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Q&A on Distribution Agreements

Part 1: 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:

Distribution agreements are not explicitly regulated under Slovenian law. However, rules on agency and sales agreements shall also apply in case of distribution agreements. On the one hand, issues related to distribution agreements which concern the general distribution framework agreement are interpreted according to the rules applicable for agency agreements as provided for in chapter XIX (Agency agreement) of the Slovenian Obligations Code (hereinafter: OC) (Official Gazette of the RS, No. 83/01, as amended). On the other hand, issues which relate to individual supplies under such framework agreements are regulated according to sales contract law as provided for in chapter I (Sales agreement) OC. In particular, rules applicable to agency agreements shall be used in respect of questions related to the form and termination of the distribution agreement, protection of business secrets and non-compete obligations. Rules applicable to sales agreements shall apply to delivery of non-conforming goods, takeover and payment of individual deliveries of goods and transfer of risk in respect of delivered goods.

Provisions on vertical agreements contained in the Prevention of Restriction of Competition Act (hereinafter: PRCA) (Official Gazette of the RS, no. 36/08, as amended), are also applicable to distribution agreements.

b. Link(s) to official publication:

  • OC: link to Slovenian version.
  • PRCA: link to Slovenian version.

c. Link(s) to English translation:

  • OC: link to unofficial English translation.

  • PRCA: link to unofficial English version.

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)?

No.

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)?

Yes.

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

a. General rules

Art. 63.a PRCA prohibits acts of unfair competition. An act of unfair competition is defined as an act of an undertaking operating on a market in contradiction with honest commercial practices and by which harm is or may be caused to other undertakings. 

PRCA further provides examples of unfair competition:

  • providing information about other undertakings, if this harms or potentially harms the reputation and business of another undertaking;
  • selling goods with labels or information that cause or may cause confusion regarding the origin, method of production, quantity, quality or other characteristics of goods;
  • acts focused on the termination of a business relation between other undertakings or that prevent or make such relations difficult;
  • unjustified non-fulfilment or termination of agreements with an undertaking in order to conclude an identical or similar agreement with another undertaking;
  • etc. 

If harm is caused by acts of unfair competition described in Art. 63.a PRCA, the harmed party may:

  • seek compensation;
  • lodge an action in litigation proceedings for the prohibition of any further acts of unfair competition;
  • demand destruction of objects by which the act of unfair competition was committed and restitution, if possible; and
  • in some cases, publication of the judgement in the media. 

Under the OC, business customs as well as customs and practices established between parties shall be taken into consideration in the assessment of the required behaviour and effects thereof in commercial contractual relationships.

b. Link(s) to official publication:

See Q1. 

c. Link(s) to English translation:

See Q1. 

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:

See Art. 5 (principle of diligence and fairness), Art. 46 (fundamental mistake), Art. 49 (deceit) OC. 

b. Information to be disclosed:

The OC does not explicitly impose an obligation to disclose specific information about the subject of the contractual relationship, about the party or other circumstances which could be deemed important for the conclusion of a contractual relationship. Such an obligation derives from one of the basic principles of the law of obligations: the principle of diligence and fairness (Art. 5 OC), which requires the participants to duly consider this principle already during the conclusion of contractual relationships and act in accordance with good business practices. 

In case law, the principle of diligence and fairness is often linked to mistake and deceit. The mistaken party may, according to Art. 46, Paragraph 2 OC, demand annulment of the agreement under two conditions:

  1. the mistake shall be material (i.e., shall apply to (a) essential characteristic of the object of the contractual relationship, (b) the party with whom an agreement is being concluded if it is being concluded in respect of such party, or (c) decisive circumstances); and
  2. the mistake must be justifiable, meaning that the mistaken party has acted with such care as expected in legal transactions. However, the mistaken party shall not be able to annul the agreement if the other party is prepared to fulfil the agreement as if no mistake occurred. 

Under Art. 49 OC deceit is considered as a qualified form of mistake and foresees that the party in possession of certain information intentionally hides such information from the other party with the intention to lead the other party to the conclusion of the agreement. In such cases mistake shall be taken into account even if it is not material.  

c. Link(s) to official publication:

See Q1. 

d. Link(s) to English translation:

See Q1. 

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

No. 

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 agreement, penalty payment)?

In cases of fundamental mistake and deceit, the agreement may be annulled by the mistaken or deceived party (Art. 46 and 49 OC). In cases of fundamental mistake, the party that was not mistaken may demand damages from the mistaken party due to the annulment of the agreement. In cases of deceit the deceived party may request annulment of the agreement and a repayment of damages from the other party that caused the deceit. 

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 precontractual liability:

Art. 20 OC (culpa in contrahendo). 

b. Conditions for precontractual liability:

Negotiations prior to the conclusion of an agreement shall not be binding and may be terminated by either party whenever the party so desires. A party that negotiated without the intention to conclude an agreement or with the intention to conclude an agreement but abandons the intent without justifiable grounds, thus inflicting damage on the other party, shall be liable for such damage. 

c. Consequences for precontractual liability:

A party which unjustifiably terminates pre-contractual negotiations shall not be required to conclude the agreement, but may be liable for damages to other party as described in b) above. The party which suffered damages in pre-contractual negotiations shall only be entitled to negative interest and no loss of potential revenue. Each case shall be assessed on a case-by-case basis, taking into account the freedom of each party to terminate pre-contractual negotiations on the basis of justified reasons.

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

No.

Part 3: Contractual phase

A. Form of distribution agreements

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

Only in certain instances. According to provisions on agency agreements, which also apply to issues regarding the form of distribution agreements, the parties may agree that a written agreement is a condition for the validity of the agreement and any amendment thereto (Art. 808 OC). Also according to rules on agency agreements, a prohibition on competition after termination of the agreement shall only be valid if concluded in writing (Art. 836, paragraph 2 OC).

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

Yes.

If yes, which formalities apply? 

According to provisions on sales agreements, which also apply to individual supplies of goods under a distribution agreement, a retention right by the seller shall be effective against the buyer’s (distributor’s) creditors only if the signature of the buyer on the agreement containing the retention right is notarized before the buyer’s bankruptcy or attachment of goods (Art. 520, paragraph 2 OC).  

B. Content of distribution agreements

Q.11 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

Specific rules and/or restrictions apply in distribution agreements with respect to non-compete clauses. According to provisions on agency agreements, which also apply to issues regarding non-compete obligations in distribution agreements, a non-compete clause may bind the distributor for a maximum of two years after the termination of the agreement (Art. 836, paragraph 4 OC). 

Q12. Do specific rules and/or restrictions 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?

No specific rules apply.

C. Term and termination

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

Yes.

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

According to provisions on agency agreements, which also apply to issues regarding the termination of distribution agreements, an agreement concluded for a fixed period shall terminate when the agreed period ends. If the parties continue to perform the agreement also after the period for which it was concluded, the agreement shall be deemed as concluded for an indefinite period (Art. 831 OC).

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:

When according to a case-by-case assessment, Slovenian agency law rules are applicable to a distribution agreement, upon termination of a distribution agreement the distributor shall have the right to appropriate severance pay, if and insofar as the distributor obtained new clients for the supplier or appreciably expanded the transactions with previous clients and after the agreement terminates the supplier enjoys significant benefits with such clients, or if the payment of severance pay is appropriate in view of special circumstances, in particular the loss of commission on transactions with such clients. For more detail on determining the amount of compensation after termination and conditions see Art. 823, Paragraph 4, Art. 833 – 835 and Art. 836, Paragraph 3 OC. 

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

According to provisions on agency agreements, which also apply to issues regarding the termination of distribution agreements:

  • a distribution agreement concluded for an indefinite period may be terminated by either party by giving notice of termination. The period of notice shall depend on the duration of the agreement and shall amount to one month for each year begun during the agreement. If the agreement lasts longer than five years, the period of notice shall be six months. The parties are not able to shorten the termination period by agreement, but may agree on longer periods (Art. 830 OC); and
  • a distribution agreement concluded for a fixed period shall terminate upon expiry. If the parties continue to perform the agreement after the period for which it was concluded ends, it shall be deemed as an agreement concluded for an indefinite period (Art. 831 OC). 

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

According to provisions on agency agreements, which also apply to issues regarding the termination of distribution agreements, either party may withdraw from the agreement without any termination period or before the expiry of the term if such termination is justified due to serious grounds, in particular non-performance of obligations by the other party, or because of exceptional circumstances. This right may not be limited or excluded by the agreement. If the notice of termination does not cite the applicable serious grounds the termination shall be deemed as made with the ordinary notice in such case each party shall have the right to compensation. An unjustified termination shall give the other party the right to withdraw from the agreement without notice (Art. 832 OC). 

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?

According to provisions on agency agreements, which also apply to issues regarding protection of business secrets in respect of distribution agreements, the distributor shall be obliged to safeguard the business secrets of which he learns in connection with the agreement. In case of misuse, the distributor shall be held liable, even after the termination of the agreement (Art. 817 OC). 

Part 5: Dispute resolution

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

No. 

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?

Claims from commercial agreements and claims for the return of expenditure arising in connection with such agreements shall become statute-barred after three years. The prescription period shall run separately for each supply of goods, performance of work and provision of services (Art. 349 OC). 

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