THE NETHERLANDS: Successful claim for a long notice period.

Jaap VAN TILL | NETHERLANDS | 2010-10-14


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The facts of this case can be briefly summarized as follows.

An exclusive Distribution Agreement was entered into between a Belgium Supplier of electronic appliances and a Dutch Distributor of those products for the Netherlands. Failing a clause in the Distribution Contract concerning the Governing Law, Dutch Law applied. The Distribution Contract did not contain a clause on the required term of notice in the event of termination. The Belgium Supplier terminated the relationship after nearly 30 years with due observance of a 12 months’ notice period. The Dutch Distributor argued the validity of the termination and held the Supplier to the Distribution Agreement. Summary proceedings were initiated by the Distributor before the District Court of Haarlem. The Court ruled that termination was without legal effect and that the Supplier was not entitled to terminate the relationship due to a lack of reasons sufficiently justifying a termination. The Belgium Supplier appealed this summary decision. The outcome of this appeal in summary proceedings was that the Court of Appeal of Amsterdam ruled that the supplier should continue the Distribution Agreement for a period of three years.

Following this judgment, the Belgium Supplier did not terminate the Distribution Agreement with due observance of a three years notice period. It, however, initiated regular proceedings before the District Court of Haarlem in which it requested for a ruling that termination with a 12 months’ notice period was legally effective. The request was rejected by the District Court on grounds similar to the grounds used by the Court in its judgement in the earlier summary proceedings. The Belgium Supplier appealed this decision before the Court of Appeal of Amsterdam. The Court of Appeal ruled that the Belgium Supplier was entitled to terminate but that, failing a contractual notice period, a reasonable notice period had to be determined taking into consideration the relevant circumstances of the case. On the one hand the Court of Appeal recognized the Belgium Supplier’s wish to reorganize the distribution of its products in the Netherlands and to do so by taking the distribution into its own hands.

On the other hand the Court of Appeal took into consideration the long duration of the distribution relationship (30 years), the fact that around 95% of the Distributor’s earnings were derived from the sales of the Suppliers products and that there had not been given any signals by the Belgium Supplier prior to termination that a termination was likely to be given in the near future.

On the basis of the above, the Court of Appeal came to the conclusion that the termination by the Belgium Supplier had been without legal effect since the notice period that had been observed (12 months) had been too short given the circumstances of the case briefly referred to above. Given the fact that the Belgium Supplier had clearly indicated that it wished to maintain its termination of the Distribution Agreement, the Court of Appeal ruled that a term of notice of three (3) years was to be considered as reasonable and would start running on the date of the judgment. Accordingly the Court of Appeal ruled that the Distribution Agreement would therefore terminate three years after the date of the judgment.

This judgment reconfirms that under Dutch Law a Distributor can successfully request for a continuation of a Distribution Agreement until it has been terminated with due observance of a reasonable notice period and that it is not always easy to establish what term of notice can be considered as reasonable. Failing contractual arrangements on terms of notice, termination of longstanding relationships should in any case be well prepared and motivated in order to minimize the risk of being held to a continuance of the relationship for a far longer term than anticipated and thereby being put into a difficult position when negotiating a financial settlement for earlier termination.

This judgment shows that under Dutch law one cannot always rely on a contractually agreed notice period and that such a contractual provision can be set aside by the principles of reasonableness and fairness if so justified by the specific circumstances of the case.



Jaap van Till, Agency & distribution country Expert for Netherlands



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