Local distributors and commercial agentsDistribution structures
What distribution structures are available to a supplier?
A commercial agent acts in the name and on behalf of the principal (supplier) in exchange for an appropriate commission. Agency agreements are regulated by Greek Presidential Decree 219/1991 (PD 219/1991). As per paragraph 2 article 1 of PD 219/1991, the main characteristics of a commercial agency agreement are:
- its bilateral character;
- the permanency of the relationship between the parties;
- the duration of the services rendered by the commercial agent;
- the independence and autonomy of the commercial agent’s provision of services; and
- the sale of goods and the rendering of services by the agent on behalf of and in the name of the principal.
Distributors and authorised dealers
A distributor is an intermediary between the producer or supplier of a product and third parties in the distribution or supply chain who purchases the products from the producers or suppliers and undertakes to resell them to third parties acting in his or her own name, on his or her behalf and bearing the associated business risks.
Under franchise agreements, the franchisor licenses to franchisees the ‘franchise package’ which includes, among others, the franchisor’s brand name, its know-how, its technical and business methods and so on and supports the franchisee throughout the duration of the franchise agreement. The franchisee undertakes to operate its business following the instructions and assignments of the franchisor.
Commissionaires are independent merchants whose business consists of buying or selling goods or services (article 90 of the Greek Civil Code) in their own name on behalf of the principal in exchange for an appropriate commission.
Other distribution structures are available to suppliers such as sales representatives (who work in the name and on behalf of their employer), sale under private label, trademark licensing, among others.Legislation and regulators
What laws and government agencies regulate the relationship between a supplier and its distributor, agent or other representative? Are there industry self-regulatory constraints or other restrictions that may govern the distribution relationship?
Agency agreements are regulated by Greek Presidential Decree 219/1991 as amended, which implemented the provisions of Council Directive 86/653.
Distribution agreements and franchise agreements are not regulated in Greece by a specific law (see exemption below with regard to exclusive distribution agreements). The parties have a wide discretion in structuring their contractual relationship.
The following laws may also be relevant to distribution or franchise agreements:
- 3959/2011 Greek Competition Act;
- 4072/2012 On Trade Marks;
- 146/1914 On Unfair Competition;
- 2251/1994 On Consumer Protection;
- 2121/1993 On Copyright; and
- the Greek Civil Code.
The provisions of PD 219/1991 may apply, by analogy, to distribution agreements. In particular, article 14, paragraph 4 of Law No. 3557/2007 provides that PD 219/1991 applies to exclusive distribution agreements, in case the distributor acts as part of the sale’s organisation of the supplier. However, the above-mentioned law does not refer to other forms of distribution (eg, selective distribution agreements and franchise agreements).
Greek courts have ruled that PD 219/1991 may apply to distribution agreements under the following circumstances (indicatively):
- the distributor acts as part of the sale’s organisation of the supplier, having the same weak position and intense dependency on the supplier as the commercial agent, as well as the same degree of integration in the supplier’s network;
- the distributor contributes to the extension of the supplier’s clientele, undertaking responsibilities similar to those of a commercial agent;
- the distributor undertakes a non-compete obligation;
- the distributor enjoys a specific protected territory; and
- the supplier has knowledge of the distributor’s clientele and after the termination of the distribution agreement, the distributor delivers to the supplier a list of its clientele.
The answer to the question of whether PD 219/1991 applies to other forms of distribution agreements (including franchise agreements) needs to be considered on a case-by-case analysis of the ‘integration’ criteria stipulated above.
There are no government agencies specifically tasked to regulate distribution agreements. However, since competition laws, trademark and unfair competition laws and consumer laws are applicable to distribution agreements, the Hellenic Competition Commission ensures compliance with competition law, the General Secretariat of Commerce or Ministry of Development may address trademark matters, and the General Secretariat of Consumer Protection or Ministry of Development monitors compliance with consumer law in Greece.
There are no industry self-regulatory constraints which could govern distribution agreements. The only exception is the Code of Ethics regarding franchise agreements, a self-regulatory instrument of the Greek Franchise Association. The provisions of the Code of Ethics are compulsory for the members of the Greek Franchise Association, but are not legally enforceable.
Several suppliers and distributors have drafted and implemented their own code of ethics and business morals regarding the distribution of their products.Contract termination
Are there any restrictions on a supplier’s right to terminate a distribution relationship without cause if permitted by contract? Is any specific cause required to terminate a distribution relationship? Do the answers differ for a decision not to renew the distribution relationship when the contract term expires?
The general principles of Greek Civil law apply to the termination of distribution agreements. For fixed-term agreements, termination takes place when the agreed term expires or when there is due cause for termination. Agreements for an indefinite term can be terminated at any time; however, goodwill and other criteria such as the duration of the agreement may impact the validity of termination.
If PD 219/1991 is applicable, article 8 paragraphs 3 and 4 provides that:
where a contract is concluded for an indefinite period either party may terminate it by notice. The period of notice shall be one month for the first year of the contract, two months for the second year commenced, three months for the third year commenced, four months for the fourth year commenced, five months for the fifth year commenced and six months for the sixth year commenced and subsequent years. The parties may not agree on shorter periods of notice.
Moreover, according to article 8, paragraphs 5 and 6 of PD 219/1991:
If the parties agree on longer periods than those laid down in paragraphs 3 & 4 of PD 219/91, the period of notice to be observed by the principal must not be shorter than that to be observed by the commercial agent. Unless otherwise agreed by the parties, the end of the period of notice must coincide with the end of a calendar month.
The above provisions apply in agency agreements.
Agency agreements and distribution agreements that fall within the provisions of PD 219/1991 may be terminated immediately without the application of the above-mentioned periods of notice, in case one party fails to fulfil all or part of his or her obligations or in exceptional circumstances.
Is any mandatory compensation or indemnity required to be paid in the event of a termination without cause or otherwise?
According to article 9 of PD 219/1991:
the agent, after termination of the agency contract, shall be entitled to an indemnity if and to the extent that he has brought the principal new customers or has significantly increased the volume of business with existing customers and the principal continues to derive substantial benefits from the business with such customers and the payment of this indemnity is equitable having regard to all the circumstances and, in particular, the commission (profits) lost by the distributor on the business transacted with such customers.
The agent must notify the principal to this effect within one year of the termination of the agreement.
Where the agency agreement is terminated for due cause by the supplier, the latter is not liable for such indemnity.
Moreover, the agent shall be entitled to compensation for the damage suffered as a result of the termination, particularly when the termination takes place in circumstances depriving the commercial agent of the commission that proper performance of the agency contract would have procured him or her while providing the principal with substantial benefits linked to the commercial agent’s activities, and that have not enabled the agent to amortise the costs and expenses that he or she had incurred for the performance of the agency contract on the principal’s advice.
No mandatory compensation or indemnity is required to be paid following termination without cause or otherwise in case the provisions of PD 219/1991 do not apply. However, the distributor shall be entitled to compensation for the damage he or she suffers as a result of the termination of his or her relations with the supplier.Transfer of rights or ownership
Will your jurisdiction enforce a distribution contract provision prohibiting the transfer of the distribution rights to the supplier’s products, all or part of the ownership of the distributor or agent, or the distributor or agent’s business to a third party?
Yes, if such prohibitions are stipulated in the distribution or agency agreement.