By: Eli Doron, Adv; Yaron Tikotzky, Adv, (C.P.A); Dr.Slomo Nass, Adv, (C.P.A)
Distribution Law in Austria
Due to its geographic location in the center of Europe, Austria is a prime location for distribution of services and goods from non-EU countries such as Israel. In this regard, some formal requirements have to be taken into account.
Applicable Law: In principle, it is possible in export contracts to agree on the law applicable to the contract (choice of law agreement) and use should be made of this option.
The agreement of the UN Convention on Contracts for the International Sale of Goods offers itself as a compromise solution if the importer wants Austrian law, but the exporter wants his own law. In this case, the UN Sales Convention forms a balanced middle course that takes into account the interests of both parties. The UN Convention on Contracts for the International Sale of Goods applies not only when the contracting parties are established in different contracting states of the UN Sales Convention, but also when the rules of private international law refer to the law of a contracting state. If, for example, Austrian law is applicable to a contract, then the provisions of the UN Sales Convention apply to a cross-border contract for the sale of movable goods. The UN Sales Convention is - to put it simply - only applicable to business transactions. Its application can also be excluded by contract.
Austrian law on Agency Agreements is set out in the Austrian Commercial Agents Act that implements the requirements of EU law on Commercial Agents.
Scope of Commercial Agency Agreement: The Principal and the Commercial Agent are free to agree on the scope of the Commercial Agency, e.g. the geographic scope and a possible limitation regarding specific products.
Online Distribution: Within the EU, Austria ranges within the prime locations for e-commerce since the country has very few obstacles to e-commerce. Generally, the same rules apply to offline commerce and online e-commerce. Austria has implemented the relevant EU-Directives (on e-commerce, distance contracts, distance marketing of financial services, electronic signatures, etc). Nevertheless, there are still some areas that provide e.g. for formal requirements for some contracts or invoices or where special information requirements are stipulated due to the distance between business and customer.
Non-competition: Austrian statutory law provides for a non-compete obligation of the Commercial Agent during the contractual term. In this regard, we often recommend to define the clients of the principal by a adding a list of clients as an annex to the distribution agreement in order to have clarity about the scope of the non-competition obligation of the Agent.
Termination of Distribution and Agency Agreement: There are no specific termination restrictions for distribution agreements; however, termination provisions must be reasonable. Regarding Agency Agreement concluded for an unlimited period, minimum notice periods must be respected (i.e. one month during the first year, two month during the second year etc)
Jurisdiction or Arbitration Clause: In international distribution Agreements, we strongly recommend to provide for the applicable Law and a litigation or arbitration clause since export contracts may involve the exporting company having to seek the assistance of foreign courts in order to enforce its purchase price claim. On the other hand, it is conceivable that the company may be drawn into foreign proceedings, for example if the buyer asserts claims for damages or warranty.
Litigation before a foreign court entails a number of complications that should be avoided by small and medium-sized enterprises in particular.
On the other hand, arbitration has always been of great importance in foreign business. In an arbitration agreement, the parties agree that a court of arbitration will decide instead of the ordinary courts. The parties can choose from various arbitration institutions in Austria or Europe, e.g. Arbitration Court of the Austrian Federal Economic Chamber, Arbitration Court of the International Chamber of Commerce in Paris, Arbitration Court of the Chamber of Commerce in Zurich. Advantages of arbitration proceedings are that arbitral awards are enforceable worldwide, the special expertise of the arbitrators, the free choice of language of the proceedings and the non-publicity of the proceedings. In arbitration courts, decisions are usually made by only one instance. This has the advantage that the proceedings are completed more quickly, but the disadvantage for the losing party that there is no possibility of appeal.
Our law firm specializes on all issues of distribution law and legally advises commercial clients as well as trade agents on their rights and obligations according to applicable Austria and EU law. We strongly recommend the consultation of an attorney helping distributors to establish safe trade relationships within the international legal framework.