REPORT ON THE APPLICATION OF ARTICLE 17 OF COUNCIL DIRECTIVE ON THE CO-ORDINATION OF THE LAWS OF THE MEMBER STATES RELATING TO SELF-EMPLOYED COMMERCIAL AGENTS (86/653/EEC)
Date: 1996-07-23
Institutions: European Commission
Subjects: approximation of laws, contract, indemnification, national implementing measure, sales occupation

COMMISSION  OF THE  EUROPEAN  COMMUNITIES 

Brussels,  23.07.1996 
COM(96) 364 final 

REPORT ON THE APPLICATION OF ARTICLE 17 OF COUNCIL DIRECTIVE ON THE 
CO-ORDINATION OF THE LAWS OF THE MEMBER STATES RELATING TO 
SELF-EMPLOYED COMMERCIAL AGENTS (86/653/EEC) 

(Presented  by the  Commission) 

REPORT ON THE APPLICATION  OF ARTICLE  17 OF COUNCIL  DIRECTIVE  ON THE 
CO-ORDINATION OF THE LAWS OF THE MEMBER STATES  RELATING  TO 
SELF-EMPLOYED  COMMERCIAL  AGENTS  (86/653/EEC) 

* 
\ 

This  Report  is  made  under  Article  17(6)  of  Council  Directive  on  the  co-ordination  of  the 
laws  of  the  Member  States  relating  to  Self-Employed  Commercial  Agents  86/653/EEC1. 
Article  17 of Directive requires Member States to take the measures necessary  to ensure that 
the  commercial  agent  is,  after  termination  of  the  agency  contract, 
indemnified  or 
compensated. 

Article  17 represents a compromise between the Member States.  It was therefore agreed that 
Member  States  should  have the choice between the  indemnity  system and the  compensation 
system  and  that  the  Commission  would  undertake  a  report  to  the  Council  on  the  practical 
consequences of the  different solutions. 

This  report  is  made  on the basis  of  responses  to  a questionnaire  which  was  sent  out,  inter 
alia,  to  organisations  representing  agents  and  principals,  chambers  of  commerce  and 
federations  of industry and legal practitioners specialising  in agency law.  The authorities of 
Member States were also invited to  contribute with their views and experience. 

THE  TWO SYSTEMS 

l. 

The Indemnity  System 

Under the indemnity  system, the agent is entitled,  after cessation of the contract,  to payment 
of an indemnity  if and to the extent that he has brought new customers to the principal or has 
significantly  increased  the  volume  of  business  with  existing  customers  and  the  principal 
continues  to  derive  substantial  benefits  from  such  customers  after  the  cessation  of  the 
contract.  The  payment  of  the  indemnity  must  be  equitable  having  regard  to  all  the 
circumstances  and,  in  particular,  the  commission  lost  by  the  commercial  agent  on  the 
business  transacted  with  such  customers.  Finally,  the  Directive  provides  a  ceiling  on the 
level of  indemnity of one year calculated from the agent's average annual remuneration over 
the preceding  five years and if the contract goes back less than five years the maximum is to 
be calculated on the average for the period in question. 

The  indemnity  represents  the  continuing  benefits  to  the  principal  due  to  the  efforts  of  the 
agent.  The agent,  however,  will  only  have received commission during  the duration of  the 
contract,  which  will  not  typically  reflect  the  value  of  the  goodwill  generated  for  the 
principal.  It  is  for  this  reason  that  the  payment  of  a  goodwill  indemnity  is  commercially 
justified.  An  indemnity  will  only  be payable  if  the  agent  has brought to  the  principal  new 
customers or increased business with existing customers.  If no goodwill  has been generated 
or  there  is  a  group  of  customers  whom  the  principal  can  derive  no  benefit  from,  no 
indemnity need be paid.  Therefore,  a principal should not be forced to pay an unreasonable 
amount of indemnity. 

The  indemnity  system was modelled on Article  89b of the German Commercial  Code which 
had provided  for  the  payment of  a goodwill  indemnity  since  1953  and concerning  which a 
large  body  of  case-law  has developed  regarding  its calculation.  This case-law  and practice 
should provide  invaluable  assistance  to the Courts of  other Member  States when  seeking  to 
interpret the provisions of Article 17(2) of the  Directive. 

O.J. L 382 p. 17 of 31.12.1986 

First  it is  necessary  to ascertain whether an agent has a right to an indemnity  having regard 
to the circumstances  in which the agency contract was terminated.  An indemnity  is payable 
on  termination  of  the  contract  except  where  one  of  the  circumstances  in  Article  18  of  the 
Directive applies.  Clearly,  the indemnity  is payable on the end of a fixed  term contract and 
in principle, an indemnity or limited indemnity is payable on the bankruptcy of the principal. 

Secondly,  the conditions  set out in Article  17(2)(a) of  the  Directive  have to be met,  namely 
that either the agent has brought new customers or has substantially  increased the volume of 
business with existing customers.  As regards the volume of business with old customers, the 
German courts  look  to see  if  the  increase  in volume  is  such that  it can be considered  to be 
economically  equivalent to the acquisition of a new customer.  In relation to new customers, 
the  addition  of  one  new  customer  is  sufficient.  However,  new  customers from outside  his 
territory for which the agent is not entitled to commission are excluded as there is no loss of 
commission  for which the agent needs to be compensated.  The agent must have acquired 
the new client and in this respect the instrumentality  of the agent is crucial.  A small level of 
involvement  is  sufficient  and it  is enough that the  agent has merely  contributed  to bringing 
the  new  customer.  However,  the  agent  must  have  played  an active  role  and  therefore  the 
existence  of  a  new  customer  who  falls  within  the  territorial  scope  of  an  exclusive  agency 
agreement will not automatically  suffice. 

Thirdly,  the principal must continue after the end of the agency contract to derive substantial 
benefits  with such customers.  This is presumed to be the case even if the principal  sells his 
business or client  list  if  it can be shown that the purchaser  will  use the client base2. 
If the 
agent  continues  to  meet  the  needs  of  the  same  clients  for  the  same  products,  but  for  a 
different principal, the agent is prevented from seeking an indemnity3.  It is also possible for 
Fourthly,  the 
the  court  to  consider  a  fall  in  the  turnover  of  the  principal's  business. 
payment of an indemnity must be equitable. 

As to the actual calculation of the indemnity,  it is undertaken in the following way: 

Stage.1 

(a)  The  first  stage  in  line  with  the  second  indent  of  Article  17(2)(a)  is  to  ascertain  the 
number  of  new  customers  and  the  increased  volume  of  business  with  existing 
customers.  Having  identified  such  customers  the  gross  commission  on  them  is 
calculated  for  the  last  12 months  of  the  agency  contract.  Fixed  remuneration  can be 
included  if  it  can  be  considered  to  be  remuneration  for  new  customers4.  Special 
circumstances  may justify  departing  from  this,  for  example,  where  is  a  long  start up 
period. 

(b)  An  estimate  is  then  made  as  to  the  likely  future  duration  of  the  advantages  to  the 
principal  deriving from business  with the new  customers  and such old customers  with 
whom  the  business  has  been  significantly  increased  (intensified  customers)  which  is 
calculated  in  terms  of  years.  The  aim  is  to  predict  the  likely  length  of  time  the 
business  with  the  new  and  intensified  customers  will  last.  This" will  involve 

2  Case 18 U 162/76 Oberlandesgericht Hamm of 14.3.1977 
3  Case BB 605/60 Bundesgerichtshof of 25.4.1960 
4  Case VIIZR 194/63 Bundesgerichtshof of 15.2.1965 

considering  the  market situation  at time  of  termination  and the  sector  concerned.  The 
fact  that  sales  drop  after  termination  of  the  contract  does  not  automatically  lead  to a 
corresponding reduction in the level  of indemnity as sales may decline due to lowering 
in quality of goods or competition5.  The usual period is 2-3 years, but can be as much 
as 5 years. 

3 

(c)  The next factor to consider is the rate of migration.  It is acknowledged  that over time 
customers  will  be  lost  as  customers  naturally  move  away.  The  rate  of  migration  is 
calculated  as  a percentage  of  commission  on a per annum basis and is  taken from the 
particular experience of the agency in question.  This clearly varies, but in one case the 
Bundesgerichtshof held that the rate of migration was 38%6. 

(d)  The  figure  is  then reduced  in order to calculate  the present  value  taking  into  account 
that  there  is  an  accelerated  receipt  of  income.  Such  a  calculation  based  on  average 
interest rates is a concept found in other jurisdictions. 

StageJ» 

It is at this stage that the question of equity is considered as set out in Article  17(2)(a) second 
indent of the Directive.  The figure  is rarely adjusted for reasons of equity  in practice.  The 
following  factors are taken into account: 

Whether the agent is retained by other principals; 

The fault of the agent; 

The level of remuneration of the agent.  For example, did the principal recently reduce 
the  rate  of  commission  e.g.  because  he  felt  that  agent's  earnings  were  becoming  too 
high  or  pay  to  the  agent  a  large  amount  of  commission  on  contracts  with  customers 
which the agent did not introduce or had little to do with ?  Also, did the agent receive 
special  compensation  for  keeping  a  consignment  inventory,  special  bonuses  for  new 
clients, del credere commission, any special allowance for trade fairs or extra payments 
for sub-agents ?  Did he incur costs regarding loss of sub-agents? 

Decrease in turnover of the principal; 

Extent of the advantage to the principal; 

Payment of pension contributions by the principal; 

The existence of restraint of trade clauses.  Clearly,  a principal will be required to pay 
a higher indemnity for this. 

5  Case BB 227/70 Celle of 13.11.69 

6  Case VIIIZR 94/93 Bundesgerichtshof of 23.2.1994 

The  amount  calculated  under  Stages  1  and  2  is  then  compared  with  the  maximum  under 
Article  17(2)(b) of  the Directive.  This provision provides that the amount of  the indemnity 
may  not  exceed  a  figure  equivalent  to  remuneration  for  one  year  calculated  from  the 
commercial  agent's  average  annual  remuneration  over  the  preceding  five  years  and  if  the 
contract goes  back  less  than five  years the  indemnity  shall  be calculated  on the average  for 
the period in question.  The maximum is  in fact therefore  a final  corrective,  rather than as a 
method of calculating the indemnity7. 

In  calculating  the  maximum,  remuneration  includes  all  forms  of  payment,  not  just 
commission  and is  based  on  all  customers,  not  only  new  or  intensified  customers8.  If the 
sum under stages  1 and 2  is  less than the maximum then this sum is  awarded.  If however, 
the  sum exceeds  the maximum,  it  is  the maximum  which  is  awarded.  It is  unusual  for the 
maximum to be reached unless the agent has procured all or most of the customers. 

An example of stages  1 to 3 is set out: 

Commission on new customers 
and/or intensified customers 
over last  12 months of agency 

Anticipated duration of benefits is 
3 years with 20% migration rate 

Year 1 
Year 2 
Year 3 

50,000  -10,000 
40,000 -  8,000 
32,000-  6,400 

50,000 ECUs 

40,000 ECUs 
32,000 ECUs 
25,600 ECUs 

Total lost commission 

97,600 ECUs 

Correction to present value say 10%. 
This figure being equal to the actual 
indemnity 

This figure might be adjusted for 
reasons of equity (stage 2 above) 

A final correction must be made should 
the amount exceed the maximum 
under Article  17(2)(b) of the Directive. 

87,840 ECUs 

7  Case VIIZR 47/69 Bundesgerichtshof of 19.11.1970 

8  Case VI! ZR 23/70 Bundesgerichtshof of 3.6.1971 

Article  17(2)(c)  states that the grant of  an indemnity  shall  not prevent the commercial  agent 
from seeking damages.  This provision governs the situation where the agent under national 
law  is entitled  to seek damages for breach of contract or failure to respect the notice period 
provided for under the Directive.  Annex B attempts to identify these provisions. 

It can thus be  seen that the method of calculation of  the indemnity  is extremely  precise and 
should  lead to a predictable  outcome.  Principals  should  therefore be able  to ascertain their 
risks in advance and to be able to enter into agency contracts with some degree of assurance. 
From  the  agent's  perspective,  clearer  rights  make  it  easier  for  the  claim  to  be  made  and 
established. 

The Compensation System 

Under Article  17(3) of the Directive,  the agent is entitled to compensation for the damage he 
suffers  as  a  result  of  the  termination  of  his  relations  with  his  principal.  Such  damage  is 
deemed to occur particularly when the termination takes place in circumstances: 

depriving  the  agent  of  the  commission  which  proper  performance  of  the  agency 
contract  would  have  procured  him  whilst  providing  the  principal  with  substantial 
benefits linked to the agent's activities. 

and/or  which  have  not  enabled  the  agent  to  amortize  the  costs  and  expenses  he  had 
incurred for the performance of the  agency contract on the principal's advice. 

There is no maximum level of compensation. 

The compensation  system was based on French law,  which dated from  1958  and whose aim 
was  to  compensate  the  agent  for  the  loss  he  suffered  as  a  result  of  the  termination  of  the 
agency contract.  As for the indemnity system in Germany, a body of case-law has developed 
in France concerning  the right and level of compensation.  Various judgments of  the French 
courts have justified  the payment of compensation on the ground that it represents the cost of 
purchasing the agency  to the agent's successor or on the ground that it represents the time it 
takes for the agent to re-constitute the client base which he has been forcefully  deprived  of. 

By judicial custom the level of compensation is fixed  as the global sum of the last two years 
commission or the sum of 2 years commission calculated over the average of last three years 
of  the  agency  contract  which  conforms  with  commercial  practice.  However,  the  courts 
retain  a  discretion  to  award  a  different  level  of  compensation  where  the  principal  brings 
evidence  that the agent's  loss  was  in fact  less,  for example, because of the short duration of 
the contract or where,  for example,  the agent's  loss  is greater because of  the agent's  age or 
his length of service. 

The indemnity is calculated on all remuneration, not just commission.  It is based on the gross 
figure.  No  distinction  is  made  between  old  and  new  customers  and  it  includes  special 
commission.  There  is  no  practice  to  reduce  for  professional  costs.  Finally,  outstanding 
commissions must also be included in the calculation. 

The indemnity represents that part of the market lost to the agent and his  loss is fixed at that 
moment.  Accordingly,  future  occurrences  are  not  taken  into  account,  such  as  the  principal 
ceasing  to trade, the agent continuing  to work with the  same clients  or developments  in the 
market place.  Similarly, the agent is not required to mitigate his loss. 

6 

The Directive has brought about a greater interest in claiming damages for failure to respect the 
proper notice period.  The amount awarded is the highest of the period not respected calculated 
on commission received for the last two years or the commission received during the identical 
period the previous year. 

Further, more specific comments on the system in France can be found in Annex B. 

POSITION IN MEMBER STATES 

All  Member  States have  implemented the Directive  and a list  of  the  laws  is  annexed  to this 
Report as Annex A.  With the exception of France, the UK and Ireland, Member States have 
incorporated the indemnity option into their national  law.  The UK has permitted the parties 
to  choose  the  indemnity  option,  but  if  they  fail  to  do  so,  the  agent  will  be  entitled  to 
compensation.  Ireland has failed  to make any choice at all  in its legislation and accordingly 
the  Commission  has  opened  Article  169  proceedings.  The  Commission  has  also  opened 
infraction  proceedings  against  Italy  for  failure  to  implement  Article  17  of  the  Directive 
correctly.  Further details can be found in Annex B concerning Irish and  Italian law. 

In  most  Member  States  there  has  yet  to  be  any  reported  court  decision,  whilst  in  other 
Member States there are only a small number of cases.  This is explained by the fact that the 
laws  in most Member States are still  very  new  and that these  laws  have only  applied  to all 
contracts  in operation as from 1 January  1994.  In addition,  in France and Germany where 
there  are  cases,  many  agencies  are  not  international  in  nature  and  the  law  follows  long 
established traditions. 

The second reason for the lack of reported cases is the tendency for the parties to settle cases 
before  the  court  hearing.  Agents  are  not  always  in  the  financial  position  to  pursue  their 
claims  through  the  courts  and therefore  are  forced  to  accept  settlements.  In  addition,  the 
uncertainty  linked  to  court  proceedings,  invariably  in  a  different  jurisdiction  deters  agents 
from  pursuing their claims through the courts. 

The cases in Germany and France show a continuity with the existing jurisprudence  in these 
countries.  In Portugal,  where the Directive represents a change to the previous  situation the 
case-law  shows  an approach which is different  to that of  the German courts with an attempt 
by the judge to apply directly the principle of equity.  In Italy, where there has only been one 
judgment  under the  new  Article  1751  of  the  Civil  Code,  the  Viterbo  Magistrate  Court has 
ruled,  that having  regard  to  the  lack  of  criteria  for  calculation  of  the  indemnity  in  Article 
1751  of  the Civil  Code,  it would apply  the collective  agreement.  The collective  agreement 
follows  a system of calculation based on the duration of  the agency  and is  not. related to the 
number of  new  customers brought.  Thus,  it also takes  a different  approach to the German 
courts.  However, this is a single judgment of the Italian courts and has yet to be confirmed. 
In Denmark,  only three judgments have been reported.  A fourth judgment is now subject to 
appeal.  The reported cases reveal a tendency to take over and follow German jurisprudence. 

7 
Having regard to the relative  lack of jurisprudence  and the  nature of  the  subject  matter,  the 
Commission in its preparation for this Report sought  to ascertain the practical as well  as the 
legal  situation.  An  outline  of  the  legal  and practical  position  is  set  out  in  more  detail  in 
Annex B. 

There  are  no  statistics  available  in any  of  the  Member  States.  The  International  Union  of 
Commercial  Agents  and  Brokers  have  now  started  to  collect  data.  This  is  a  helpful 
development,  as IUCAB should be able to  collect  a good  level  of  data  through  its  member 
organisations in Member States and IUCAB has offered  to present these statistics  periodically 
to the Commission.  The Portuguese authorities have also established  a centralised  method of 
collecting  information  from  all courts on the nature  and  outcome of cases  which  involve  EC 
law  or  the  Lugano  Convention,  which  of  course,  includes  the  Directive  on  Commercial 
Agents. 

BUSINESS PRACTICE 

The Commission  sought to ascertain whether, as a result of the Directive and  in particular the 
right to an  indemnity  or compensation,  there had  been  any change  in business  practice.  The 
Commission also wanted to establish whether, as a result of the different  options, distortions in 
competition  had arisen.  The lack of statistics makes  it more difficult  to reach  conclusions  in 
this regard. 

Overall, the Commission found that there had not been any change in business practice.  There 
was  some  evidence  that  principals  were  moving  to  distributorship  contracts  in  France, 
Germany,  Luxembourg and Belgium.  This can be partially explained by the fact that on  lawful 
termination of distributorship contracts no indemnity  or compensation  is payable or a reduced 
level.  In  the  UK,  Ireland  and  Sweden  it  was reported  that  principals  were  now  considering 
much  more  carefully  whether  agency  contracts  were  the  most  appropriate  business 
arrangements  and were therefore  taking a much more cautious approach.  However,  principals 
were not always actually moving away from agency contracts. 

In the UK there appears to have been a specific reaction.  First prior to the coming into force of 
the UK  Regulations  implementing  the  Directive, principals  terminated  their  agency  contracts 
and  on  the  whole  re-negotiated  new  contracts.  There  were,  however,  occasions  where  new 
agency contracts were not entered into or the agents were taken on as employees.  This  reflects 
the fundamental  change brought about by the Directive to UK law and the fear of principals of 
the unknown.  It is too soon to determine whether there will  be a permanent  shift  away from 
agency contracts in the UK. 

Under French law and practice, compensation awarded in the vast majority  of cases amounts to 
2  years  commission  which  is  twice  the  legal  maximum  provided  for  under  the  indemnity 
option.  This clearly  makes the appointment  of an  agent  in France under  French  law  a much 
more  costly  enterprise.  This  has  led  some  principals  seeking  when  appointing  an  agent  in 
France to seek to apply a law other than French law or to avoid entering into agency  contracts 
altogether.  There is no evidence of any widespread problems or distortions in trade as regards 
those Member  States who have opted for the indemnity  system  and those who have opted  for 
the compensation option. 

2} 

REACTIONS OF PRINCIPALS AND AGENTS 

It can  generally  be  said  that  agents  have  given  a  positive  response  to  the  Directive  as  it  is 
considered to have increased their rights. This would be the case in Austria, Denmark, Finland, 
Ireland, Luxembourg, Sweden and the UK.  French agents continue to feel positively about the 
system of compensation in France and do not wish for change. 

The  reaction  of  principals  has  been  mixed.  To  some  extent,  principals  are  bound  to  feel 
negative about change as they now have to grant greater rights to agents.  For other principals it 
is not that they are against paying an indemnity  on termination, but rather there  is a degree of 
discontent  in  that  the  system  lacks  clarity.  French  principals  appear  to  support  the 
compensation system and  have not raised any objections regarding it. 

There  is  no  tendency  amongst  either  agents  or  principals  in  the  Member  States  who  have 
implemented the indemnity option to favour  anything  other than the indemnity  system.  In the 
UK, where the parties are able to opt in favour of payment of an indemnity, no clear  preference 
emerges  although  most  contracts  do  not  contain  an  indemnity  provision.  Principals  are  still 
unclear  about  what  the  differences  between  the  two  systems  are.  There  is  a certain  level  of 
interest  in  the  indemnity  amongst  some  principals  because  of  the  maximum  limit,  but  other 
principals prefer the compensation option as agents must prove actual loss. 

DIFFICULTIES 

A number of difficulties  have arisen in relation to Article  17 of the Directive. 

(1) 

Interpretation  difficulties 

Many commentators and lawyers have pointed to the imprecise and uncertain nature of Article 
17,  which  causes  difficulty  in  trying  to  advise  clients  on  the  extent  of  an  agent's  rights  on 
termination.  This was reported in particular in Denmark, Ireland, Italy, Spain, Sweden and the 
UK. 

a. 

Indemnity 

As  regards  the  indemnity  option,  there  has  been  a tendency  in  some  Member  States  to  seek 
reliance  on  the  maximum  figure  whereas  under  the  German  system,  which  influenced  the 
Directive, the maximum  has no bearing on the actual  method  of calculation  of the  indemnity. 
It is merely used at the end of the process as a final adjuster.  In some Member  States attempts 
are made to try and establish an equitable amount taking into account various different  factors, 
which again is not the approach taken by the German courts.  Denmark  and Austria appear to 
follow  the  German  model  but  in  the  case  of  Austria,  the  maximum  limit  is  often  reached, 
whereas in Germany it is very rarely reached except when all the customers have been brought 
by the commercial agent. 

In Italy, it appears, at the moment, that the previous  system  continues  to apply  even though a 
new law was introduced.  This has been re-enforced  in the ruling in the Pretura Viterbo case in 
which  the  court  held  that  the  provision  of  Article  1751  of  the  Italian  Civil  Code,  which 
implements Article 17(2) of the. Directive, was so uncertain as to the method of calculation of 
the  indemnity,  it would  apply the collective  agreement.  The method  of calculation  under  the 
collective agreement does not correspond with the German model, but is based on the length of 
the contract, the level of commission and the percentages set out in the collective agreement. 

It therefore appears there is a divergence of approaches.  However, there is of course still only a 
very  limited  jurisprudence  of  the  courts  of  Member  States  concerning  Article  17  outside 
Germany. 

9 

b. 

Compensation 

As regards the compensation option, clearly this has not presented problems of interpretation in 
France where pre-existing jurisprudence has continued to be applied.  However, as regards the 
UK which applies the compensation option in default  of the choice  of the parties, there  is a 
fundamental  difference  in approach.  At this stage, there is no UK case-law but the parties in 
practice  are attempting  to apply  common  law principles.  These  common  law  principles are 
directly opposed to the well-established method of calculation of compensation in France.  For 
example, the English system will take account of future developments after termination of the 
contract and this results in the need to for the injured person to mitigate his  loss.  Whereas, 
under French law, events after the termination of  the  agency contract have no bearing on the 
compensation to be awarded.  Under French Law, the standard award is two years commission 
which represents the value of the  purchase of an  agency or the period it will take the agent to 
re-establish his client base.  It is difficult to see how the UK courts will reach this figure. This, 
no doubt, derives from the previous  legal position in the UK, that agency contracts could be 
terminated on notice without any payment being due.  This naturally has had consequences for 
business practices.  There was no real concept of goodwill attaching to an agency to which the 
agent had a right to a share in.  It is not possible to predict how the UK courts will interpret the 
Directive, but it seems likely that they will have regard to existing common law principles. 

The same difficulties are likely to arise in Ireland if Ireland opts for the compensation option. 

c 

Consequences of uncertainty 

The difficulties  in interpretation have had an effect on the reactions of agents and principals to 
the Directive.  For both it has entailed increased time being spent on negotiation  since rights 
and levels of rights are not clearly established.  This benefits neither party.  It has also led to 
different  amounts  being  awarded.  Uncertainty  and  divergence  also  lead  to  a  reluctance  to 
create agencies and act as a barrier to principals to take on agents in other Member States.  It is 
important that the Directive is uniformly interpreted and leads to predictable and clear results. 

(2)  Position of Agents 

The Directive  has led to  an improvement  in the position  of  agents vis-à-vis  their principals. 
Nevertheless it appears that agents are not always able to enforce their rights to the full because 
they  lack the resources  to  take court  action.  This  is  a problem  of  a general  nature  and not 
specific to the Directive.  Possible remedies lie outside the remit of this Report.  However, it is 
the view of the Commission that clarification of the provisions of the Directive and methods of 
calculation will be of assistance to agents and make the enforcement of rights easier. 

(3)  Choice of Law 

Finally,  certain  problems  have  been  encountered  with  regard  to  choice  of  law  clauses  in 
contracts and attempts have been made to avoid the application of certain laws by choice of law 
clauses or jurisdiction clauses.  The Directive does not lay down any rules concerning private 
international  law.  The  parties  are therefore free to  choose  the  law  which  is  to  govern the 
agency  contract,  subject  to  the  rules  contained  in  the  Rome  Convention  1980  on  the  law 

10 
applicable to contractual obligations.  In the Commission's opinion Articles  17 and  18 of the 
Directive are mandatory rules and accordingly, the courts of the Member States can apply the 
law  of  the  forum  in  accordance  with  the  1980  Rome  Convention  and  thereby  ensure  the 
application of the Directive.  The 1968 Brussels Convention on jurisdiction and enforcement of 
judgments  in  civil  and  commercial  matters  will  also  assist  in  ensuring,  that  in  so  far  as 
Community  cases are concerned and the agent  is  carrying  on his activities  in the  EC, that a 
court of a Member State will have jurisdiction9.  Accordingly, there does not appear to be any 
need to amend the Directive in this regard. 

CONCLUSION 

The  Commission  notes  that  the  indemnity  option  has  been  chosen  by  the  vast  majority  of 
Member States and that this has received the support of agents and principals in those Member 
States.  The Directive provides for a ceiling on the level of indemnity, but does not give precise 
guidance for its method of calculation.  A clear and precise method of calculation would lead to 
greater  legal  certainty,  which  would  be  of  advantage  to  both  parties.  As  regards  the 
compensation option, which has been maintained by France, it does not appear to have caused 
problems for agents and principals in France.  The level of compensation in France is generally 
much higher than the level  of indemnity.  The implementation in the UK whereby the parties 
have the choice of the system has led to uncertainty, particularly as neither of the two options is 
known to the British legal system. 

At this stage, there is very little jurisprudence concerning the Directive.  Having regard to the 
information received, it appears that there is a need for clarification  of Article  17.  Any more 
further  far-reaching  conclusions  are premature.  The Commission  considers  that this Report, 
which  gives  detailed  information,  particularly  concerning  the  method  of  calculation  of  the 
indemnity  as  it  is carried out  in Germany,  provides  further  clarification  of  Article  17 of the 
Directive and secondly, by so-doing  should facilitate  a more uniform  interpretation of Article 
17 of the Directive. 

Arcado  Sprl v  Haviland  SA Case N° 9/87  [1988]  ECR  1539 the Court held that right to compensation  was 
contractual  in nature  and therefore  Article  5(1)  of the  1968  Brussels  Convention  applied  thus  opening  the 
possibility  of an additional basis of jurisdiction 

41 

ANNEXA 

LIST QF MEMBER STATES LAWS IMPLEMENTING THE DIRECTIVE QN 
COMMERCIAL AGENTS (86/653/EEC) 

Expiry of implementation period : 31.12.89 
(United Kingdom and Ireland : 31.12.93) 
(Italy, concerning article 17 : 31.1*2.92) 

1. Belgium 

2. Denmark 

3£ejiQany. 

4. Greece 

5. Spain 

6.Erarjce 

Law of 13.4.1995 
published in Moniteur Belge of 2.6.1995, pg. 15621 
entry into force : 12.6.1995 

Law n° 272 of 2.5.90 
publication : Lovtidende A. 1990 p. 922 
entry into force : 4.5.90 
application to contracts in operation : 1.1.92 

Law of 23.10.89 
publication : Bundesgesetzblatt  198911910 
entry into force : 1.1.90 
application to contracts in operation : 1.1.94 

Presidential Decree n° 219 of 18.5.1991 
publication : QJ of the Greek government n° 81 of 30.5.1991 and n° 136 
of 11.9.1991 as amended by Decrees n° 249/93, 88/94 and 312/95. 
entry.into force : 30.5.1991 
application to contracts in operation : 1.1.94 

Law 12/1992 of 27.5.1992 
publication : BOE n° 129 of 29.5.1992 
entry into force : 19.6.1992 
application to contracts in operation : 1.1.94 

Lawn° 91-593 of 25.6.1991 
publication : OJ of the French Republic 17.6.1991 p. 8271 
entry into force : 28.6.1992 
Decree 92-506 of 10.6.1992 
Publication: OJ of the French Republic 12.6.1992 p. 7720 
entry into force : 1.1.1994 
application to contracts in operation : 1.1.94 

7. Ireland 

Statutory Instrument : SI N° 33 of 1994 of 21.2.1994 
Entry into force : 1.1.1994 
application to contracts in operation : 1.1.94 

42 

8. Iialy 

Legislative Decree n° 303 of 10.9.1991 
publication : Gazetta ufficiale n° 57 of 
20.9.1991. 
entry into force : 1.1.1993 
application to contracts in operation : 1.1.94 

9. Luxembourg 

Law of 3 June 1994 
publication : Memorial A-N° 58 of 6.7.1994, p. 1088 
application to contracts in operation : 1.1.94 

10. Netherlands  Law of 5.7.89 

publication : Staatsblad 1989 n° 312 
entry into force : 1.11.89 
application to contracts in operation : 1.1.94 
Re-enacted by Law n° 374 of 1993 as Articles 400-445 of Title 7 of the 
Burgerlijk Wetboek 

11.AusJxia 

l2.£oimgal 

Federal Act of 11.2.1993 
published in Federal Gazette 88 
entry into force : 1.3.1993 
application to contracts in operation  1.1.1994 

Decree n° 178/86 of 3.7.86 
publication : Diârio da Repûblica, I série, 1986, p. 1575 
entry into force : 2.8.86 
application to contracts in operation : 2.8.86 
amended by law No  118/93 of 13.4.93 published Diârio da 
Repûblica No 86 p.1818 of 13.4.93 
application to contracts in operation : 1.1.94 

B.Einlâûd 

Law n° 417 of 8.5.1992 
published in Gesetzblatt of 14.5.1992 
entry into force : 1.11.1992 
application to contracts in force : 1.1.1994 

14. Sweden 

Lawn° 351 of 2.5.1991 
entry into force : 1.1.1992 
application to contracts in force : 1.1.1994. 

15. UK 

Statutory Instrument SI 1993 n° 3053 of 7.12.93 
and SI 1993 n° 3173 of  16.12.1993 
entry into force : 1.1.94 
application to contracts in operation : 1.1.1994 
Northern Ireland : 
Statutory Rules of Northern Ireland 1993 n° 483 of 17.12.1993 
entry into force : 13.1.1994 
application to contracts in operation : 13.1.1994 

f\b 

ANNEXB 

BELGIUM 

The  law  on  Commercial  Agent  Contract  only  came  into  force  on  12  June  1995. 
Accordingly, there are no cases decided by the courts on the new law. 

Article 20 of the law introduced the right to a goodwill indemnity.  Prior to the new law, 
the right to a goodwill  indemnity had been rejected by the main decisions of the Belgian 
courts  as  goodwill  was  considered  to  attach  to  the  principal  more  than  to  the  agent. 
Accordingly, the new law has brought about an important change to the law. 

The law contains no guidance as to how the indemnity is to be calculated, but it is argued 
by  most  commentators  that  is  for judge  to  determine  the  amount  taking  into  account 
various  factors  such  as  level  of  commission  in  last  years  of  the  contract,  level  of 
development  of  customers,  extent  to  which  principal  will  continue  to  derive  benefits, 
duration  of  contractual  relations,  level  of  involvement  of  the  principal,  existence  of  a 
pension financed by the principal or whether the agent's contract with the principal  is his 
sole agency.  One author has specifically drawn on the German method of calculation. 

Practising Belgian lawyers considered that regard would be had to the law on commercial 
representatives  and  to  the  German  experience.  Under  the  Law  on  Commercial 
Representatives  of  3  July  1978,  however,  the  indemnity  is  calculated  on  the  basis  of 
3 months wages for a commercial representative who has acted for the same principal for a 
period of one to five years.  This period is increased by one month for each further  five 
years. 

Under Article  18(3) of the Belgian law, it is possible to claim damages for lack of notice, 
which amounts to lost commission in accordance with method of calculation set out in this 
Article. 

Finally,  under Article  21  of  the Belgian law,  an agent who has a right to  an indemnity 
can claim  in  addition  damages  for  the  harm actually  suffered.  It  is  not  clear  in  what 
is  this  payable  and  whether  entitlement  to  an  indemnity  gives 
circumstances 
automatically  a  right  to  seek  damages. 
In  the  view  of  the  Commission  this  latter 
interpretation would be contrary to Article  17(1) of the Directive as the effect  of such an 
interpretation would be that the two options would apply cumulatively. 

DENMARK 

With the implementation of the Directive in Denmark and the introduction of the right to 
an indemnity  under Section 25 of Law N° 272 of 2 May  1990, a new right was granted 
which had not existed under the previous law. 

é 

To date, only  three judgments  have  been  reported10.  In Lope  Handel  the  principal  was 
ordered to pay losses for the failure to respect the contractual period of notice and to pay an 
indemnity of  1 years commission on the new customers acquired for the principal by the 
agent.  It was proved that the new customers were  lost one year after termination of the 
agency contract.  In S&L, the principal was ordered to pay an indemnity equivalent to the 
maximum.  It was proved that practically all the customers were brought by the agent.  In 
Cramer, the court found that a substantial number of customers were once-only customers 
with whom the principal  could expect no further business.  The principal  was ordered to 
pay an indemnity amounting to DKK  150,000.  For comparison the maximum would have 
been 400,000. 

In practice it appears that agents seek the maximum amount and principals try to argue the 
figure  down.  At present, although there is no set picture, there is no tendency  to pay the 
maximum figure.  Calculations appear to follow the German model. 

As for other Member States, no useful statistics are available. 

Section 6 of the law implements Article  17(2)(c) of the Directive and provides that if an 
agent  or  principal  is  in  breach  of  his  obligations  to  the  other,  the  other  is  entitled  to 
compensation for any damage caused thereby. 

GERMANY 

Article  89b  of  the  Handelsgesetzbuch  sets  out  the  agents  right  to  an  indemnity.  The 
method of calculation is set out in the Report itself. 

In practice  it  appears  that  there  has  been  no  change  in  Germany  as  to  the  method  of 
calculation  of  the  indemnity  following  the  implementation  of  the Directive  in Germany 
as the indemnity provision of the Directive did not require change to German law.  The 
change  noted  by  industry  was  in  relation  to  contracts  with  other  EU  countries,  which 
prior to the Directive did not provide for an indemnity. 

GREECE 

The implementation of Article  17 of the  Directive by Article 9 of Presidential  Decree 219 
of  18  May  1991  did  not  conform  with  the  Directive,  in  particular,  in  that  it  did  not 
implement  the  second  indent  of  Article  17(2)(a)  which  requires  that  the  indemnity  be 
equitable.  Greece has following  correspondence with the Commission  introduced  a new 
law in 1995 which implements Articles 17(2)(a). 

10  Lspaiiiodfil v GE Lighting  (Commercial Court of Copenhagen of 25.9.1995); S&L v Eskimo. (High 
Court  Western  Division  of  14.11.1995); Cramer v  B&B (Commercial  Court of  Copenhagen of 
15.12.1995) 

AS 

Article 9(lXc)  states that the right to seek an indemnity does not prevent an agent from 
seeking damages under the Civil Code.  Damages are payable and awarded according to 
whether the contract was fixed term or of indefinite duration. 

An agent may also seek damages for lack of proper notice. 

SEAIN 

Article 28 of law N°  12/1992 of 27 June 1995 provides for the payment of an indemnity. 
Article 29 of the law provides for the award of damages if the principal unilaterally breaks 
an agency contract which is for an indefinite period.  The Directive has filled a legal gap in 
Spanish law in that prior to the law implementing the Directive there was no specific  law 
covering commercial agents or commercial agency contracts.  However, Article 29 is not 
restricted  merely  to  breach  of  contract  and  by  virtue  of  this  Spain  has  seemingly 
implemented  both  options  contained  in  Article  17  of  the  Directive  unless  the  Court 
interprets the scope of Article 29 narrowly. 

Owing  to the recent coming  into force  of the law there is a lack of jurisprudence  in this 
area. The case-law prior to the new law may be of relevance for the future  since  some of 
the principles may act as guidance for future judgment by the Spanish courts. 

Under the old law, it was also possible to claim both damages and a goodwill  indemnity 
and  agents  used  to  cumulate  both  claims.  The  difference  between  both  remedies  was 
sometimes  blurred  in  practice.  The  Supreme  Court  has  repeatedly  recognised  the 
possibility of obtaining an indemnity for goodwill.  The judge is given a wide discretion to 
fix  the  level  of  the  indemnity  and  in  general  it  is  calculated  depending  on  the  agent's 
earnings11.  As  regards damages, the courts considered  a number of  different  matters in 
arriving at the award, including the level of the last commission, the nature of the activity, 
loss of prestige and whether the contract was exclusive or not12. 

Finally,  damages are payable for failure to respect the correct notice period which  is the 
amount  of  commission  the  agent  would  have  received  if  the  notice  period  had  been 
respected13. 

However,  despite  these  judgments  it  is  still  difficult  to  reach  general  conclusions, 
particularly as in Spain the level of indemnity is fixed after the hearing and the decision is 
not published. 

1 '  Supreme Court judgments of 22 March 1988 and 19 September 1989 
12  Judgment of Court of Appeal of Lugo of 4.6.1994; Court of Appeal Valence of  14.7.1993 and Court of 

Appeal Barcelona of 30.1.1995 

13  Judgment of Supreme Court of 19.9.1989 

Aio 

ERANCE 

Unlike for many other Member States, the Directive has not brought about radical change 
to the pre-existing law in France.  Under Article  12 of Law N° 91/593  of 25  June  1991, 
French  law  continues  to  give  a  right  to  compensation  on  termination  of  the  agency 
contract.  The change brought about relates to the circumstances in which compensation is 
payable  and not  in  its  calculation.  The right to  compensation  now  exists  for  the  non 
renewal  of the contract and termination by the agent for reasons of old  age,  sickness or 
infirmity and on death. 

Compensation is calculated as before according to the jurisprudence as neither the old law 
or the  present  law  sets  out  the  method  of  calculation.  In the  vast  majority  of  cases  it 
amounts  to  two  years  gross  commission  which  is  calculated from the  agent's  average 
remuneration  over  the  preceding  three  years  or  the  global  sum  of  the  last  two  years 
commission.  This  sum has become the  customary  award and  is  confirmed  with  court 
decisions applying the new law14. 

The indemnity is calculated on all remuneration, not just commission.  It is based on the 
gross  figure.  No  distinction  is  made  between  old  and  new  customers  and  it  includes 
special  commission.  There  is  no  practice  to  reduce  for  professional  costs.  Finally, 
outstanding commissions must also be included in the calculation. 

The indemnity represents that part of the market lost to the agent and his loss  is fixed at 
that  moment.  Accordingly,  future  occurrences  are  not  taken  into  account,  such  as  the 
principal  ceasing  to  trade,  the  agent  continuing  to  work  with  the  same  clients  or 
developments in the market place.  Similarly, the agent is not required to mitigate his loss. 

The  French  courts  do  not  order  the  payment  of  two  years  gross  commission  as 
compensation where it can be shown that the loss suffered by the agent is less, for example, 
because of the short duration of the contract.  Similarly, the level may be increased, where, 
for example, an agent's loss is greater because of his age or length of the agency contract. 

The  Directive  has  brought  about  a  greater  interest  in  claimlhg.damages  for  failure  to 
respect  the  proper  notice  period.  The  amount  taken  is  me'highest  of  the  period  not 
respected  calculated  on  commission  received  for  the  last  two  years  or  the  commission 
received during the identical period the previous year. 

14  See for example: Court of Appeal Toulouse 20.12.1994 Les Annonces de la Seine, N° 39 1.6.1995 p.28; 
Court of  Appeal  Dijon,  16.6.1994  Les  Annonces de  la  Seine, N°  39,  p.26;  Court of  Appeal  Paris, 
17.1.1995, Les Annonces de la Seine 1.6.1995, N° 39. p.8. 

/ ft 

IRELAND 

Ireland has not implemented this provision and therefore agents do not have either a right 
to compensation or an indemnity.  Under the common law, an agent can seek damages for 
breach  of  contract.  In  a  fixed  term  contract,  this  will  allow  the  agent  to  claim  the 
commission  he would  have received  until  the end of the  contract,  subject  to  the agent's 
duty to mitigate his loss.  However, this is not sufficient  for the purposes of implementing 
the  Directive. 
In  cases  of  contracts  of  indefinite  period  the  claim  is  usually  for 
remuneration during the notice period to be respected.  In addition, in both cases, he may 
claim for the economic loss suffered as a result of the breach of contract. 
To date there are no reported cases. 

11 AL L 

Italy amended Article  1751 of the Civil Code by Article 4 of legislative Decree N° 303 of 
10 September  1991 to introduce the indemnity system set out in the Directive.  However, 
in the view  of the Commission the implementation by Italy  is  incorrect  in that Italy has 
treated the two indents in Article 17(2)(a) of the Directive as alternative conditions whereas 
they  are  in  fact  cumulative.  Accordingly  the  Commission  has  opened  infraction 
proceedings. 

It appears that the old system of collective agreements continues to apply.  The Enasarco 
agreement of 30.10.1992  was agreed to by both principals and organisations representing 
agents.  By  doing so they have de facto re-introduced the criteria which were applicable 
under the previous text of Article 1751. 

In its judgment of  1 December  1994, the Viterbo Magistrate Court applied the collective 
agreement.  The court held  that Article  1751  of the Civil  Code  could  not  be  applied  in 
practice as it does not fix any criteria for calculating the indemnity except the  maximum. 
Accordingly,  the court considered  it appropriate to  apply  the collective  agreement.  The 
Court also stated that the circumstances in Article  1751 were not intended for calculating 
the amount of indemnity, but for determining whether an indemnity was justified if at least 
one  of  the  circumstances  applied.  Further,  the  court  considered  that  wisely  the  social 
partners, in order to avoid practically  insoluble problems, had replaced the old  collective 
agreement hereby enabling Article  1751 of the Civil Code to be applied in practice.  It is 
not clear at this stage whether this judgment will be followed. 

The system of the collective agreement is based on level of commissions  and duration of 
the agency contract and the set percentages laid down in the agreement. 

Under the collective agreement, the agent in most cases receives an amount which is much 
less than the maximum envisaged under the Directive. 

UJXEMBQURO 

Luxembourg's  law  implementing  the  Directive  of  3  June  1994  applies  to  all  contracts 
existing  before  1 January  1994 as well  as to contracts entered  into  force  after  that date. 
Article  19 provides for an indemnity to be paid on termination.  The new law introduced a 
right  which did not exist under the pre-existing law.  It is therefore unsurprising that there 

Al 

courts decisions.  Those consulted also thought it was too soon to develop a theory about 
how the law would be interpreted. 

Article  23(1)  sets out the right to damages for unjustified  failure  to give  due notice and 
Article 23(2) provides for damages to be paid for a serious breach of contract.  Article 24 
states that this amounts to a sum equal to the remuneration that would have been received 
in the period between the breach and the normal end of the contract.  To calculate this sum 
regard is to be had to the previous level of commissions and to other relevant matters.  This 
sum can be reduced if the judge considers it too high in the circumstances of the case. 

THE NETHERLANDS 

Article 7:442 of the Civil Code provides for an indemnity to be paid on termination of the 
agency contract.  Under Article 7:439 damages are payable for unjustified failure to respect 
the correct notice period and Articles 7:440 and 7:441  provide for damages to be paid for 
breach of contract.  This covers the period from actual termination to the date on which the 
agency  would  have  been  terminated  had proper notice  been  given.  This  amount  is  the 
amount of remuneration which would have been received and is based on the commission 
received prior to termination and other relevant circumstances.  The judge can reduce the 
amount if he considers that it is too high having regard to the facts of the particular case. 
Under Article 7:441.3, the party can seek in place of the sum under Article 7:441.1  and 2., 
compensation for the actual damage suffered and lie bears the burden of proving his loss. 

There  is  not  any  reported  case  to  date  concerning  the  new  law  and  nor  are  there  any 
statistics. 

AUSTRIA 

The Austrian law of  11 February  1993 came into force on  1 March  1993.  Under Article 
24, the agent has a right to an indemnity.  To date there are no reported cases concerning 
the amount of indemnity or damages payable on termination of an agency contract under 
the 1993 law.  The Directive has lead to a change in the previous law and in particular to a 
doubling  of  the  maximum  limit.  Therefore,  previous  case-law  is  not  useful  guidance. 
Under the old law, there was a digressive reduction in the upper limit of compensation of 
aggregate  amount  of  one  year's  commission  calculated  as  a  yearly  average  over  the 
previous three years according to the length of the relationship. 

In practice, it appears that commercial  agents calculate the indemnity on the basis of the 
average income of the last five years taking into account the fluctuation  of customers by 
computing a digression of income on the basis of 5 years.  In most cases, this exceeds the 
upper limit set by law.  On this basis, the parties negotiate  in order to find a reasonable 
settlement,  The method of calculation is based on German experiences. 

It was considered  too  soon to make any judgment about the  average  level  of  indemnity 
paid.  A  claim  for  damages  or  performance  of  the  contract  can  be  made  if  a  party 
terminates  the contract prematurely  without just  cause under article  23.  Article  23  also 
applies to a breach of Article 21 which is concerned with notice periods.  Any other claims 

/ft 

for damages are dealt with in accordance with the provisions of the General Civil Code and 
the Commercial Code. 

PORTUGAL 

Portugal  adopted  its  law  in  1986  which  followed  to  a  large  extent  the  proposal  for  the 
Directive and included at Article 33 the right to an indemnity.  The law came into force on 
2 August  1986.  It has been amended by Articles 33 and 34 of Decree No.  118/93 to bring 
Portugese law in conformity with Article 17 of the Directive. 

In Portugal there have been a number of court judgments15.  The courts have calculated the 
level  of  indemnity  taking  into  account  the  importance  of  new  clients,  the  increased 
development of existing customers, the advantages to the principal after the termination of 
thé contract and the loss of commission by the agent.  The courts consider the indemnity as 
a measure of compensation for the agent for the benefits to the principal existing at the end 
of the contract with the clients developed by the agent. 

Under Article 32 of the  law and under Articles 562-572 of the Civil  Code, there is also a 
right to  be  indemnified  for  the  damages  suffered  for  breach  of  contract.  Article  29 
specifically provides for damages for failure to respect the notice period or alternatively to 
damages for lack of due  notice.  The agent can seek, as an alternative to damages, a sum 
calculated  on  the  basis  of  the  average  monthly  remuneration  over  the  previous  year 
multiplied by the time remaining if the  contract had continued to run.  If the  contract is of 
less than one years duration then the whole contract period is to be used. 

FINLAND 

Under section 28 of Act N° 417 of 8 May 1992, the right to indemnity on termination of an 
agency  contract  was  introduced.  The  Directive  has brought  about  a change  in  the pre 
existing  law.  The law came into force on  1  November  1992 and there has been no court 
decision to date. 

In practice,  it appears that agents  seek  the maximum amount and the  principal  makes a 
counter-offer.  The negotiations  result in  an amount which  is  not  based  on  any  specific 
calculation,  rather  it  is  the  outcome  of  bargaining.  Generally,  the  indemnity  is  in  the 
region of  3-6  months average commission.  It was  felt  by  the agents  federation  that the 
amount of indemnity period was slightly higher under the new law than under the old law, 
but no statistics are available to support this. 

Under Section  9  of the  law, the right to damages for harm caused by  a violation  of the 
agency  contract  is  laid  down or for  when  a party  has  neglected  one  of  his  obligations. 

15  Accôrdâo  da Relaçâo de  Coimbra of  14.12.1993 Court of  Appeal  in  Colectànea  de Jurisprudéncia, 
Year XVIII,  1993,  Volume  V,  p.  46;  Accôrdâo  do  Supremo  Tribunal  de  Justiça  of  4.5.1993  in 
colectànea de Jurisprudéncia - Accordaos do Supremo Tribunal de Justiça,  Year I,  Volume II, 1993, 
p.  78 and also same court, judgment of 27.10.1994 in Year II, Volume III,  1994, p.  101; Acôrdâo da 
Relaçâo do  Porto of  18.10.1994 in Colectànea de  Jurisprudéncia,  Year  XIX,  Volume  IV,  1994, p. 
212. 

Further, Sections 26 and 27 of the Act provide for damages where notice periods are not 
respected. 

o/o 

Article 28 of Law N°351  of 2 May  1991 introduced a right to receive an indemnity which 
did not exist under the previous law, which only  sought to ensure that an agent  received 
commission  on  orders concluded  after  the withdrawal  of  the agent's  authority  provided 
that the orders were brought about through the acts of the agent during the currency of the 
agreement. 

As for other Member States, there has yet to be any court decision.  In practice agents seek 
the maximum  amount permitted under the  law and the parties  negotiate  on  this  basis  to 
reach an equitable sum.  In doing so, the parties take into account, inter alia, the duration of 
the contract, the agent's promotional activities, the number of new customers, orders given 
after termination, the possibility of a new contract for the agent and the costs incurred  and 
investments made by the agent. 

There  are no  statistics  but the  Swedish  authorities  estimated  that awards  were  typically 
between 6 months and  1 year commission calculated as an average over the  last  years of 
the contract.  This would represent an increase in the amount of compensation. 
Article 34 of the law provides for damages for breach of contract. 

UNITED KINGDOM 

The UK has adopted  its  own  particular system  in that under Regulation  17 of  Statutory 
Instrument N° 3053 of 1993 the parties may choose whether an agent will have the right to 
an indemnity or compensation.16  It is only in default of a contractual provision that the law 
requires compensation to be paid.  This method of implementation has of  itself  produced 
uncertainty,  particularly  since  neither  of  the  two  options  are  familiar  to  the  UK  legal 
systems. 

The law has only recently come into force in the UK and has caused a certain amount  of 
confusion as parties and lawyers attempt to apply concepts with which they are  unfamiliar 
and which are a certain degree alien to UK traditions.  Various different  approaches  have 
developed. 

In relation to compensation, lawyers try to apply traditional common law principles which 
does not work well  since under the common law, termination of a contract in accordance 
with its terms or at the natural end of a fixed term contract does not give rise to a damages 
claim.  Under the common law, the court tries to put the agent in the position he would 
have been in if the contract had been properly performed, but the injured party is expected 
to mitigate his loss and the court will have regard to future events.  Typically  for  a fixed 
term contract, this would give the agent the right to claim commission for the duration of 
the  contract.  In  the  case  of  a  contract  for  an  indefinite  period,  the  agent  could  seek 

16Regulation 17 of  S.I  No. 483 of  1993 for Northern Ireland 

«31 

damages for the notice period amounting to the remuneration  he  would  have received  in 
this period.  The agent could also seek compensation for costs incurred in pursuance of the 
agency.  Lawyers  therefore  have  difficulties  in  reaching  a  view  as  to  the  level  of 
compensation  where  the  agent  has  died,  become  ill  or  retired.  Typical  compensation 
payments  are between  3-6  months  with  some  payments  of  15 months  depending  on  the 
level of service. 

Some lawyers have therefore  tried to apply by analogy the law relating to unfair  dismissal 
or redundancy which is determined by age, length of service and the weekly wage. 

As regards the indemnity  provision, agents claim the maximum  amount  and then through 
negotiations a smaller sum is agreed.  Typical payments appear to be between 3-6 months 
commission  based on what  would  have been earned  rather  than the  average  of the  last 5 
years. 

Most  contracts  do  not  contain  a provision  providing  for  an  indemnity,  but  this  does  not 
necessarily  reflect  a  preference  for  the  compensation  option  rather  than  the  indemnity 
option. 

To  date,  there  have  been  no  cases  and  parties  are  reluctant  to  litigate  since  lawyers  are 
unconfident  in advising what their clients' rights are and consequently what the courts will 
award.  However, there are likely to be cases in the near future. 

ISSN 0254-1475 

COM(96) 364 final 

DOCUMENTS 

EN 

06  04  05  08 

Catalogue number  : CB-CO-96-365-EN-C 

ISBN92-78-07182-X 

Office for Official  Publications of the European Communities 

L-2985 Luxembourg