Distribution agreements in Germany: exclusivity, termination and compensation

Germany has no statute for distributors (Vertragshändler). Its courts instead borrow the rules the Commercial Code (HGB) writes for commercial agents: the notice periods of § 89 and, when the distributor is built into the supplier's sales system and must hand over its customers, the goodwill indemnity of § 89b, which cannot be waived in advance.

Putting it simply: an open-ended German distribution agreement is ended with notice, and the Federal Court of Justice (BGH) has applied the agents' scale of one to six months to distributors that are integrated into the supplier's sales organisation like an agent. Whether you owe money at the end depends on two facts the contract largely decides: how far the distributor works like your agent, and whether it must pass its customer base to you when the deal ends. If both are present and German law governs, a clause excluding the indemnity is void.

This page is general information as of 8 November 2026, not legal advice. Have the draft reviewed by a lawyer qualified in Germany.

Which law governs the agreement

The EU frame. No EU act protects distributors as such. The Commercial Agents Directive 86/653/EEC covers a self-employed intermediary with continuing authority to negotiate sales or purchases "on behalf of" the principal (article 1(2)); a distributor buys and resells in its own name, so its protection is national. Competition law applies to every distribution agreement: Regulation (EU) 2022/720, the Vertical Block Exemption Regulation (VBER), exempts vertical agreements where neither supplier nor buyer exceeds 30% of the relevant market (article 3), unless they contain a hardcore restriction listed in article 4. It applies until 31 May 2034 (article 11). Under § 2(2) of the German competition act (GWB), the EU block exemptions also apply to agreements that do not affect trade between Member States.

German law: case law built on the agency rules. The HGB agency rules (§§ 84 to 92c) are applied to distributors by analogy, case by case. For the indemnity, the BGH requires two conditions: the distributor is integrated into the supplier's sales organisation so that, to a large extent, it performs tasks that would otherwise fall to an agent, and it is obliged to transfer its customer base so that the supplier can use it "sofort und ohne weiteres" (immediately and without more) at the end (BGH, 5 February 2015, VII ZR 315/13, paragraph 11). A plain seller and buyer relationship does not qualify; an exclusive territory combined with an exclusive purchasing obligation is, in general, not enough on its own (BGH, 13 June 2007, VIII ZR 352/04, paragraphs 14 to 18 as numbered in the lexetius.com reprint). Standard terms are also tested under § 307 BGB, which voids clauses that unreasonably disadvantage the other side; § 310(1) BGB keeps that control between businesses.

Choice of law and forum. Under Rome I, the parties may choose the governing law (article 3); without a choice, a distribution contract is governed by the law of the distributor's habitual residence (article 4(1)(f)), which for a German distributor means German law. Where German law governs, the BGH held that the indemnity cannot be excluded in advance even when the distributor works in another EU or EEA state (BGH, 25 February 2016, VII ZR 102/15). For agents, Ingmar (Court of Justice, C-381/98, 9 November 2000) applies the Directive's indemnity where the agent works in a Member State, even under a chosen non-EU law. The Directive, and with it Ingmar, does not apply to distributors, not even by analogy; the 2016 BGH judgment says so (paragraphs 30 and 34) and notes that Rome I allows a choice of law for distributor contracts (paragraph 35). That judgment did not address whether a court would apply the distributor indemnity against a chosen foreign law as an overriding mandatory provision under Rome I article 9, so take advice before relying on a foreign law to avoid the indemnity.

On jurisdiction, Brussels I bis gives effect to a written choice of a Member State court whatever the parties' domicile (article 25). Without one, and where the defendant is domiciled in a Member State, the Court of Justice treats an exclusive distribution agreement that contains specific terms on the distributor's distribution of the goods as a contract for services (Corman-Collins, C-9/12, ruled under the predecessor regulation), so the court for the place where the services are provided, usually Germany, has jurisdiction under article 7(1)(b). The language of German courts is German (§ 184 GVG). Since 1 April 2025, § 184a GVG lets the federal states set up Commercial Chambers and Commercial Courts that hear selected commercial disputes entirely in English if the parties agree; otherwise, budget for translating a contract and evidence written in English.

Exclusivity and territory

Exclusivity is a contractual choice in Germany; no statute grants it or presumes it. The VBER sets the limits. In an exclusive system, you may stop the exclusive distributor from actively selling into territories or customer groups reserved to you or allocated to up to five other exclusive distributors (article 4(b)(i)). You may not stop passive sales, meaning unsolicited orders. The VBER's definition of passive sales expressly includes "participating in public procurement or responding to private invitations to tender" (article 1(1)(m)), which matters if your German distributor answers tenders from hospitals or public bodies across a border.

Preventing the "effective use of the internet" to sell is a hardcore restriction (article 4(e)). Fixing a minimum or fixed resale price is hardcore too; a maximum or recommended price is allowed if it does not turn into a fixed price through pressure or incentives (article 4(a)).

Term, termination and notice

Fixed or indefinite term. A fixed-term agreement ends on its date. Under § 89(3) HGB, an agency contract that both parties continue after expiry is treated as extended for an indefinite period, and the whole duration counts for notice. In VIII ZR 95/01 (9 October 2002, paragraph 15 as numbered in the lexetius.com reprint) the BGH considered that a chain of annual distribution agreements could form one indefinite agreement.

Notice periods. For agents, § 89(1) HGB sets one month in the first year, two in the second, three in years three to five and six months after five years, to the end of a calendar month unless agreed otherwise. The periods may be extended, but the supplier's may not be shorter than the agent's (§ 89(2)). In VIII ZR 95/01 the BGH held that, if the distributor proved it was integrated like an agent, the relationship of more than five years could be ended only with the six months of § 89(1) applied by analogy, and declined a longer period because the distributor had not shown it needed more time to adjust (paragraph 15; the case went back to the court of appeal for the facts). A distributor that invested heavily may argue for more.

Termination for cause. Any long-term contract can be ended without notice for good cause (§ 314 BGB); where the cause is a breach, a deadline to remedy it or a warning (Abmahnung) usually has to come first, and notice must follow within a reasonable time. For agents, § 89a HGB adds that this right "kann nicht ausgeschlossen oder beschränkt werden" (cannot be excluded or limited). Listing serious breaches helps but cannot remove that right. No registration or special form is required.

Compensation at the end

Basis. There is no statutory right. The indemnity is case law applying § 89b HGB by analogy, and only when the two BGH conditions above are met. The second condition can be shaped by the contract: in VII ZR 315/13 the BGH refused the indemnity because the supplier was contractually bound to block the customer data it had received at the end, stop using it and delete it on the distributor's request, so it could not use that customer base "immediately and without more" (paragraphs 18 to 21). That followed from the data agreement in that case, and the supplier then really loses the data.

Conditions and cap. Under § 89b(1), the indemnity is due when the principal keeps substantial benefits from customers the agent brought in and payment is equitable. § 89b(2) caps it at one year's commission or other annual remuneration, calculated as the average of the last five years of activity (or of the whole duration, if shorter). A distributor earns a resale margin instead of a commission, so the figure has to be adapted; as of 8 November 2026 we had not reviewed the case law on how that is done, so ask your lawyer for the calculation. § 89b(3) excludes the claim where the agent terminated itself (unless the principal gave cause, or age or illness make continuation unreasonable), where the principal terminated for good cause because of the agent's culpable conduct, or where, by agreement with the principal, a third party takes over the agent's position (an agreement that cannot be made before the contract ends).

Waiver and deadline. § 89b(4) says the claim cannot be excluded in advance and must be asserted within one year after the contract ends. The BGH applies that bar on advance waivers to distributors whenever the indemnity conditions are met (VII ZR 102/15, paragraph 22). § 92c(1) HGB allows agents whose activity is outside the EEA to agree otherwise; the BGH refused to extend that exception to a distributor working inside the EEA (paragraphs 26 to 33).

Other clauses the local lawyer will look at

• Non-compete during the term. The VBER exempts a non-compete obligation of up to five years; an indefinite one, or one over five years, falls outside the exemption (article 5(1)(a)). Buying more than 80% of the distributor's needs from you counts as a non-compete (article 1(1)(f)).
• Non-compete after the term. The VBER covers a post-term ban only if it concerns competing goods, is limited to the premises the distributor used, is indispensable to protect know-how you transferred, and lasts no more than one year (article 5(3)). For agents, § 90a HGB also requires written form with a signed document handed to the agent, a maximum of two years, a limit to the agent's territory or customer group and products, and reasonable compensation for the whole period. As of 8 November 2026 we could not confirm from a primary source how far German courts apply § 90a to distributors; plan on compensation if you want one.
• Minimum purchases and targets. Common and lawful. Targets, reporting duties and instructions on how to sell also make the distributor look more like an agent, which feeds the indemnity test.
• Stock buy-back. No statutory rule; agree it.
• Trade marks and domain names. Register them in your own name and require transfer of any local registrations on termination.
• Language. We found no German statute imposing a language for a contract between businesses. Product instructions are a separate matter: where safety depends on them, § 3(4) of the Product Safety Act (ProdSG) requires them in German. Our Germany playbook covers German documentation and XRechnung e-invoicing.
• Disputes. A choice of a German court or of arbitration avoids a fight over forum; remember that a German court hears the case in German unless the parties use an English-language Commercial Chamber or Commercial Court where one exists (§ 184a GVG).

A first-draft checklist

• State the governing law and court (or arbitration seat) expressly, and ask your lawyer what that choice means for the indemnity.
• Decide exclusive or non-exclusive, and define the territory and any customer groups reserved to you.
• Restrict only active sales outside the territory; leave passive sales, including public tenders, free.
• Choose a fixed term or an indefinite one, and write notice periods of at least the § 89 HGB scale, equal for both sides, ending at month end.
• List serious breaches and the warning or remedy period before termination for cause.
• Decide deliberately who owns the customer data at the end, and write it down; that decision drives the indemnity.
• Keep the distributor's duties proportionate if you want to limit agent-like integration; record what it does for itself.
• Set any non-compete within VBER limits, and price a post-term one.
• Agree minimum purchases and stock buy-back terms.
• Keep trade marks and domain names in your name, with transfer on termination.
• Use recommended or maximum resale prices only.
• Prepare a German version of the key terms or budget for translation if it ends in court.

What this means for a manufacturer

German courts read a distribution agreement through the agency rules. The indemnity depends on integration and on the customer base, both of which your draft influences. Notice periods modelled on § 89 HGB and a clear position on customer data are the two points that most often decide what the end of a German distribution relationship costs.

This page is general information, not legal advice. Have the draft reviewed by a lawyer qualified in Germany.

Where Cresques fits

Cresques shows the companies that already win public contracts for your category in Germany, with the award notices as evidence, and their profiles, so you know who you are negotiating with before the contract stage. It also drafts a first message in German for the lawful channel. Start from the Germany market page and the Germany playbook.