A well-drafted international contract that protects your company’s interests can make the difference in the event of a dispute between the parties.
When a company decides to go beyond national borders and enters into agreements with clients and/or suppliers abroad, it is essential that an international contract lawyer drafts and negotiates all legal clauses with the other party of the Agreement. Failure to do so increases the risk of not regulating potentially litigious aspects of the international contract, hence the importance of knowing how to identify the critical points of each contract in order to protect our clients’ interests.
Our team is made up of lawyers specialised in different types of commercial contracts with international elements: agency contracts, international distribution agreements, franchising, guarantees, sales and purchases in Spain and abroad and other types of commercial contracts.
Legal advice for your company in Spain
LAWANTS offers comprehensive legal assistance of the highest quality when offering international contracting services, trying to make the client part of the negotiation of the contract in order to achieve a regulation in the contract that benefits both commercial and legal aspects.
An international business contract can give rise to numerous problems if it is not regulated as it should be, but with good legal advice in this area, the contract should be seen as an opportunity for the company to have a variety of options to react to foreseeably unexpected situations.
Such a reaction should go hand in hand with the advice of an expert lawyer in international business contracts matters, a field that requires training and experience in private international law, in order to be able to protect the company’s foreign investment in Spain.
Agency Agreement in Spain
One of the most common contracts for foreign companies seeking to expand their activity beyond their borders is the Agency Agreement.
This contract has a special regulation in the Spanish legal system through Law 12/1992, of 27 May, on Agency Contracts, enacted as a result of Council Directive 86/653/EEC, which sought to unify the regulation in this area in order to protect the agent from the employer.
In-depth knowledge of this law is essential in order to provide advice on such a litigious matter, which has given rise to a multitude of legal proceedings, as is the relationship between an agent and an employer. Furthermore, in order to protect the weaker party in the relationship, in this case the agent, the aforementioned law establishes a regulation that in many aspects is imperative and does not allow the parties to submit to different agreements, which is why it is crucial to sign an agency agreement that does not have potentially null and void clauses.
Termination of the Agency Agreement in Spain
The termination of the Agency Agreement in Spain depends on the causes of termination foreseen by the parties, such as the duration of the agency agreement for a fixed or indefinite period of time.
In the event that an Agency Agreement is for a fixed term, the contract will be terminated upon expiry, but in the event that the same is established for an indefinite term, the Agency Agreement Law in Spain provides that it will be terminated unilaterally at the initiative of either of the parties provided that the minimum notice period provided for by law is met, which is one month for each year of the contract, up to a maximum of six months.
Failure to comply with the notice period is one of the aspects that give rise to most legal proceedings in this area, although the judicial procedure par excellence in this field is the compensation for clients (“indemnización por clientela”) regulated in Article 28 of the aforementioned Law. Following the termination of the Agency Agreement in Spain, the agent will be entitled to a client indemnity at the end of the relationship, provided that certain requirements are met. The assessment of the fulfilment of these requirements must be carried out by a lawyer specialised in the Agency Agreement Law and in the most recent case law of the Spanish courts, since otherwise the company will decide without having at its disposal the relevant information to decide whether to reach an agreement with the agent, or not to pay any amount as the requirements demanded by the case law and the applicable legislation have not been met.
From LAWANTS, expert lawyers in Commercial and Litigation Law, will advise your company throughout the entire procedure: from the drafting of the Agency Agreement, the hypothetical modification of the same, its resolution and any conflict between the agent and the company that may be subject to legal proceedings.
Distribution contract in Spain
In the international Distribution Agreement, one of the parties of the contract is foreign. In most cases, a foreign company needs to distribute its products in Spain and therefore enters into an international distribution agreement with a Spanish distributor.
The Distribution Agreement in Spain, unlike the agency agreement, does not have any special regulation. However, in certain cases, the parties are allowed to agree on the application by analogy of the rules laid down in Law 12/1992, of 27 May 1992, on Agency Contracts, especially with regard to compensation to the agent, an area that is also widely disputed in this contract.
In addition to the atypical nature of the international distribution agreement, the main difference between this contract and the agency contract is that the distribution contract consists of the acquisition by the distributor from the entrepreneur of certain products to be marketed by the distributor at his own risk. Therefore, in this case we are not talking about commissions, which are typical of the agency contract, but rather the remuneration that the distributor will receive will arise from the margin that he applies when reselling these products to his own customers.
The similarities between the two contracts are evident, but they cannot be treated in a uniform manner, as doctrine and jurisprudence itself refers to them as two very different agreements, which is why it is essential to have specialised legal advice for each type of agreement, when negotiating and incorporating the clauses that may favour our clients.
Termination of the Distribution Agreement in Spain
As mentioned above, the Agency Agreement Law can be applied analogically to the Distribution Agreement. This must be the subject of negotiation between the parties and is a point to be taken into account during the first contacts with the distributor.
In the event of termination of the Distribution Agreement, in certain cases the company will have to compensate the distributor if this has been agreed in the agreement. However, there are mechanisms that will allow your company to reduce this compensation if it exists, such as, for example, the establishment of minimum turnover targets.
Given the high litigation in this type of contract with agents or distributors, a key point in the international agency or distribution agreement is the establishment of the competent jurisdiction in the event of a dispute between the parties. Companies tend to want to establish the competent jurisdiction of the agreement as that of their own national courts. This is part of the unreasonable belief that “playing at home” is always better, when this is not the case at all.
Looking after the interests of a foreign company entering into an agency or distribution agreement with a Spanish distributor, our legal advice after many years of experience in this area of commercial and procedural law would be to try to establish the jurisdiction of the Spanish courts.
In this case, in the event of a legal claim by the Spanish distributor, he would not have an immediately enforceable title in Spain, but would have to initiate new legal proceedings in Spain. On the contrary, if the company establishes the jurisdiction of the Spanish court, in case of a claim against the Spanish distributor, the Italian company will have an enforceable title in Spain.
Something that may seem obvious, is not even taken into account by many legal professionals. If you wish to notify your distributor in Spain of the termination of the distribution agreement, we advise you to contact one of our lawyers specialised in international contracts.
