Things
might be about to change for franchisors in Spain
as a legislative initiative dealing with
distribution contracts is currently being
discussed. The first draft of the proposed
Distribution Law lays down ground rules for all
types of distribution including franchising. It
will apply to all types of franchising with the
exception of "industrial franchising" (essentially
a franchise based on a patented process).
Although the Draft is
still in its initial stages and not expected to
become law for some time, it currently proposes
the following key provisions which will have a
serious impact on franchisors:
-
Termination: the
Draft allows termination of franchise agreements
against payment of liquidated damages equal to
two years earnings.
-
Goodwill indemnity:
the Draft makes it clear that franchisees will
be entitled to the same indemnity payment as
commercial agents. Currently it is unclear
whether franchisees and distributors have the
right to claim an indemnity. The Draft
seeks to remove this uncertainty. However, the
right to claim indemnity will be limited to
specific circumstances.
-
Under the Draft all
amendments of franchise or distribution
contracts have to be in writing.
The
provision in respect of the goodwill indemnity
will have a serious impact on franchising, and
franchisors need to consider lobbying the Spanish
legislature against this proposed change.
For
more information on franchising in Spain or the
new draft legislation, please contact Mark
Abell or Babette
Märzheuser-Wood.