Setting up distribution contractual relationships in Portugal

1. Context

Setting up a business in Portugal, including any distribution contractual relationships, usually begins with choosing the business entity that best suits specific cases. To this effect, the most common and best suited types of business for an importer owned by a foreign supplier are: (a) public limited liability company; (b) private limited liability company (Lda.); and (c) single shareholder limited liability company.

In the case (a) of public limited liability companies, the basic (mandatory) elements for its incorporation are: (1) minimum of five shareholders; (2) minimum share capital of € 50,000; (3) articles of association; (4) commercial name; (5) board of directors and supervision board, which must be composed of at least one public certified auditor.

For (b) private limited companies, the basic elements for incorporation are: (1) minimum of two shareholders; (2) minimum hare capital of € 2,00 (€ 1,00 per shareholders); (3) articles of association; and (4) commercial name.

Unlike both previous options, (c) single shareholder limited liability companies are based on individual investment, and the basic elements are similar to private limited liability companies with minor exceptions: in addition to the sole shareholder, the minimum share capital is € 1,00.

Bearing this in mind, any distribution relationship (producer-distributor-final consumer) is available in Portugal, including the following and best known:

  • Agency – by which an agent (an individual or a company) undertakes the obligation to promote contracts on behalf of the principal, with autonomy and stability;
  • Concession – by which one of the parties undertakes to sell its products to the other party who the undertakes to buy them and sell them to the third parties, on its own account and on a stable basis, in a given constituency;
  • Franchising – by which one party grants another the right to exploit its trademark, company name or patents or any other licenses of intellectual property rights for certain consideration, often committing to provide its assistance and knowledge of the market, as well as its know-how.

2. Key Legislation

In the case of suppliers’ internal personnel, the rules of the Portuguese Labour Code apply, which regulate employment contracts. Regarding other distribution relationships, when the distributor is independent, the rules for service contracts mentioned in the Portuguese Civil Code apply. This is without prejudice to the agency law regime set forth in Decree Law nº 178/86 of 3 July 1986 (DL 178/86), which may be applicable to certain distribution contractual relationships.

The basic legal aspects to consider when assessing the contractual relationship between suppliers and distributors are the following:

  • Agency contracts – are subject to the legal regime laid down in DL 178/86. In line with the case law and legal commentary, the provisions of this regime may apply to other contracts that present similarities, although they do not operate automatically, but rather on a case-by-case basis.
  • Concession contracts – are not subject to a specific legal regime. In general, they follow the principle of contractual freedom, as well as the general rules of contracts. When admissible, the agency regime may be applicable by analogy.
  • Franchise contracts – are not subject to a specific legal regime either. Like concession contracts, franchise contracts are common. Such contracts are also governed by the principle of contractual freedom and other general rules of contracts.

It is important to mention that certain industry regulatory constraints exist, generally adopted in the form of codes of conduct, (e.g., in the context of the automobile industry, alcoholic drinks and publicity).

To learn more, please read the Portuguese chapter of the Lexology Getting the Deal Through’ guide “Distribution & Agency 2022”, submitted by the Portuguese team of Victoria Associates (available here).

Victoria Associates has successfully represented clients in disputes related to distribution contractual relationships and welcomes any question that may arise in this context (

Victoria Associates

Resolving Disputes in International Distribution Agreements in Portugal


This post addresses very briefly the mechanisms to solve international disputes, in Portugal, in the context of international distribution and agency agreements.

In order to solve disputes, suppliers and distributors have at their disposal all means of dispute resolution, including judicial litigation and other alternative means of resolution (e.g., arbitration, mediation or negotiation). Other remedies may include notifications to the Portuguese Competition Authority or to the Economic and Food Safety Authority.


Under European Regulation (EU) No. 1215/2012, foreign companies may bring a judicial proceeding before the Portuguese courts if an agreement conferring jurisdiction has been concluded (according to article 25).

Such agreement attributing jurisdiction must be concluded: (a) in writing or verbally with written confirmation; (b) in a form which accords with practices which the parties have established between themselves; or (c) in international trade or commerce, in accordance with a usage of which the parties are or ought to have been aware and which in such trade or commerce is widely known to, and regularly observed by, parties to contracts of the same type in the particular trade or commerce concerned.

However, this Regulation applies only to member state and to civil and commercial matters, in this sense points out Article 6 of the European Regulation (EU) No 1215/2012.


As mentioned, it is possible to resort to alternative means of dispute resolution, requiring the existence of an arbitration agreement for this purpose. As to this specific scenario, parties may agree to submit to arbitration, thus requiring the intervention of an impartial decision maker.

The arbitration agreement should adopt written form, as the requirement being deemed to be met when the agreement is contained in a written document signed by the parties. A typical advantage of arbitration is that the award is enforceable in far more countries than court judgments considering the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards. When settling their disputes through arbitration in Portugal, parties are granted full confidentiality and, in general, such proceedings are faster than judicial proceedings; plus, the experience and expertise of arbitrators may contribute to a more suitable decision.

Learn more

To know more, please read the Portuguese chapter of the Lexology “Getting the Deal Through” guide “Distribution & Agency 2021”, submitted by the Portuguese team of Victoria Associates (available here).

Victoria Associates has successfully represented clients in disputes related to distribution contractual relationships and welcomes any question that may arise in this context (

Victoria Associates


Duarte G Henriques –

João Nuno Frazão –

Maria Teresa Silva –

Compensation in Distribution Contracts: a snapshot of Portuguese Law

I. Background

The right to compensation in the event of termination may arise in multiple legal contexts. The contracts where this issue arises the most are the distribution contracts (agency, franchise and the like).

In Portugal, distribution contracts do not follow a specific legal framework. However, there is a specific legal regime applying to agency contracts, enacted by Decree-Law no. 178/86, of July 3, 1986 and later amended by Decree-Law no. 118/93, of July 3, 1993). This legal regime may also be applicable by analogy to other (if) similar distribution contractual relationships (e.g., franchise or concession contracts). In such cases, one must take into account, among others, the type of business model in question and also the obligations arising from the contract to both parties.

II. Rights to compensation

According to the agency legal regime, there are two different compensations to consider in case of termination: (i) a compensation, in general terms, for damages resulting from the other party’s default or breach and (ii) a so called “goodwill compensation”. Consequently, the agent (or other type of distributor, depending on the case) is entitled to a general compensation when it has suffered damages resulting from the breach or violation of the contract by the other principal. In specific cases, this compensation shall be calculated according to equity.

The agent may also be entitled to a “goodwill compensation”, provided that the following cumulative criteria are met: (i) the agent has brought new customers to the principal or increased substantially the volume of business of the latter with existing clients; (ii) the principal will benefit considerably after the termination of the contract due to the agent‘s activity; and (iii) the agent ceases to receive any remuneration for the contracts negotiated or concluded, after termination of the contract, with the customers referred in the first criterion. Such compensation is determined in accordance with equity, but cannot exceed a value equivalent to an annuity, calculated out of the average annual remuneration received by the agent during the previous five-year period.

The question that follows is whether this “goodwill compensation” also applies in case of termination of other types of distribution contracts, by virtue of analogy. The answer is not clear as it will depend on a case-by-case assessment. However, as a general rule, we now have the guidance from the Portuguese Supreme Court of Justice. Indeed, the Portuguese Supreme Court of Justice affirmed that the criterion above mentioned in (iii) should also be considered for the purposes of awarding a “goodwill compensation” in the context of concession contracts (Judgement no. 6/2019, of 4 November 2019). In other words, when applying such regime to other types of distribution contracts in case of termination, all the criteria set forth in the agency legal framework must also be met.

Accordingly, other types of distributor may be accorded with the “goodwill compensation” in case of termination. This holds a very important consequence: indeed, according to the Portuguese law on the agency contract, the goodwill compensation is not subject to any waiver, that is, it is mandatory. This means that any distributor may not waive its right to goodwill compensation.

III. Final notes

Several other legal and contractual details exist, notably when the reality of each business differs and parties agree on clauses to better suit their contractual relationship. This is why the application of the agency legal regime to other types of contracts should be considered cautiously and on case-by-case basis.

The Portuguese team of Victoria Associates has successfully represented clients in disputes related to termination of distribution contracts and welcomes any question that may arise in this context (

Victoria Associates


Duarte G Henriques

João Nuno Frazão