Presentation Slides
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Presentation Slides
Cross-‐Border Distribu/on and Agency Agreements ACC International Legal Affairs Committee Quick Hit: May 10, 2012 Presented by: James L. (Jay) Rogers Womble Carlyle Sandridge & Rice, LLP Distribu/on and Agency Agreements Generally § Distinguishing Distribution from Agency Agreements § Local jurisdiction legal treatment of sales intermediaries § Focus today on out-bound Distribution Agreements (U.S. supplier selling into overseas market via distributor) What is different about Interna/onal Distribu/on/Agency Agreements? § Many issues in common with their domestic cousins § Key issues are defining territory, term of agreement, performance metrics, exclusivity vs. non-exclusivity, defining/protecting intellectual property rights § But treatment of certain issues can be quite different when cross-border issues are involved Territorial Restric/ons and Exclusivity § Territorial restrictions are generally okay, but within the EU exclusivity may be a necessary quid pro quo in order to restrict distributor s territory. § Why? EU has strong bias in favor of a single European market. Territorial restrictions are viewed as antithetical to single market and so are looked upon with suspicion. Termina/on of Agreement and Local Dealer Protec/on Statutes § Some jurisdictions have minimum terms, as well as onerous termination provisions, as part of a so-called dealer protection statute. § Rationale behind dealer protection statutes: need to protect local distributors/agents who build a new market for foreign company and are then discarded in favor of foreign company s own, proprietary distribution channel or sales force. § Dealer protection statute may override the parties agreement on grounds of public policy. Termina/on of Agreement (cont d) § Punitive aspects of dealer protection statutes typically triggered by termination without cause. So, define what constitutes cause in your agreement with reference to performance metrics; ie. minimum sales goals, minimum marketing/promotional spend, etc. § Termination without cause may lead to liability for lost profits of distributor for term of agreement, or five years, or the like. § If distributor fails to meet contractual requirements but supplier does not terminate the agreement, be careful to document that failure to enforce contract terms does not constitute a waiver of termination rights for cause. Risk of Loss and Title Passage § Agreement should address when title/risk of loss passes to distributor; who is responsible for insuring product in transit; use of Incoterms (published by the International Chamber of Commerce, http://www.iccwbo.org/incoterms/) or simply spell it out in the agreement. § Title passage issue can also impact responsibility for VAT tax in local jurisdiction and foreign source income for U.S. supplier. Dispute Resolu/on § Choice of Forum: here, there, or at some neutral location? § Litigation vs. Arbitration; U.N. Convention on Arbitration a/k/a the 1958 New York Convention frequently makes arbitration the most attractive option due to enhanced enforceability of award. § Which is the binding language of agreement? § Governing law; again, ours, theirs, or law of some perceived neutral body such as UN Convention on Contracts for the International Sale of Goods (UNCISG). Trap for the Unwary: Failure to Specifically Disclaim the UNCISG Means It Will Govern the Agreement § If the parties are resident in countries which are signatories to the UNCISG (the U.S. is a signatory along with 77 other countries), and the agreement involves the sale of goods (not services), the UNCISG automatically governs the Agreement unless it is specifically disclaimed. Easom Automation Systems, Inc. v. Thyssenkrupp Fabco, Corp., 2007 U.S. Dist. LEXIS 72461 (E.D. Mich. 2007). Merely stating that the law of a particular jurisdiction governs the agreement is insufficient to disclaim the UNCISG. For a list of UNCISG signatories see: http://www.uncitral.org/uncitral/en/uncitral_texts/sale_goods/ 1980CISG_status.html Other Bear Traps: An/trust and Local Franchise Law § Antitrust Issues § Territorial restrictions esp. in EU; § Resale Price Maintenance (as of 2007 Leegin decision no longer per se illegal in U.S. but E.U. takes a more skeptical line) § Loyalty rebates § Accidental Franchisor: e.g. Article 142 of Mexico s Industrial Property Law Contact Informa/on James L. (Jay) Rogers Womble Carlyle Sandridge & Rice, LLP 550 South Main Street, Suite 400 (Zip 29601) P.O. Box 10208 (Zip 29603) Greenville, South Carolina Phone 864.255.5436 Email: [email protected] Web bio: http://www.wcsr.com/lawyers/james-rogers