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Distributors – right to compensation

Lithuania: The Supreme Court starts to apply the right of commercial agents to compensation in similar contractual relationships.

In its decision of 12 February 2016 the Lithuanian Supreme Court turned a new page in Lithuanian legal history by awarding the same compensation that commercial agents are entitled to upon termination of their contractual relationship by analogy to persons acting in similar contractual relationships. As a consequence of this decision, in future parties to certain distribution agreements (e.g. authorized dealers) may well claim compensation based on the principles of compensation rights of commercial agents.

This would be the case if the contractual relationship is similar to that of commercial agency from a legal perspective and the two are comparable by function and from the economic aspect.

The following criteria are considered when evaluating these similarities:
1. Is the other contractual party closely integrated into the organisational distribution scheme of the principal?
2. Is the manner of performing the contractual obligations similar to that of a commercial agent?
3. Does the added value which the contractual party has created (for example the client base) stay with the principal after termination of the contractual relationship?

The decision develops practical application of compensation rights in this field towards the practice of other European countries, which have already been applying the same analogy for many years.