Terminating Dutch agency contracts (4): Damages in addition to goodwillFriday, 12 August 2016
Upon termination of a commercial agency contract, agents may be able to claim not only goodwill compensation, but also damages. The Supreme Court of the EU ruled that EU Member States may allow damages in addition to goodwill, provided that the claim for damages relates to a different matter than what was already covered by goodwill compensation. From the perspective of Dutch law, is this good news for commercial agents faced with termination?
On 3 December 2015, the Court of Justice of the EU (CJEU) handed down its judgment in Quenon. The case was referred by a Belgian court.
It becomes clear from Quenon that in case of termination of a commercial agency contract, EU law permits agents to have multiple statutory rights under national law. EU Member States may allow agents to claim damages in addition to the well-known goodwill compensation. However, only when and insofar as those damages go above and beyond what was already covered by goodwill. In other words: the agent must not receive double compensation (para. 35).
The standard of proof also appears to be in favour of the agent. To be awarded additional damages, it is not necessary for the agent to demonstrate an unlawful act or violation, attributable to the principal, which is causally linked to the alleged additional damage. However, the alleged additional damage must be different from what is already covered by goodwill compensation.
EU legal framework
The relevant legal framework is the European Agency Directive 86/653/EEC.
The Agency Directive has multiple objectives. It seeks to protect agents against their principals; to promote legal certainty in commercial transactions; and to facilitate the free movement of goods between EU Member States by harmonizing national laws (ECJ Honyvem Informazioni Commerciali, C-465/04, EU:C:2006:199, para. 17-19; ECJ Semen, C-348/07, EU:C:2009:195, para. 13-14).
Dutch legal framework
In the Netherlands, the Agent Directive has been implemented in Book 7 of the Dutch Civil Code (“BW“).
Article 7:442(1) BW explains that an agent has a right to goodwill compensation upon termination of the agency contract. Just like in Belgium, the relevant jurisdiction in the Quenon case, Dutch lawmakers have chosen a system of goodwill compensation to implement European law (cf. also Article 17(2) Agency Directive). In the Netherlands, the statutory right to goodwill compensation is applicable, irrespective of any right to claim damages.
Goodwill compensation is not unlimited. It can never surpass one year’s worth of commission or provision. Goodwill is calculated based on the annual average during the past five years (or, if the commercial agency contract did not last that long, to the average for its entire duration). Many factors may be taken into account (Article 7:442 (2) BW).
To the extent that an agent suffered more damage than covered by goodwill, EU Member States are at liberty to grant agents a statutory right to claim full compensation (the policy thought being greater protection for the weaker party). According to the ECJ, this part of agency law is not harmonized by the Agency Directive (para. 30-33).
Article 7:439(3) and 7:441(1) BW give an example of such an additional claim for damages: in case the commercial agency contract is terminated for ‘compelling reasons’ and the other party can be blamed for termination, this in principle gives rise to liability for damages.
To my mind, in addition to goodwill and the above damages, Dutch law permits agents to bring other claims for damages as well. The language of Article 7:442(1) BW appears open-ended (“irrespective of any right to claim damages“). The Quenon judgment seems to support confirm this view. The clarification by the CJEU may therefore be of special interest for agents faced with termination of their commercial agency agreement.
Awarding damages upon termination of an agency contract may not lead to double compensation (i.e. it is limited to matters not already covered by goodwill compensation). Apart from that understandable restriction, it follows from the Quenon judgment that EU Member States are at liberty to protect agents above and beyond the level of protection offered by the Agency Directive (ECJ Unamar, C-184/12, EU:C:2013:663, para. 50).
In the Netherlands, it seems that the Dutch Civil Code already provides sufficient room for courts to grant additional damages. We advise agents to carefully review what kind of claims they can bring upon termination of their commercial agency contracts. They may otherwise miss out on full financial compensation.
Check out our other contributions on terminating agency under Dutch law
- Rights & entitlements of the commercial agent
- Rights & entitlements of the principal business
- How best to terminate commercial agency agreements?
- Damages in addition to goodwill
- Claiming goodwill for existing customers