On 12 December 2024, The Danish Eastern High Court issued an interesting judgment concerning an international distribution contract. The judgment concerned, inter alia, questions on exclusivity and the question of loss suffered by a distributor as a result of (direct or indirect) sales made by the supplier into a geographical area assigned to the distributor.
Background
In 2019, a Danish supplier, UV Robots ApS, entered into a “Distribution Agreement” with an Italian distributor, Nanutech Srl. The Distribution Agreement obliged the distributor to make sales to customers in the assigned area (including reaching certain sales goals) and to provide service and support to the customers of the products (robots using ultraviolet light (UV) for disinfection of hospital patient rooms).
In 2020, as a result of the Covid pandemic, the European Commission decided to donate a number of UV robots to hospitals in the EU for disinfection purposes to reduce the spreading of the virus. Due to the urgency, normal procurement procedures were not followed, and the Commission invited six companies, including the Danish supplier UV Robots, to submit a bid for delivery of UV robots and installation, support and service of the same.
Following the invitation, UV Robots informed its distributors in the EU, including Nanutech, that it intended to submit a bid, and that – if UV Robots were to win the bid – UV Robots would sell and deliver UV robots to the Commission which robots would then also be donated to hospitals in the geographical area assigned to Nanutech. The Danish supplier also offered Nanutech to handle installation and support to customers in the assigned geographical area (against payment from UV).
Nanutech expressed concerns about the low price that UV Robots intended to offer to the Commission and worried that it would affect pricing on the market, but Nanutech did not clearly object to UV Robots submitting the bid. UV Robots then submitted a bid, in competition with two other companies, and UV Robots won the bid and was awarded the contract with the Commission. Nanutech was informed hereof and was offered to deliver installation and support, as explained above, but Nanutect declined.
The Lawsuits and Decisions of the Danish Courts
Nanutech filed a lawsuit in Denmark against UV Robots for breach of exclusivity and claimed damages and was initially successful. However, UV Robots appealed the case to the Danish Eastern High Court.
The Danish Eastern High Court stated that the Distribution Agreement did not clearly state that UV Robots was prohibited from selling the products into the geographical area assigned to the distributor or was prohibited from selling to buyers outside said area who would actively sell the products into this area. However, even so and especially considering that Nanutech was obliged to reach sales goals in the area and was obliged to provide service and support therein, the court found that UV Robots had been obliged not to sell the products into the assigned area and thereby make sales that Nanutech would otherwise have made.
The court then went on to analyze if Nanutech would indeed have made any sales, if UV Robots had not participated in and had not won the bid with the Commission. The court found that that was not the case as other UV robots would then have been sold to the Commission and delivered to the customers by one of the other two companies that had participated in the bid. In consideration of this, the court found that UV Robots had not breached its obligations towards Nanutech. The court also added that as Nanutech was fully aware of UV Robot’s intention to participate in the bid, and that by not informing UV Robots that this was considered unacceptable, Nanutech had accepted that UV Robots participated in the bid. Finally, the Court mentioned that UV Robots had offered Nanutech to provide installation and support relation to the UV robots delivered to customers in the assigned area, and that UV Robots had therefore complied with its obligations in the Distribution Agreement. UV Robots was therefore acquitted of Nanutech’s damages claim.
Take Aways
This court decision demonstrates that Danish courts may consider a distribution agreement exclusive, even if this is not clearly stated in the contract; for instance, if the distribution agreement contains an assigned area (including an obligation to reach certain sales goals and to provide service and support to the customers of the products).
Further, the decision demonstrates that to claim damages under a contract in Denmark, several requirements must be met, including that a party has breached its obligations, and the said breach has resulted in a financial loss to the other party.
Peter E.P. Gregersen, IDI agency & distribution country expert for Denmark