NEW ISSUES IN INTERNATIONAL
DISTRIBUTION
Panel on the impact of the distributor's
bankruptcy in different jurisdictions
Turin, 11 June 2010
Panel on the impact of the
distributor's bankruptcy
 Anders Fernlund, Advokatfirman NOVA AB,
Stockholm
 Simon Hotte, Fidal, Lyon
 Paolo Lombardi, Buffa Bortolotti & Mathis,
Torino
 Ingrid Meeussen, LVP Law, Brussels
 Olga Sztejnert, Drzewiecki, Tomaszek &
Partners, Warsaw
 Edward Miller, Reed Smith, London
Scenario One – Cause for Concern
Scenario One – Cause for Concern (1)
 Optimistic Apparel appoint Dodgy Distribution as
their exclusive distributor for a five year fixed term
 The first season goes well, but then Optimistic
Apparel start to hear rumours about the financial
situation of Dodgy Distribution
 Optimistic request financial information from Dodgy,
but do not receive it.
 After making some enquiries of their own, Optimistic
discover that although Dodgy have honoured all
obligations to optimistic to date, they seem indeed to
be in some financial difficulty.
Scenario One – Cause for Concern (2)
 Optimistic meet Dodgy and suggest that
Dodgy considers the following:
 a reduction in credit limit
 shorter payment terms
 some larger customers becoming
Optimistic house accounts
 Dodgy say everything is OK and there is no
need to make any changes
Scenario Two – Getting in Deeper
Scenario Two – Getting in Deeper
 Trading between Dodgy and Optimistic
continues. Dodgy does not make payments
on time and builds up debt.
 Optimistic meets Dodgy again and agrees to
give Dodgy extra time to pay.
 Optimistic and Dodgy also discuss whether a
guarantee might be available from Dodgy’s
parent, Sharp Practice Group, and whether
Dodgy could offer some security over its
European Distribution Centre building
Scenario Three – Mine is mine
Scenario Three – Mine is mine (1)
 The discussions on guarantees and security
come to nothing and debts continue to build
up
 Optimistic finally looses patience and send a
lorry to Dodgy’s European Distribution
Centre to pick up all Optimistic’s garments
delivered to Dodgy
Scenario Three – Mine is mine (2)
 Dodgy refuses to hand over the garments, making
the following points:
 Optimistic has agreed to extend credit so no
payment is overdue
 Some orders have in fact been paid for –
Optimistic can’t identify which garments are paid
for and which are not
 In any event, garments delivered less recently
have all now been sold
 Furthermore, any retention of title right should
have been registered
Scenario Four – Bad to worse
Scenario Four – Bad to worse (1)
 Having failed to get any goods back,
Optimistic’s lorry returns empty
 In desperation, Optimistic decides that it will
now cease all further deliveries to Dodgy
Scenario Four – Bad to worse (2)
 In response, Optimistic receives a letter from
Dodgy’s lawyers making the following points:
 Optimistic is contractually bound to make
deliveries to Dodgy
 Dodgy has committed no breach of its obligations
to Optimistic, and in any event has committed no
breach of the outstanding orders in respect of
which payment is not yet due
 If Optimistic continues to withhold delivery, this
will cause serious loss to Dodgy because they are
economically dependent on Optimistic. In the
current circumstances, ceasing delivery could put
Dodgy out of business. Dodgy will hold Optimistic
legally responsible for this
Scenario Five – Disaster strikes
Scenario Five – Disaster strikes (1)
 Optimistic reluctantly agrees to release the
deliveries, only to receive a few days later a
document stating that Dodgy has entered
some form of insolvency procedure
Scenario Five – Disaster strikes (2)
 In shock, Optimistic wonders what to do:
 should Optimistic terminate the Distribution
Agreement
 can Optimistic now suspend deliveries
 can Optimistic get its stock back
 can Optimistic prevent its high class garments
being sold at knock down prices in local markets
 can Optimistic now appoint a new distributor