Are distributors entitled to goodwill compensation under Bulgarian law?

The law

This compensation is regulated under the European Commercial Agents Directive. It was transposed into Bulgarian law in the section of the Commercial Act which regulates commercial agents’ agreements. It applies specifically to these agreements.

There is no legal provision which rules that distributors must be entitled to goodwill compensation.

Can the court apply this compensation by analogy to distribution agreements

In Bulgaria, a legal provision can be applied by analogy if there is a gap in the law. In this case, the matter shall be governed by the provisions applicable to similar cases, provided that this is in compliance with the objectives of the law.

Hence, the question that needs to be answered is: is there a gap in the regulation of distribution agreements under Bulgarian law.

Bulgarian law does not contain specific explicit regulation of distribution agreements. However, this is not sufficient to conclude that there is a gap in the law. The distribution agreements are commercial agreements. Commercial agreements are regulated by the general provisions for commercial transactions of the Commercial Act, the Bulgarian civil law and the commercial practices. In other words, distribution agreements are not left without legal regulation. The question whether there is a particular gap in that regulation or not, is a question that requires a detailed particular analysis. In case of a dispute between the parties, this is the court that shall interpret the law and decide on the application of a legal provision by analogy.

Bulgarian courts have not applied goodwill compensation by analogy to distribution agreements. On the contrary, they deny distributors entitlement to such compensation.

The courts deny distributors the right to goodwill compensation

In 2010, the Sofia Appellate Court in its decision explicitly confirmed that goodwill compensation is not due to a distributor under a distribution agreement and interprets what the difference is between the commercial agent and a distributor, focusing on the way the distributor forms its profit, e.g., from the difference between the buy and sale prices of the goods it realises on the market, but not as a commission fee for its services.

Based on the same argumentation, in 2015, the Varna Appellate Court in its decision confirmed explicitly that a distributor is not a commercial agent and therefore it is not entitled to goodwill compensation.

The question was subject to analysis by the Sofia courts in a dispute spanning from 2021 to 2025. It concerned arrangements between a trader and its contractor, which acted both as a distributor and as a commercial agent. Finally, the Supreme Court of Cassation has clearly distinguished the commercial agent arrangement between the parties from the distribution arrangement and confirmed that the goodwill compensation is not due under a distribution arrangement but only under commercial agent arrangements.

Conclusion

Bulgarian law does not provide for mandatory goodwill compensation in favour of distributors.

Bulgarian courts deny the right of distributors to goodwill compensation.

Based on the freedom to contract principle, parties to a Bulgarian distribution agreement can agree on goodwill compensation in favour of the distributor. In this case, the contractual provision, but not the law, will regulate entitlement to the compensation, its triggers, calculation and other relevant conditions.