Following 17 months’ contractual relationship, the supplier Weststar Sales AB terminated an oral cooperation agreement with Mion AB regarding sales of eatables with one month prior notice. Arguing it had been acting as a commercial agent, Mion claimed an indemnity according to the provisions of the Swedish Act on Commercial Agency. Weststar Sales rejected the claim for an indemnity, primarily on the grounds that Mion had acted as an independent distributor and that there were no valid bases for an analogous application of the indemnity rules applicable to commercial agents.
In assessing the factual nature of the contractual relationship, the court considered, among other things, the agreed mechanism for compensation for Mion, which comprised three various arrangements: (i) a fixed minor monthly compensation for a limited period of time, considered by the court as a kind of marketing compensation; (ii) a “variable remuneration” corresponding to the difference between the price invoiced by Mion to stores and the price paid by Mion to Weststar Sales, which made up the major part of Mion’s income; and (iii) a compensation for sales invoiced directly by Weststar Sales to the stores, an arrangement which, even though similar to an agency, had been intended only for limited volumes and in fact never was applied between the parties (and therefore was disregarded by the court). Thus, finding that Mion had in substance acted in its own name and for its own account, setting its own prices in relation to the stores, and regardless of the fact that it had not kept a stock of its own, the court concluded that Mion had in fact acted as an independent distributor and not as an agent. Underlining that certain caution should be observed in applying provisions of the Commercial Agents Act by analogy on distribution contracts, and that the circumstances of the present case were quite different from other instances where such analogies had been considered, the court found that an indemnity could not be awarded based on an analogy of Section 28 of the Swedish Act on Commercial Agency or on any other ground. It should be noted that the question of a possible exclusivity for Mion was not brought up by either party in the proceedings.
Finally, the court clearly rejected an argument from Mion that a right to indemnity could be based on the rules laid out in the Draft Common Frame of Reference – while these principles may provide guidance for interpretation, they have not been implemented as Swedish law.
It is not yet known whether the judgement will be appealed to the Supreme Court.
Magnus Nedström, IDI agency and distribution Country Expert for Sweden.
