A distribution dispute is a conflict between a supplier and a distributor regarding the execution, performance, or termination of a distribution agreement. In our practice, we see disputes primarily at termination—particularly in countries with strong distributor protection, such as Belgium. Thoughtful renegotiation of the contract beforehand prevents the vast majority of claims. In the event of a conflict, the applicable law determines the outcome and the amounts.
What is the legal issue?
Distribution contracts regulate exclusivity, targets, pricing, and termination. In the event of a dispute, liability for missed targets, damages resulting from termination, and goodwill compensation come into play. Rules vary internationally: some countries offer protection equivalent to commercial agency, others do not. Clumsy termination leads to large damage claims.
What does the law say?
For distribution within the EU, Regulation (EU) 2022/720 (vertical agreements) applies. Under Dutch law, distribution is not a statutory type of contract; freedom of contract is the guiding principle. In Belgium, the Act on Unilateral Termination of Exclusive Sales Concessions Granted for an Indefinite Duration (1961, revised in the Economic Law Code 2014) grants the right to a reasonable notice period and fair compensation. In Germany, distributors may make a claim under the analogous application of Section 89b of the German Commercial Code.
Under Brussels I-bis, the court of the distributor's place of establishment often has jurisdiction in the event of a termination dispute.
What risks do companies face?
A notice period that is too short leads to claims for damages for lost profits and investments. Protection as a commercial agent can yield goodwill compensation amounting to a year's turnover in commission. Clumsy termination in countries with strong distributor protection can prove costly. Loss of the customer base upon termination makes it more difficult to find a new distributor. Infringement of competition law leads to fines under Article 101 TFEU.
Practical example from our practice
We represented a Dutch brand manufacturer who wanted to terminate the Belgian distributor after fifteen years of cooperation with a three-month notice period. Under the 1961 Act, a Belgian court deemed three months insufficient; for a fifteen-year relationship, twelve to eighteen months is customary. Upon renegotiation, we incorporated a nine-month notice period with phasing plus a goodwill compensation of 200,000 euros. Legal proceedings were avoided, and total costs were 600,000 euros lower than the estimated scenario after the claim.
What can you do?
Incorporate clear targets, evaluation moments, and termination clauses. Document performance issues before termination. Apply a reasonable notice period tailored to the duration and investment. Incorporate a limitation of goodwill where permitted by law. For strategic markets: choose arbitration for neutral settlement. Combine with a transitional arrangement for customers and inventory. See also our article on Exclusive distribution agreements: the legal considerations.