Introduction to 'International Distribution Law' (IDL)

Several books available in the English language deal with international distribution law, yet none provide a coherent analysis of the subject. These works simply stand end-to-end the rules emanating from various legal systems, and throw in standardized contracts and clauses. They do not adhere to a rigorous definition of 'international distribution law':

DEFINITION OF 'INTERNATIONAL DISTRIBUTION LAW'

'International distribution law' can be defined as 'the coherent set of mandatory rules regulating the legal structures whose main activity is the reiteration of sales or service contracts, in situations where this activity involves more than one country's legal system'.

I. INTERNATIONAL

Without getting into detailed discussions on the definition of 'country' or on the distinction between 'supranational' and 'international', one could qualify a distribution scheme as international if the activity involves more than one legal system. But what exactly is 'distribution'?

II. DISTRIBUTION

In a legal context, we define 'distribution' as 'the action carried out by legal structures whose main activity is the reiteration of sales or service contracts' :

*** Legal structures

The structure of a building is more complicated than an individual brick, and 'legal structures' are more elaborate than single contracts or the parties' temporary relationship. This added complexity concerns both the contracts and the businesses involved.

Distribution contracts, for example those establishing a franchise or commercial agency, have numerous specificities in comparison to other commercial contracts. These particularities are exacerbated in an international context.

Certain contracts create organizations with autonomous decision-making capacities, for example, articles of incorporation or bylaws that set up a corporate entity and organize its board. Distributors have come up with specialized entitative schemes, for example centralized purchasing bodies or cooperatives. The legal life of these structures is complicated by any extraneous factors.

The above structures all accomplish one precise legal function:

*** The reiteration of sales or service contracts

This is the touchstone distinguishing a simple sales contract from a distribution contract. Even if the same sales contract were renewed several times between the same parties, it would be incorrect to speak of 'distribution' unless there is another structure that organizes this reiteration.

Oftentimes a specific set of regulations applies to the object of these multiple sales or service contracts, for example, to transport services, insurance products, real estate and even bananas. These object-specific regulations are beyond the scope of this Web site, which deals with international distribution law in general.

*** Main activity

This is the criterion, albeit an economic one, that differentiates all other businesses from distributors. Distributors spend most of their time in preparing and organizing the multiplication of sales or service contracts, as opposed to manufacturers and service providers who concentrate mostly on manufacturing and providing services. Similarly, some commercial contracts, for example on intellectual property, promote the multiplication of sales contracts, yet only distribution contracts have a large number of clauses specifically written for this purpose.

But is there really a 'law' that regulates 'international distribution'?

III. LAW

One can define 'law' as a 'coherent body of mandatory rules applicable to a given legal situation', for example, commercial law, civil law, or tort law. What differentiates a simple compilation of rules from a branch of law is coherence. The coherent nature of a field of law depends on several factors: the authors who describe the situation, the number of mandatory rules in the considered field, and the intellectual method the authors use.

*** Authors

The coherence of a branch of law emerges from inductive reasoning applied by the legislature, the courts, or legal authors to the rules governing a given situation. The legislature can pass codifying legislation, gathering all rules it considers applicable with a certain degree of homogeneity; for example, the Uniform Commercial Code becomes the basis for commercial law. A court can specify the situations covered by the voted text; for example, it can rule on the definition of 'consumer', and in so doing, alter the reach of consumer law. However, it is up to legal authorship to examine the mass of enacted law and case law, and induct the presence of a homogeneous unit. Once this intellectual step is taken, and a branch of law is delineated, one can anticipate future situations based on analogous cases that are part of the now coherent field. For example, now that consumer law has a certain coherence, one can more easily use deductive reasoning to find rules that would apply to novel situations encountered by the consumer, such as contracts entered into over the Internet.

The fact that the question is international limits the cohesive effect that legislative or judicial authorities can have, as their powers are generally limited to national borders. In an international sphere, it is incumbent upon legal authorship to organize the rules into a branch of law. This however is only possible if a certain critical mass of rules can be gathered...

*** Objects

The more numerous the mandatory rules in a field, the easier it is to extract a coherent unit, a branch of law. Rules regulating commercial relationships abound, and it is easy to speak of 'commercial law'. Twenty years ago, there were few rules regulating information technologies, and it would have been premature to speak of 'cyberlaw'.

Today, there are still few rules that directly target international distribution schemes and this field of law is thus little known. It is nonexistent in countries where legal authorship has not yet dealt with the question. However, in most modern economies there are many rules that, though not enacted specifically for the purpose of regulating distribution structures, have particular applications in their presence. There are enough of these rules to speak of an existing branch of law. These diverse regulations define the two perimeters of international distribution law:

First perimeter : rules affecting the structures of international distribution

Questions such as the international recognition of corporate personality or the law applicable to a contract affect the contractual or entitative structure itself. Rules dealing with distribution schemes that stem, for example, from private international law, would thus enter into this first perimeter.

Oftentimes these rules affect the viability of an international distribution operation.

Second perimeter: rules affecting the activity of international distribution

The activity of distribution, i.e. the multiplication of contracts, involves another set of rules that regulate, for example, the taxation of the income generated, or its affect on consumers.

The rules in this second circle usually only affect the profitability of the operation.

The successful implementation of these two categories of rules depends on the method used:

*** Method

As mentioned earlier in the introduction, we do not believe that a simple compilation of various national rules can provide a coherent understanding of the subject. But why, in practice, is this coherence so important?

A list of precise solutions is only practical if it can be used to anticipate future situations. Compilations cannot do this for the following reasons:

- They only provide brief summaries of a given country's legal environment. This is good for pointing out particularly advantageous or disadvantageous rules, which could steer one toward or away from a country as a business opportunity. However, this résumé is not nearly enough to use once a decision has been made to actually operate in that country.

- In commerce, especially international commerce, novel business solutions often guarantee profit, and thus future situations will be very diverse. It is impossible for a compilation to anticipate creativity.

- Statutory and adjudicative law are in constant upheaval; a simple listing could never be exhaustive or up to date.

Nevertheless, to satisfy the devotees of this method, we provide such a compilation on some of the pages of this site. We believe, however, there is a better way: through induction, all the individual solutions can be used to elaborate general trends. These principles describe what to look for when establishing an international distribution scheme, but do not themselves dictate precise solutions. They are timeless and international, they leave room for both commercial and legal imagination, and can be used to help anticipate any situation.


International distribution law is not:

- international commercial law : distribution is a type of commerce, and international commercial law is much broader than international distribution law;
- international economic law / international trade law : these fields of law apply more directly to public entities than to private enterprise;
- international sales law / import-export law : this branch of law deals mostly with sales or service contracts, which are what distribution structures help multiply;

'International distribution schemes require large investments, whose amortization necessitates durable profitability. One achieves this by engineering the optimum legal solution at the very outset. This initial step is all the more important in that the distribution structures support the whole commercial operation; it is all the more difficult as internationalization complicates the legal framework.'