Indemnity for distributors Reimbursement of investments (art 454 UGB)

1. Indemnity for distributorsReimbursement of investments (art 454 UGB) Gustav Breiter, Vienna International Distribution Institute - Barcelona 2009

2. Indemnity (Art 24) by analogy provided that similar to an agent, supplier has knowledge of the customer data and the distributor has acquired new, permanent customers

3. The following criteria are relevant: • exclusivity of the distributor • competition clause • defined territory • obligation to buy a certain amount of goods • obligation to distribute also new products of the supplier • price recommendations • obligation to do promotion • reporting • sales targets

4. transmission of customer data to supplier • right to inspect the books of the distributor • obligation to keep an adequate stock • right of the supplier to give instructions • duty of the distributor to do the after-sale-service • right of the supplier to inspect the business premises • a margin which cannot be considered as a full compensation for the customers acquired by the distributor.

5. The Austrian Supreme Court says: Even if some criteria are missing, indemnity might be due (3 Ob 85/02z; 2 Ob 155/06t).

6. The amount of indemnity depends on the performance of the distributor, maximum amount: yearly margin.

7. details of the calculation still rather unclear under Austrian Law: In some cases calculated as it is usually done concerning agents. Only the part of the margin for “real promotion of business” can be included when calculating the lost profit. In a second step, this result has to be compared with the maximum of the five-years-average of the margin. car distribution: five years-average of the effective margin minus 40-50% for the reputation of the suppliers´ products, the risk of loss of customers and general distribution costs.

8. Maximum amount: in any case a five-years-average of the margin of the distributor. Not the full margin but only the part comparable to an agent´s commission? No clear jurisdiction in this point

9. Reimbursement of investments (art 454 UGB) distributor is entitled to claim his non-amortized investments during the contractual period (Art 454 Commercial Code - UGB). should protect car distributors applicable also to agents and franchisees in force since August 21, 2003. It is applicable to investments the distributor is obliged to after this date (Art 906 UGB).

10. The legal provisions for the reimbursement of investments are: the distributor made brand-specific investments (e.g. personal staff for a certain brand), the investment was not already amortized and otherwise it is not reasonably exploitable and the distributor terminated because of an important reason or the supplier terminated without an important reason.

11. The amount the supplier has to reimburse is the non amortized difference to a “normal”, non-brand-specific equipment: additional costs of material assets (e.g. showroom) and special personal staff (e.g. costs for supplementary trainings). to what extent the profit already covered these costs included interest? supplier has to reimburse a remaining difference.

12. mandatory law one-year-deadline The compensation claim acc. Art 24 HVertrG remains unaffected.

13. Some practical problems arise: • “specific” investment: also in case the distributor have been obliged to do such investments also as partner of another supplier of that branch? • supplier obliged a potential distributor to make such investments in order to be accepted as a partner • general obligation to invest before August 21, 2003; specific directive of the supplier after that date • reasons excluding this claim do not correspond to the respective reasons concerning the compensation claim.

14. Thank you for your attention! Mödling Bahnhofsplatz 1/I/5 A-2340 Mödling Tel +43 2236 22 050 Fax +43 2236 49 239 Wien Jasomirgottstrasse 6 A-1010 Wien Tel +43 1 535 24 53 Fax +43 1 535 28 10 www.vbsn.at office@vbsn.at