Distribution Contracts in Spain

In this first episode of Legalmondo’s Distribution Talks series, I spoke with Ignacio Alonso, a Madrid-based lawyer with extensive experience in international commercial distribution.

Main discussion points:

• in Spain, there is no specific law for distribution agreements, which are governed by the general rules of the Commercial Code;
• therefore, it is essential to draft a clear and comprehensive contract, which will be the primary source of the parties‘ rights and obligations;
• it is also good to be aware of Spanish case law on commercial distribution, which in some cases applies the law on commercial agency by analogy.
• the most common issues involving foreign producers distributing in Spain arise at the time of termination of the relationship, mainly because case law grants the terminated distributor an indemnity of clientele or goodwill if similar prerequisites to those in the agency regulations apply.
• another frequent dispute concerns the adequacy of the notice period for terminating the contract, especially if there is no agreement between the parties: the advice is to follow what the agency regulations stipulate and thus establish a minimum notice period of one month for each year of the contract’s duration, up to 6 months for agreements lasting more than five years;
• regarding dispute resolution tools, mediation is an option that should be carefully considered because it is quick, inexpensive, and allows a shared solution to be sought flexibly without disrupting the business relationship.
• if mediation fails, the parties can provide for recourse to arbitration or state court. The choice depends on the case’s specific circumstances, and one factor in favor of jurisdiction is the possibility of appeal, which is excluded in the case of arbitration.

Go deeper

• Goodwill or clientele indemnity, when it is due and how to calculate it: see this article and on our blog;
• Practical Guide on International Distribution Contract: Spain report
• Practical Guide on International Agency Contract: Spain report
• Mediation: The importance of mediation in distribution contracts
• How to negotiate and draft an international distribution agreement: 7 lessons from the history of Nike