Distribution agreements and the importance of timely warning: Lessons from the Fujifilm ruling of the Netherlands Commercial Court

Why this statement is relevant to your business

If your company operates in the Netherlands or operates internationally, sooner or later you will have to deal with contract law and disputes about commercial contracts. The ruling by the Netherlands Commercial Court (NCC) in the dispute between Duomed and Fujifilm offers important insights for companies working with distribution agreements (Amsterdam District Court 5 July 2023, ECLI:NL:RBAMS:2023:4109). The ruling underlines the importance of careful communication and timely information of contracting parties when terminating long-term commercial relationships. This article explains what the NCC is, what the essence of the ruling is and what lessons you can draw from it for your business.

The Netherlands Commercial Court: specialist in international commercial disputes

The Netherlands Commercial Court (NCC) is a specialised chamber of the District Court of Amsterdam that focuses on international commercial disputes. Proceedings are conducted in English, making it attractive to internationally operating companies. The NCC offers efficient and expert handling of complex commercial disputes, where speed and quality are paramount. This makes the NCC eminently suitable for companies operating in international trade and contract law.

The dispute between Duomed and Fujifilm

Duomed and Fujifilm had a distribution relationship for endoscopy products in the Netherlands since 1978. From 2013 onwards, fixed-term contracts, which expired automatically, were always concluded. In March 2023, Fujifilm informed that it did not want to conclude a new distribution agreement, which meant that the cooperation would end on 31 March 2023. Duomed feared damage as a result, partly because it could not inform its customers in time and arrange alternatives.

Duomed initiated proceedings at the NCC and claimed that Fujifilm should be obliged to continue the distribution relationship for another 18 months. At the heart of the dispute was whether Fujifilm had taken sufficient account of Duomed's interests in terminating the partnership.

Legal considerations: duty of care and legitimate interests

The NCC ruled that, regardless of whether there was a continuing contract (a contract for an indefinite period of time), parties must take each other's legitimate interests into account when terminating a contract. This follows from established Supreme Court case law. In this case, the court found that Fujifilm had not given Duomed timely and unambiguous warning that the cooperation would end. A mere expression of dissatisfaction or the start of negotiations on a new contract is insufficient as a warning.

Because Fujifilm did not explicitly indicate its intention not to renew the contract until three weeks before the end, Duomed could not adequately respond to the impending end of the cooperation. According to the court, this constituted a breach of the parties' reciprocal duty of care.

Practical implications of the ruling

The NCC obliged Fujifilm to continue the distribution agreement for another six months to give Duomed sufficient time to inform its customers and arrange alternatives. Fujifilm also had to inform its customers that the cooperation with Duomed had not ended immediately. This shows that courts do not shy away from providing practical, tailor-made solutions in commercial disputes.

For companies, this means that when terminating a distribution agreement or other long-term cooperation, you should not only look at the letter of the contract, but also at the interests of the other party. A timely, clear and written warning is essential to avoid liability and litigation.

As a company, what can you do?

• Evaluate your contracts: Make sure your distribution agreements contain clear provisions on termination and notice periods.
  
• Communicate in good time: Inform your contracting parties well in advance if you want to end or not renew a collaboration.
  
• Document your communications: Record when and how you informed the other party.
  
• Be alert to legitimate interests: Consider the consequences for the other party and allow sufficient time for a smooth transition.

How can TK help you?

TK has extensive experience in contract law, distribution agreements and international trade disputes. We can advise you on drafting, terminating or renegotiating contracts and assist you in proceedings before the Netherlands Commercial Court or other courts. Would you like to know whether your contracts meet the latest legal requirements or do you have a dispute about a distribution agreement? Then contact Michiel Teekens for a no-obligation consultation.