It is common knowledge that, in the event of termination of a distribution agreement, the distributor may be entitled to compensation for clientele (through the application by analogy of article 28 of the Law on Agency), as well as compensation for the damages generated by the termination, in accordance with articles 1.101 and 1.106 of the Spanish Civil Code. However, with regard to indefinite distribution contacts, the right to specific compensation for the amount of unamortised investments may arise.
Within the framework of distribution contracts, and, especially, those concerning exclusive distribution, it is customary that the distributor must make significant investment for the purpose of fulfilling the obligations agreed upon and the appropriate adaptation of their activity to the requirements of the distribution network. It is equally possible that, upon termination of the contract, such investments have not been completely amortised, which may mean financial detriment to the distributor. Thus, even for cases wherein the manufacturer may have terminated the contract, with sufficient advance notice to the distributor (normally at least six months’ notice, through the application by analogy of article 25.2 of the Law on Agency), the distributor may have a right to, if the requirements set forth below are complied with, to compensation of the value of said investments which have not been recovered.
That said, this right to compensation does not constitute a general rule, but rather an exception of an extraordinary nature. As a rule, the termination of the contract does not give rise to an obligation for the manufacturer or supplier to compensate per se, unless certain circumstances are present that may justify this. The principal characteristics and limits of this compensation may be resumed as follows:
1) Amortisable nature of the investment
Only those investments which, from an accounting point of view, are of an amortisable nature will be compensable. Therefore, ordinary expenses related to the day-to-day management of the business (such as salaries, rent or supplies) are excluded, as are amounts paid by the distributor arising from the termination of employment (severance payments), even if these are caused by the termination of the contract.
2) Origin of the investment
Not all outstanding investments are eligible for compensation, only those expressly undertaken to fulfil contractual obligations and carried out in accordance with the manufacturer’s or supplier’s instructions. Investments decided upon unilaterally by the distributor, in accordance with their own interests or expectations, shall not be eligible for compensation.
3) Alternative investment
Only those investments which may not be efficiently assigned to other objectives, or which imply a substantial loss of value if assigned to different activities may be compensated. Therefore, assets such as industrial plants, land or other elements which may easily be used for diverse activities or sold will not be deemed compensable investments, given that the distributor may continue to obtain gains from them.
4) Proof of the damage suffered
It will be the responsibility of the distributor to sufficiently demonstrate both the existence and assessment of the damage as well as the inability to recover the outstanding amount of the affected investments.
Consequently, the distributor’s right to compensation for unamortised investments following the termination of an indefinite distribution contract will only be enforceable if cumulatively the following conditions are met:
1) The termination of the contract prevents the total amortisation of the investments made for the performance of the contract.
2) The investment is subject to accounting depreciation.
3) Said investments were made following the manufacturer’s or supplier’s instructions.
4) It is not possible to reasonably repurpose these investments in other business activities.
If these conditions are met, the distributor may claim compensation corresponding to the outstanding value of such investments as of the date of termination of the contract.
Joan Lluís Rubio
Vilá Abogados
For more information, please contact:
19th September 2025
