move. A number of importers were left unable to meet orders and frantically trying to source replacement stock. In some cases, this will have meant their having to let customers down completely at the busiest time of year, and could prove very damaging for both the importers and the customers.

What can be claimed?

The stock-owner will want to claim the market value of the stock – the amount it would cost him to obtain replacement stock, or the amount he would have expected to sell it for. He will also want to claim for any other consequential losses suffered. Typically, however, a warehouse’s terms and conditions will include clauses:

• limiting liability in respect of the value of the goods, for example to £100 per tonne (inclusive of duty);
• excluding or limiting liability for consequential loss.

Furthermore, liability is usually only accepted for “neglect or wilful damage” by the warehouse. Proving “neglect” in these circumstances may be difficult and costly.

If the warehouse insures its customers’ goods, as most do, that insurance should then kick-in, but it will be subject to the above limitations and exclusions of liability.

Stock-owner’s insurance cover

To the extent that the warehouse’s contract terms and insurance cover combine to limit the amount recoverable by the owner, he must look to his own insurance policy to fill the gaps. He may well be disappointed. In the our experience, many import/distribution businesses have standard “business all risks” policies, which usually have significant gaps in cover for importer/distributors:

• stock held off their premises will not normally be insured.
• business interruption/loss of profit and other consequential losses suffered in these circumstances will rarely be adequately covered.
• claims arising from breach of contract will generally not be covered.
• loss or damage in transit will generally not be covered – and hauliers’ contract conditions usually restrict cover in a similar way to the warehouses.
• whilst goods are in bond, duty still needs to be considered. If stock is destroyed, no duty is payable. If stock is lost or stolen, e.g. in transit, then the importer remains liable for duty.

The importer may have to settle for whatever he can get from the warehouse/its insurers, and meet all the other losses and claims himself – including any claims from his customers. While this clearly could be potentially catastrophic, the good news is that specialised insurance policies are available which can fill the gaps, by providing market value cover for stock held by third parties, and business interruption/loss of profit and consequential loss cover. It would mean paying a higher premium, but:

• what is already being paid in premium for an all-risks policy may actually be of little value, and provide an illusory reference point.
• there could be scope for reducing the amount spent on premises and contents cover, by looking realistically at the risks and distinguishing between the manageable and the unmanageable — i.e. what could wipe the business out altogether.

Are there any other major gaps in cover?

When reviewing their insurance cover, importers might ask some further questions:

• do they have adequate product liability cover? Many importers assume that an all risks policy provides such cover, whereas it normally will not do so unless it is specifically insured and paid for.
• what about product recall liability insurance? This is an even rarer bird.

Where products are originally supplied by an EU-based producer, product liability may be less of a concern, provided the importer has negotiated satisfactory contractual indemnities with the producer and he is properly insured or unquestionably good for the money. But where the wine is imported from outside the EU, the importer will be held liable as if he were the producer. He, not the producer, is likely to be the first port of call for claims in the event of any serious product liability or recall issue. And if it turns out that he has no insurance cover, he could have a big problem.

Thanks to John Haber-Smith of John Ansell & Partners Ltd, Insurance brokers, for his help with this article – www.ansell.co.uk

LCB roof collapse – claims and insurance implications

LCB roof collapse – claims and insurance implications

Harpers Wine & Spirits Trade Review December 2010

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.