Short answer
The starting point is unusually clear. Rome I contains a named rule for distribution contracts:
"a distribution contract shall be governed by the law of the country where the distributor has his habitual residence" —
So a German supplier appointing an Italian distributor, with no governing-law clause, will normally find Italian law applies.
This surprises suppliers, who often assume their own law governs by default. It does not. The Regulation deliberately protects the party providing the characteristic performance — here, the distributor who builds and services the market.
Three qualifications matter:
- The contract must actually be a distribution contract, not a series of sales.
- Article 4(2) takes over where the contract is not covered by the listed categories, or where it falls under more than one.
- Article 4(3) allows escape where the contract is manifestly more closely connected with another country.
Is it a distribution contract at all?
Rome I does not define the term, and the label on the document is not decisive.
A distribution contract is normally a framework arrangement under which the distributor buys in its own name and resells in a defined territory, typically with obligations about promotion, stock, minimum purchases, exclusivity or territorial restrictions. It is characterised by the ongoing relationship, not by the individual sales made under it.
That must be distinguished from:
- A series of sales contracts. If the parties merely trade repeatedly with no framework obligations, each sale falls under Article 4(1)(a) and is governed by the law where the seller has habitual residence — the opposite result.
- Commercial agency. An agent negotiates or concludes contracts on the principal's behalf and does not take title. Agency is not in the Article 4(1) list and is normally analysed as a services contract under Article 4(1)(b), pointing to the agent's habitual residence, with the further complication described below.
- Franchising. Article 4(1)(e) gives franchise contracts their own rule, pointing to the franchisee's habitual residence.
The Court of Justice has addressed how distribution arrangements are characterised in the jurisdiction context — for instance in Saey Home & Garden (C-64/17), which considered the classification of a distribution relationship and the connecting factors where marketing occurs in a third Member State. Classification reasoning in that context is instructive, although the jurisdictional and applicable-law instruments pursue different aims and should not be conflated.
Where a framework agreement sits above individual sale contracts, the two can be governed by different laws. That is a real drafting risk, not a theoretical one.
Finding the distributor's habitual residence
Article 19 supplies the definition, and it is not the place of incorporation:
"For the purposes of this Regulation, the habitual residence of companies and other bodies, corporate or unincorporated, shall be the place of central administration." —
Two refinements matter in practice.
Branches count. Article 19(2) provides that where the contract is concluded in the course of the operations of a branch, agency or other establishment, or where performance is the responsibility of such an establishment, that establishment's location is treated as the habitual residence. A distributor incorporated in one Member State but performing through a branch in another can therefore produce a different answer.
The time is fixed at conclusion. Article 19(3) fixes the relevant point in time as the conclusion of the contract. A later relocation of the distributor's central administration does not retrospectively change the governing law.
When Article 4(1)(f) gives way
Mixed and multi-category contracts. Article 4(2) applies where the contract is not covered by paragraph 1, or where its elements would be covered by more than one of points (a) to (h). Then the law is that of the country where the party required to effect the characteristic performance has habitual residence.
This is common in practice. A single agreement bundling distribution, a trade-mark licence, technical services and a supply obligation may straddle several categories. The analysis then becomes: which performance characterises the contract as a whole? Often it remains the distributor's, but not always — a licence-dominant arrangement may point elsewhere.
The escape clause. Article 4(3) allows displacement where "it is clear from all the circumstances of the case that the contract is manifestly more closely connected with a country other than that indicated in paragraphs 1 or 2".
Note the threshold: manifestly. This is deliberately higher than the ordinary closer-connection wording used in Article 8(4) for employment. It is intended as an exception, not a routine second stage. Factors sometimes relied on include the territory of exclusive operation, the currency and language of the contract, an associated contract with its own governing law, and the location where the commercial relationship is genuinely centred.
Last resort. Article 4(4) applies the law of the country with which the contract is most closely connected where the applicable law cannot be determined under paragraphs 1 or 2.
Agency law can intrude whatever the answer
Even with the applicable law settled, the Commercial Agents Directive 86/653/EEC can impose protections that the governing law does not.
In Ingmar (C-381/98) the Court held that the Directive's compensation and indemnity provisions applied where the agent carried on activity in a Member State, notwithstanding a choice of the law of a non-Member State. In Unamar (C-184/12) it addressed the conditions under which a forum's more protective implementation of the Directive may be applied as overriding mandatory provisions against another Member State's law.
Two cautions. That line of authority concerns commercial agency, not distribution, and Member States differ on whether and how far agency-style protections extend to distributors. Some national laws give distributors termination-indemnity or notice protections of their own.
So the applicable-law analysis does not end the enquiry. Article 9 overriding mandatory provisions, and national distributor-protection rules in the territory concerned, need separate checking.
Why the default is uncomfortable for suppliers
The commercial consequences of Article 4(1)(f) are real.
The supplier ends up litigating and advising under the distributor's law. Termination notice periods, indemnity or compensation on termination, post-termination restrictions and stock buy-back obligations differ substantially between Member States. Several national systems are markedly more protective of distributors than others.
A supplier with distributors across ten Member States and no governing-law clauses has ten governing laws — and ten different termination analyses.
Drafting response
Include a governing-law clause. Article 3 gives freedom of choice, and this is the simplest fix. It will not displace overriding mandatory provisions or local distributor-protection rules, but it removes the default.
Align the framework and the sales. Ensure the distribution agreement and the individual sale contracts, including any standard terms and order confirmations, point to the same law. Conflicting clauses across the documents are a common and avoidable problem.
Characterise the contract deliberately. If the arrangement bundles distribution, licensing and services, say which performance is characteristic, and consider separate agreements with aligned clauses.
Check the territory's mandatory rules before signing. Termination protections are usually the point of exposure.
Review legacy contracts. Long-standing distribution relationships often rest on short documents with no governing-law clause at all.
Operational checklist
- Confirm whether the arrangement is genuinely distribution, agency, franchise or a series of sales.
- Identify the distributor's central administration, and any branch through which the contract was concluded or performed.
- Fix habitual residence at the date of conclusion.
- Test Article 4(2) where the contract spans several categories.
- Apply Article 4(3) only where the closer connection is manifest.
- Check agency-derived and national distributor-protection rules in the territory.
- Consider Article 9 overriding mandatory provisions separately.
- Add or align governing-law clauses across the framework and sales documents.
Conclusion
With no governing-law clause, a cross-border distribution agreement is normally governed by the law of the distributor's habitual residence under Article 4(1)(f) — the opposite of what most suppliers assume.
That default is displaced only by the characteristic-performance rule for multi-category contracts, or by a manifestly closer connection. The practical answer is rarely to argue about it: it is to include a governing-law clause, align it across the framework and sales documents, and then check separately what local mandatory rules will apply on termination regardless.
Sources
This article provides general legal information, not advice for a specific matter. Laws, facts and procedural deadlines may change the result. Follow the linked primary sources and obtain local advice before acting.