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The new VBER entered into force on 1 June 2022.

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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:

  • Swedish Competition Act (2008:579)
  • Act on Block Exemption for Vertical Agreements (2008:581)
  • Act on Block Exemption for Vertical Agreements in the Motor Vehicle Sector (2008:584)
  • Contracts Act (1915:2018)
  • Sale of Goods Act (1990:931)
  • Commercial Agency Act (1991:351)
  • Commission Act (2009:865)
  • Franchise Act (2006:484)

b. Link(s) to official publication:

The Swedish version of the:

  • Swedish Competition Act (2008:579) is accessible via this link.
  • Act on Block Exemption for Vertical Agreements (2008:581) is accessible via this link.
  • Act on Block Exemption for Vertical Agreements in the Motor Vehicle Sector (2008:584) is accessible via this link.
  • Contracts Act (1915:2018) is accessible via this link.
  • Sale of Goods Act (1990:931) is accessible via this link.
  • Commercial Agency Act (1991:351) is accessible via this link.
  • Commission Act (2009:865) is accessible via this link.
  • Franchise Act (2006:484) is accessible via this link.

c. Link(s) to English translation:

Not 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.

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

According to Art. 1 Act on trading terms between business actors (1984:292), the Patent and Market Court may prohibit a business actor to enforce unfair trading terms against another business actor. The meaning of an unfair trading term has not been assessed by the Swedish Patent and Market Court to a great extent. However, an example of an unfair trading term could be a term that states a unilateral right to change certain conditions in an agreement during the contractual period (MD 1985:16).

b. Link(s) to official publication:

The Swedish version of Act on trading terms between business actors (1984:292) is accessible via this link.

c. Link(s) to English translation:

Not available.

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:

According to Art. 3 Franchise Act, the franchisor is obligated to provide the franchisee with information, in writing, about the agreement that is necessary in accordance with the circumstances.

b. Information to be disclosed:

  • Description of the franchisor´s business,
  • Information about other franchisees with whom the franchisor has entered into agreements within the same franchise system and the scope of their businesses,
  • Information on the compensation that the franchisee must pay to the franchisor and other financial conditions for the franchise business,
  • Information on intellectual property rights to be granted to the franchisee,
  • Information on the goods or services that the franchisee is obliged to buy or rent,
  • Information on non-compete obligations to be applied during or after the period of the franchise agreement,
  • Information on the term of the agreement, the conditions for change, extension and termination of the franchise agreement and the financial consequences of a termination, and
  • Information on how a dispute in connection with the agreement is to be solved, and what is to apply in terms of cost responsibility for such dispute.

c. Link(s) to official publication:

The Swedish version of the Franchise Act (2006:484) is accessible via this link.

d. Link(s) to English translation:

Not available.

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?

No.

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:

The general rule is that either party is free to terminate the negotiations at any time and without any liability. However, subject to Swedish contract law principles, a party which through negligence or a wilful act causes damage or loss to the other party, may in some instances be liable to compensate the other party for such damages or losses.

b. Conditions for pre-contractual liability:

The damaging party must have, through negligence or a wilful act, caused the damage or loss to the other party by terminating the negotiations. One common scenario is that the damaging party has acted disloyally vis-à-vis the other party, e.g. by entering into negotiations regarding an agreement which needs regulatory approvals, knowing that such regulatory approvals will not be granted and not informing the other party hereof. Another scenario is if a party enters into negotiations with no intention to actually agree on an agreement.

It should in this context be noted that it may be difficult to prove that the damaging party has actually acted wilfully or with negligence given that  the general rule is that either party is free to terminate negotiations at any time without liability, which is a strong presumption in favour of the damaging party.

c. Consequences of pre-contractual liability:

If a party would be liable to pay damages to the other party by virtue of pre-contractual liability, the size of the compensation to be paid by the damaging party would be equivalent to the actual and proven loss of the other party. For example, a proven loss could be the costs related to the negotiations with the other party.

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?

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

No specific rules and/or restrictions apply.

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?

Specific rules and/or restrictions apply with regard to (i) obligations of the supplier vis-à-vis the distributor, including in relation to the remuneration of the distributor, (ii) obligations of the distributor vis-à-vis the supplier or vice versa and (iii) specific sectors. Different rules apply depending on the type of distribution relationship.

In resale relationships, there is no specific legislation applicable, and the parties are, within the boundaries of the contract law, free to agree on their resale agreement without any restrictions.There are several differences between a distribution respectively a resale agreement, for example, unlike the commissioner agreement, the reseller itself becomes the owner of the products and therefore also carrying the risk that the goods will be sold and the commission consists of the margins on the sales. A commissioner does not own the products, though has the right to sell the products under its own label/name. However, the supplier is the owner of the products until the products are sold to the customer.

With respect to commission relationships, the Commission Act includes a framework of rules which, according to Art. 2, in many instances are not mandatory and may be deviated from in an agreement. However, the Commission Act stipulates that if the principal is a consumer, provisions in a commission agreement which are less beneficial to the principal than the provisions under the Act are null and void. The agreement as such is however still enforceable and there are no specific sanctions if there are provisions which are less beneficial to the principal. One example of when a consumer is to be considered the principal is when the consumer has submitted clothes to a second hand store and the store acts as a commissioner.

The Commission Act includes obligations on the supplier to remunerate the distributor (see, Art. 11). The remuneration shall be agreed between the parties but in the absence of an agreement the remuneration shall be “reasonable”.

According to Art. 12, the distributor is entitled to commission on third party agreements that has been entered into after the termination of the Commission agreement, if (i) the third party agreement is entered into under the circumstances for which the commissioner had been entitled to commission under the commission agreement and the principal has received the bid/offer from the third party during the contract period or (ii) the agreement has been concluded mainly through the commissioner’s participation during the contract period and has been entered into within a reasonable time after the termination of the agreement.

Under the Commission Act, the distributor is bound to comply with the supplier’s instructions and keep the principal informed about circumstances that may have an impact on the commission relationship. Moreover, the distributor must treat any goods held by the distributor with due care and, if necessary, maintain a sufficient insurance in relation to the goods (see, Art. 6).

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:

According to Art. 33(2) Commission Act, and with respect to commission relationships subject to the Commission Act, a distribution agreement of indefinite term may be terminated with one month’s notice during the first year, two month’s notice during the second year, three month’s notice during the third year, and so on, up to a maximum notice period of six months. If the agreement has a fixed term, the agreement terminates upon the expiration of the term, unless the parties continue with the commission relationship regardless of the expiration, in which case the agreement becomes an indefinite duration agreement (and the notice period will then be calculated on the basis of the length of the full contract period).

The agreement may also be terminated for cause if either party has committed a material breach, if the terminating party has significant grounds for terminating the agreement prematurely, or if the other party becomes bankrupt.

According to Art. 39, upon termination of the agreement, the distributor is entitled to indemnity if the distributor has provided new customers to the supplier or increased the volume (of sales) within the incumbent customer base. In such case, that indemnity must be reasonable given the circumstances in each individual case. If the agreement was terminated by virtue of the distributor’s material breach, then the distributor is no longer entitled to any indemnity.

Swedish legislation does not include any specific rules for termination of resell agreements, however, there have been cases regarding terminations of reseller agreement. For example, the Swedish Supreme Court’s decision of 14 February 2018 (NJA 2018 s.19), where the court found that a longterm reseller agreement (22 years) without terms on termination, had a notification period of six months.

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

If the agreement has a fixed term, the agreement runs until the term expires. If the agreement is indefinite, the above mentioned notice periods apply.

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 the event of a termination for cause, subject to title a) above, the agreement may be terminated with immediate effect and the notice periods do not apply. 

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. According to Art. 28 Commission Act, the distributor shall return any stock or material that has been provided by the supplier within the scope of the commission relationship (not applicable for resale, as there is no legislation that governs this relationship). The distributor may however keep stock and other material as security if the supplier has not paid commission or if there is any other outstanding debt.

Moreover, upon the expiry of a commission agreement, the distributor shall take measures to protect the supplier from loss until the principal can safeguard its interests on its own. The distributor is entitled to reasonable compensation for taking such measures.

In resale relationships, no similar obligations apply.

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?

The general limitation period is ten years, which is applicable unless the parties agreed otherwise. In commercial relationships, the parties are free to agree on a longer or shorter limitation period. There are also specific rules e.g. in relation to the limitation period for a buyer’s faulty goods, that stipulates that if the buyer has not given the seller notice of the defect within two years after receiving the goods, the buyer shall have forfeited the right to invoke the defect, unless otherwise provided by a warranty or other similar undertaking. Nothwithstanding the previous, the buyer may allege that the goods are defective if the seller has been grossly negligent or has acted against faith and honour. In the preparatory work to the Contracts Act, it is stated that if someone has acted against faith and honour when the situation is contrary to the “sense of justice” i.e one’s own perception of what is right. Since the Act does not apply to a business – consumer – relationship, the parties can agree on a shorter period.

Claims in tort have a general limitation of ten years, with shorter limitation periods for claims relating to strict liability, i.e when a defendant is liable for committing an action, regardless of what his/her intent or mental state was when committing the action.

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