Advocatia Abogados - Madrid Indemnities for agents and distributors in Spain: the calculation criteria by the courts Ignacio Alonso ADVOCATIA ABOGADOS MADRID

Advocatia Abogados - Madrid Indemnities in Agency and Distribution Contracts  Agency contracts  Goodwill compensation  Distribution Contracts  Goodwill compensation  Some recommendations

Advocatia Abogados - Madrid Agency agreements  The existence of the compensation: Article 28.1 Agency Act  Termination of the contract (for determinate or indeterminate period)  New clients or sensibly increased operations with previous ones  Still substantially benefit the Principal  Other elements  Limitation of competition  Loss of commissions  Other circumstances (exclusivity)

Advocatia Abogados - Madrid Agency agreements  The amount of the compensation (legal and case-law criteria)  Not automatic. Compulsory (contrary agreement not valid)  Maximum legal amount (one year / five years)  The remunerations (subventions, prices, bonuses)  Other circumstances  Reasonable moderation (increasing of commissions)  Possible sales in last period  Well-known products  The clients fidelity  Habitual clients

Advocatia Abogados - Madrid Agency agreements  Some examples by courts (1)  2 years and 9 months contract:  Total Commission ,93 €  Compensation of ,56 € (98,99% of the legal maximum)

Advocatia Abogados - Madrid Agency agreements  Some examples by courts (2)  One year contract  Total commissions ,51 €  compensation: €  In case of advertising paid in a 50% by the principal  compensation reduced in 20%

Advocatia Abogados - Madrid Agency agreements  Some examples by courts (3):  Long term contract (two cases):  (a) Last five years commissions: ,84 €  compensation: 5.217,19 € (legal maximum);  (b) Last five years commissions: ,13 €  Compensation: ,83 € (legal maximum)  Two years and five months: annual average

Advocatia Abogados - Madrid Agency agreements  First conclusions  Maximum vs. usual compensation  Freedom and moderation of Courts  Some specific recommendations  Special clause including compensation

Advocatia Abogados - Madrid Distribution agreements  The existence of the compensation: no specific applicable law. The analogy.  Termination of the contract  New clients or increased operations  Still benefit the Principal  Other elements :  exclusivity;  exclusion if there is not bad faith

Advocatia Abogados - Madrid Distribution agreements  The amount of the compensation (case-law criteria). The analogy  Not compulsory. Parties can exclude it.  Maximum amount. Analogy.  The remunerations. Difficulties and criteria proposed  Other criteria followed by the courts  Circumstances of each case  Freedom for the First Instance Judge  Moderation  Analogy

Advocatia Abogados - Madrid Distribution agreements  Some examples: courts decisions (1/5)  More than two years contract.  Distributor: ,29 €,  FIC: ,44 €  High Court (confirmed by Supreme Court): ,13 €  Short duration contract (-)  Not exclusive contract (-)  Distribution had not excessive importance in distributor (9.5%) (-)

Advocatia Abogados - Madrid Distribution agreements  Some examples: courts decisions (2/5)  Exclusive 10-year contract  Distributor asked €  FIC: not accepted (other reasons)  High Court : €:  Long term duration (+)  Exclusivity (+)  Near relationship Distributor-final client (+)  But: Reduction of sales (-)  Distributor also sold other materials (-)

Advocatia Abogados - Madrid Distribution agreements  Some examples: courts decisions (3/5)  13-year contract  Distributor asked ,69 €  FIC: only ,32 due to the number of clients  High Court : ,63 €:  The number of clients was higher (+)  But : The clientele was due to the prestige of the products (-)  The sales had not increased during the contract (-)

Advocatia Abogados - Madrid Distribution agreements  Some examples: courts decisions (4/5)  Exclusive long term contract (six months previous notice)  FIC: ,10 €  High Court confirms:  Calculation on the possible benefit the distributor would have obtained  Reduction according its capacity of moderation

Advocatia Abogados - Madrid Distribution agreements  Some examples: courts decisions (5/5)  Exclusive 10-year contract  Distributor: € (Principal’s sales increased from to € during the contract)  FIC: annual average of gross margin in the last five years  High Court: confirms criterion  Supreme Court (January 2008): confirms criterion

Advocatia Abogados - Madrid Common recommendations  Respect to the law and contract  Exclusive (+) or not (-)  The creation of clientele  Well-known products  The publicity made by the Principal  Evolution of sales by the intervention of Agent or Distributor  The importance of the distribution in the activity or the Agent or Distributor  Other elements  Disregard of Agent or Distributor obligations  Incidence of the Principal in the distribution of products

Advocatia Abogados - Madrid Thank you Ignacio Alonso Partner Advocatia Abogados - Madrid