Jones, Mark L.

Vanderhaeghe, Werner

English

Southern Methodist University

WERNER VANDERHAEGHE*MARK L. JONEStCurrent Developments inEuropean Agency LawThe purpose of the Note is to draw the reader's attention to two pendingchanges in European law which are of special concern to those who have con-cluded or will be concluding agency agreements in the countries of the Euro-pean Economic Community.On the one hand a Benelux Treaty on independent commercial agents wassigned at The Hague on November 26, 1973 and is presently being im-plemented in the Benelux States (Belgium, Luxemburg and the Netherlands).On the other hand, the EEC Council is currently discussing a proposed Direc-tive on the same subject, the provisions of which, when adopted, will have tobe implemented in all nine EEC Member States (the three Benelux countries,Denmark, France, the Federal Republic of West Germany, Ireland, Italy andthe United Kingdom) as of the middle of 1980.Both these instruments, which are similar in all major respects, are intendedto harmonize the presently divergent rules governing commercial agency con-tracts in the various Member States and thereby to afford greater protection toself-employed commercial agents. Hence they deal with such matters as therespective rights and duties of principal and agent, the commercial agent'slimited liability in del credere agreements, the commissions payable to theagent, the conditions governing termination of the agency and the payment ofa goodwill indemnity upon such termination. Most of these provisions arecompulsory public policy provisions which will therefore apply to the agencycontract notwithstanding any express stipulation of the parties to the contrary.The Benelux TreatyThe Netherlands is the only country of the three Benelux States which hasimplemented thus far the provisions of the Benelux Treaty. They were enacted*Licentiaat rechten, State University of Ghent, 1974; MCJ, University of Texas at Austin,School of Law, 1975. Member of the Brussels Bar.tB.A. Oxon, 1974.International Lawyer, Vol. 12, No. 3672 INTERNA TIONAL LA WYERand incorporated into the Dutch Commercial Code as articles 74 and 75 by thelaw of March 23, 1977 on the adaptation of the Commercial Code and theBankruptcy Act to the Benelux Treaty on Agency Contracts and Annex,signed at The Hague on November 26, 1973 (published in the "Staatsblad vanhet Koninkrijk der Nederlanden," 1977, 153).In Luxemburg, on the other hand, no legislative action whatsoever has beentaken up until now.In Belgium there never was any special legislation protecting self-employedcommercial agents so that, when the Treaty was submitted to the BelgianParliament for ratification during the 1975-1976 term, the Belgian governmentsimultaneously tabled a bill to enact the Treaty provisions into Belgian law.On June 3, 1976 the Belgian House of Representatives ratified the Treatyand approved the bill, both of which are now pending before the Senate. Ac-cording to unofficial government statements it seems that the governmentwould like to see the bill become law by the end of the 1977-1978 parliamen-tary session.As to the impact of the new legislation on existing agency contracts, inBelgium the government is presently preparing an amendment to the [bill of]law to the effect that all existing contracts will be subject to the new law. Asfor the Netherlands, the law of March 23, 1977 explicitly provides that all ex-isting agency contracts, as of July 1, 1977 are subject to the new regulations(Article III of the law of March 23, 1977). As a result thereof both in Belgiumand in the Netherlands the existing agency agreements should be modified,where clauses are in violation of public policy provisions. Hence, the com-pulsory public policy provisions are of particular interest to companies doingbusiness through agencies under Belgian and Dutch law. Those provisions maybe summarized as follows.Article III of the Treaty provides that an agent can only be held liable for theexecution of the obligations by the clients he solicited or their solvency if anagreement was made thereto in writing. If so, the liability cannot exceed thecommision agreed upon.Article V stipulates when the commission is due to the agent; and section 2of Article V, which constitutes public policy, explicitly states that the agent isentitled to a reasonable compensation for the soliciting of orders which turninto a sale only after the termination of the agency contracts. Also Article VI,section 3, provides that the clause which makes the payment of the commissiondependent on the completion of the sale must specifically so state. Accordingto this section of Article VI, only when the principal submits evidence that itcannot be held responsible for the nonexecution of the obligation will theagent not be entitled to the commission.Article VII secures the agent's control over the payment and the calculationInternational Lawyer, Vol. 12, No. 3Current Developments in European Agency Law 673of the commission and creates the opportunity for the agent to rely on theassistance of an expert acceptable to the principal or, if not, who is appointedby the president of a Court of competent jurisdiction at the agent's request.Article XI handles the procedure of termination of the agency agreement.Section 1 of this article, which is not public policy, indicates that if an agencyagreement is entered into for an indefinite period of time, or for a definiteperiod of time with the right of early termination, each of the parties has theright to terminate by respecting the agreed notice period.If no agreement exists thereon, the notice period will be four months, in-creased by one month if the contract has been in force for three years and bytwo months after six years. However, section 2 of Article XI which is publicpolicy and must be observed in any event, states explicitly that the noticeperiod cannot be less than one month.Article XIII regulates the termination of the agency agreement before theexpiration of the time agreed upon or without taking into account the legal orcontractual notice period. In such case, the terminating party must paydamages unless the termination takes place for motives which are urgent andwhich were communicated immediately to the other party. Section 4 of this ar-ticle declares as null and void any clause giving discretionary power to one ofthe parties to decide whether an urgent motive exists or not.Article XIV, regulating the procedure for requesting the termination of theagency agreement before a Court, also constitutes public policy, while ArticleXV states that in case termination of the agency agreement is wrongful, theterminating party must pay an indemnity equal to the remuneration due forthe period remaining in case of normal termination. This indemnity will bedetermined considering, among others, the commissions which were earned inthe course of the agreement. Finally, upon termination of the agency agree-ment for whatever reason, the agent may ask for an indemnity which may notexceed the amount of one year's remuneration if he has brought in clienteleand accordingly created a goodwill for his principal's enterprise. This indemni-ty is calculated on the average of the remuneration for the past five years or onthat of the entire duration of the contract if the contract has been in effect forless than five years (Article XVI).Finally, Article XVII determines the validity of the noncompetition clausesfor agents after the termination of their agency agreements. As a matter ofpublic policy, such a clause is valid only if in writing. It has no validity at all,even if done in writing, if the agreement was terminated at will and withoutnotice or for urgent motives in which there is fault on the part of the principal.It is also prescribed as a matter of public policy that the statute of limita-tions for claims arising out of violations of Article XIII, XIV and XVI (ter-mination of agency contract, granting of a clientele indemnity) is one year.International Lawyer, Vol. 12, No. 3674 INTERNATIONAL LA WYERThe Proposed EEC DirectiveThe proposed EEC Directive is presently under discussion in the EEC Coun-cil following its submission to that body by the EEC Commission onDecember 17, 1976 (text published in the Official Journal of the EuropeanCommunities of January 18, 1977, No. C 13, page 2). Experience of the Com-munity legislative process would indicate that the proposal is unlikely to beadopted by the Council before the middle of 1978, while the end of 1978 is amore probable prognosis.The proposal itself stipulates that the nine Member States (including ofcourse the three Benelux countries) must adopt and publish the necessary im-plementing measures before January 1, 1980 and must apply them as of July 1,1980.For those Benelux countries which will already have enacted the provisionsof the Benelux Treaty this could mean two changes in agency law within ashort time since, although the proposed Directive is essentially the same as theTreaty (indeed the latter provided much of the inspiration for the proposal),there nevertheless exist various differences in detail between the Treaty and thetext of the proposal as it now stands.When the Directive is implemented in the various national legal systems, anycommercial agency contract which is governed by the law of one of the EECMember States will be subject to its provisions. As far as the possible retroac-tive application of the Directive to existing contracts is concerned, EEC of-ficials indicate that this question would be left to the individual Member Statesto solve in accordance with their own national rules. The parties would be atliberty to derogate from the compulsory public policy provisions "in relationto those activities which the commercial agent carries on outside the Com-munity" (article 35 of the proposal).Furthermore, in the case of certain specified provisions derogation wouldalways be possible where the commercial agency is undertaken by a companyor legal person with a paid-up capital exceeding the equivalent of 100,000European units of account (more or less 157,000 US dollars) (article 33 of theproposal).ConclusionEuropean law relating to independent commercial agents will undergo con-siderable modification in the near future when the provisions of the BeneluxTreaty and more especially those of the proposed EEC Directive are im-plemented in the various national legal systems. Indeed, after implementationagency contracts will be subject to the same compulsory public policy provi-sions, affording a minimum protection to the commercial agent, in all nineMember States. One consequence of this is that there will be less to be gainedInternational Lawyer, Vol. 12, No. 3Current Developments in European Agency Lawby the parties choosing a law to govern their contract which may previouslyhave been more favourable towards the principal.Given these pending changes and their probable retroactive application toexisting contracts, companies doing business in Europe through agents will nodoubt consider it essential to keep their agency contracts under review and tomonitor closely developments in this area.International Lawyer, Vol. 12, No. 3

Current Developments in European Agency Law

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Current Developments in European Agency Law

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