Distribution law in Slovakia

Agency Agreements

Slovak Commercial Code

Are there any formal requirements upon concluding an Agency Agreement?

Under Slovak law, an Agency Agreement may be executed both verbally or in writing. There are no special formalities to take into account.

Can the Commercial Agent bind the Principal?

The contract can grant the Commercial Agent the power to negotiate and conclude agreements in the name and on behalf of the Principal.

Without being granted a power of attorney, the Commercial Agent is not entitled to conclude contracts, receive anything on the Principal’s behalf or undertake other legal acts in the name of the Principal.

The power of attorney can be included in the Agency Agreement itself or it can be granted separately.

What are the primary duties of the Commercial Agent?

The Commercial Agent has the following duties:

  • to perform an activity aimed at concluding a certain type of contracts or negotiating and concluding contracts in the name and on behalf of the Principal;
  • to conduct the activity with professional care and acting in good faith, to respect the Principal’s interests, act in accordance with their authorisation and the Principal’s reasonable instructions and provide the Principal with the required and available information;
  • to submit a report to the Principal concerning market developments and all circumstances important for the Principal’s interests, in particular for their decision-making related to the conclusion of contracts;
  • to conclude businesses only under the business terms determined by the Principal, unless the Principal has expressed their consent to another procedure.
What are the primary duties of the Principal?

The Principal has the following duties:

  • provide the Commercial Agent with the necessary information related to the subject of businesses;
  • provide the Commercial Agent with the information necessary for fulfilment of obligations arising from the Agency Agreement;
  • to inform the Commercial Agent immediately when he anticipates that the volume of transactions will be considerably lower than the Commercial Agent could have expected; and
  • to notify the Commercial Agent within a reasonable period that the Principal accepted, refused or failed to fulfil a business arranged by the Commercial Agent.
How is the Commercial Agent paid?

The Commercial Agent is entitled to the agreed commission or to the commission corresponding to the customary practice in the branch of activity at the place of conducting such activity, taking into account the type of the commercial transaction that is subject of the contract. The commission can also depend on the number or level of commercial transactions.

During an Agency Agreement

Unless otherwise agreed, the Commercial Agent is entitled to the commission for any deals made during the term of the agreement, provided that

a) the transaction has been concluded as a result of its action,

b) the transaction has been made with a third party whom he has previously acquired as a customer for the transaction of the same kind.

After termination

Unless otherwise agreed, the Commercial Agent is entitled to a commission if:

  • the transaction is mainly attributable to the Commercial Agent's efforts during the period covered by the Agency Agreement and if the transaction was entered into within a reasonable period after that contract terminated; or
  • the order of the third party reached the Principal or the Commercial Agent before the Agency Agreement terminated; or
  • the obligation of third party was fulfilled after termination of the Agency Agreement.

A subsequent Commercial Agent has no right to claim commission if the predecessor deserves it, unless the circumstances justify a division of the commission between him and its predecessor.

Can a del credere clause be inserted into the Agency Agreement?

A del credere clause is valid.

Duration of the Agency Agreement

Parties are free to decide on the duration of the agreement. Agreements of definite duration are converted to agreements for indefinite duration if they continue to be performed after the fixed term.

Termination of the Agency Agreement

Where an Agency Agreement is concluded for an indefinite period either party may terminate it by notice.

Notice period

Minimum notice periods must be respected. During the first year, one month's notice must be given, during the second year two months' notice must be given, during the third year and any subsequent years three months' notice must be given.

The contractual parties may agree to extend the notice period, but the period to which the Principal is bound must not be shorter than the period which must be observed by the Commercial Agent.

Goodwill or other Compensation

A Commercial Agent is entitled to make an appropriate compensation claim after termination of the contractual relationship if and to the extent that:

  • he has brought the Principal new customers or has significantly increased the volume of existing business;
  • the amount of the compensation is equitable taking into account all the circumstances and, in particular, the commission lost by the Commercial Agent on the business concluded with the customers in question.

The amount of the compensation may not exceed a figure equivalent to one year's average annual commission (calculated as an average of commissions received during the preceding five years) and if the contract has lasted for less than five years, the compensation shall be calculated as an average of all commissions received during the entire contractual period.

In which cases does compensation not apply?

No compensation is due when:

  • the Principal has terminated the Agency Agreement because of default attributable to the Commercial Agent which would justify immediate termination of the Agency Agreement;
  • the Commercial Agent has terminated the Agency Agreement, unless such termination is justified by circumstances attributable to the Principal or on grounds of age, infirmity or illness of the Commercial Agent in consequence of which he cannot reasonably be required to continue its activities;
  • the Commercial Agent assigns its rights and duties under the Agency Agreement to another person with the agreement of the Principal.

The Commercial Agent loses the compensation claim if he has not notified to the Principal within one year after termination of the contract that he wishes to claim its rights for compensation.

Is a post contractual non-compete obligation enforceable?

A post contractual non-compete obligation is valid when:

  • in writing;
  • limited to the type of transaction covered by the Agency Agreement;
  • limited to the territory or type of clientele attributed to the Commercial Agent;
  • limited to 2 years after termination of the agreement.

When in doubt, a post contractual non-compete obligation may be limited or declared invalid by the court if it would restrict the Commercial Agent more than required for the necessary degree of Principal’s protection.

What is the statute of limitation?

All claims based on the Agency Agreement except for the above compensation claim expire after 4 years.

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Distribution Agreements

Are there any formal requirements upon concluding Distribution Agreements?

Under Slovak law, there is no special regulation of the Distribution Agreement. The relationship between the Distributor and the Principal is governed by the common sale agreement. A Distribution Agreement may be executed both verbally or in writing. There are no special formalities to take into account.

Can exclusivities be granted?

Exclusivities are explicitly provided for by the Slovak Commercial Code only in connection with international trade. The Supplier undertakes not to deliver, within a certain area, goods specified in the contract to any person/entity other than the Buyer. If the contract is not concluded in writing and does not specify the area or types of goods to which the contract applies, it is invalid.

In domestic trade, exclusivities may be agreed upon between the Supplier and the Buyer.

Exclusivities may be granted, however, subject to the EU regulation on vertical restraints.

Is a contractual non-competition clause enforceable?

Non-compete clauses are valid subject to EU Competition law. If the market shares of both parties are below 30%, non-complete clauses are valid provided that they do not exceed five years, are geographically limited and proportional to the rights and interests of the Principal.

Can Distribution Agreements include Minimum Sales Quotas?

Minimum Sales Quotas may be imposed on the Distributor, but restrictions (e.g. anti-trust law, no abuse of dominant position) may apply.

Can the Principal influence resale price of the Distributor?

Under the Slovak Act on Protection of Competition, the agreement restricting competition by fixing the prices or other trading conditions is prohibited.

Therefore, the Distribution Agreement may only impose maximum prices or suggest recommended resale prices although the parties must be confident that the maximum or recommended price will most of the time not operate as a disguised fixed price. This point is important in all cases, but above all where the Principal's or Distributor's market share is over 30%.

Termination of the Distribution Agreement and indemnities

Is a notice period necessary?

Contracts of definite duration without the possibility of an early termination end upon the expiry of their term, without prior notice.

Contracts of indefinite duration concerning an obligation to a continuous or repeated activity or an obligation to omit certain activity or to tolerate certain activity may be terminated with a three-month notice period ending at the end of the applicable calendar quarter, unless agreed otherwise in the agreement.

Are there any formalities to be completed?

There are no specific formalities.

Is there any kind of compensation or goodwill indemnity to be paid?

There are no special provisions about compensation relating specifically to the Distribution Agreement, therefore the general provisions about compensation under the Slovak Commercial Code apply.

Is bankruptcy a reason for termination?

A contractual provision allowing termination in case of bankruptcy is not valid.

What is the statute of limitations?

A statute of limitation of four years applies to all claims regarding the performance of a (distribution) agreement.

May parties choose litigation or arbitration?

Jurisdiction clauses:

  • Contractual jurisdiction clause is valid.

Arbitration clauses:

  • An arbitration clause has to be in writing and signed by both parties or by the exchange of a letter, fax, e-mail or other forms of communications and prove the consent of the parties.

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Portrait ofSoňa Hanková
Soňa Hanková
Partner
Bratislava
Portrait ofMartina Šímová
Martina Šímová
Senior Associate
Bratislava