Exclusive Agreements and Exclusivity Clauses in Russia: A Legal Guide

 

May 11, 2025

BRACE Law Firm ©

 

The admissibility of exclusive agreements is one of the most relevant issues in commercial practice. When entering into exclusive agreements, parties must consider several antimonopoly and other restrictions.

This article examines exclusive agreements and exclusivity clauses, their definitions and types, sample wording, liability for breaching exclusivity conditions, and antimonopoly restrictions.

Which Agreements Are Considered Exclusive?

Russian legislation does not formally define the term "exclusive" agreement, but the possibility of entering into agreements with exclusivity conditions arises from the principle of freedom of contract provided for by Article 421 of the Civil Code of the Russian Federation (the "Civil Code"). Participants in commercial turnover may enter into any agreements, including mixed and unnamed contracts not specifically listed in the Civil Code. They may include any terms in their agreements that do not contradict the law.

The essence of an exclusive right is that the party granting it must provide it only to a specific person and refrain from entering into similar agreements with other persons or within a certain territory. Furthermore, any party to a respective agreement may be granted an exclusive right. In a supply agreement, for example, the supplier or the buyer may undertake an obligation not to enter into similar agreements with third parties.

Voluntary actions of the parties aimed at disposing of civil rights when entering into an exclusive agreement do not constitute a waiver of their rights within the meaning of Article 9 of the Civil Code, as the restrictions are temporary — lasting only while the parties are bound by the obligation. Given this and the principle of freedom of contract, an exclusivity clause may supplement any civil law contract unless prohibited by law. [1]

In several cases, the law directly provides for the possibility of entering into agreements with exclusivity conditions. Although the term "exclusive" is not explicitly mentioned, the provisions refer to this specific right:

• Commercial Concession (Franchising) Agreement, under which the right holder undertakes to provide the user, for remuneration and for a specified or unspecified term, the right to use a complex of exclusive rights belonging to the right holder in the user’s entrepreneurial activity. This includes the right to a trademark, service mark, and rights to other objects of exclusive rights provided for by the agreement, particularly a commercial designation and a trade secret (know-how) (Article 1027 of the Civil Code). A franchising agreement may include the following exclusive conditions: the obligation of the right holder not to grant other persons similar complexes of exclusive rights for use in the territory assigned to the user or to refrain from its own similar activities in that territory; and the user’s waiver of obtaining similar rights from competitors (potential competitors) of the right holder under commercial concession agreements (Article 1033 of the Civil Code).
• Agency Agreement, which may provide for the principal's obligation not to enter into similar agency agreements with other agents operating in the territory specified in the agreement, or to refrain from independent activity in that territory similar to the activity constituting the subject of the agency agreement. An agency agreement may also provide for the agent's obligation not to enter into similar agency agreements with other principals that must be performed in a territory that fully or partially overlaps with the territory specified in the agreement (Article 1007 of the Civil Code).
• Production Sharing Agreement, under which the Russian Federation provides an economic entity, for a fee and for a specified term, exclusive rights to search for, explore, and extract mineral raw materials in the subsoil plots specified in the agreement and to conduct related work, while the investor undertakes to perform the specified work at its own expense and risk. [2] A production sharing agreement determines all necessary conditions related to subsoil use, including the terms and procedure for dividing the produced products between the parties.

In some cases, an agreement may contain terms that are unusual for that specific type of contract, such as exclusivity. For example, a service provider may undertake an obligation to provide certain services on an exclusive basis. This article reviews the concept of exclusivity, types of agreements, existing restrictions on their execution, and potential liability for breaching exclusivity.

Types of Exclusive Agreements and Exclusivity Clauses

Exclusive agreements and exclusivity clauses can be classified by the degree of restriction on the rights of the party granting the exclusive rights. Depending on this, one can distinguish between full and limited exclusivity:

• Full Exclusivity means that the economic entity (licensor, supplier, franchisor, etc.) grants exclusive rights to the counterparty without retaining similar rights for itself. It waives the independent use of the subject of the agreement; for example, it cannot sell goods in the specified territory or use its own trademark.
• Limited Exclusivity implies that the economic entity retains the ability to use the subject of the agreement but cannot grant similar rights to third parties. For example, it may sell the goods itself but is not entitled to enter into exclusive agreements with others.

Based on the severity of the restrictions imposed on the person granted the exclusive right:

• Full exclusivity, where a ban is imposed on any alternative actions, such as an absolute ban on a dealer selling goods of other brands;
• Partial exclusivity, where exceptions are allowed — for example, a distributor may sell competitors' goods only with the manufacturer's consent.

Additionally, they can be classified by various criteria, such as the object of exclusivity:

• Territorial exclusivity – restricting the agreement's effect to a specific territory, such as the city of Moscow, the Republic of Tatarstan, other regions, or specific cities;
• Product exclusivity, i.e., the sale of specific goods;
• Customer exclusivity – work is carried out only with specific counterparties;
• Other types of exclusivity.

They can also be divided by party composition:

• Unilateral exclusivity, where restrictions are imposed on only one party;
• Mutual (Bilateral) exclusivity, where restrictions are provided for both parties.

Exclusivity conditions may also be included in ordinary agreements. The presence of such a condition in any given agreement changes its legal nature — it becomes a mixed agreement. In addition to the main agreement, it includes an obligation to grant an exclusive right (Article 421 of the Civil Code). A distinctive feature of a mixed agreement is that the rules governing the agreements whose elements are contained therein apply to the respective parts, unless otherwise follows from the essence of the agreement or the agreement of the parties.

Exclusive Distribution Agreement

An exclusive agreement may include a distribution agreement, under which a manufacturer undertakes to alienate goods to a distributor on a permanent basis under agreed supply terms, and to provide information for product promotion and materials for subsequent maintenance. The distributor, in turn, pays for such goods, sells them in its own name in a specific territory under agreed terms, and promotes the distribution of the goods.

Distribution relationships have not received specific legal regulation in Russian legislation, despite being in demand in foreign trade and the domestic market. In international practice, certain distribution issues are addressed in advisory acts, particularly the ICC Model Distributorship Contract developed by the International Chamber of Commerce.[3] Fragmentary regulation of distribution is also provided within the framework of the Eurasian Economic Union, which established quality assurance conditions for the distribution of medicinal products. [4] The purpose of these rules is to comply with proper storage, transportation, and distribution conditions necessary to ensure the quality, safety, and efficacy of medicinal products throughout the supply chain and to prevent the risk of falsified medicinal products entering the supply chain.

A distributor is a party to an agreement that acquires ownership of goods directly from the manufacturer for further resale, organizes the placement of goods on the market and promotion at its own expense, and independently selects methods for selling and distributing goods in a specific territory. The distributor's goal is to profit from entrepreneurial activity, which by its nature is not an intermediary activity.

The terms of distribution are determined by the distribution agreement (contract). Since there is no specific regulation for distribution agreements, the parties may independently determine its content at their discretion by virtue of the principle of freedom of contract, subject to restrictions provided for by legislation on foreign trade activity, antimonopoly, tax, and other laws. The agreement harmonizes the subject matter, territory, and term of distribution, supply and promotion conditions, contract price, and the rights and obligations of the parties depending on the cooperation model.

Distribution agreements have the following features: [5]

• The subject of the agreement includes the parties' obligations to organize supplies, where the distributor systematically acquires goods from the manufacturer for subsequent resale to third parties. It also includes additional obligations for the distributor to perform factual and legal actions to create demand and promote goods, and to perform obligations on behalf of the manufacturer related to product quality guarantees. The manufacturer may also grant the distributor rights to use means of individualization, information, and materials for selling and advertising goods, and provide training. Thus, distribution agreements may include elements of commercial concession or license agreements;
• Supply terms may be determined directly in the distribution agreement itself; alternatively, the distribution agreement may act as a framework agreement of a general nature, and the parties may enter into additional supply agreements for individual batches of goods to perform the obligations;
• The relationship between the parties is of a lasting nature and is implemented on a permanent or regular basis. Thus, agreements may be concluded for either a fixed or indefinite term;
• Distribution agreements provide a privileged position for each party. The manufacturer generally grants the distributor exclusive rights to sell goods and does not sell them to other persons, refraining from independent sales in a specific territory. An alternative may be granting a preference, where the manufacturer offers goods for sale in that territory primarily to the distributor and then to other persons if the distributor refuses. In turn, the distributor has reciprocal obligations and does not place competing goods in the respective territory;
• The agreement is aimed at the acquisition of goods by the distributor for further sale, promotion, and distribution in a specific territory. In essence, such relationships do not have the qualifying features of mediation from a legal perspective. Each party acts in its own name and in its own interests;
• The agreement is for consideration, as it is related to the entrepreneurial activity of each party and is aimed at generating profit. Typically, the parties agree on product costs, minimum purchase amounts, and the distributor's remuneration. The distributor's remuneration depends on the result and is determined as a percentage of the cost of acquired goods, a percentage of sales volume, or, less frequently, as a fixed lump sum;
• The agreements are consensual and mutual;
• Distribution agreements must be in writing given the party composition and, in the case of foreign trade relationships, due to applicable control measures.

It should be noted that judicial practice lacks a uniform approach to defining the legal nature of a distribution agreement. Depending on the terms, meaning, and purpose of the agreement, the intent of the parties, and the structures and models of cooperation used, courts qualify distribution agreements as follows:[6]

• As an unnamed or mixed agreement, to which the rules on purchase and sale, supply, and other agreements apply, depending on the terms of the distribution agreement. For example, in Case No. A66-8311/2019, taking into account the terms of the agreement and established circumstances, the courts concluded that "the distribution agreement contains, in addition to purchase and sale terms, elements of an agency agreement and an agreement for the provision of services for a fee";[7]
• As an agency agreement. In legal literature, the distinction between distribution and agency agreements is made specifically based on the criterion of the distributor performing respective actions at its own expense. Furthermore, the criterion of the distributor performing actions in its own interests is significant, whereas an agent acts in the interests of another person. A distributor possesses a high degree of independence because, unlike an agent, it owns the products being sold. An agent acting as a representative creates rights and obligations for the principal through its actions, and the principal becomes a party to the agreements concluded by the agent with third parties. Thus, distribution and agency relationships have sufficient differences in their subject matter, purpose, and other qualifying features, which does not allow one agreement to be substituted for the other.[8] In Case No. A40-60618/2020, the organization of exclusive product sales was carried out under an exclusive agency-distribution contract, according to which the agent provided a service—organizing the exclusive sale of the principal's products, as confirmed by a supply agreement;[9]
• As a supply agreement, including those concluded in the form of a framework agreement. In Case No. A40-143970/2020, it was established that a distribution agreement was concluded between the plaintiff and the defendant, under which "the plaintiff assumed the obligation to supply the defendant with ownership of goods in the agreed assortment and quantity, and the distributor undertook to accept it, pay for it, and carry out further sale of the goods in the manner and on the terms provided for by the agreement. The agreement concluded by the parties represents, in part, an ordinary purchase and sale agreement." [10]

Antimonopoly Restrictions When Concluding Exclusive Agreements

Parties are entitled to determine terms regarding exclusivity at their discretion, while complying with mandatory norms in effect at the time the agreement is concluded. In this regard, it is important to consider that restrictions arising from exclusive agreements and exclusivity clauses must not:

• Prevent the party that undertook the respective obligation from entering into public contracts with third parties (Article 426 of the Civil Code);
• Operate selectively, exclusively for a specific category of buyers (customers) or exclusively for buyers (customers) located or residing in the territory specified in the agreement (Articles 1007 and 1033 of the Civil Code).

Particular attention should be paid to potential violations of antimonopoly rules.

For instance, in accordance with Clause 1 of Article 11 of Federal Law No. 135-FZ dated July 26, 2006, On Protection of Competition (the "Law on Protection of Competition"), agreements between competing economic entities — meaning economic entities selling goods in the same product market or economic entities purchasing goods in the same product market — are recognized as cartels and are prohibited if such agreements lead or may lead, in particular, to a refusal to enter into agreements with specific sellers or buyers (customers).

In a case handled by the Leningrad OFAS Russia, Case No. 047/01/11-2181/2024, the antimonopoly authority found violations of the Law on Protection of Competition in the actions of Homeowners' Association "O." These actions involved coordinating the economic activity of telecom operators by restricting access to the telecommunications equipment of LLC "I" when providing communication services in an apartment building and providing an advantage to LLC "PA," LLC "Yu," and LLC "N" in providing communication services. Homeowners' Association "O" suggests that owners of premises in the apartment building enter into agreements for communication services with internet providers "PA," "Yu," and "N," and refuse agreements with internet provider "L," information about which is "distributed on the back of receipts for housing, communal, and other services." [11]

In Case No. 22/01/11-51/2023 reviewed by FAS Russia, the coordination of the economic activity of insolvency officers led to "a refusal by insolvency officers to enter into agreements with persons not accredited by Association 'N' in the product market for services provided by persons engaged by insolvency officers — members of Association 'N' — to ensure the performance of duties assigned to them in bankruptcy cases."[12]

Furthermore, Article 13 of Federal Law No. 381-FZ dated December 28, 2009, On the Fundamentals of State Regulation of Trade Activity in the Russian Federation, prohibits economic entities engaged in the retail sale of food products through the organization of a retail chain, and economic entities supplying food products to retail chains, from imposing terms on a counterparty regarding a ban on entering into food supply agreements with other economic entities engaged in similar activities, or with other economic entities on similar or other terms.

Regarding distribution agreements, they are classified as "vertical" agreements (Clause 19 of Article 4 of the Law on Protection of Competition). According to the position of FAS Russia, an agreement between a manufacturer of goods and its buyer intending to resell them (a distributor) should be classified as "vertical" even if the parties to such an agreement sell goods within the same boundaries of a product market (product markets), provided that the distributor sells goods acquired from that manufacturer in that product market and does not manufacture interchangeable goods, and also in cases where the distributor sells interchangeable goods manufactured by different manufacturers. [13]

Part 1 of Article 14.32 of the Code of Administrative Offenses of the Russian Federation (the "CAO RF") provides for administrative liability for an economic entity entering into an agreement recognized as a cartel under antimonopoly legislation, or participating in it. This violation carries an administrative fine for officials in the amount of 40,000 to 50,000 rubles or disqualification for a term of one to three years. For legal entities, the fine ranges from 0.03 to 0.15 of the offender's revenue from the sale of the goods (works, services) or the offender's expenses for the purchase of the goods (works, services), but not less than 100,000 rubles.

Additionally, Part 3 of Article 14.32 of the CAO RF establishes liability for an economic entity entering into a "vertical" agreement prohibited under antimonopoly legislation, or participating in it. The punishment includes a fine for officials in the amount of 15,000 to 30,000 rubles or disqualification for a term of up to one year. For legal entities, the fine ranges from 0.01 to 0.05 of the offender's revenue from the sale of the goods (works, services) or the offender's expenses for the purchase of the goods (works, services), but not less than 100,000 rubles.

How to Draft and Ensure Performance of an Exclusivity Clause?

The following elements will help create a clear structure for an exclusivity condition and protect the interests of both parties to the agreement:

• Territorial boundaries – specifying the region or territory where the exclusive agreement applies;
• Subject matter – defining the specific services or goods that are the subject of the exclusive cooperation;
• Term of the exclusivity conditions;
• Sanctions – liability for breaching exclusivity obligations.

Here are a few examples of such clauses:

• Restriction on competition between the parties: "The Parties hereby agree that the Supplier undertakes not to enter into similar agreements with third parties during the term of this Agreement";
• Territorial restriction: "The Supplier undertakes not to enter into similar agreements with third parties in the territory of the Republic of Tatarstan during the term of this agreement";
• General condition on exclusive rights: "The Buyer acquires the exclusive right to purchase the Supplier's goods, and the Supplier guarantees this right to the Buyer for the entire term of the agreement."

What Remedies Apply in the Event of a Breach of Exclusivity Conditions?

A supplier's breach of an exclusivity condition, for example, does not provide grounds for challenging the agreements it concluded in violation of such a condition, as the law does not explicitly provide for such a possibility. However, according to certain authors, this does not release a bad-faith supplier from liability to the injured distributor whose exclusive right was violated. [14]

In the event of non-performance of obligations undertaken under an exclusive agreement or the emergence of a real threat of their violation, the creditor is entitled to demand the cessation of the respective actions regardless of the recovery of damages (Clause 6 of Article 393 of the Civil Code).

In Case No. A50-23711/2015, the plaintiff (agent) filed a lawsuit against the defendant (principal) to impose a ban, for the term of the agency agreement, on entering into similar agency agreements with third parties and to impose an obligation to refrain from independent activity in a similar territory aimed at selling the goods. In violation of the agreement terms, the defendant independently sold the goods, concealed the relevant information from the agent, and failed to redirect buyers to the agent. The offense committed by the principal was ongoing, lasting for five months, and the principal's behavior was in bad faith. The principal systematically violated its obligations under the agency agreement, leading to a decrease in the volume of goods sold through the agent and making it impossible for the agent to perform its obligations related to product sales. The courts established that since an agency agreement may provide for the principal's obligation not to enter into similar agency agreements with other agents, "the law allows for restricting the principal from creating competitive obstacles for the agent."[15]

Note that damages are quite difficult to prove and confirm. The most effective liability measures are contract termination and penalties. To apply them, these liability measures must be provided for in the agreement, and the fact of the party's failure to comply with the accepted restrictions must be proven.

Thus, in Case No. A40-21196/2018, the parties provided for the seller's liability for each recorded instance of violating the buyer's exclusive rights by paying a penalty (late fee) to the buyer. Meanwhile, in denying the original claims, the courts concluded that "the case materials lack proper evidence demonstrating the defendant's breach of obligations (violation of exclusive conditions) regarding the sale of goods to third parties."[16]

In Case No. A79-10652/2015, the documents showed that a lease agreement was concluded between the plaintiff and the defendant to organize a children's entertainment center. The agreement provided the tenant with a guarantee from the landlord that, during the term of the agreement, the landlord would not allow the placement of organizations providing similar services in the shopping and entertainment center. However, due to the placement of other organizations providing services similar to the tenant's services, and due to repeated violations of the agreement terms that rendered the premises unfit for use, the plaintiff initiated early termination of the agreement. The grounds for filing the lawsuit were the plaintiff's damages in the form of the cost of inseparable improvements to the premises and lost profits. The courts recognized "the placement of gaming equipment (crane machines, air hockey, other attractions, and similar equipment) as a violation of the lease agreement's exclusivity terms" and satisfied the claims. [17]

Since exclusivity relationships are not comprehensively regulated by Russian legislation, parties independently determine the terms of cooperation at their discretion, including on the basis of agreements specifically named in the Civil Code, while considering existing legislative restrictions.

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References

[1] Resolution of the Fifteenth Arbitration Court of Appeal dated December 10, 2020, in Case No. A32-17353/2020.

[2] Article 2 of Federal Law No. 225-FZ dated December 30, 1995, On Production Sharing Agreements.

[3] Publications of the International Chamber of Commerce No. 518 and No. 646.

[4] Decision of the Council of the Eurasian Economic Commission No. 80 dated November 3, 2016, On Approval of the Rules of Good Distribution Practice within the Framework of the Eurasian Economic Union.

[5] Alekseeva, E.V. What is a distribution agreement? SPS ConsultantPlus, 2025.

[6] Ibid.

[7] Resolution of the Arbitration Court of the North-Western District dated June 4, 2020, in Case No. A66-8311/2019.

[8] Vlasova, N.V. Transborder distribution agreement in national legislation and international commercial practice. Journal of Foreign Legislation and Comparative Jurisprudence, 2023, No. 3.

[9] Resolution of the Arbitration Court of the Moscow District dated December 4, 2020, in Case No. A40-60618/2020.

[10] Resolution of the Arbitration Court of the Moscow District dated October 18, 2021, in Case No. A40-143970/2020.

[11] Decision of the Leningrad OFAS Russia dated December 4, 2024, in Case No. 047/01/11-2181/2024.

[12] Decision of FAS Russia dated December 22, 2023, in Case No. 22/01/11-51/2023.

[13] Clarification No. 2 of the Presidium of FAS Russia "Vertical" Agreements, including Dealer Agreements, approved by the minutes of the Presidium of FAS Russia No. 3 dated February 17, 2016.

[14] Bychkov, A. Exclusive right: restriction of legal capacity or the will of the parties to an agreement? October 31, 2014. "Economics and Life" website.

[15] Resolution of the Arbitration Court of the Ural District dated September 29, 2016, in Case No. A50-23711/2015.

[16] Resolution of the Arbitration Court of the Moscow District dated February 12, 2019, in Case No. A40-21196/2018.

[17] Resolution of the Arbitration Court of the Volga-Vyatka District dated March 10, 2017, in Case No. A79-10652/2015.