SPAIN: Distribution contracts draft law.

This draft has been discussed by the Commission on Industry, Tourism and Commerce.

The Draft is still in a very preliminary situation and has to follow all the steps in order to be amended and approved. Nevertheless, and although it has been discussed by the different Parties even the convenience of adopting a uniform text for all the different distribution agreements, it could be interesting to have a previous idea of its most relevant points:

1. The purposes of the Draft are to regulate the different types of distribution agreements and the contractual relationship between the parties involved in this sector. This includes, particularly mentioned, the sales exclusive concession (article 19), selective distribution (article 20) and franchise agreement (article 21).
2. The Draft is influenced by the Spanish Agency Contract 12/1992 in the provisions concerning to the contract formalization (article 7), duties of the parties (article 13), term (article 22), termination (article 23) and termination in case of non determined or the notice of period and the causes of termination (article 24).
3. It is also influenced by the Royal Decree 2485/1988 which creates the Franchisor Registry. In this sense, it can be found in the Draft the pre-contractual duties of information of the supplier (article 8) that the Royal Decree establishes.
4. The Draft establishes the possibility of the written form of this type of contracts (article 7) but it seems to be compulsory this form for its modifications. (Articles 5 ).
5. Encouragement of the free enterprise and competition, good faith, collaboration between the parties and the distributors’ independence (articles 13 and 16).
6. It seems that the Draft also foresees the possibility of immediate termination by the supplier with a previous notice and with the payment of an indemnity equal to two years of distributor’s benefit. In order to calculate the indemnity it will be considered the average benefit of the last 5 years or all the period of duration of the contract if this lasted less than 5 years. This will not include general or extraordinary expenses nor the extraordinary incomes. Notwithstanding, distribution contracts for an indeterminate period, could not be terminated before a reasonably term permitting to amortize investments made unless the terminating party offers to the other party the complete payment of such investments (articles 25 and 26).
7. The Draft adopts some of the more relevant case-law criteria concerning the evaluation of the goodwill indemnity. In this sense, the Draft denies the existence of such indemnity unless it can be proved the existence of a clientele and some circumstances such as the increasing of such clientele and the existence of a non competition agreement after the termination of the contract (Article 28).

Ignacio Alonso, IDI country expert for Spain.