Compensation after Termination of Long-Term Distribution Contracts: An Economic Perspective of EU Law

Termination and compensation after termination are two of the most relevant –albeit not the only ones- dimensions of the long-term contracts through which distribution chains are formed and structured. The EC rules that establish a regime of compensation after termination are studied in this paper, in particular, the Commercial Agents Directive. Then, compensation after termination is analysed from the economic perspective, highlighting the importance of the open-ended nature of a relationship, termination as a disciplining mechanism against non-verifiable breach of distribution contracts, the problem of specific investments and the covenants not to compete. The contrast of the examined EC rules with the theoretical findings of the Law and Economics literature dealing with the matter does not offer a promising view of their likely consequences for the contractual behaviour of the parties.