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Commercial agency contract: The Court of Justice of the European Union rules on lost commissions and one-off commissions for the purpose of the indemnity due to the commercial agent

Distribution law

Commercial agency contract: The Court of Justice of the European Union rules on lost commissions and one-off commissions for the purpose of the indemnity due to the commercial agent

In its ruling of 23.3.2023 (C-574/21), the Court of Justice of the European Union (CJEU) ruled on two questions referred to it for a preliminary ruling by the Supreme Court of the Czech Republic in a dispute between a commercial agent and the Czech telephone company O2.

The following questions were referred to the Court:

1.  Must the expression “the commission lost by the commercial agent,” within the meaning of Article 17(2)(a), second indent, of [Directive 86/653], be interpreted to the effect that such commissions include commissions for the conclusion of contracts which a commercial agent would have entered into had the commercial agency [contract] endured, with the customers that he or she brought the principal or with which he or she significantly increased the volume of business?

2. If so, subject to what conditions does this conclusion apply to ‘one-off commissions’ for the conclusion of a contract?’

The European Court of Justice has clarified that the indemnity must also compensate for the future business and the commissions lost as a result. This is because the indemnity is primarily about future services to the client, while the lost commissions are a factor to be considered for reasons of equity. For transactions that have already been concluded at the end of the contract, the commercial agent is in any case entitled to the commission. The "lost commission" must therefore necessarily relate to future transactions. The Community provision must therefore be interpreted as meaning that the commissions which the commercial agent would have received in the hypothetical case of continuation of the agency contract for the transactions which he would have concluded after the termination of that contract with the new customers which he had arranged for the principal before that termination must be taken into account for the purposes of calculating the indemnity provided for in Article 17(2) of the Directive.

The Court then addressed the issue of 'one-off commissions'. During the proceedings, it turned out that it was a question of a flat-rate commission for each new contract, both with new and existing customers. It was therefore not a genuine one-off commission in the strict sense of the term, i.e., a one-off commission for each new customer, without any commission being payable on subsequent contracts. The Court ruled on this second question by denying that the agreement of a lump-sum commission can exclude the indemnity, stating as follows:

- The choice of a certain type of commission, such as, for example, one-off commission payments, cannot therefore call into question the right to indemnity provided for in that provision. If that were not the case, there would be a risk of circumvention of the mandatory nature of that right to indemnity provided for in Article 19 of that directive.

- Article 17(2)(a) of Directive 86/653 is to be interpreted as meaning that the payment of one-off commissions does not exclude from the calculation of the indemnity, provided for in Article 17(2), the commission lost by the commercial agent resulting from transactions carried out by the principal, after the termination of the commercial agency contract, with new customers which he or she brought to the principal before that termination, or with customers with which he or she significantly increased the volume of business before that termination, where those commissions correspond to flat-rate remuneration under any new contract concluded with those new customers or with existing customers of the principal, through the commercial agent.

In our opinion, it is not entirely clear whether the Court's decision also applies to lump-sum commissions in the narrower sense, since in such cases the commercial agent does not lose commissions from follow-up business.