Working with foreign distributors is an efficient way to open international markets through local partners. At Musch Legal, we regularly advise Dutch manufacturers on contracts with distributors in Germany, Belgium, the UAE, and Asian markets. The legal balance between commercial control and exclusive rights is precarious — especially under EU competition law and local distributor protection.
What is the legal issue? (Where does the risk lie in distribution?)
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. Awkward termination leads to large damage claims. EU competition law limits exclusivity and non-compete.
What does the law say? (Which frameworks apply?)
For distribution within the EU, Regulation (EU) 2022/720 (vertical agreements) applies, with a market share threshold of 30 percent and hardcore restrictions under Article 4. Under Dutch law, distribution is not a statutory type of contract; freedom of contract is the guiding principle. In Belgium, the 1961 Act (in the WER) provides for a mandatory notice period and goodwill compensation. In Germany, Section 89b of the HGB applies by analogy. In UAE Federal Law 3 of 2022. Under Brussels I-bis, in termination disputes, the court of the distributor's place of establishment often has jurisdiction.
Subject matter
EU Standard
Belgium/UAE
Exclusivity
30% market share + non-hardcore
Permitted + protective
Notice period
Contractually free
Statutory: 6-18 months for long-term
Goodwill compensation
No statutory claim
Belgian law: fair compensation
Online sale
Not prohibited under Foreign Regulation
Same as above, but passive sales protected
Hardcore
No minimum price under Art. 4
Same as above under EU
Subject matter
EU Standard
Belgium/UAE
Exclusivity
30% market share + non-hardcore
Permitted + protective
Notice period
Contractually free
Legally: 6-18 months for long-term
Goodwill compensation
No statutory claim
Belgian law: equitable compensation
Online sales
Not prohibited under Foreign Regulation
Same as above, but passive sales protected
Hardcore
No minimum price under Art. 4
Same as above under EU
What risks do companies face? (What goes wrong during distribution termination?)
Too short a notice period leads to damage claims for lost profits and investments. Protection as a commercial agent can yield goodwill compensation of up to a year's turnover. Clumsy termination in countries with strong protection (Belgium, UAE) can turn out to be costly. Loss of customer base upon termination. Infringement of competition law leads to fines under Article 101 TFEU of up to 10 percent of turnover.
Practical example from our practice (How do we safely salvage a distribution termination?)
Musch Legal advised a Dutch brand manufacturer that wanted to terminate a Belgian distributor with a three-month notice period after fifteen years of cooperation. Under the 1961 Act, this was insufficient; for a fifteen-year relationship, twelve to eighteen months is customary. During the renegotiation, we built in: a nine-month notice period with phasing, a voluntary goodwill compensation of 220,000 euros, and a transition period for customers. Legal proceedings were avoided, and total costs were 280,000 euros lower than the estimated scenario after the claim.
What can you do? (Which distribution contract do you construct?)
Construct a clear distribution contract with targets and an annual evaluation. Align exclusivity with Regulation 2022/720 (maximum 30 percent market share). Avoid hardcore restrictions (no fixed prices). Build termination triggers with a reasonable notice period. For countries with mandatory protection (Belgium, UAE): plan a goodwill budget. Combine with a transitional arrangement for customers and inventory. Engage Musch Legal for a distribution template.