Distributors may be able to assert an indemnity claim at the end of the contract. This indemnity claim is not directly regulated by law. However, the courts apply the provision on the commercial agent's indemnity claim (section 89b of the German Commercial Code, HGB) accordingly under certain conditions. The purpose of the claim is to compensate as a kind of residual remuneration for the fact that the development or expansion of the customer base has generated value from which further advantages for the manufacturer (or importer; in the following, for the sake of easier readability, only the manufacturer will be directly addressed) arise.
Such claims can be very expensive: In the case of commercial agents, the claim may be an average annual commission, and in the case of distributors, the equivalent (calculation: complicated – more on that another time).
Manufacturers often want to avoid such claims: the distributor has earned well during the cooperation. Why should he still receive money after that? The perspective of the distributor is exactly the opposite: Where would the manufacturer be without us? We built up the market for him in the first place. So, it is only fair that we participate in it now, when the harvest is brought in.
If manufacturers want to prevent having to pay indemnity after the end of the contract, then they must first know what the requirements are for this and, if necessary, design the contract accordingly. The decisive course is set in the drafting of the contract. And conversely, it is important for distributors to recognise which arrangements generate - or prevent - an indemnity claim.
In particular, the following approaches may be particularly important:
- Section 89b of the German Commercial Code can only be applied if German law is applicable. In the case of cross-border contractual relationships, a court located within the EU would apply the law of the state in which the distributor has their "habitual residence" (Art. 4 para. 1 f) Rome I Regulation), unless the parties have agreed otherwise. If this country is Germany, what is explained in the following paragraphs applies. If this country is not Germany, then a different law applies. Both parties to the contract would then do well to determine whether or not there is an indemnity claim for distributors in that other country. This varies greatly around the world (in Belgium, for example, it is expensive, in England there is no indemnity, in Austria the analogy requirements are different than in Germany). Whether the parties, if the distributor is active in Germany, can effectively agree that another legal system applies, is disputed, if and to the extent that this results in no indemnity claim arising. The Berlin Court of Appeal (Kammergericht) ruled (indirectly) in 2025 that this was permissible and valid. However, other courts are not bound by this decision. In any case, in a constellation where both parties are German and where no other relevant elements are located outside Germany, such a choice of law would clearly not be effective with regard to the indemnity claim (Art. 3 para. 3 Rome I Regulation). It can be attractive for manufacturers to choose a foreign legal system that does not have an indemnity claim for distributors. And distributors should therefore (also) from this point of view not consider the choice of law to be of only secondary importance and, if necessary, insist on the application of German law.
- If, according to the above statements, German law is to be applied, the question arises as to whether the criteria for analogy are met, i.e. the prerequisites for the provision of section 89b German Commercial Code applicable to commercial agents to be applied in the specific case. It is necessary for the contractual relationship to be so similar to a commercial agent relationship that it is appropriate to apply commercial agents law in this respect. The case law proceeds in two stages:
- At the first stage, it is verified whether the distributor is integrated into the manufacturer's sales organisation in the same way as a commercial agent. This is usually done with the help of a catalogue of criteria, which is used to check the written contract and the established contractual practice. The overall picture is decisive, not necessarily that all criteria can be affirmed. Important criteria include the existence of a sales obligation, the allocation of a contract territory, control rights of the manufacturer, reporting obligations of the distributor, etc. The manufacturer who wants to avoid an indemnity claim may consider how demanding he wants to make the catalogue of obligations of the distributor and, if necessary, waive obligations that are less important to him if this reduces the probability that he will have to pay indemnity one day. Conversely, the distributor could work to ensure that the contract provides for intensive integration. However, he should take into account that it is likely to seem strange and suspicious if he asks for the imposition of further obligations. Such approach would probably only be able to work if the distributor submits the first draft of the contract.
- At the second stage - i.e. only if the first stage (see paragraph above this) has been affirmed - the courts then examine whether the distributor was or is contractually obliged to transfer the customer base, i.e. to transmit the necessary customer data to the manufacturer that enables the manufacturer to contact the customers without significant intermediate steps. It is important to note that the prevailing opinion (at least still) requires that it be a contractual obligation. According to this, it is not sufficient that the manufacturer actually knows the customers, e.g. because the market is so small, or the distributor transmits the customer data without being asked. All of this is criticised and controversial for good reasons, and it may be that this analogy feature will be abandoned or modified in the foreseeable future. At present, however, one should still expect a court to demand such a contractual obligation. If a contractual obligation does not exist, there is no indemnity claim. And this results in several possibilities for the manufacturer to avoid having to pay indemnity by drafting the contract: He can simply refrain from providing for such an obligation in the contract. It is even better to explicitly write in the contract that the customer data should not be transmitted (e.g. in the context of any reporting obligations). But beware: You have to live it that way and as a manufacturer you must not demand the submission of customer data. Otherwise, there is a risk that a court will derive a tacitly agreed obligation to transfer the customer base from the lived contractual practice. If the contract does not provide for an obligation to transfer and the manufacturer asks for customer data, the distributor may conversely consider whether he complies with this request despite the fact that the obligation does not exist, and documents everything thoroughly and thus gives himself an improved chance of receiving indemnity later. Sometimes, of course, the manufacturer wants to have the customer data. But even then, there are approaches whose pursuit prevents the arising of an indemnity claim: For example, it can be regulated that the distributor does not have to transmit customer data, but can transmit it voluntarily - then in return for benefits to be agreed. Here, a certain degree of finesse is required to ensure that the arrangement does not result in an invalid circumvention of case law. It is also conceivable to regulate that the customer data is not to be transmitted to the manufacturer, but to an external marketing agency, and that this agency uses the data for the manufacturer's purposes during the term of the contract, but no longer thereafter. Other approaches that go in this direction are conceivable and, in some cases, have also been tried and tested in court. Distributors who see such provisions in draft contracts should recognise that the avoidance of an indemnity claim can be the background and objective and carefully examine whether they accept this as appropriate and fair or, if necessary, whether they want to demand further consideration. If they are assured in an open discussion that it is not at all a question of avoiding an indemnity claim, it may be advisable to counter this with the demand for an express regulation on the indemnity claim. This will probably be met with little approval, but it may reveal the true motives.
- If, according to the preceding paragraphs, the application of German law is to be assumed and the two analogical criteria are also met, it could seem tempting from the manufacturer's point of view to simply exclude the annoying indemnity claim at the stroke of a pen by means of a corresponding contractual clause. However, this is not effectively possible if the distributor has to operate within the European Economic Area (EEA = EU + Iceland, Liechtenstein, and Norway), as the German Federal Court of Justice ruled in 2016: The indemnity claim is mandatory for commercial agents (section 89b para. 4 of the German Commercial Code) and this, according to the German Federal Court of Justice, also applies to distributors by analogy. However, the situation is different if the distributor has to operate outside the EEA: In that case, Section 92c of the German Commercial Code (HGB) allows the exclusion of the indemnity claim, at least in individually negotiated contracts. However, it has not been conclusively clarified how this applies to arrangements based on standard terms and conditions.
Oliver Korte
