Distribution law in Switzerland

Swiss law on Agency Agreements is set out in the Swiss Code of Obligations (CO), articles 418a and following.

Under Swiss law, an Agency Agreement can be entered into both, verbally and in writing. There are no special formalities to be taken into account. If the parties want to deviate from certain non-mandatory provisions of the CO, however, such deviations have to be agreed on in written form.

Swiss statutory law does not provide for any specific information obligations regarding Agency Agreements.

In principle not: Namely in B2B situations, Swiss Law does not fundamentally differentiate between individually agreed agreements and standard terms and conditions. Hence, the enforceability risks in case general terms and conditions are used are lower in comparison with other jurisdictions.

The Principal and the Commercial Agent are free to agree on the scope of the Commercial Agency. This applies namely to its territorial scope, as well as to the products of the Principal to be promoted under and to the customers to be covered by the Commercial Agency.

As a general principle, the Commercial Agent has the following primary obligation based on statutory law:

• The Commercial Agent has a general obligation to safeguard the interests of the Principal. Amongst other things, he must not exploit or inform others of business secrets of the Principal.

As a general principle, the Principal has the following primary obligations based on statutory law:

• The Principal must do everything in its power to enable the Commercial Agent to successfully perform its activities;
• it must immediately inform the Commercial Agent if he anticipates that a considerably lower volume of business can be concluded than was agreed or was to be expected in the circumstances;
• it must pay the agreed commission fee; and
• it must pay an adequate compensation to the Commercial Agent if the Commercial Agent is prohibited from simultaneously representing other Principals and is prevented without fault from performing its function due to illness, compulsory Swiss military service or similar reasons.

Parties are free to negotiate the method of remuneration.

During the contractual term, in the absence of an agreement of the parties to the contrary, the Commercial Agent is entitled to the agreed or customary commission on all transactions that he facilitated or concluded. In addition, unless otherwise agreed in writing, the Commercial Agent is also entitled to the agreed or customary commission on transactions concluded by the Principal without the Commercial Agent's involvement provided that the Commercial Agent has solicited the third person as a customer for business transactions of such kind.

The Commercial Agent, to whom a certain territory or a certain clientele is allocated exclusively, is even entitled to the agreed or customary commission on all business which is concluded with customers in that territory or of that clientele.

After termination of the Agency Agreement, the Commercial Agent will, unless otherwise agreed or customary, be entitled to a commission for subsequent orders by customers who were solicited by the Commercial Agent during the period of the Agency Agreement only if such orders were received prior to the actual termination of the Agency Agreement.

In cases in which the Commercial Agent has been instructed to collect debts for the Principal, unless otherwise agreed or customary, the Commercial Agent is, in addition, entitled to collect commissions on any amounts he collects and delivers to the Principal in accordance with the latter's instructions.

The Commercial Agent subsequently loses its claim for a commission to the extent that the performance of a concluded business transaction does not occur for reasons for which the Principal is not responsible.

The claim for commission becomes even fully extinct if the performance by the third party, in consideration of which the Principal has already performed, does not occur, or fails to such a substantial extent that the Principal cannot reasonably be expected to pay a commission.

The claim for commission is finally also forfeited if the Commercial Agent acts contrary to the interests of the Principal or in bad faith.

There are no statuary rules on the term of Agency Agreements. The parties are thus, as a general principle, free to decide on its duration. If an Agency Agreement with a fixed period of time is continued by both parties by tacit consent after expiration of such period, the contract is deemed to have been renewed for the same period of time, but not for longer than one year.

If the Agency Agreement has been entered into for a fixed term, the Agency Agreement may only be terminated extraordinarily for good cause. A termination for convenience is, on the other hand, not admissible.

If the Agency Agreement has been entered into for an indefinite term and its duration is not limited by virtue of its purpose, it may be terminated extraordinarily for good cause and for convenience by complying with certain minimum notice periods. Swiss statutory law sets out the following minimum notice periods (depending on the actual duration of the Agency Agreement in question):

• During the first year, the Agency Agreement may be terminated by either party by giving one month notice to the end of the following month. The parties can agree on shorter or longer notice periods, the agreement on shorter notice periods requiring an agreement in writing.
• Thereafter, the Agency Agreement may be terminated as of the end of a calendar quarter by giving two months' notice. The parties may agree upon a longer notice period or upon another termination date.
• No agreement shall provide for different notice periods for the Principal and for the Commercial Agent.

If the Commercial Agent, through its activity, has substantially increased the Principal's clientele, and if, even after termination of the agency contract, the Principal or its successor in title benefits substantially from the business relations with the acquired clientele, the Commercial Agent has an inalienable right to an adequate compensation to the extent that such compensation is not inequitable (‘goodwill indemnity'). Such claim shall not exceed the net earnings for one year derived from this contractual relationship, computed on the average of the last five years.

No claim exists if the Agency Agreement was terminated for a reason for which the Commercial Agent was responsible.

Swiss law does not stipulate a post contractual non-compete obligation of the Commercial Agent.

The parties may, however, agree in writing on a post contractual non-compete obligation. For competition law reasons, such non-compete clause should not exceed one year. Furthermore, such prohibition must, for civil law reasons, be appropriately restricted with regard to place, time and scope.

The court may, at its own discretion, impose restrictions on an excessive non-compete clause, taking due account of all the circumstances.

Where such a post-contractual non-compete clause has been agreed, the Commercial Agent has an inalienable entitlement to an adequate special remuneration upon termination of the Agency Agreement.

A post contractual non-compete clause is not applicable upon termination of the Agency Agreement by the Principal (unless based on a breach committed by the Commercial Agent).

The Commercial Agent's recurrent claims (general and special commissions) become time-barred five years after they became due. Other claims become time barred after 10 years.

In the case of agency law, the status of the Commercial Agent is often disputed, i.e. whether the Commercial Agent is actually self-employed or rather an employee of the Principal (Decision of the Federal Supereme Court 4A_393/2022 of 26 April 2023).

The question whether a contract qualifies as an Agency Agreement or another type of contract is also often discussed in other fields of the law, such as for example regarding the distinction between a broker agreement and an Agency Agreement in the decision of the Federal Supreme Court 4A_529/2023 of 20 September 2024.

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There are no specific statutory rules on Distributors.

Under Swiss law, a Distribution Agreement can be entered into both, verbally or in writing. There are no special formalities to be taken into account. Certain statutory provisions, however, imposing formal requirements for specific contractual clauses may be applicable by analogy for certain types of Distribution Agreements (e.g. the conclusion of a non-compete clause for the time after the termination of a Distribution Agreement must always be in writing).

Are there any specific information obligations on concluding Distribution Agreements?

Swiss law does not provide for any specific information obligations regarding Distributions Agreements.

In principle not: Namely in B2B situations, Swiss Law does not fundamentally differentiate between individually agreed agreements and standard terms and conditions. Hence, as with Agency Agreements the enforceability risks in case general terms and conditions are used are lower in comparison with other jurisdictions also with respect to Distribution Agreements.

Scope of Distributor’s instruction

In principle, the Principal and the Distributor are free to agree on the scope of the Distribution Agreement.

However, there are restrictions with respect to exclusivities for Distributors. Such exclusivities are not per se illegal but they may not unduly restrict competition. For instance, clauses according to which passive sales of other Distributors into the exclusive territories are prohibited are not permitted under Swiss competition law.

If the market shares of the Principal and of the Distributor each are less than 30%, then the exclusivity is likely to be justifiable on grounds of economic efficiency (if such grounds of economic efficiency can be established). Hardcore restrictions such as resale price maintenance or absolute territorial protection are, however, usually very difficult to justify even if market shares are lower than 30%. This is in particular the case considering a decision of the Swiss Federal Supreme Court according to which hard-core restrictions in principle automatically lead to a significant restriction of competition.

Exclusive purchase agreements (single branding) are usually unproblematic if they are concluded for a limited duration of no longer than five years and if the market shares of both parties do not exceed 30%.

Minimum Sales Quotas can, basically, be imposed on the Distributor. There are, however, limitations to such freedom set by the abuse of rights principle and the principle that no person may restrict itself to a degree which violates the law or public morals. Such excessive agreements are (partially) void. If the agreed Minimum Sales Quotas amount to 80% or more of the requirements of a Distributor regarding a certain product, in addition, the rules applicable to exclusive purchase agreements (single branding) have to be observed.

The contract can basically impose maximum resale prices unless such imposition has the same effect as an imposition of fixed or minimal resale prices which is not allowed under Swiss competition law.

As a general principle, the Distributor (in particular the Exclusive Distributor) and the Principal have certain responsibilities which are similar to the responsibilities based on statutory law regarding Agency Agreements.

However, as no specific statutory law on Distributors exists, we strongly recommend to specifically set forth the obligations of the Distributor and the Principal in the Distribution Agreement.

The parties are, basically, free to negotiate how the Distributor shall be remunerated. Usually, the Distributor will not be entitled to a specific remuneration for its activities. He is rather compensated by way of reselling the products at a higher price than he purchased them form the Principal.

There are no statutory rules on the term of Distribution Agreements. The parties are thus, as a general principle, free to set out the parameters of the contractual term, for example, by agreeing on a fixed term or an indefinite term.

However, exclusive Distribution Agreements cannot be entered into for an indefinite term/an excessive duration without the possibility of termination under Swiss law. Such agreements are not void but rather will be adjusted by the courts (i.e. the courts will define the applicable termination conditions). In one case, the Swiss Federal Supreme Court considered the duration of eight years (without termination possibilities) to be the maximum acceptable duration for an exclusive Distribution Agreement. After expiry of such eight years term a notice period of six months was deemed appropriate.

Generally, the parties are free to agree on the conditions under which a Distribution Agreement may be terminated.

If the parties do not agree on any specific notice periods and neither a fixed term, the notice period of an exclusive Distribution Agreement is one month in the first year and thereafter six months according to the majority doctrine (whereas there are different views). To avoid any confusion or misunderstandings regarding the duration and termination of the Distribution Agreement, we strongly recommend specifying the conditions and deadlines for termination in the contract.

In the case of an ordinary termination in compliance with the relevant notice periods or an extraordinary termination for valid reasons, no general compensation, respectively damages are owed by the terminating party.

An extraordinary termination may, on the other hand, entitle the terminating party to claim damages provided that such termination is based on a breach of contract by the other party.

In Distribution Agreements, contrary to Agency Agreements, a goodwill indemnity is, in principle, not owed. However, the question is highly disputed amongst scholars. The newer doctrine seems to accept a right to an indemnity at least in certain situations, provided that the Distributor is strongly integrated in the distribution organisation of the Principal (similar to a Commercial Agent) and it is likely that the end customers will stay with the Principal and not follow the Distributor. This view has been confirmed by the Swiss Federal Supreme Court with regard to an exclusive Distribution Agreement.

Once these requirements are fulfilled with respect to a certain Distribution Agreement, the goodwill indemnity is owed under the same conditions as in case of an Agency Agreement (cf. our related explanations above).

Statutory law does not provide for a post-contractual non-compete clause but the parties may basically agree upon such clause.

Swiss competition law, as a general principle, considers non-compete clauses valid during the term of the agreement (limited to a five year duration). Post-contractual non-compete clauses must be concluded in writing and should, for competition law reasons, not exceed one year. Furthermore, such post-contractual non-compete clauses must, for civil law reasons, be appropriately restricted with regard to place, time and scope. Finally, depending on the circumstances, the Distributor may be entitled to an adequate compensation for such post-contractual non-compete obligations (in exclusive distribution agreements, such compensation always becomes due; in other Distribution Agreements, it depends on the specific circumstances).

Eventually, a statute of limitation of five years applies to all recurrent claims of the Distributor. For other claims the statute of limitation is 10 years.

The Swiss Federal Supreme Court confirmed 2008 that under certain circumstances, an exclusive Distributor has a right to goodwill indemnity analogous to Art. 418u CO (agency law). However, there is very little case law on this issue, although it is highly relevant in practice. This is in particular due to the fact that many Distribution Agreements provide for an arbitration clause making the dispute confidential. In addition, litigations before state courts are in many cases amicably settled before the court can render a judgment.

Other issues that are often controversial (even though there is very little case law) are the applicability and limitations of competition law with regard to the agreed exclusivity, price regulations and minimum sales quotas.>> Go to the top