Law No. 6209
Protection for the Representatives and Distributors of Foreign Companies

THE LEGISLATIVE ASSEMBLY OF THE REPUBLIC OF COSTA RICA

DECREES:

ARTICLE 1: Law No. 4684 of November 30, 1970 (Law of Protection for the Representatives of Foreign Companies) is hereby amended to read as follows:

 

"Article 1: The following definitions are given for the purposes of this law:

a- "Foreign Company": any person or corporate entity which, domiciled abroad, carries on commercial activities in the country, by itself or through branch offices, agents or subsidiaries.

b- "Representative of Foreign Companies": any person or corporate entity, which in a continuous and autonomous manner with or without legal representation prepares, promotes, facilitates or finishes-up the sale or distribution of goods or services that foreign companies sell or provide in the country.

c- "Exclusive Distributor or Co-distributor": any person or corporate entity, which, by the means of a contract with a foreign company, imports or manufactures in the country goods for its distribution in the local market, acting under its own account and risk.

d- "Manufacturer": any person or corporate entity which produces, packs or manufactures in the country, products bearing the brand name of a foreign company which has authorized it to do so, using the raw materials and techniques which the aforesaid company indicates.

 

ARTICLE 2: If the representation, distribution or manufacturing contract is terminated due to causes not related to the will of the representative, the distributor or the manufacturer, or when the term of a contract bearing a term has expired and it is not extended for reasons beyond the will of the representative, the distributor or the manufacturer, the foreign company must indemnify them, with an amount to be calculated on the basis of four months of gross profits for each year or fraction thereof of time served. The amount of the indemnification shall not, in any case, be calculated for a term exceeding nine years of service.

In order to establish the gross profits for each month, the monthly average earned during the last four years or fraction thereof of the term of duration of the contract will be used, in the case of the representatives and manufacturers, and the average of the last two years or fraction thereof in the case of the distributors.

ARTICLE 3: When a contract of representation, distribution or manufacture is cancelled, the foreign company represented shall purchase the inventory of its products from the representative, distributor or manufacturer, at a price including the cost of said products, plus a reasonable percentage of the investment made. This percentage shall be determined by The Ministry of Economy, Industry and Commerce.

ARTICLE 4: The following are deemed as just causes for the termination of the contract of representation, distribution or manufacture, with liability for the foreign company:

a- Crimes committed by the Foreign Company's representatives or officials against the property and/or reputation of the representative, distributor or manufacturer.

b- Closure of the Foreign Company (termination of business), unless it is due to force majeure.

c- Unjustified restrictions on sales imposed by the Foreign Company, which result in a decrease on the transaction volume of the representative, distributor or manufacturer.

d- Lack of timely payment of commissions or fees earned by the representative, distributor or manufacturer.

e- The appointment of a new representative, distributor or manufacturer, when the affected parties have exercised the representation, distribution or manufacture on an exclusive basis.

f- Any unilateral modification introduced by the foreign company to the contract of representation, distribution or manufacture, which impairs the rights or interests of their representative, distributor or manufacturer.

g- Any other major breach by the Foreign Company that damages the contractual or legal rights of the representative, distributor or manufacturer.

 

When the Foreign Company changes its domicile, its name or its object, or if it is transformed, subdivided, merged or absorbed by another Company, there is no just cause for the termination of the contract of representation agency or distribution. The company with which it would have merged, by which it would have been absorbed or authorized to use its trademarks, shall be jointly liable up to the full amount of the indemnity under the same terms hence, enabling the concessionaire to undertake the same actions which this law grants, against the company or companies with whom it merges, by whom it is absorbed, or against each and everyone of the subdivisions into which the company would have been divided into or received the authorization for the use of the trademark".(*)

ARTICLE 5: The following are deemed as just causes for the termination of the contract of representation, distribution or manufacture, for which the foreign company is not liable:

a- Crimes committed by the representative, the distributor or the manufacturer against the property and/or reputation of the Foreign Company.

b- The incompetence or negligence on the part of the representative, distributor or manufacturer, declared by one of the civil judges of its domicile, as well as the decrease or a prolonged and substantial stagnation in sales, due to causes that can be blamed on the representative, distributor or manufacturer. The establishment of quotas or official restrictions on the importation or sale of the product or service shall make presume the non-existence of this charge against the representative, distributor or manufacturer, unless proven otherwise.(*)

c- Violation by the distributor, representative or manufacturer of the confidentiality or the secrets and loyalty of the Foreign Company, by means of revealing facts, knowledge or techniques concerning the organization, or the products and the operation of the Foreign Company, which were acquired during their commercial relationship.

d- Any other major breach by the representative, distributor or manufacturer relative to its contractual or legal duties and obligations with the foreign company.

ARTICLE 6: Any person or corporate entity, which takes over, totally or partially, any commercial activity that was formerly performed by a foreign company through a representative, distributor or manufacturer, shall respond for the continuity of the contract of representation, distribution or manufacture, unless the foreign company would have paid, previously, the corresponding indemnity".

ARTICLE 7: The jurisdiction of the Costa Rican courts of justice and the rights of the representative, distributor or manufacturer, by virtue of this law, cannot be waived.

ARTICLE 8: The rights and obligations originated under this law shall have a statute of limitations of two years, starting from the date of the act the generates the claim.

ARTICLE 9: The indemnities contemplated within this law must be paid in one lump and full payment, immediately after the termination of the contract or, be it the case, upon the final court judgement. The foreign company must render a guarantee covering the total amount of the indemnities claimed by the representative, distributor or manufacturer, which amount shall be determined by the judge. Should the company not do so, the Ministry of the Treasury shall suspend, upon request of the plaintiff, any kind of importation of the products of the aforementioned foreign company.

ARTICLE 10: For the legal effect of the present law, the antiquity of the contracts of representation, distribution or manufacture, shall be considered from the beginning of the business relationship between the two parties.

ARTICLE 11: Law No. 4684 of November 30, 1970 is hereby "annulled".

 

ARTICLE 2: In force as of the date of publication.

TRANSITORY PROVISIONS

I. For the legal effects of the present law, the duration of the existing contracts of representation, distribution or manufacture, shall be maintained since the date of their subscription.

II. The Executive Power shall regulate the present law within a period of not over one hundred and twenty days after the date of its publication.
Let it be known to the Executive Power.

Legislative Assembly - San José - on the twenty-fourth day of the month of February, nineteen seventy-eight.

President: Elías Soley Soler

First Secretary: Rolando Araya Monge

Second Secretary: Carlos L. Fernández F.

Presidential House - San José on the ninth day of the month of March, nineteen seventy-eight.

 

Daniel Oduber
The Minister of Economy, Industry and Commerce
Rodolfo Quirós González

 

(*) Amended by Law No. 6333 of April 30, 1979.