Commercial agents: ECJ examines the right to commission on repeat transactions or to an indemnity on termination

Rights to commission on repeat transactions: Rigall Arteria Management sp z oo spk v Bank Handlowy w Warszawie S.A. (Case C-64/21) EU:C:2022:783 (13 October 2022)

Background

Rigall Arteria Management (“Rigall”) and Bank Handlowy concluded multiple agency contracts, under which Rigall acted as intermediary in relation to financial services offered by the bank. Rigall’s remuneration was usually a specific amount paid per credit card issued or successful loan application processed, but only for contracts concluded with Rigall’s direct involvement.

In December 2014, Bank Handlowy terminated the final contract. Rigall requested information from Bank Handlowy on the commission payable under the contracts, which the bank refused on the basis that it had already provided that information. Actions by Rigall in the Regional Court in Warsaw in 2016 and the Court of Appeal in Warsaw in 2018 were dismissed on the grounds that the declarations submitted by the bank were complete and that it was not apparent from the terms of the contract that the agent was entitled to claim commission on the contracts concluded by the bank with customers previously acquired by the agent.

On appeal to the Supreme Court in Poland, the case was referred the case to the ECJ, seeking clarification on the interpretation of Article 7(1)(b).

Jurisdiction and applicability of the Directive under Article 1(2)

The contract at issue concerned the sale of financial services. As such, it did not strictly fall within the scope of the Directive, which under Article 1(2) applies only to commercial agents with continuing authority to negotiate or negotiate and conclude contracts for the sale or purchase of goods.

However, settled case law states that where domestic legislation adopts concepts from EU law in a wider sense, for instance to ensure a single procedure in comparable situations, the EU law concept should be interpreted uniformly. Since the Polish legislature defined agency contracts without reference to the sale or purchase of goods, the ECJ ruled that it had jurisdiction to give a preliminary ruling on the question referred to it.

Article 7(1) of the Directive

Under Article 7(1) of the Directive, commercial agents are entitled to commission on commercial transactions concluded during the period covered by the agency contract where:

• the transaction has been concluded as a result of the agent’s action; or
• the transaction is concluded with a third party whom they have previously acquired as a customer for transactions of the same kind.

The question for the ECJ was whether Article 7(1) of the Directive must be interpreted as meaning that parties cannot contract out of the right to commission for an agent in respect of repeat transactions with customers previously acquired by the agent.

ECJ Ruling

The ECJ held that there was no automatic right to commission on repeat transactions. The word “or” in Article 7(1) of the Directive makes it clear that the EU legislature intended to offer a choice to parties. Additionally, the parties are free to agree the level of the agent’s remuneration under Article 6 of the Directive, and the wording of Article 7(1)(b) does not suggest any departure from that principle.

Elsewhere, the Directive makes clearly apparent where it is not possible to derogate from a provision. The fact that Article 7(1)(b) is not expressly stated to be mandatory is significant, particularly in context given that a proposal to make it mandatory was dropped during the legislative process.

The ECJ also considered the objectives of the Directive, which (among other things) were to protect commercial agents. It suggested that making the entitlement to commission under Article 7(1)(b) mandatory would not necessarily achieve this, since principles could simply alter the remuneration received by agents in order to compensate, for instance by reducing commission rates generally.

Sub-agents right to indemnity on termination: NY v Herios (Case C-593/21) EU:C:2022:784 (13 October 2022)

Background

In this case, Herios was engaged by a German company, Poensgen, to sell its products under a commercial agency contract. In turn, Herios engaged NY as sub-agent to assist with negotiations in relation to Poensgen products, effectively acting as sub-agent. In June 2016, Poensgen terminated its agency contract with Herios, which accordingly terminated its own agency contract with NY in February 2017. In the intervening period, NY became the direct commercial agent of Poensgen.

Herios and Poensgen agreed on the payment of a goodwill indemnity to Herios in May 2017. In turn, NY claimed a goodwill indemnity from Herios, arguing that the indemnity paid to Herios was a “substantial benefit” derived from the customers NY had acquired.

Although NY’s claim was upheld at first instance, the Court of Appeal in Liege, Belgium overturned the ruling on the grounds that the goodwill indemnity received by Herios was not a “substantial benefit” within the meaning of Article X.18 of the Code of Economic Law, which transposes Article 17(2)(a) of the Directive.

On appeal, the Cour de cassation (Court of Cassation, Belgium), referred to the ECJ the question of whether the goodwill indemnity constitutes a “substantial benefit” to the main agent.

The “substantial benefit” test

Under Article 17(2)(a) of the Directive, on termination of an agency agreement, commercial agents are entitled to an indemnity if and to the extent that:

• the agent has brought the principle new customers or has significantly increased business with existing customers and the principal continues to derive “substantial benefits” from business with those customers; and
• the payment of an indemnity is equitable with regard to all the circumstances, and in particular the commission lost by the commercial agent on the business transacted with those customers.

ECJ Ruling

The ECJ held that the goodwill indemnity paid by Poensgen was a “substantial benefit” to Herios. Following the wording of Article 17(2)(a), the principal (here Herios), must derive a benefit after the termination of the contract, which is both significant and is connected with the services provided by the agent (here NY). A goodwill indemnity such as that received by Herios would fall under that meaning. The court also considered the objective of the Directive, which was to protect commercial agents’ interests. A restrictive interpretation of Article 17(2)(a) would deprive the commercial agent of compensation for the added value that they have brought to the principle, and therefore could not be correct.

However, the ECJ also highlighted the second requirement of Article 17(2)(a), that the payment of an indemnity must be equitable with regard to all the circumstances. In this case, NY had not necessarily lost any compensation relating to the termination of the agency agreement, since NY had subsequently contracted with Poensgen directly. The ECJ held that it was for the national court to assess whether the payment of the goodwill indemnity was equitable in those circumstances.