Article 17 of Council Directive 86/653/EEC of 18 December 1986 on the coordination of the laws of the Member States relating to self-employed commercial agents (as amended from time to time, ''the Directive'') stipulating the indemnity or compensation of a commercial agent after the termination of an agency contract is a good example how harmonization is achieved between the Member States of the European Union.
In its evaluation report dated 16 July 2015, the European Commission concluded that the "Directive seems to have been effective in achieving its objective to facilitate cross border operations in commercial representation" and "it is recommended that the Directive is maintained in its current form."
Article 17 of the Directive is the Directive's best known provision and its interpretation (respectively the interpretation of its transposition into national law) is subject to numerous disputes before national courts and the ECJ.
Recently, the ECJ (C-645/16) dealt with a request for a preliminary ruling under Article 267 TFEU from the Cour de cassation (Court of Cassation, France).
The respective agency contract behind the dispute stipulated that the contract was entered into for a trial period of 12 months, at the end of which the contract would be deemed to last for an indefinite period. Each party had the right to terminate during the course of the trial period, subject to giving 15 days' notice during the first month and one month's notice thereafter.
French courts ruled on the basis of French case law that there is, by way of exception, no right to compensation where a commercial agency contract is terminated during the trial period, especially because the agency contract has not yet been definitively concluded during the trial period.
Since, inter alia, the Directive does not refer to any trial period the French Court of Cassation asked whether Article 17 of the Directive also applies where termination of the commercial agency contract occurs during a trial period.
The ECJ came in particular to the following conclusions:
- The Directive makes no reference to the concept of a 'trial period': therefore, it must be considered that such a provision is not as such prohibited by the Directive.
- The termination during the specific trial period constitutes a termination within the meaning of Article 17(1) and (3) of the Directive: the interpretation that the agency contract has not yet been definitively concluded during the trial period has no basis in the Directive.
- The indemnity and compensation regimes laid down by the Directive are not intended to penalize termination but to indemnify/compensate the Agent for his/her services in the past. The Agent's claims cannot be denied if the conditions set out in Article 17(2) and (3) are satisfied.
- Furthermore, the Directive shall protect the Agent. In the light of the aim of the Directive any interpretation of Article l 7 which may prove to be detrimental to the commercial agent is not permissible.
- The interpretation of the French courts that there is no right to compensation in case the contract is terminated during the trial period is therefore contrary to the objective of the Directive.
As a result, the ECJ ruled that the Agent may also be entitled to indemnity or compensation according to Article 17 paragraphs 2 and 3 of the Directive in the event, that the contract is terminated during a trial period.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.