Many managers might be tempted to use standard American sales channel agreements in Europe.

After all, they are not the most complicated agreements in the world.  And you have already spent good time and money on having them drafted to suit your needs.  The temptation can become overwhelming, especially when new distributors in Europe are knocking on the door, but threatening to go to a competitor if contracts are not signed quickly.  It must make sense to re-use these agreements.   Right?  Wrong.

Using American agreements can leave you facing unlimited liabilities, and swingeing fines, and paying partners vast sums just to go away. Here are some of the risks associated with using US agreements in Europe.

Competition or Anti-Trust Law
This is undoubtedly the biggest area of risk, as toymaker Hasbro recently found out – at a cost of nearly £5m in fines.  Failure to comply with European competition law can result in fines of up to 10% of your worldwide revenue.  In addition, your agreements can be held to be unenforceable.

End-user price fixing and restrictions on distributors from selling into certain territories or customer groups are blacklisted.  Non-compete obligations, during and after the distribution agreement, are also highly regulated.  If you have a market share of over 30%, you will also be unable to benefit from the block exemption for vertical agreements, so you will be scrutinised even more heavily.

Liability and Warranty Clauses
Getting this wrong in your US contract could leave you with unlimited liability under the contract -– and a totally unmanaged risk.

Many European member states prohibit the exclusion of certain liabilities.  For example, in the UK it is not permissible to attempt to exclude or limit liability for death or personal injury caused by negligence.  In Germany, there are mandatory provisions on product liability that may not be excluded under the agreement.  For instance, the German Civil Code imposes a duty to provide a minimum warranty of 2 years in relation to the sale of certain software products. This is unlikely to be covered in your USA agreement!

What is more, simply changing your governing law clause to, say, English law won't always help.  For instance, under American agreements, we often see liability for loss of business profits excluded as an example of a consequential loss.  In the UK, this drafting would leave you exposed, as you would be liable to pay for any loss of business profits suffered by your distributor where it is a direct loss.  This somewhat subtle distinction could have large ramifications for you, the USA supplier.

Each member state has its own regime in relation to the enforceability of liability clauses.  What is fair in one member state may be deemed to be unfair in another.  So don't take it for granted that your standard USA liability clause will be enforceable, as it may be held to be unreasonable.

Agency Agreements
Americans are often shocked by European agency law.  Hire a European agent for a fixed period and, even when its contract expires, the agent can be entitled to compensation!

Certainly your standard USA agency agreement will not have been drafted with European legislation in mind.  The laws relating to commercial agents in Europe have (more or less) been harmonised and the position of commercial agents in relation to their principals has been strengthened.  In particular, agents can benefit from mandatory minimum notice periods of up to 3 months and are entitled to compensation on termination of the agency agreement, even if the agreement is terminated on notice, or a fixed period expires.

This very much contradicts the USA approach of freedom of contract, as it is simply not possible to contract out of these mandatory provisions.
Intellectual Property Issues

American technology companies acquiring European companies can suddenly discover that the IP crown jewels, which they thought they were buying, belong to a third party.  In most European jurisdictions, unless the IT contractor assigns his/her intellectual property rights in his/her developed work to the software company, the IT contractor retains ownership of the intellectual property rights in the work.

As a licensor, you simply can not apply the kinds of all-encompassing prohibitions on reverse engineering, decompiling, etc., commonly used by US licensors.  European legislation permits limited access to licensed software to ensure interoperability with a licensee's existing system.  It is not possible to contract out of this right.

Consumer Protection
Whilst many major sales channels involve sales from business to business, many US corporations are now beginning to reach consumers.  There is a whole raft of legislation that is aimed at protecting consumers, some local and some Europe-wide.

The member states are at varying stages of implementing this legislation. But care must be taken, where channels deal with consumers, to ensure that the terms on which your goods are sold on your behalf by your partners are fully compliant with the latest changes in this area.

Data Protection
A variety of European laws now regulate the processing of personal data and data privacy.  Your sales channels will need to comply with the data protection laws in every country they operate in.  The USA is less robust in its attitude towards data protection, and so your contracts are unlikely to address these issues.

This list could go on, but enough: I think that the point has been made.  You use your USA contracts at your own peril!