Preliminary ruling concerning the interpretation of Article 17 (2) (a) of Council Directive 86/653/EEC

In its judgement of 7 April 2016, the European Court of Justice (“ECJ”) has provided guidance to the national courts concerning the concept of “new customers” within the meaning of Article 17 (2) (a) of Council Directive 86/653/EEC of 18 December 1986 (“the Directive”).

Article 17 (1) of the Directive provides that EU 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.

The indemnity option has been implemented by the vast majority of the Member States into their national law (with the exception of France, the UK and Ireland).

Article 17 (2) (a) of the Directive provides that a 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 profits 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.

The German Bundesgerichtshof (Federal Court of Justice) referred the following question to the ECJ for a preliminary ruling:

“Must the first indent of Article 17 (2) (a) of Directive 86/653 be interpreted as precluding the application of a national provision under which “new customers” can also be customers acquired by the commercial agent who have already had business with the principal for products sold by him from a range of products but not for products whose sole representation the principal has entrusted to the agent? “

The ECJ first considers that the wording of the first indent of Article 17 (2) (a) of the Directive, in that it differentiates between new customers and existing customers, might suggest that only customers with whom the principal had, until the commercial agent’s involvement and generally speaking, maintained no business relations, are to be regarded as new customers. At the same time, however, the ECJ acknowledges that those words, by themselves, do not establish for certain whether the “new” or “existing” nature of a customer must be assessed in relation to the principal’s entire range of goods or in relation to certain goods in particular.

The ECJ then continues by stating that the purpose of the Directive is, inter alia, to protect the commercial agent in his relations with the principal and that Article 17 is, in that regard, of particular importance. Within that context the concept of “new customers” may therefore, according to the ECJ, not be construed restrictively.

In that regard, the mere fact that customers brought in by a commercial agent for his principal had already purchased from the principal goods comparable in nature to those in respect of which the commercial agent has negotiated the sale to those customers cannot suffice as a basis for the view that the latter goods already formed part of the pre-existing business relations with those customers.

In such cases, and with due consideration of the role of a commercial agent as a sales negotiator, the ECJ rules that it is necessary to examine whether the sale of the goods in question required, on the part of the commercial agent, particular negotiating efforts and sales strategy, leading to the establishment of specific business relations, particularly in so far as those goods relate to a different portion of the principal’s range of products.

The fact that the principal entrusted a commercial agent with the marketing of a specific brand to customers with whom the principal already maintained certain business relations may indicate that those goods relate to a different portion of the principal’s range of products and that the sale of such products would require the commercial agent to set up specific business relations, this, however, according to the ECJ, being a matter for the national courts to determine.

According to the ECJ, the argument that it is easier for a commercial agent to negotiate sales of new goods with customers who already have business relations with the principal, even if considered to be proven, can be fully taken into account by the national courts in the course of their analysis seeking to ascertain, in conformity with the second indent of Article 17 (2) (a) of the Directive, the equitable nature of the indemnity.

When dealing with indemnity claims after termination of a commercial agency contract, it is therefore relevant to take into consideration that customers with whom the principal had business relations in relation to specific goods, may be considered as “new customers’ in the sense of Article 17 (2) (a) of the Directive, in the case where the the goods for which the commercial agent was appointed as the sales negotiator required the establishment of specific business relations.