Distribution Agreements in Austria

Distribution agreements (in Austria called “Vertriebsverträge”) do not expressly have reference in Austrian statutory law.  For distribution agreements no special formalities are required. Even oral contracts are possible.

Yet, we advise to always use the written form, especially for reasons of proof, should a dispute arise later. 

A distribution agreement offers an entrepreneur (e.g. manufacturer, supplier, service provider) the possibility to open or develop a new market with the support of intermediaries. These can be commercial representatives, agents, licensees, etc.

The legal sources

There are no specific statues in Austria ruling the legal requirements of a distribution agreement. Yet, the main applicable sources are the following:

• The Austrian Civil Code and the Austrian Civil Procedure Code (Allgemeines bürgerliches Gesetzbuch (ABGB) and Zivilprozessordnung (ZPO)).
• The Austrian Commercial Code (Unternehmensgesetzbuch (UGB)) and the Austrian Cartel Act (Kartellgesetz (KartG 2005)).
• The Austrian Commercial Agency Act (Handelsvertretergesetz (HVertrG)), which often serves as a model for commercial distribution agreements in Austria. Due to the lack of specific regulations for distributors, the Commercial Agency Act is frequently applied by analogy.
  If the business relationship between manufacturer and distributor is similar to that between agent and principal, the Commercial Agency Act (HVertrG) may also apply (Austrian Supreme Court, OGH 157/73).
• EU Regulation (Rome I): Where at least one contracting party is located in an EU Member State, Articles 3 and 4 of the Regulation apply. If both parties are based in Austria, jurisdiction is governed by the Austrian Court Jurisdiction Act (Jurisdiktionsnorm).
• The Treaty on the Functioning of the European Union (TFEU), art. 101 and the EU Commission Regulation 2022/720 (VBER) on the application of art 101 TFEU.
  

In Austria, the main intermediaries are commercial agents (Handelsvertreter) and distributors (Vertriebspartner/Vertragshändler). Unlike agents, distributors are fully independent, acting in their own name and on their own account. The manufacturer or supplier sells its products or services to the distributor, which is often a company from another country within the same corporate group.

The distributor is a buyer-seller and true entrepreneur, acting in his own name and assuming all costs and risks, unlike the commercial agent, who acts solely for his principal and bears no such liability.

After purchasing the goods from the producer or supplier, the distributor stores them at his own expense and distributes them to buyers in the target area, using his local presence and market knowledge.

Thanks to this knowledge, the distributor can act in the producer’s or supplier’s interest, providing selective and well-informed distribution that is less competitive than direct sales.

In Austria, the franchisee model is often used. Unlike distributors, franchisees operate fully under the franchisor’s brand and identity—including signage, store layout, uniforms—while remaining legally independent and paying royalties. Franchisees are subject to strict controls and detailed directions from the franchisor, making them operationally dependent and essentially local replicas of the parent company

Conclusion of a distribution agreement

Austrian law does not provide for a specific form of a distribution agreement, nor any kind of mandatory registration: a distribution agreement can be executed between legal or natural persons, either verbally or in written form. Generally, a commercial agency contract is taken as a model also for distribution agreements.   

Austrian law does not prescribe a specific form or registration for distribution agreements. They may be concluded orally or in writing, between legal or natural persons. While Art. 13 of Council Directive 86/653/EEC allows Member States to require written agency contracts, Austrian law imposes no such rule. However, written form is recommended.

Contractual obligations of the parties in a distribution agreement

Austrian law sets no specific statutory obligations for distribution agreements. Therefore, the parties should define key terms such as territory, product range, sales conditions, exclusivity, termination, and dispute resolution. 

Main obligations of the distributor: 

• Purchase and store products at own cost. 
• Distribute and promote them in the agreed territory, following the manufacturer’s guidelines (only maximum or recommended resale prices may be set). 
• Provide the manufacturer with relevant market and customer information (Benachrichtigungspflicht), based on the duty of care principle: Sorgfaltspflichtprinzip). According to Austrian case law, concealing relevant facts may release the manufacturer from contractual duties (OGH 22/12/2015, 1 Ob 191/15).
• Allow manufacturer’s representatives access to premises, protect its interests, and maintain confidentiality. 
• If agreed, provide client services and train employees accordingly. 

Main obligations of the manufacturer/supplier: 

• Sell products to the distributor and clearly regulate the order process, e.g., when an order is accepted or delivery triggers contract fulfilment.
• Include a general clause in the contract outlining ongoing support, advice, and provision of relevant information to the distributor (instead of drafting new contracts for every single new order). 

What is an exclusive distribution agreement?

The producer/supplier sells its products exclusively to a specific distributor who is the sole seller in a defined area. Exclusivity may benefit either the distributor or the producer and should be specified in the contract.

Distributor’s exclusivity

In this common form, the manufacturer sells exclusively to one distributor and agrees not to appoint others or supply the distributor’s clients directly in the same area.

Producer’s/supplier’s exclusivity

If exclusivity favors the producer, the distributor must buy only from that producer. To motivate the distributor as the weaker party, contracts often include incentive clauses or bonuses tied to sales targets or growth. Such exclusivity significantly limits competition.

In Austria exclusive distribution is allowed, but only under specific circumstances.

In Austria, exclusive distribution is permitted under certain conditions. According to § 1 KartG (Kartellgesetz 2005 = Cartel Act), agreements that restrict competition (“Kartelle”) are generally prohibited. However, § 2 KartG allows cartels that contribute to improving production or distribution or promote technical or economic progress with adequate consumer benefit. Minor cartels with competitors holding less than 10–15% market share are allowed if they do not fix prices or divide markets. Specific exemptions apply to books, art, media, and cooperative agreements.

EU Law

Article 101 TFEU prohibits cartels and agreements that restrict competition in the EU internal market; Austrian § 1 KartG reflects this rule. 

Commission Regulation (EU) 2022/720 (VBER) clarifies cartel limits: 

According to Art. 2 and 5 VBER, vertical agreements with a duration of up to five years are allowed.

However, Art. 4 VBER defines certain “hardcore restrictions” that are always prohibited. These include:

• Any agreement that restricts the buyer’s ability to determine its sale price (resale price maintenance).

- In exclusive distribution systems, any restriction on the territory into which, or the customers to whom, the exclusive distributor may actively or passively sell the contract goods or services.

-Preventing the effective use of the internet by the buyer or its customers to sell the contract goods or services, such as banning an entire online advertising channel. However, certain restrictions on online sales or advertising are permitted if they do not completely block an entire channel.

A key exception allows such agreements if they involve a maximum of five exclusive distributors.

Exclusivity clauses are interpreted under Austrian Civil Code (§§ 914 et seq. ABGB-Austrian Civil Code), focusing on the parties’ intentions and contractual fairness (redlicher Verkehr, § 328 ABGB). 

In Austria, resale pricing is primarily governed by the above-mentioned Austrian Cartel Act (Kartellgesetz, KartG 2005), mainly § 1 and 2, which incorporates EU competition law, particularly Article 101 TFEU and the already mentioned EU Regulation 2022/720 (VBER) on vertical agreements. As said:

• The direct or indirect imposition of fixed or minimum resale prices by the supplier is prohibited and is considered a serious restriction on competition.
• The use of maximum or recommended resale prices is permitted, if they are not made effectively binding through pressure, incentives, or indirect threats and, in any case, if they do not distort free commercial competition.

The competent authority for enforcement is the so-called Bundeswettbewerbsbehörde (BWB – Federal Competition Authority), which can impose sanctions for RPM practices in various sectors.

The retention of title clause ensures that ownership of the goods remains with the seller until full payment is received. If the commercial partner fails to pay within the agreed terms, the seller retains the right to reclaim the goods.

Although Austrian law does not have a specific statute governing this clause, it is widely accepted under the principle of freedom of contract and the non-mandatory nature of Austrian Civil Code (§ 1063 ABGB), which treats delivery without payment as a sale on credit where ownership transfers immediately to the buyer. Contracting parties may agree to defer ownership transfer, using the retention of title clause.

This clause is valid in Austrian commercial practice if:

• It is in writing and the affected party is aware of it.
• It applies to movable goods.
• It complies with general Austrian contract law limitations, concerning initial impossibility and illegality or immorality (such as §§ 878 and 879 ABGB).

Retention of title can be:

• Simple reservation: ownership remains with the seller until full payment.
• Extended reservation: applicable also to goods sold or incorporated into other products.

Examples:

1. A customer resells machinery before paying the original supplier. Under an extended retention of title clause, the supplier retains ownership and may claim payment directly from the new buyer.
2. A customer buys wood under such a clause and uses it to make furniture. The seller may retain ownership or a share of the finished product’s value.

Austrian law contains no specific rule regulating non-compete clauses in distribution agreements, either during or after the contract. Instead, these clauses are assessed under general civil and contract law principles (mainly §§ 879, 869, and 916 ABGB-illegality, lack of clear consent, and protection of third parties). The decisive legal standard for non-compete clauses in distribution agreements is the directly applicable EU Regulation 2022/720 (VBER).

Article 5 VBER provides that any direct or indirect obligation preventing the buyer, after termination of the agreement, from manufacturing, purchasing, selling, or reselling goods or services is permitted only if all of the following conditions are fulfilled:

• The obligation relates to goods or services which compete with the contract goods or services.
• The obligation is limited to the premises and land from which the buyer has operated during the contract period.
• The obligation is indispensable to protect know-how transferred by the supplier to the buyer and, in matter of duration after the termination of the contract, when “the duration of the obligation is limited to a period of one year after the termination of the agreement”.

If a distributor is considered equivalent to a commercial agent, § 25 of the Austrian Commercial Agents Act (HVertrG) applies. This means that any agreement restricting the agent’s professional activity after termination is invalid. As a result, post-contractual non-compete clauses are in principle unenforceable for commercial agents—and equally for distributors treated as such under Austrian law. Austrian case law also prohibits other clauses that, while different in form, have the same effect, such as so-called customer protection clauses (Kundenschutzklauseln)

There is no specific statutory rule in Austria for non-compete obligations during the contractual period, even for commercial agents or comparable distributors. However, Austrian case law (e.g., OGH 9 ObA 38/08s) confirms that exclusive agents owe a duty of loyalty to the principal, requiring them to act solely in the principal’s interest (§§ 5 es seq. HVertrG). As a result, a non-compete obligation during the contract period is generally considered implied, with or without an express clause, and this also applies to comparable distributors. 

Recommendation: If the principal wishes to ensure that the distributor, whether comparable to a commercial agent or not, does not engage in competitive activities, it is advisable to include a clear and comprehensive written non-compete clause. This should be drafted to also prevent circumvention through indirect conduct.

As a rule, Austrian law does not provide specific statutory provisions on the duration or termination of distribution agreements. The parties are generally free to determine the duration contractually, either as a fixed term or an indefinite term.

• Fixed-term agreements: If the parties agree on a fixed duration and do not provide for early termination, the contract ends automatically at the end of the agreed period, without any notice required. Ordinary termination before expiry is only possible if the contract explicitly allows it. If, after expiry, the parties continue performing the agreement, it is generally considered to have been tacitly renewed for an indefinite term (by analogy to § 20 Commercial Agency Act - HVertrG).
• Indefinite-term agreements: Where the duration is not specified, it is advisable to agree on rules regarding termination notice, period, and date. If no written notice period is agreed, the contract may only be terminated with reasonable notice as required by fairness and the specific circumstances. Written form for termination is recommended.
• General: If the termination terms are agreed, an ordinary termination in accordance with the notice period is always permissible. Specific statutes relating to commercial agency contracts, such as termination or compensation provisions, may be applied by analogy to distribution agreements in some cases if distributors act similarly to agents.

Extraordinary termination

A distribution agreement may be terminated with immediate effect for important reasons (“good cause”). Under Austrian law, there is no exclusive statutory regulation, but § 22 of the Commercial Agents Act (HVertrG) provides a list of relevant grounds, which is generally applied by analogy to distribution agreements. This right to termination for good cause is a fundamental principle of Austrian contract law, supported by Supreme Court decisions (e.g., OGH 139/65).

Good cause must be promptly declared once known to the party entitled to terminate. Failing to notify the other party immediately can be seen as acceptance of the situation and intent to continue the agreement.

Examples of good cause justifying immediate termination by the entrepreneur include:

• The distributor is unable to fulfil the contract.
• The distributor is guilty of conduct undermining the entrepreneur’s trust, especially in case of illegal actions.
• The distributor, for substantial time or due to circumstances, fails to act for the entrepreneur or breaches key contractual duties.
• The distributor is criminally convicted of violence or defamation against the entrepreneur.
• Insolvency or bankruptcy proceedings are initiated against the distributor.

Good cause for the distributor or agent includes:

• Becoming unable to fulfil obligations.
• The entrepreneur unlawfully reduces or withholds commission, breaches major contractual duties, is guilty of physical violence or serious dishonor, or ceases operating in the relevant business sector.

This right to extraordinary termination cannot be contractually waived and applies even in fixed-term agreements.

Minimum turnover clauses require the distributor to achieve a certain sales volume over time. They often set minimum targets for an initial probation period to test market performance. The contract specify the consequences of meeting or missing these targets, which may include:

• Short-term:
• Meeting targets: the distributor retains exclusivity.
• Missing targets: exclusivity may be lost.
• Long-term:
• Meeting targets: the area or product scope may be expanded.
• Missing targets: the area or product may be adjusted, or the agreement terminated.

In principle, such clauses are permitted and mostly unrestricted. The main limitation is the general requirement of fairness and compliance with Austrian public morals. If a clause is manifestly unfair, it will be void, e.g., if it compels the distributor to act unlawfully or imposes clearly disproportionate obligations. The distributor could then seek a declaration of nullity.

According to Austrian law, distributors have two types of compensation claims, similar to commercial agents, with commercial agency rules applicable by analogy.

• Claims under the Austrian Commercial Code (Section 454 UGB): Distributors may claim, within one year after contract termination, compensation for investments made based on the distribution contract if these cannot be amortized or adequately used by the supplier. No claim exists if:

- The distributor terminated the contract without good cause or prematurely,

- The supplier terminated for reasons attributable to the distributor,

- The distributor unlawfully transferred contractual rights and obligations to third parties.

The right is lost if not asserted within one year, and cannot be contractually limited. This does not affect rights under § 24 HVertrG.

• Claims under the Commercial Agency Act (§ 24 HVertrG): If the distributor is integrated into the supplier’s sales structure in a way comparable to a commercial agent and is obliged to transfer its customers to the principal, compensation under § 24 HVertrG applies. This amount is determined by the benefit the supplier gains after contract termination. The claim must also be filed within one year of termination.

Specifically, what requirements must be met for a distributor’s compensation claim?

• First, the claim must concern a fair amount, considering all the circumstances, especially the commission the distributor lost on customer transactions.
• Second, the distributor must have acquired new customers for the entrepreneur or significantly expanded existing business with current customers.
• Third, it must be foreseeable that the entrepreneur or their legal successor will gain substantial advantages from these relationships during and after the contract.

If these criteria are satisfied, compensation can be claimed—even in the event of the distributor’s death. Compensation is not due if the distributor terminates the contract without cause or dissolves the relationship prematurely, unless the entrepreneur is responsible for the termination, or the distributor’s age, illness, or infirmity justify termination. Likewise, no compensation is due if the entrepreneur terminates for breach of contract by the distributor.

Unless agreed otherwise, compensation is capped at one year’s average remuneration calculated over the last five years; for shorter contracts, the average is based on the actual duration.

Under Austrian product liability law (Produkthaftungsgesetz, PHG), consumers who suffer damage from a defective product can claim compensation from the liable party. In a distribution agreement, the liable party may be:

• The entrepreneur who manufactured and marketed the product.
• The importer who introduced the product into the European Economic Area (EEA) and marketed it, including all EU countries, Norway, Iceland, and Liechtenstein.
• If neither the manufacturer nor importer can be identified, any entrepreneur who put the product on the market is liable, unless they promptly provide the injured party with the manufacturer’s details.

According to § 7 PHG, the distributor can avoid liability by proving they did not act as an entrepreneur, do not meet the criteria for liability, or that the defect did not exist when the product was sold.

The new EU Product Liability Directive (2024/2853) must be transposed into national law by all member states by December 9, 2026. Key changes relevant to distribution agreements include:

• The scope of liability is broadened to include software, artificial intelligence, digital files, and smart products, making distributors potentially liable even for non-tangible products.
• The definition of liable parties is expanded: not only manufacturers and importers, but also authorised representatives, fulfillment service providers, and under certain circumstances online platforms and distributors can be held directly liable.
• The burden of proof for injured parties is reduced, including presumptions of defect and causality, especially for complex products or technologies.
• Claimants have improved access to evidence: courts can require distribution chain members to disclose internal documentation about product manufacturing and functioning if damages are sufficiently plausible.
• The distributor and other supply chain members must ensure contractual provisions and insurance reflect these stricter liability rules and wider exposure.

All companies involved in placing products on the EU market, including distributors, should prepare for these regulatory changes as member states implement the directive by December 9, 2026.

In Austria, since there is no specific law regulating the rights of distributors, a distributor does not automatically have a right to reimbursement for unsold stock, investments, or other losses resulting from contract termination unless this is expressly provided for in the agreement. To ensure such entitlements, it is advisable to include a specific reimbursement clause in the distribution contract.

However, if a distributor is integrated into the principal’s system in a way comparable to a commercial agent, as described earlier, they may be entitled to a termination indemnity by analogy with § 24 of the Austrian Commercial Agents Act (HVertrG). Additionally, where a distributor, as part of a vertical system, was contractually required to invest, § 454 of the Austrian Commercial Code (UGB) allows a claim for reimbursement of those investments upon contract termination, provided they are not amortized or reasonably reusable.

Under Austrian law, contracts between entrepreneurs and distributors are governed by the principle of extensive contractual autonomy, which includes the freedom to choose the applicable law. If the parties are based in different EU Member States, EU Regulation (Rome I) applies:

• Article 3 provides that a contract shall be governed by the law chosen by the parties. This choice must be expressed or clearly evident from the contract or the case’s circumstances and may apply to the whole contract or just part of it.

Article 4 (f) determines that a distribution contract shall be governed by the law of the country where the distributor has his habitual residence,therefore Austrian law;

The parties in a distribution agreement are free to choose the place of jurisdiction. It is recommended to specify a jurisdiction clause for all disputes arising from the contract. Such an agreement should be evidenced in writing and in a form consistent with either the practices agreed by the parties or common usage in the relevant trade.

If no jurisdiction clause is included, the following rules apply:

• If the parties are based in different EU Member States, Regulation EU 1215/2012 (Brussels I bis) governs jurisdiction:

- Article 4(1): Generally, persons domiciled in a Member State can only be sued in that State.

- Article 7(1): Allows litigation in the courts of the place of performance of contractual obligations (e.g., where goods are delivered or services provided).

If EU rules do not apply (e.g., both parties are located in Austria), jurisdiction is determined by the Austrian Court Jurisdiction Act (“Jurisdiktionsnorm”), which generally assigns jurisdiction to the seat, domicile, or habitual residence of the defendant.

In Austria, parties may agree to resolve disputes through arbitration (“Schiedsgericht”) instead of ordinary courts. The arbitration procedure (“Schiedsverfahren”) concludes with either an arbitration award (“Schiedsspruch”) or an arbitration settlement (“Schiedsvergleich”).

To use arbitration, parties must have a written arbitration agreement, signed by both, specifying the seat and the competent arbitration institution.

Why choose arbitration in Austria?

1.         International recognition:

Arbitral awards are generally recognized internationally under the 1958 New York Convention, to which Austria is a signatory. This facilitates easier and faster enforcement across more than 100 countries, extending beyond Europe.

2.         Flexibility and speed:

The parties can tailor the process, agreeing on expedited deadlines and hearings, leading to faster resolutions compared to court litigation.

3.         Effectiveness:

Arbitral awards are binding legal decisions typically issued by three independent arbitrators after a fair procedure ensuring due process and equality.

While arbitration costs may be higher upfront, the finality of awards—with limited grounds for appeal—can reduce prolonged and costly litigation often seen in state courts.

What do you have to consider in drafting an arbitration clause?

When drafting an arbitration clause, ensure the arbitration agreement is formulated to be legally effective. Legal advice is recommended in order to tailor the clause and ensure validity, whether as a standalone agreement or as a contractual provision. It must be contained in a document signed by both parties, or in an exchange of letters, faxes, emails, or other forms of communication that clearly evidence the agreement.

The selection of the arbitration tribunal is of primary importance

The choice of the arbitral tribunal is crucial in Austria. Most arbitration proceedings are conducted under the Vienna International Arbitral Centre (VIAC) according to the Vienna Rules. If VIAC is chosen, its procedural rules apply. If VIAC is not specified, arbitration follows the Austrian Code of Civil Procedure (§§ 577–618 ZPO), whose rules largely reflect the UNCITRAL Model Law, providing flexibility and international standards. Additionally, local chambers of commerce and bar associations offer arbitral courts for domestic disputes.

The relevant legal framework in this area is the OECD Model Convention 2017, a set of international treaty standards, not domestic law, implemented through bilateral Double Taxation Conventions between states (for example, Austria-Italy, Austria-Hungary). Austria applies it in its treaties with EU Member States.

Article 5 of the Convention defines a “permanent establishment” as a fixed place of business through which the enterprise’s business is wholly or partly carried on. Paragraph 2 includes places of management, branches, offices, factories, workshops, and natural resource extraction sites. Paragraph 3 covers construction sites or installation projects, which only result in permanent establishment if lasting more than twelve months.

Paragraph 4 excludes activities that are solely preparatory or auxiliary, such as storage, display, delivery, purchasing, or information gathering, provided they are not core business activities.

Specifically for distributors: under paragraph 5, an enterprise is considered to have a permanent establishment if a person (other than an independent agent) habitually concludes contracts in its name in that state, unless those activities are limited as described in paragraph 4.

In summary, if the distributor regularly concludes contracts or actively sells on behalf of the enterprise in Austria, the enterprise may be taxed in Austria due to the regularity and significance of the distributor’s commercial activity.