OPINION OF ADVOCATE GENERAL

BOT

delivered on 3 June 2010 1( )

Case C‑203/09

Volvo Car Germany GmbH

v

Autohof Weidensdorf GmbH

(Reference for a preliminary ruling from the Bundesgerichtshof (Germany))

(Directive 86/653/EEC – Self-employed commercial agents – Termination of the agency contract by the principal – Default by commercial agent on his obligations – Commercial agent’s entitlement to a goodwill indemnity)

1. One of the principal contributions 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 ( ) is to provide for payment of an indemnity to such agents by their principals after termination of an agency contract (‘the goodwill indemnity’).

2. Article 18(a) of the Directive provides, however, that such an indemnity is not payable ‘where the principal has terminated the agency contract because of default attributable to the commercial agent which would justify immediate termination of the agency contract under national law’.

3. The present reference for a preliminary ruling provides the Court with the first opportunity to interpret that provision and, in particular, to rule on whether the exclusion of a goodwill indemnity is conditional on there being a causal link between, on the one hand, a default imputable to the commercial agent which is of such a nature as to justify the immediate termination of the contract and, on the other, the principal’s decision to terminate the agency contract.

4. The present reference arises in a specific scenario, inasmuch as it appears from the facts in the main proceedings that the commercial agent’s default took place during the period of notice following the principal’s decision to terminate the agency contract and that the principal became aware of the default only after the contract had actually ended.

5. In this Opinion, I will propose that the Court adopt a consistent and teleological interpretation of Article 18(a) of the Directive and answer the national court by saying that that provision must be interpreted as meaning that it does not preclude a commercial agent whose contract has been terminated from being deprived of his goodwill indemnity where the principal establishes, after the termination of the agency contract, default which occurred during the currency of the contract and which was of such a nature as to justify immediate termination of that contract, but which was not the cause of that termination, where the principal became aware of the conduct only after the end of the contract.

I – Legal framework

A – European Union law

6. Under Article 1(2) of the Directive:

‘For the purposes of this Directive, “commercial agent” shall mean a self‑employed intermediary who has continuing authority to negotiate the sale or the purchase of goods on behalf of another person, hereinafter called the “principal”, or to negotiate and conclude such transactions on behalf of and in the name of that principal.’

7. The obligations of a commercial agent are set out in Article 3 of the Directive, which is worded as follows:

‘1. In performing his activities a commercial agent must look after his principal’s interests and act dutifully and in good faith.

2. In particular, a commercial agent must:

(a) make proper efforts to negotiate and, where appropriate, conclude the transactions he is instructed to take care of;

(b) communicate to his principal all the necessary information available to him;

(c) comply with reasonable instructions given by his principal.’

8. Article 15(1) of the Directive provides that ‘[w]here an agency contract is concluded for an indefinite period either party may terminate it by notice’. However, it can be seen from Article 16 of the Directive that:

‘Nothing in this Directive shall affect the application of the law of the Member States where the latter provides for the immediate termination of the agency contract:

(a) because of the failure of one party to carry out all or part of his obligations;

(b) where exceptional circumstances arise.’

9. Furthermore, Article 17(1) and (2)(a) of the Directive provides:

‘1. Member States shall take the measures necessary to ensure that the commercial agent is, after termination of the agency contract, indemnified in accordance with paragraph 2 or compensated for damage in accordance with paragraph 3.

2. (a) The commercial agent shall be entitled to an indemnity if and to the extent that:

– he has brought the principal new customers or has significantly increased the volume of business with existing customers and the principal continues to derive substantial benefits from the business with such customers, and

– the payment of this indemnity is equitable having regard to all the circumstances and, in particular, the commission lost by the commercial agent on the business transacted with such customers…’

10. According to Article 18 of the Directive:

‘The indemnity or compensation referred to in Article 17 shall not be payable:

(a) where the principal has terminated the agency contract because of default attributable to the commercial agent which would justify immediate termination of the agency contract under national law;

…’

11. Lastly, according to Article 19 of the Directive:

‘The parties may not derogate from Articles 17 and 18 to the detriment of the commercial agent before the agency contract expires.’

B – National law

12. Under Paragraph 89a of the Handelsgesetzbuch (Commercial Code) (‘the HGB’):

‘(1) Each party may terminate the contract on serious grounds without complying with the notice period. That right may be neither excluded nor limited …’

13. Paragraph 89b of the HGB transposes Articles 17 to 19 of the Directive. That paragraph, as it was worded at the time of the facts in the main proceedings, reads as follows:

‘(1) The commercial agent may, after termination of the agency contract, demand from the principal a reasonable indemnity if and to the extent that:

1. the principal continues to derive substantial benefits, even after termination of the agency contract, from the volume of business with new customers which the commercial agent brought;

2. the commercial agent, by reason of the termination of the agency contract, loses rights to commission from business already transacted, and business to be transacted in the future, with customers he has brought, and

3. the payment of an indemnity is equitable having regard to all the circumstances.

…

(3) That indemnity shall not be payable if:

1. the commercial agent terminated the contract, except where the principal’s conduct was a reason justifying the termination or where the commercial agent may no longer be required to continue his activities due to age or illness, or

2. the principal terminated the contract and there were serious grounds for termination relating to wrongful conduct by the commercial agent …’

14. According to the settled case-law of the Bundesgerichtshof (Federal Court of Justice) (Germany), referred to in the order for reference, the provisions concerning a commercial agent’s goodwill indemnity in Paragraph 89b of the HGB apply by analogy to a dealership agreement such as the one at issue in the main proceedings. The wording of point 2 of Paragraph 89b(3) of the HGB does not require the principal to have terminated the contractual relations with the commercial agent, without giving notice, by reason of the agent’s default. It is sufficient if a serious ground justifying immediate termination of the contract existed objectively at the date of the decision to terminate the contract. Where the commercial agent has failed, before the normal end of the contract, to perform his obligations in such a manner that termination without notice is justified, the case‑law of the Bundesgerichtshof permits even a principal who has decided to terminate the contract at the end of a notice period to decide either to terminate that contract afresh, without notice, if he learned of the default during the period of notice, or to rely on the default as a ground for refusal to pay a goodwill indemnity where that principal learned of the default only after the normal end of the contract.

II – The main proceedings and the questions referred for a preliminary ruling

15. A dealership agreement was concluded in 1993 between Volvo Car (the principal, ‘Volvo Car’) and AHW (the dealer, ‘AHW’). At the same time the directors of AHW operated, together with a former director of that undertaking, Autovermietung Weidensdorf GbR (‘AVW’). Through another company, AVW established commercial relations with Volvo Car which were governed by a ‘framework agreement for big buyers’ concerning special discounts for supplying brand-new Volvo vehicles. On the basis of the framework agreement AVW purchased vehicles from AHW, availing itself of the agreed discounts. In return for this, AHW received allowances from Volvo Car in accordance with the ‘General conditions for allowances for dealers’.

16. By letter of 6 March 1997, Volvo Car gave contractual notice of termination of the dealership agreement, with effect from 31 March 1999.

17. In the period from April 1998 to July 1999, 28 vehicles which AVW had purchased from AHW were sold prematurely (including 16 sold before 31 March 1999), contrary to the framework agreement for big buyers, which required big buyers to retain vehicles for at least six months. As is apparent from the order for reference, Volvo Car’s statement that it became aware of those facts only after the termination of the dealership agreement was accepted as accurate in the context of the appeal on a point of law (‘Revision’ under German law).

18. Since it considered that Paragraph 89b of the HGB applied to the dealership agreement, AHW claimed a goodwill indemnity from Volvo Car and claimed payments on the basis of credit notes. Volvo Car maintains that payment of a goodwill indemnity to AHW is precluded by point 2 of Paragraph 89b(3) of the HGB inasmuch as AHW procured for itself allowances to which it was not entitled because, in collusion with AVW, it did not adhere to the contractually agreed minimum retention period. That failure on AHW’s part to comply with its contractual obligations would have justified immediate termination of the dealership agreement by Volvo Car if it had been aware of the default before the termination of the contract.

19. The Landgericht (Regional Court) allowed AHW’s indemnity claim in the amount of EUR 180 159.46 and upheld the claim in respect of the credit notes in full, together with interest in each case.

20. The Oberlandesgericht (Higher Regional Court), on appeal by Volvo Car, varied the judgment at first instance in part with regard to the amounts of the goodwill indemnity and the credit notes. The Oberlandesgericht considered that AHW was entitled to a goodwill indemnity from Volvo Car through an application by analogy of Paragraph 89b(1) of the HGB. The Oberlandesgericht held that point 2 of Paragraph 89(b)(3) of the HGB must be interpreted in a way which is consistent with Article 18(a) of the Directive. Consequently, that court held that the serious ground for termination relating to the commercial agent’s default must have been the cause of the principal’s decision to terminate the contract in order for the agent to be deprived of his entitlement to a goodwill indemnity. In the absence of such a causal link, the Oberlandesgericht considers that the actual circumstances of the premature sale of the vehicles and the relevance of whether Volvo Car had prior knowledge of that sale should be considered only when determining whether payment of a goodwill indemnity is just and fair within the meaning of the third indent of Paragraph 89b(1) of the HGB.

21. Volvo Car appealed on a point of law against the judgment of the Oberlandesgericht.

22. Taking the view that the outcome of the dispute turns on the interpretation of Article 18(a) of the Directive, the Bundesgerichtshof decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling:

‘1. Is Article 18(a) of [the Directive] to be interpreted as precluding national legislation under which a commercial agent is not entitled to an indemnity in the event of contractual termination of the contract by the principal if a serious ground for immediate termination of the contract because of the agent’s default existed at the date of contractual termination but was not the cause of the termination?

2. If such national legislation is consistent with the Directive:

Does Article 18(a) of the Directive preclude the application by analogy of the national legislation concerning the exclusion of the indemnity claim to a case where a serious ground for the immediate termination of the contract because of the agent’s default arose only after contractual notice of termination was given and the principal became aware of that ground only after the contract ended, so that he was no longer able to give a further notice of immediate termination of the contract based on the agent’s default?’

23. Volvo Car, the German Government and the Commission of the European Communities submitted written observations. In addition, AHW, the German Government and the Commission presented oral argument at the hearing on 6 May 2010.

III – Analysis

24. Both of the questions which the Bundesgerichtshof has referred to the Court concern the interpretation of Article 18(a) of the Directive, which provides that the goodwill indemnity to which, in principle, a commercial agent is entitled is not payable ‘where the principal has terminated the agency contract because of default attributable to the commercial agent which would justify immediate termination of the agency contract under national law’.

25. The first question seeks, essentially, to determine whether that provision must be interpreted as meaning that it precludes national rules which provide that a commercial agent whose contract has been terminated is not to receive a goodwill indemnity where the principal alleges default on his part which admittedly existed at the time of the termination but which was not the cause of that termination.

26. The second question asks, essentially, if the answer to the first question is in the negative, whether Article 18(a) of the Directive must be interpreted as meaning that it precludes a commercial agent also being deprived of his goodwill indemnity where the agent’s default occurred after the principal had decided to terminate the contract and where the principal became aware of the default only after the end of the contract.

A – The Court’s jurisdiction to answer the questions referred

27. Before commencing my substantive analysis, two obstacles to the Court’s jurisdiction to rule on the present reference for a preliminary ruling must first be eliminated.

28. The first obstacle, put forward by Volvo Car, is that the Court has no jurisdiction to answer the questions referred by the national court inasmuch as the directive of which interpretation is being sought concerns the relations between commercial agents and their principals, whereas the dispute in the main proceedings concerns a dealer and a supplier.

29. I would point out in that regard that it is apparent from the order for reference that, under German law, the safeguard provisions relating to goodwill indemnities for commercial agents also apply in respect of dealers. The provisions concerning goodwill indemnities for commercial agents laid down in Paragraph 89b of the HGB thus apply by analogy to a dealership agreement such as the one concluded between Volvo Car and AHW. According to the settled case-law of the Bundesgerichtshof, for that to happen, the dealer must be integrated into the sales organisation of the producer or supplier and must be required to transfer his customers to the producer or supplier so that, at the end of the contract, the latter may derive immediate benefit from the clientele, without taking any further steps. Moreover, compliance with those conditions and the resulting equating of a dealer with a commercial agent under German law are not challenged in the main proceedings.

30. In my view, the Court has jurisdiction to answer the questions raised in such a scenario. As, indeed, the Court has repeatedly observed, within the framework of the cooperation between the Court and national courts and tribunals established by Article 267 TFEU, it is solely for the national court to determine, in the light of the particular circumstances of the case, both the need for a preliminary ruling in order to enable it to deliver judgment and the relevance of the questions which it submits to the Court. The Court can refuse a request submitted by a national court only where it is quite obvious that the ruling sought by that court on the interpretation of European Union law bears no relation to the actual facts of the main action or its purpose or where the problem is general or hypothetical. ( ) Consequently, where questions submitted by national courts concern the interpretation of a provision of European Union law, the Court is, in principle, obliged to give a ruling. Neither the wording of Article 267 TFEU nor the aim of the procedure established by that article indicates that the framers of the Treaty intended to exclude from the jurisdiction of the Court requests for a preliminary ruling on a European Union provision where the domestic law of a Member State refers to that European Union provision in order to determine the rules applicable to a situation which is purely internal to that State. ( ) According to the Court, where domestic legislation adopts the same solutions as those adopted in European Union law in order, in particular, to avoid discrimination against foreign nationals or any distortion of competition, it is clearly in the Community interest that, in order to forestall future differences of interpretation, provisions or concepts taken from European Union law should be interpreted uniformly, irrespective of the circumstances in which they are to apply. ( )

31. The second obstacle to the Court’s jurisdiction, put forward by the Commission, concerns only the first question which, in so far as it envisages a scenario in which the commercial agent’s default existed at the date of termination of the agency contract, although it was not the cause of the termination, relates to a situation which is foreign to the facts of the main proceedings and is therefore hypothetical. It is common ground that the default complained of in regard to AHW occurred after Volvo Car’s decision to terminate the contract, with the result that only the second question corresponds precisely to the facts in the main proceedings. The Court might consider it appropriate, therefore, to concentrate its answer solely on the second question.

32. However, that is not the way I would propose that the Court proceed. I consider it excessive to state that the first question manifestly has no relation to the reality or the subject-matter of the main proceedings. It is, of course, true, that the scenario on which that question is based does not correspond exactly to the facts of the main proceedings. However, that question focuses on the central problem posed by the interpretation of Article 18(a) of the Directive and which is decisive for the outcome of the dispute in the main proceedings, namely, whether or not a causal link is required between the commercial agent’s default which is sufficient to justify termination of the agency contract without notice and the principal’s decision to terminate that contract and thereby deprive the agent of his goodwill indemnity.

33. The two questions are, moreover, very closely linked and are mutually complementary, the national court regarding the first as a forerunner of the second. I would therefore propose that the Court join the two questions so as to provide the national court with a complete answer and at the same time ensure a coherent interpretation of Article 18(a) of the Directive.

34. This reference for a preliminary ruling must therefore, in my view, be regarded as concerning principally the question whether Article 18(a) of the Directive must be interpreted as meaning that it precludes a commercial agent whose contract has been terminated from being deprived of his goodwill indemnity where the principal establishes, after the termination of the agency contract, default which occurred during the currency of the contract and which was of such a nature as to justify immediate termination of that contract, but which was not the cause of that termination.

B – Substance

35. As the Bundesgerichtshof states in its order for reference, comparison of the wording of Article 18(a) of the Directive with that of point 2 of Paragraph 89b(3) of the HGB shows that the latter defines more strictly the conditions under which a commercial agent will not be entitled to a goodwill indemnity.

36. The wording of Article 18(a) of the Directive indicates that the goodwill indemnity referred to in Article 17 of the Directive is not payable ‘where the principal has terminated the agency contract because of default attributable to the commercial agent which would justify immediate termination of the agency contract under national law’. ( ) The expression ‘because of’ expresses the idea of a causal link between the agent’s default which justifies immediate termination of the contract and the principal’s decision to terminate the contract in question.

37. If I limited myself to a literal interpretation of Article 18(a) of the Directive, I could therefore be tempted to interpret that provision in the way which affords the greatest protection to the commercial agent and to answer the national court by saying that the provision must be interpreted as meaning that it precludes non-payment of the goodwill indemnity to a commercial agent whose contract has been terminated where the principal subsequently proves the existence of a default which was not the cause of the termination.

38. However, in my view, the wording of Article 18(a) of the Directive is not clear enough to permit me to restrict myself to a literal interpretation. The wording of the article contains an ambiguity in regard to whether the decisive condition for non-entitlement to a goodwill indemnity is the presence of a causal link between the default by the commercial agent such as to justify immediate termination of the contract and the principal’s decision to terminate the contract in question or, more fundamentally, the fact that a default by the commercial agent such as to justify immediate termination of the contract occurred during the currency of the contract. For that reason, I consider that the provision in question should be interpreted in the light of the structure and aims of the Directive. ( )

39. With regard first to the structure of the Directive, I consider that Article 18(a) cannot be interpreted in isolation but must be interpreted in conjunction with Articles 3 and 16(a) thereof in order to guarantee the coherence and useful effect of all those provisions.

40. I would point out in that regard that a commercial agent is required by Article 3 of the Directive to fulfil certain obligations. Thus, the commercial agent must carry out his mission and must report on that performance. ( )

41. The commercial agent’s obligation to carry out his mission has three aspects, namely, that the agent must comply with his principal’s instructions, act with diligence and conduct himself loyally.

42. With regard to compliance with the instructions given to him by his principal, it must be observed that, although the commercial agent generally enjoys considerable freedom in carrying out his mission since, by definition, he is a self-employed professional, ( ) he is bound to comply with mandatory instructions concerning certain aspects of his mission which he may receive from his principal concerning, for example, the conditions governing contracts to be concluded with customers.

43. Moreover, a commercial agent must show diligence in the accomplishment of his mission, that is to say, he must carry out his contract as a ‘good professional’. He would fail to fulfil that obligation, for example, were he to fail to visit customers, be insufficiently active, make patchy efforts at promotion, whether in space or in time, or maintain an unsatisfactory organisational policy.

44. Lastly, a commercial agent is bound by an obligation of loyalty towards his principal. In that regard, he must ensure that information concerning the principal’s commercial strategy remains confidential and he cannot agree to represent an undertaking which competes with that of his principal without the latter’s agreement.

45. In addition to the obligation to carry out his mission, a commercial agent is required to report on his performance to his principal. That obligation consists in keeping the principal informed of the results of his mission and communicating to his principal all the necessary information available to him. For example, the agent must provide all useful information concerning the market situation, including competitors present on that market.

46. Breach of those obligations will naturally give rise to sanctions.

47. Article 16(a) of the Directive thus gives the Member States the option of maintaining or adopting provisions providing for immediate termination of the contract because of the failure by one party to carry out all or part of his obligations, whereas the general rule is that the principal is required under Article 15 of the Directive to give a period of notice.

48. It is the same type of default, justifying, under national law, immediate termination of the contract which, under Article 18(a) of the Directive, relieves the principal of the obligation to pay a goodwill indemnity to the commercial agent.

49. The idea underlying that provision is that the commercial agent should be entitled to a goodwill indemnity under Article 17(2) of the Directive only when that is compatible with the principal’s interests. That entitlement exists, therefore, only when the agent has not acted against the interests of the principal. On the other hand, if, by not carrying out his obligations, as set out in Article 3 of the Directive, the agent acted without regard for the interests of his principal, thereby breaching the relationship of confidence between them, he is no longer worthy of protection. In that case, the principal cannot be required to pay the commercial agent a goodwill indemnity, the purpose of which is to reward the agent for the efforts he made to develop his clientele in accordance with his obligations. The decisive factor in deciding whether or not to uphold entitlement to a goodwill indemnity is therefore, not only whether the commercial agent fulfils the conditions for the grant of such an indemnity as laid down in Article 17(2)(a) of the Directive, but also whether he has carried out his mission in compliance with his obligations under Article 3 of that directive.

50. Moreover, if the purpose of the goodwill indemnity is to prevent unjust enrichment for the principal, inasmuch as it is paid in consideration of the profit which the principal continues to obtain, after the termination of the contract, from the activities carried on by the commercial agent during the currency of the contract and for which he is no longer paid, the non-payment of such an indemnity is intended, in parallel, to prevent unjust enrichment for a commercial agent who conducted himself improperly. To allow entitlement to a goodwill indemnity for a commercial agent who has been shown to have failed to carry out his obligations would be enrichment arising from fraud, which was certainly not the intention of the European Union legislature when it adopted Article 18(a) of the Directive. In that sense, the provision in question is intended to protect the principal’s interests by avoiding, in particular, the enrichment of the commercial agent on the basis of fraud.

51. It is clear from the terms of that provision that one of the principal conditions for the loss of the goodwill indemnity is that the commercial agent’s default must have occurred during the contractual relationship. In my view, it is of little importance that the default occurred before or after the principal’s decision to terminate the contract for a reason other than default. ( ) Thus, a default occurring during the notice period following an ordinary decision to terminate the contract, as is the case in the main proceedings, would, in my view, justify, in principle, the refusal to pay a goodwill indemnity inasmuch as the commercial agent has infringed the obligations by which he is bound until the contract is actually terminated.

52. Another condition laid down in Article 18(a) of the Directive is that the commercial agent’s default must justify immediate termination of the contract under national law, which implies that the default must be fairly serious. Point 2 of Paragraph 89b(3) of the HGB refers to ‘a serious ground for termination because of the commercial agent’s default’. By way of comparison, French law requires a serious fault on the part of the commercial agent, for example, acts constituting unfair competition, insulting remarks concerning the principal, unlawful conduct, serious failure to follow instructions received or serious breaches of the obligation of confidentiality.

53. In other words, I consider that it follows from Article 18(a) of the Directive, in conjunction with Articles 3 and 16(a) thereof, that a goodwill indemnity is, in principle, not payable by the principal where the commercial agent has, during the contractual relationship, committed a default which justifies immediate termination of the contract under national law but of which the principal became aware only after the end of the contract.

54. To require the commercial agent’s default to have occurred before the principal’s decision to terminate the contract immediately and the default in question to be the cause of that termination cannot, in my view, be reconciled with the need to sanction improper conduct by the commercial agent, as evidenced by a combined reading of Articles 3, 16(a) and 18(a) of the Directive.

55. Such a condition would lead to a difference in treatment between a commercial agent who was unable to conceal his default and whose principal became aware of it before the end of the contract, and a commercial agent who managed to conceal the default so that his principal discovered it only after the termination of the contract. Whereas the first agent may have his contract terminated without notice and may also lose his goodwill indemnity, the second, whose contract can no longer be terminated without notice, would not be sanctioned by the loss of his goodwill indemnity either.

56. Such a difference in treatment constitutes an incitement to fraud, would deprive Article 3 of the Directive of its useful effect and would even produce an unintended side-effect.

57. As the national court points out, referring to the circumstances in the main proceedings, where the principal terminates the agency contract in the ordinary way and learns only after the termination of the contract of improper conduct by the commercial agent justifying termination without notice, with the result that the principal was unable to terminate the contract on the basis of that conduct, the commercial agent is no more deserving of protection than where the principal was aware of the agent’s conduct during the currency of the contract and, because of that conduct, actually terminated the contractual relationship. The fact that the commercial agent committed a default during the currency of the existing contractual relationship which justified termination of the contract without notice is decisive, since Article 18(a) of the Directive imperatively rules out payment of the goodwill indemnity. Such an imperative direction not to pay cannot be contingent on whether the commercial agent succeeds in concealing his default until the end of the contract. In fact, a commercial agent who succeeds in doing so is as undeserving of protection as a commercial agent whose default was discovered in due time.

58. I also agree with the view expressed by the national court that account must be taken of the fact that, precisely as a result of an ordinary termination of an agency contract by the principal, there could be a risk of the commercial agent using the time remaining until the end of the contract to procure undue advantages and, in so doing, engage in improper conduct of which the principal is unaware until after the termination of the contract but which would have permitted him to terminate the contract on serious grounds if he had become aware of it sooner. In order to avoid that sort of improper conduct during the currency of the contract and, in particular, during the notice period, the principal should be able, at all times, to require his commercial agent to comply with the obligations set out in Article 3 of the Directive and should therefore be released from the obligation to pay the goodwill indemnity where he discovers such conduct after the termination of the contract.

59. Consequently, I consider that Article 18(a) of the Directive should be interpreted as meaning that it does not preclude a commercial agent whose contract has been terminated from being denied his goodwill indemnity where the principal establishes, after the termination of the agency contract, default which occurred during the currency of the contract and which was of such a nature as to justify immediate termination of that contract, but which was not the cause of that termination, where the principal became aware of the conduct only after the end of the contract.

60. That interpretation of Article 18(a) of the Directive is corroborated by the objectives pursued thereby.

61. Undeniably, the Directive is designed to protect commercial agents as defined therein. ( ) The purpose of Articles 17 to 19 of the Directive, in particular, is to protect the commercial agent after termination of the contract and the regime established by the Directive for that purpose is mandatory in nature. ( )

62. However, the protection of commercial agents is not the only purpose of the Directive. As is apparent from the second recital in the preamble to the Directive, the harmonising measures laid down by the Directive are intended, inter alia, to eliminate restrictions on the carrying-on of the activities of commercial agents, to make the conditions of competition within the European Union uniform and to increase the security of commercial transactions. ( ) The purpose of the regime established in Articles 17 to 19 of the Directive is thus to protect, for all commercial agents, freedom of establishment and the operation of undistorted competition in the internal market. ( ) Lastly, as is clear from the third recital in the preamble, the Directive also seeks to facilitate trade in goods between Member States by harmonising their legal systems within the area of commercial representation. ( )

63. I consider that those objectives, in particular the one intended to ensure undistorted competition in the internal market, would be compromised if Article 18(a) of the Directive were to be interpreted as precluding improper conduct such as that complained of in regard to AHW from being regarded as justification for non-payment of the goodwill indemnity. In my view, it is imperative that the standardisation of the conditions of competition sought by the European Union legislature be done on a proper basis, without an interpretation likely to open a breach for fraudulent conduct by unscrupulous commercial agents, in particular during the notice period preceding the end of the agency contract.

64. Before terminating my comments, I would like to make the following two remarks.

65. A reply must be given to the argument which, the national court informs us, is defended in some of the German legal literature to the effect that, even under a restrictive interpretation of point 2 of Paragraph 89b(3) of the HGB and Article 18(a) of the Directive, improper conduct by a commercial agent may be taken into account when a court ascertains whether payment of a goodwill indemnity is equitable within the meaning of the third indent of Paragraph 89b(1) of the HGB and the second indent of Article 17(2)(a) of the Directive.

66. I would point out that, according to the latter provision, the commercial agent is entitled to an indemnity if and to the extent that ‘the payment of this indemnity is equitable having regard to all the circumstances’. Consideration of the question of fairness also acts as a safety valve that the court may use to adjust the amount of indemnity in the light of the particular circumstances of the case or even, in borderline cases perhaps, to rule out any goodwill indemnity. ( )

67. However, given the broad discretion which national courts enjoy in the context of consideration of the question of fairness, that consideration does not amount to a system of mandatory disallowance of any goodwill indemnity where there has been a default by a commercial agent justifying, under national law, immediate termination of the contract. In my view, consideration of the question of fairness cannot be a substitute for the rule for non-payment of the goodwill indemnity laid down in Article 18(a) of the Directive, that rule being mandatory in nature. ( )

68. Furthermore, it must be stated that the Member States may choose between a goodwill indemnity scheme, provided for in Article 17(2) of the Directive, or a damage compensation scheme, provided for in Article 17(3) thereof. It should be noted, however, that the latter provision makes no reference to fairness, with the result that the solution which favours account being taken of the commercial agent’s improper conduct in the context of a consideration of the question of fairness would not, in any event, be relevant for those Member States which have opted for a damage compensation scheme. Such a solution cannot therefore constitute a general alternative to mandatory disallowance of the goodwill indemnity arising under Article 18(a) of the Directive.

69. On the other hand, an approach under which the commercial agent is deprived of his goodwill indemnity where he has committed, during the currency of the contract, a fault which justifies immediate termination of that contract, gives the national court identical discretion, irrespective of the option chosen by the Member States, inasmuch as that court alone has jurisdiction to assess the gravity of such a fault. Thus, in a case where the principal became aware of that fault before the end of the contract but tolerated it, it is not impossible that the absence of any complaint or warning from the principal to his commercial agent could affect the agent’s entitlement to a goodwill indemnity. In such a scenario, it could be argued, on the basis of Articles 3, 16(a) and 18(a) of the Directive, that, given the principal’s tolerance in not immediately terminating the contract, the commercial agent’s fault is not so serious as to deprive him of his goodwill indemnity.

IV – Conclusion

70. In the light of the foregoing considerations, I propose that the Court reply as follows to the questions referred to it for a preliminary ruling by the Bundesgerichtshof:

Article 18(a) 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 must be interpreted as meaning that it does not preclude a commercial agent whose contract has been terminated from being deprived of his goodwill indemnity where the principal establishes, after the termination of the agency contract, default which occurred during the currency of the contract and which was of such a nature as to justify immediate termination of that contract, but which was not the cause of that termination, where the principal became aware of the conduct only after the end of the contract.