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Q&A Distribution agreements

Part I: Legislative framework

Q1.Please specify the legislative framework generally applicable to the conclusion and execution of distribution agreements (a)? Please include a link to the official publication of the applicable rules (e.g., relevant link to the Official Gazette) (b) and, if available, to the English translation of the legislative framework (c).

a. Legislative framework:

Dutch law does not have a specific legal regime applying to distribution agreements. This means that the general law of contracts applies to distribution agreements, such as Art. 6:213-279 Dutch Civil Code (hereinafter: “DCC”).

b. Link(s) to official publication:

The Dutch version of Book 6 DCC is accessible via this link.

c. Link(s) to English translation:

An official English translation of the Dutch Civil Code is not publicly available.

Q2. Other than for agency agreements pursuant to Directive 86/653 (EEC) on the coordination of the laws of the Member States relating to self-employed commercial agents, are there specific rules depending on the distribution format (e.g. franchising, exclusive distribution)?

Yes.

If yes, which specific rules apply (a)? Where available, please also include a link to the official publication of the applicable rules (b) and, if available, to the English translation of the legislative framework (c).

​​​​​​​a. Specific rules depending on distribution format:

Franchise agreements are regulated in the Dutch Franchise Act. The Dutch Franchise Act is applicable since 1 January 2021.

​​​​​​​b. Link(s) to official publication:

The Dutch Franchise Act is implemented in Art. 7:911-922 DCC and is accessible via this link.

​​​​​​​​​​​​​​c. Link(s) to English translation:

An English translation of the Dutch Franchise Act is not available.

Q3. Other than general contract law and competition law, are there other rules which may generally restrict the parties when drafting and concluding distribution agreements (e.g., rules in relation to unfair contract terms in B2B contracts, specific requirements in the context of a prohibition of abuse of economic dependence)?

No.

Part 2: Pre-contractual phase

Q4. Are there mandatory provisions in relation to the disclosure of pre-contractual information prior to concluding and/or executing distribution agreements?

Yes. 

If yes, which mandatory provisions apply (a) and which information must be disclosed (b)? Where available, please also include a link to the official publication of the applicable rules (c) and, if available, to the English translation of the regulatory framework (d).

a. Mandatory provisions:

In general: Dutch general contract law does not contain mandatory provisions regarding the disclosure of pre-contractual information. However, during the pre-contractual phase, the principles of fairness and reasonableness apply. As a consequence, the parties are required to take all reasonable measures to prevent the other contracting party to conclude an agreement on the basis of misleading information.

Franchise agreements: the Dutch Franchise Act contains far-reaching disclosure obligations in the pre-contractual phase. This pre-contractual information must be provided in a way that ensures unchanged accessibility for future reference for a period of time adequate for the purposes for which the information was provided. See, Art. 7:913 DCC and Art. 7:917 DCC.

​​​​​​​b. Information to be disclosed:

In general: the information that should be disclosed during the pre-contractual phase depends on the circumstances of the case.

Franchise agreements: the pre-contractual information that must be disclosed includes a general obligation for the franchisor to inform the franchisee about anything that is or could reasonably be relevant for the conclusion of a franchise agreement. The following information must be provided as a minimum:

  • the draft of the franchise agreement, including its appendices;
  • a statement of the content and scope of rules regarding fees, surcharges, or other financial contributions to be paid by the franchisee or regarding the investments required from him/it;
  • the manner and frequency of consultation between the franchisor and the franchisees and, if available, the contact details of the body representing the franchisees;
  • the extent to which and the manner in which the franchisor can enter into competition with the franchisee, whether or not by means of a derived formula; and
  • the extent to which, the frequency with which, and the manner in which the franchisee will have access to turnover-related data relating to the franchisee or relevant to his/its business operations.

In addition, the franchisor will provide the prospective franchisee with the following information in a timely manner, in so far as it is available to him, to a subsidiary, or to a group company affiliated with him/it, and is reasonably relevant to conclusion of the franchise agreement:

  • information about his/its financial position; and
  • financial data regarding the intended location of the franchise enterprise or, if such is lacking, financial data of one or more enterprises considered by the franchisor to be comparable, with the franchisor making clear the reasons why he/it considers them to be comparable

c. Link(s) to official publication:

In general: Not applicable

Franchise agreements: The Franchise agreements are accessible via this link.

​​​​​​​d. Link(s) to English translation:

In general: Not applicable

Franchise agreement: Not applicable

Q5. Is there a standstill obligation linked to the requirements imposed for the pre-contractual phase?

Yes.

If yes, what does this standstill obligation entail (how long, specific procedural requirements, etc.)?

Franchise agreements: see, Art. 7:914 DCC. A minimum standstill obligation applies of four weeks between the  disclosure of the mandatory pre-contractual information and the conclusion of the franchise agreement. During this standstill period, the franchisor may not:

  • amend the draft of the franchise agreement, unless such amendment is to the benefit of the franchisee;
  • conclude with the franchisee the franchise agreement or any agreement considered inseparable therefrom, with the exception of a confidentiality agreement for the prospective franchisee to keep secret the confidential information provided by the franchisor for the purposes of concluding the franchise agreement; or
  • induce the prospective franchisee to make payments or investments associated with the franchise agreement that is yet to be concluded.

The standstill period is not required for concluding a subsequent franchise agreement between the same parties regarding the same franchise formula.

Q6. Does the relevant regulatory framework impose sanctions if the pre-contractual obligations are not (fully) respected?

Yes. 

If yes, which sanctions apply (e.g., nullity of contract, penalty payment)?

In general: the sanction of not respecting pre-contractual obligations depends on the circumstances of the case. Amongst others, a sanction may be that the agreement is voidable as the agreement might be entered into under the influence of an error or that a party has an action arising from a wrongful act against the party in breach.

Franchise agreements: the Dutch Franchise Act does not contain specific sanctions for breach of the pre-contractual obligations. Hence, the sanctions of general civil law must be invoked in case of a breach.

Q7. Can a party be held liable if it terminates the pre-contractual negotiations?

Yes.

If yes, on what grounds (a); under what conditions (b); and what consequences are generally linked to such liability (c)?

​​​​​​​a. Grounds for pre-contractual liability:

Parties must behave towards each other in accordance with the requirements of reasonableness and fairness /  good faith. This obligation may result in liability of a party when terminating the pre-contractual negotiations. This is not explicitly regulated in the DCC, but is based on settled case law.

​​​​​​​b. Conditions for pre-contractual liability:

Whether a negotiating party is under a legal obligation to continue negotiations or alternatively to pay damages for withdrawing from negotiations will depend on the stage of the negotiations. The more extensively the parties have negotiated and discussed the details of the proposed contractual relationship, the more difficult it will be for a party to break-off the negotiations.

​​​​​​​c. Consequences of pre-contractual liability:

Unlawful termination of pre-contractual negotiations may result in the other party being entitled to compensation or performance of the agreement.

Q8. Are there other relevant rules and/or restrictions that apply during pre-contractual negotiations between supplier and distributor?  

Yes. 

If yes, what do these specific rules and/or restrictions entail?

Franchise agreements: the franchisee has an obligation to investigate during the pre-contractual phase in order to prevent entering a franchise agreement on the basis of incorrect assumptions. See, Art. 7:915 DCC. The prospective franchisee will take measures, within the bounds of reasonableness and fairness, that are necessary to prevent him from concluding the franchise agreement under the influence of the incorrect assumptions.

Part 3: Contractual phase

A. Form of distribution agreements

Q9. Must a distribution agreement be executed in writing to be valid and enforceable?

No, never. 

Q10. Are there any (other) requirements as to the form of the distribution agreement for it to be valid and enforceable?

No. 

B. Content of distribution agreements

Q11. Other than restrictions imposed by EU competition law (including Regulation (EU) 330/2010), do specific rules and/or restrictions apply in distribution agreements with respect to

  • the territory in which or the customers to whom the goods/services will be sold;
  • an exclusivity granted to the distributor;
  • (exclusive) sourcing/purchasing obligations;
  • resale prices;
  • non-compete clauses?

Yes, specific rules apply with respect to non-compete clauses.

Franchise agreements: see, Art. 7:920, paragraph 2, DCC. A non-compete clause which restricts the franchisee’s power to operate in a certain manner after the end of the franchise agreement is only valid if:

  • it is set out in writing;
  • the restriction on performance of activities concerns only goods or services that compete with the goods or services to which the franchise agreement relates;
  • the restriction is indispensable to protect the know-how transferred by the franchisor to the franchisee;
  • it does not exceed one year after the end of the franchise agreement; and
  • the geographic scope is not broader than the area within which the franchisee has operated the franchise formula under the franchise agreement concerned.

Q12. Do specific rules and:or restrutions apply in distribution agreements with respect to

  • obligations of the supplier vis-à-vis the distributor, including in relation to the remuneration of the distributor;
  • obligations of the distributor vis-à-vis the supplier or vice versa;
  • a non-solicitation clause during and/or after the term of the distribution agreement;
  • minimum sales quota imposed on the distributor;
  • specific sector rules?

Yes, specific rules apply with respect to obligations of the supplier vis-à-vis the distributor, including in relation to the remuneration of the distributor and (ii) obligations of the distributor vis-à-vis the supplier or vice versa.

Franchise agreements: The franchisor and the franchisee will behave towards one another as befits a good franchisor and a good franchisee. See, Art. 7:912 DCC.

The franchisor is obliged to provide the franchisee with the assistance and commercial and technical support that may reasonably be expected by the franchisee in regard to the operation of the franchise formula. On the other hand, the franchisee is obliged to notify the franchisor if, in the opinion of the franchisee, a certain kind of assistance of support is necessary for the operation of the franchise formula. See, Art. 7:919 DCC.

The franchise agreement must contain provisions regarding (i) whether any goodwill is present in the franchisee’s enterprise, (ii) to what extent the goodwill is present, and (iii) how goodwill reasonably attributable to the franchisee will be reimbursed to the franchisee upon termination of the franchise agreement if the franchisor takes over the franchise enterprise from the franchisee in question in order to continue this enterprise independently or to transfer it to a third party with whom/which the franchisor concludes a franchise agreement (Art. 7:920, paragraph 1, DCC). A clause contrary to Art. 7:920 DCC is null and void.

Furthermore, the franchisor must seek prior written consent of a majority of the franchisees established in the Netherlands if the franchisor wants to make changes to the formula or operate a derived formula and the costs or loss of turnover associated with such a change exceeds the threshold as agreed between the parties in the agreement. See, Art. 7:921 DCC.

C. Term and termination

Q13. Are there particular rules and/or restrictions in relation to the term (incl. renewal) of distribution agreements?

No. 

Q14. Are there any specific rules and/or restrictions with respect to the termination of distribution agreements (e.g. minimum notice period, statutory right to compensation (goodwill or other))?

Yes. 

If yes, what do these specific rules and/or restrictions entail (a)? Please include whether these specific rules and/or restrictions differ depending on whether the distribution agreement is of definite or indefinite duration (b) or whether the distribution agreement is terminated by one party for convenience or for breach by the other party (c).

a. What do these specific rules and/or restrictions entail:

In general: the DCC has no general provision on the termination of continuing performance contracts, but the Dutch Supreme Court has developed a nuanced body of case law over the years. Contracts that have been entered into for a definite period of time can, in principle, not be terminated before the end of the term. Contracts that have been entered into for an indefinite period can, in principle, be terminated without cause, unless that would be contrary to the parties’ intention when entering into the contract

Franchise agreements: see, Art. 7:920, paragraph 1, DCC. The franchisee has, in general, a right to claim goodwill when terminating the agreement. This right must be agreed upon in the franchise agreement.

​​​​​​​​​​​​​​b. If applicable, differences dependent on whether the distribution agreement is of definite or indefinite duration:

In general: distribution agreements for a definite period of time can, in principle be terminated at the end of the term. However, terminating distribution agreements that are concluded for an indefinite period of time will often require (i) a (reasonable) notice period, (ii) compensation for the other party’s damage and/or a (iii) sufficiently serious ground for termination. These criteria are closely interrelated. In general, the duration of a sufficiently reasonable period of notice depends on the significance of the ground for termination. Likewise, the question whether compensation should be paid and the amount of such compensation depends on whether there is a compelling reason for termination, and whether a reasonable notice period has been observed.

Circumstances that could be relevant in this regard are the parties’ respective interests, the duration of the agreement, investments made and the degree to which a party depends on the other party or continuance of the distribution agreement for its future existence. In the literature it is argued that, based on lower case law, roughly one month notice per contract year could be considered reasonable in this context. Compensation could relate to costs incurred or investments recently made that cannot be recovered, and/or loss of profit. In principle, no goodwill indemnity needs to be paid upon termination of a distribution agreement, since a distributor is expected to be able to bear this entrepreneurial risk.

Franchise agreements: Not applicable.

​​​​​​​​​​​​​​c. If applicable, differences dependent on whether the distribution agreement is terminated by one party for convenience or for breach by the other party:

In general: if there is no statutory regulation on termination and no contractual termination clause has been agreed upon, it must be determined on the basis of reasonableness and fairness whether the contract can be terminated, and if yes, under what conditions. Hence, the ground for termination may be relevant for the required notice period and/or right to compensation for the other party. In any case, a breach of contract is more likely to be regarded as a serious ground for termination than termination for convenience.

A balancing of the parties' mutual interests could, for example, lead to the conclusion that a party is entitled to terminate the distribution agreement for breach of contract, while parties did not agree upon such possibility. In the event that this party does not wish to pay any compensation in respect of the termination consequences, it must observe an extensive notice period.

In case of a distribution agreement for a definite period, a party can usually only terminate for breach of contract, and not for convenience.

Franchise agreements: Not applicable.

Q15. Is it possible to terminate the distribution agreement based on certain grounds for termination (breach or other) included in the distribution agreement?

Yes. 

If yes, is prior judicial intervention required in order for the termination of the agreement to take effect?

No.

Part. 4: Post-contractual phase

Q16. Is the supplier required to repurchase the stock that is still at the distributor’s disposal when the distribution agreement ends?

No. 

Q17. Are there other post-contractual obligations that generally apply to either of the parties in the context of the termination of the distribution agreement?

Yes. 

If yes, which obligations apply?

During the notice period for termination, the agreement must executed as far as is reasonably possible. Among other things, placing customary orders should remain possible, even if delivery were to take place after the end of the agreement. When assessing what will be considered a customary order, the starting point must be what was customary between the parties during their cooperation under a distribution agreement. This is not explicitly regulated in the DCC, but is based on settled case law.

Part 5: Dispute resolution

Q18. Do specific rules and/or restrictions apply as regards the choice of forum and/or jurisdiction?

Yes. 

If yes, what do these specific rules and/or restrictions entail?

Franchise agreements: see, Art. 7:922 DCC. No derogation from the Dutch Franchise Act may be made to the detriment of franchisees established in the Netherlands, irrespective of the law governing the franchise agreement.

Q19. Can the parties opt for arbitration?

Yes. 

If yes, are there any rules and/or restrictions as regards the enforceability of arbitration clauses in distribution agreements?

No. 

Q20. What is the statute of limitations applicable to claims regarding the performance of a distribution agreement?

A right of action to claim performance of a contractual obligation to give or to do something becomes prescribed on the expiry of five years from the day following the one on which the claim has become due and payable (Art. 3:307, paragraph 1, DCC).

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