Article written by Zohaib Hashim – Blackmont Legal
As global markets open and logistics networks mature, businesses are increasingly tempted by the allure of foreign distributors. According to the ONS, approximately 30.5% of the UK’s GDP in the year ending March 2025 was from the export of goods and services manufactured in the uK.
On paper, the model is elegant: partner with a local entity that knows the terrain, market norms, leverages existing relationships, and absorbs the headaches of on-the-ground execution. In practice, it’s rarely so simple.
Cross-border distribution is not just a matter of signing a deal and shipping a product – it’s a legally fraught exercise that, if mishandled, can bleed value, derail strategy, and expose the business to reputational and regulatory harm. In a best case scenario, this can mean additional costs to be absorbed, harming your (and your distributor’s) margin. In a worst case scenario, it can mean market penetration strategies set back or failing entirely, effectively closing your footing in a market you had previously forecasted growth in.
Here’s what firms should consider, and what many get wrong.
Key Legal Issues Companies Can’t Afford to Ignore
1. Jurisdiction and Governing Law
It is astounding how often contracts fail to specify a clear jurisdiction and governing law – or worse, defer to the distributor’s local legal system without thought. This matters. If a dispute arises, where will it be heard? Under what rules? And how confident are you that a foreign court will enforce your rights in a language and system you don’t understand?
A robust contract should always include a governing law clause and dispute resolution mechanism, with careful thought as to enforceability and cost.
Enforceability often goes hand-in-hand with who controls the money & products in a transaction. If your distribution arrangements consist of credit arrangements and goods being outside your control, you want to ensure that your enforcement mechanisms are as simple and clear as possible.
2. Distribution vs Agency
This is not just semantics. In many jurisdictions, agents have statutory protections (including compensation entitlements upon termination) that distributors do not. Misclassifying the relationship can lead to liability you never budgeted for. Know the distinction, and draft accordingly.
3. Exclusivity and Territory
Granting exclusivity in a foreign market can make commercial sense, but only if it’s earned. A poorly drafted clause can lock you into a non-performing relationship with no meaningful way out. Set clear performance targets, reserve termination rights, and beware of creeping territorial claims that go beyond what was intended.
Your growth strategy will often be driven by how much of your product is able to be reasonably distributed in the market. It doesn’t make sense to commit to exclusivity with a distributor who doesn’t have confidence or conviction in their ability to meet those distribution growth goals.
4. Compliance and Regulation
The moment your product enters a foreign jurisdiction, you’re subject to local laws that govern how that product must conform. This includes labelling, packaging, product standards, marketing restrictions, and import controls. Make no assumptions in this regard. Your distributor may be on the hook for local compliance, but if something goes wrong, your name is still on the box.
If your products end up seized by local government authorities, you can be sure your local distributor will attempt to pass off responsibility for clearing this onto you – this is doubly risky if the goods were supplied on credit terms.
Anti-bribery laws are also non-negotiable. A distributor operating in a corruption-prone market may view informal payments as part of doing business. Your firm may view that as a criminal liability. Your own local regulator (and the Foreign Office) may want to see evidence from time to time as to how you are adhering to legislation around this.
Make the boundaries explicit in writing and monitor them.
5. Intellectual Property Protection
The distributor will need to use your brand – but on whose terms? Trademark registration in your home country does not protect you abroad.
In some markets, if you haven’t registered your mark locally, the distributor can – and there are cases where distributors have held brands to ransom. There is a rich practice of ‘brand grabbers’ operating in several jurisdictions around the world, who rush to register your trademarks to try to block an prospective distributors from bringing your products into the country through parallel imports controls – all for the purpose of seeking nuisance settlement payments from you or the distributor.
Don’t get caught out. Register your IP in every jurisdiction where you intend to trade, ideally before any agreements are signed. Yes this can carry an up-front cost, but if you are serious about penetration into a market, it is a worthwhile expenditure.
Commercial Dynamics: Not Everything Is in the Contract
Contracts matter, but so does cultural and commercial acumen. How are late payments handled locally? Are discounts expected as standard? How do local businesses negotiate and push back?
Equally, set expectations around currency risk. Are prices fixed in GBP, USD, or local currency? What happens if FX rates shift? These questions are often ignored until they explode into conflict.
Have you considered the implication of INCOTERMS? If you are responsible for onward freight and importation, and delivery to warehouse, this is an additional cost to factor for, and will impact your margins.
Red Flags Worth Pausing For
Some issues should stop a deal in its tracks (or at least trigger renegotiation). These include:
- A distributor insisting on exclusive rights without a proven track record.
- Reluctance to accept non-local governing law or international arbitration.
- Vague promises around marketing, with no defined KPIs or reporting obligations.
- Attempts to ‘localise’ your IP without a licence (e.g. purchasing a local website domain without permission)
If a distributor is unwilling to provide clarity on these points, walk away. The short-term commercial gain is not worth the long-term legal exposure.
Practical Steps to De-Risk the Relationship
Cross-border distribution doesn’t have to be a gamble. With proper legal structuring, it can be a powerful growth channel. Consider the following:
- Due diligence: Not just financials. Look at reputation, regulatory history, and litigation background. Request testimonials from existing partners if viable.
- Tailored contracts: Avoid off-the-shelf templates. Every market is different – so is every distributor. Power parity will often dictate whose contract is used; for example very large distributors (like retail grocery chains) will often insist on using their contracts, which means adherence with their contractual terms.
- IP registration: Do it early. Do it thoroughly.
- Clear reporting obligations: Sales data, customer feedback, regulatory issues – demand transparency.
- Termination rights: Ensure you can exit the relationship cleanly if things go south. Deal with what happens with excess product in the event of a termination. Remember: if you agree to a buy-back on products (or a return), this is a potential cash risk.
- Use local legal support: When in doubt, instruct local counsel. It’s an investment, not an expense.
Conclusion
The appeal of cross-border distribution is real, but so are the legal risks. Businesses that treat foreign distributors like mere sales channels, without doing the legal groundwork, are asking for trouble. The right distributor, under the right contract, can be a powerful ally. The wrong one, poorly governed, can become an expensive and legally entangled liability.
Your product might be world-class. That doesn’t mean it will survive a poorly managed international rollout. Plan accordingly.
About the Author
Zohaib Hashim has over a decade of experience in dealing with manufacturing and distribution of products in a wide variety of sectors. He has had experience in dealing with distribution rights over a hundred distinct jurisdictions, and especially with regards to distribution into/from China, the EU, the UK, and the USA.
His experience and Blackmont Legal ‘s clients span a number of industries, including regulated product, medicinal items, and luxury & FMCG goods.