Many distribution relationships in the Caribbean operate for years, sometimes decades, without a comprehensive written agreement.
The arrangement may begin informally, develop through practice, and become commercially significant over time. That informality may not matter while the relationship is working. It matters greatly when one party wants to terminate.
The Privy Council’s decision in Anheuser-Busch International Inc and another v Commonwealth Brewery Ltd [2026] UKPC 8 provides useful guidance on how courts will assess reasonable notice where a distribution agreement is oral, informal, incomplete, or silent on termination.
The Case in Brief
The dispute concerned a distribution arrangement in The Bahamas dating back to 1975. Burns House Ltd (“BHL”), which later merged with Commonwealth Brewery Ltd (“CBL”), distributed products of a Belgian company, Anheuser Busch InBev NV (“AB InBev”), including Budweiser, under an oral distribution agreement with Anheuser Busch International Inc. (“ABI”), a wholly owned subsidiary of AB InBev. The arrangement gave BHL exclusive distribution rights in The Bahamas but was never set out in a formal written contract.
Despite that informality, the relationship had structure. BHL provided sales reports, participated in marketing discussions, agreed annual marketing plans and budgets, allocated personnel to the brands, and supported brand development. The relationship lasted for approximately 40 years, and there was no criticism of BHL’s performance.
In 2015, ABI/Cerveceria Nacional Dominicana SA (“CND”) another subsidiary of AB InBev, terminated the arrangement as part of a wider commercial strategy to maintain closer control over its international brands. BHL was given just over three and a half months’ notice. BHL argued that reasonable notice should have been three and a half years. At first instance, the court held that 15 months’ notice was reasonable. The Court of Appeal disagreed, holding that a reasonable range was three to six months. The Privy Council upheld the Court of Appeal’s decision.
The Key Issue
The question was not whether there was a distribution arrangement. Nor was it disputed that reasonable notice was required. The issue was how the court should determine what period of notice was reasonable.
The Privy Council made clear that reasonable notice is not assessed by a fixed formula. It depends on the commercial circumstances of the relationship at the time notice is given.
What Reasonable Notice Is Meant to Do
The purpose of reasonable notice is to allow the parties to bring the relationship to an orderly end. It should give the recipient of the notice a fair opportunity to adjust, wind down commitments, and make progress towards alternative arrangements.
However, reasonable notice is not intended to protect the distributor from all loss of profit. Nor is it designed to give the distributor enough time to fully replace the lost business. This was central to the Privy Council’s reasoning.
In other words, the law may cushion the commercial impact of termination, but it does not remove the commercial risk of operating without agreed termination rights.
Factors the Court Considered
The Privy Council identified several factors that may be relevant when assessing reasonable notice.
First, the length of the relationship matters, but it is not decisive. A 40-year relationship did not automatically justify a lengthy notice period.
Secondly, the significance of the relationship to the distributor’s business is central. In this case, AB InBev/CND products represented about 15% of BHL’s beer turnover and less than 10% of its overall turnover. BHL was also free to distribute competing products. These facts supported a shorter notice period.
Thirdly, the court distinguished between ordinary business expenditure and extraordinary expenditure. BHL had allocated personnel to the brands and upgraded refrigeration facilities, but the Privy Council did not treat this as sufficient to justify a longer notice period. The expenditure appeared to be part of BHL’s ordinary distributorship business and was not shown to be specific only to the ABI/CND relationship.
Fourthly, the court considered the practical difficulty of a long notice period. During the notice period, both parties remained bound to perform their obligations, even though one party had decided to exit. That may point against an extended notice period.
Practical Lessons for Businesses
The decision is important for both principals and distributors.
For principals, it confirms that a long-standing relationship will not necessarily require a long notice period. However, principals should not assume that an informal arrangement can be terminated immediately or without risk. If there is no express termination provision, the court may imply a requirement to give reasonable notice.
For distributors, the decision is a reminder that longevity alone is not enough. A distributor seeking a longer notice period will need to show more than the length of the relationship. Dependence on the product line, exclusivity, extraordinary investment/expenditure, dedicated resources, and difficulty in redeploying staff or assets may all be relevant.
For both sides, the case underscores the risks of operating without a written distribution agreement.
Uncertainty may arise around termination rights, notice periods, exclusivity, inventory, customer relationships, brand use, outstanding orders, and post-termination obligations.
What a Written Distribution Agreement Should Address
A well-drafted distribution agreement should clearly deal with:
- term and renewal;
- termination for convenience;
- minimum notice periods;
- termination for cause;
- exclusivity or non-exclusivity;
- territory;
- performance targets;
- inventory buy-back or run-off;
- customer relationships;
- intellectual property and brand use;
- confidentiality; and
- governing law and dispute resolution.
These issues are best agreed when the relationship is healthy, not after termination is already being considered.
Key Takeaways
- An oral or informal distribution arrangement can still create binding legal obligations.
- Where there is no express termination clause, the court may imply a requirement to give reasonable notice.
- Reasonable notice is designed to allow orderly adjustment, not to fully protect lost profits.
- A long relationship does not automatically mean a long notice period.
- Dependence, exclusivity, investment and redeployability of resources are important factors.
- Ordinary business expenditure will usually carry less weight than extraordinary, relationship-specific investment.
- Written distribution agreements remain the best way to manage termination risk.
Conclusion
The Privy Council’s decision does not create a universal notice period for distribution arrangements. It confirms that reasonable notice depends on the facts and commercial context.
For Caribbean businesses, the message is clear: informal arrangements may be legally binding, but they also create uncertainty. Principals and distributors should document their rights, obligations and exit arrangements before the relationship comes under strain.
A written distribution agreement is not just a formality. It is a practical tool for managing commercial risk.