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GERMANY: Compensatory claim of distributors doing business within the European Economic Area

Lately, the German Federal Court of Justice (BGH) decided (BGH VII ZR 102/15) that any compensatory claim of a distributor doing business outside of Germany but within another Member State of the EU or the EEA cannot be excluded in advance as long as the distribution agreement is subject to German law.

Burghard PILTZ - 12.07.16
Country expert - IDARB Arbitrator

By this judgment, the BGH decided on a question, which has been disputed in distribution law for a long time and put distributors on an equal footing with commercial agents in this respect.

 

1. BGH: No contractual exclusion of the compensatory claim for distributors doing business outside of Germany but within the EU/EEA

 

The BGH had to decide on the following case: The defendant manufacturer based in Germany concluded a contract designated as „agency agreement“ with a Swedish corporation (distributor), which was nevertheless qualified as a distribution agreement.

The distributor’s field of activity exclusively included EU and EEA states, more precisely the countries Sweden, Latvia, Finland, Lithuania, Estonia and Norway. The parties contractually agreed on the application of German law. The claim for damages and compensation was contractually excluded for both parties.

However, after the manufacturer had terminated the distribution agreement, the distributor claimed compensation pursuant to § 89b German Commercial Code (HGB) which provides that the commercial agent is entitled to compensation after the termination of the contract.

The question, whether the distributor’s compensatory claim could possibly be contractually waived, was discussed in detail by the BGH.

Up to now, the prevailing opinion among scholars was in favour of the contractual exclusion of the compensatory claim and considered it effective in the given case by arguing that the distributor is not in need of protection if his contractual territory is outside of Germany. According to this opinion, the mandatory provisions of the commercial agents Directive do not apply to distributors since distribution law – unlike commercial agency law – has not been standardized on a European basis by a corresponding directive.

Already previously, the Higher Regional Court of Dusseldorf (judgment of 28.02.2007, VI U (cartel) 22/06) had a different view holding the contractual waiver of the compensatory claim to be invalid. The BGH has now confirmed this view: Although the scope of the commercial agents Directive is limited to commercial agents and a corresponding application to distributors does not come into consideration. However, in respect of the implementation of the commercial agents Directive in German law, the German legislature has always pursued the synchronism of the legal assessment of compensatory claims of commercial agents and distributors. It now emerges from the amended version of § 92c, sec. 1 HGB that the commercial agency law pursuant to §§ 84 ff. HGB is mandatory if the contractual territory is inside the EU/EEA. According to the BGH, the historical interpretation of § 92c sec. 1 HGB shows that the legislature intends to apply this standard analogously to the distributor.

There is no convincing reason why a distributor at a European level should be treated differently than a distributor who has to perform his duties for the manufacturer in Germany. Furthermore, the BGH considers the issue of a possible difference in treatment between Swedish and German manufacturers resulting from the impossibility of ruling out compensatory claims in distribution agreements subject to German law in advance solvable. The BGH rather refers to the parties’ possibility to choose a different law, which allows the exclusion of compensatory claims in advance, to govern their distribution agreement.

 

2. Consequences for manufacturers and distributors.

 

If a German manufacturer agrees in his distribution agreements on the application of German law and if the distributor carries out sales activities in another Member State of the EU or the EEA, the compensatory claim of the distributor cannot be excluded in advance. However, the German manufacturer has the option to arrange for the validity of another law for his distribution agreements, which does not foresee mandatory compensatory claims for distributors. From now on, special attention has to be paid on the choice of law, when drawing up contracts with foreign distributors.

 

Burghard Piltz, IDI distribution country expert for Germany

 

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