OGH: Non-Competition Clauses in Distribution Agreements

Jul 7, 2023 Benn-Ibler Rechtsanwälte

The Austrian Supreme Court (Oberster Gerichtshof, hereinafter OGH) has clarified that a non-competition clause in a distribution agreement does not automatically include all employees by way of a supplementary interpretation of the agreement.

The defendant and the plaintiff had concluded a distribution contract for paragliders, harnesses, and the like manufactured by the defendant. The contract was limited to three years. In the contract, the parties agreed on reciprocal exclusivity, in particular, that the plaintiff, as a distributor, was only allowed to sell paragliders and accessories manufactured by the defendant.

The spouse of the plaintiff’s managing director was employed by the plaintiff as a sales representative. At the same time, she was a shareholder in an OG (partnership) as well as managing director of a GmbH (limited liability company) which traded in the defendant’s competing products. The defendant considered this to be a violation of the contractually agreed non-competition clause and terminated the distribution agreement without notice.

The plaintiff defended herself against the termination and sought a declaration that the contractual relationship was still valid. The plaintiff claimed that the spouse of the managing director was neither a shareholder nor a managing director nor authorised signatory.

The OGH ultimately found no violation of the non-competition clause and upheld the plaintiff’s claim: 

The agreement of ‘exclusivity on a reciprocal basis’ contains a non-competition clause.

According to its unambiguous wording, the contract only binds the plaintiff. Even a supplementary interpretation of the contract did not convince the OGH to form the opinion that the contract also subjected the plaintiff’s employees to the non-competition clause. If the parties had wanted to extend the non-competition clause to all employees, they could have easily achieved this by using the appropriate wording. Neither custom nor the purpose of the distribution agreement require an extension of the non-competition clause to all of the plaintiff’s employees beyond the management, authorised signatories, or other executives.

OGH 7 Ob 20/23a (24.05.2023)