Commercial agency agreements in court: current decisions and their impact

ECJ judgment dated 13 October 2022 – C-64/21 on the exclusion of repeat-business commission

The ECJ confirmed that Article 7(1)(b) of the Commercial Agents Directive does not forbid a principal from excluding its commercial agent’s claim to payment of commission on repeat transactions. Commission on repeat transactions means commissions for a transaction concluded during the period covered by the contract with a third party whom the commercial agent has previously acquired as a customer for transactions of the same kind. While the ECJ pointed out, firstly, that the Commercial Agents Directive is intended to protect commercial agents, that protective purpose did not rule out excluding commission on repeat transactions. It maintained that if paying commission on repeat transactions were mandatory, it could not be ruled out that company owners would make up for the cost of commission on repeat transactions by reducing the basic commission rate, limiting or excluding the costs previously reimbursed or other elements of the remuneration or even forgo entering into a contractual relationship with a commercial agent. The ECJ thus confirmed the commonly held view in Germany.

FCJ judgment dated 19 January 2023 – VII ZR 787/21 on impediment to termination

The German Federal Court of Justice (Bundesgerichtshof) (FCJ) has fleshed out its previous case law with regard to inadmissible impediments to the termination of commercial agency contracts pursuant to the second sentence of section 89a(1) of the German Commercial Code (Handelsgesetzbuch) to the effect that the question of whether the disadvantages attached to the termination of the contract are of such weight that an invalid impediment to termination within the meaning of the second sentence of section 89a(1) of the German Commercial Code exists must always be assessed according to the circumstances of the individual case on the basis of an economic assessment. The FCJ thus effectively rejected a cookie-cutter assessment according to case groups, as previously applied in case law, and further clarified that the degree to which any disadvantages are linked to the right to summary termination is not decisive. Therefore, even indirect disadvantages which are a mere “reflex reaction to a termination” cannot be excluded from the outset from the test of applying the standards of the second sentence of section 89a(1) of the German Commercial Code and in individual cases constitute an inadmissible impediment to termination. According to the FCJ, based on an economic view regardless of the contractual structure, it must be determined whether there is an agreement within the meaning of the second sentence of section 89a(1) of the German Commercial Code which harms the commercial agent’s right of termination. In this particular case this meant that the principal could no longer demand repayment of a loan given to the commercial agent, not even by applying the law on unjust enrichment.

Judgment by Hamm Higher Regional Court dated 14 November 2022 – 18 U 191/21 on the existence of a commercial agency contract

Hamm Higher Regional Court (OLG Hamm) considered whether a distribution contract which defines how distribution activities are to be carried out, but not whether distribution activities are to be carried out, can be classified as a commercial agency contract within the meaning of sections 84 and following of the German Commercial Code. Specifically, the issue was whether the distribution partner bringing the action was a commercial agent within the meaning of section 84 of the German Commercial Code and could therefore demand to see an extract from the books under section 87c(2) of the German Commercial Code. Hamm Higher Regional Court found that the claimant was not required to broker transactions based on the distribution contract at issue. It reasoned that the claimant was therefore not constantly tasked with negotiating transactions within the meaning of section 84 of the German Commercial Code and was therefore not a commercial agent. It was not enough, the court said, for a distribution partner to simply negotiate transactions now and then. Instead, what was necessary was a contractual obligation to make efforts to achieve sales. As a result, the claimant could not demand to see an extract from the books under section 87c(2) of the German Commercial Code, the court concluded.

Judgment by Cologne Higher Regional Court dated 9 December 2022 – 19 U 21/22 on the definition of the necessary documentation

Cologne Higher Regional Court (OLG Köln) considered the interpretation of the term “documentation” in section 86a of the German Commercial Code. According to that statute, the principal must provide the commercial agent with all the documentation necessary to perform their work free of charge. Cologne Higher Regional Court has now ruled that even freely available standard software can count as “documentation” within the meaning of section 86a of the German Commercial Code if the commercial agent is obliged to use that software based on the contractual arrangement because it is impossible to negotiate transactions for the principal without that software. That applied in the case to be decided by Cologne Higher Regional Court partly because the principal had forbidden its commercial agent from using other software.

Judgment by Rhineland-Palatinate Higher Employment Court dated 27 June 2023 – 6 Sa 237/22 on the obligation to pay commission

Rhineland-Palatinate Higher Labour Court (LAG Rheinland-Pfalz) ruled that an agreement on commission in the terms and conditions which, in the event that several commercial agents conclude a transaction, awards the entitlement to commission to the commercial agent who entered the order into the principal’s system, may be validly agreed. Under the first sentence of section 87(1) of the German Commercial Code, any contributory cause is sufficient to trigger the obligation to pay commission. However, the Higher Labour Court found that a provision deviating from the first sentence of section 87(1) of the German Commercial Code, which specifies the entitlement to commission in cases in which several commercial agents are involved in concluding the transaction, is admissible because this can prevent the risk of a dual obligation to pay commission. The Higher Labour Court thus agreed with the prevailing opinion in the legal literature.

 

This article is part of the "Update Commercial 2024". All insights and the entire report as a PDF can be found here.