The parties had submitted their contract to Belgian law and jurisdiction was referred to the courts of Gent, in Belgium.
The judgement was the result of request for a preliminary ruling under Article 267 TFEU from the rechtbank van Koophandel te Gent (Commercial Court, Ghent, Belgium), made by decision of 3 September 2015, received at the Court on 24 September 2015.
The request for a preliminary ruling concerns the interpretation of Council Directive 86/653/EEC of 18 December 1986 on the coordination of the laws of the Member States relating to self-employed commercial agents, and of the Agreement establishing an Association between the European Economic Community and Turkey, signed in Ankara on 12 September 1963 by the Republic of Turkey, on the one hand, and by the Member States of the EEC and the Community, on the other, and concluded, approved and confirmed on behalf of the Community by Council Decision 64/732/EEC of 23 December 1963.
The Court of Justice decided that these instruments must be interpreted as not precluding national legislation transposing the directive into the law of the Member State concerned, which excludes from its scope of application a commercial agency contract in the context of which the commercial agent is established in Turkey, where it carries out activities under that contract, and the principal is established in that Member State, so that, in such circumstances, the commercial agent cannot rely on rights which that directive guarantees to commercial agents after the termination of such a commercial agency contract.
By letter of 26 March 2013, Petersime notified Agro of the termination of the commercial agency contract with effect from 30 June 2013. On 5 March 2014, Agro brought legal proceedings before the rechtbank van Koophandel te Gent (Commercial Court, Ghent, Belgium) seeking an order requiring Petersime to pay compensation for termination of the contract and a goodwill indemnity, the repossession of the remaining stock as well as the payment of outstanding claims.
Agro relies on the protection provided for commercial agents by the Law of 1995. In that regard, Agro claims that the provisions of the latter are applicable in the present case, given that the parties validly chose Belgian law as the law applicable to the contract which they concluded.
By contrast, Petersime contends that only Belgian general law is applicable, on the ground that the Law of 1995 applies only to the extent that the commercial agent operates in Belgium, which is not the case in the present situation.
The referring court notes that the parties made an explicit choice of the applicable law, in this case Belgian law. That court considers however that that does not imply that the Law of 1995 is applicable, since the territorial scope of that law seems to be limited to commercial agents principally established in Belgium. Article 27 of the Law of 1995, as interpreted in Belgian law, leads to the conclusion that that law is self-limiting, so that it loses its mandatory character where the commercial agent does not have its principal establishment in Belgium, regardless of the fact that the parties may have designated Belgian law in general as the applicable law.
Comment with respect to the alleged limited territorial scope of the Belgian Law on commercial agency contracts
With respect to this statement by the court of Gent, it seems interesting to refer to an important judgement of the Belgian supreme court (“Cour de Cassation” – “Hof van Cassatie”) regarding the Belgian legislation on the unilateral termination of exclusive distributorship agreements that have been executed for an indefinite duration (Act of 27 July 1961 – since 2014 integrated in Book X, Title 3 of the Code of Economic Law). In that case the distributor was an Italian company and Belgian Law had been chosen by the parties to be applicable to their contract.
The Belgian supreme court decided by judgement dated 6th April 2006 that that the Belgian Act of 27 July 1961 on the unilateral termination of exclusive distribution agreements concluded for an indefinite period of time (which is considered to contain overriding mandatory provisions) would indeed be auto-limitative.
The Act would thus be applicable whenever a Belgian Judge would be called to decide upon a case implying a distribution agreement having effect / being performed in Belgium (art. 4 of the act / art. X.39 code does not refer to the establishment of the distributor but expressly to the Belgian territory where the activities are carried out). However, in case where the Belgian Judge would be called to decide upon a case implying a distribution agreement performed outside of Belgium, the Act would lose its mandatory character and merely be applicable whenever the parties would have referred to its application expressly.
Whether this same reasoning should also prevail for the Belgian Agency Act seems to be rather uncertain and disputable. As a matter of fact it would seem rather obvious to believe that whenever parties (wherever they might be established and wherever the agency might be performed) chose Belgian law to be applicable to their agency contract, this should include the Belgian act on agency agreements.
However, we will have to wait for a clear decision in this respect by Belgian courts, preferably by the Belgian supreme court.
In this respect, the Court of Justice merely revealed the divergence as regards the interpretation of Article 27 of the Law of 1995 and the application of that law, which transposes Directive 86/653, to the situation at issue in the main proceedings. The Court hereby also refers to the opinion of the Belgian Government according to which Article 27 of the Law of 1995 does not have the self-limiting character which the referring court attributes to it. According to the Government the law would indeed apply to a situation such as that at issue in the main proceedings in which a principal established in Belgium and a commercial agent established in Turkey expressly designated Belgian law as the applicable law.
The Court of Justice in this respect recalls that it does not have jurisdiction to interpret the internal law of a Member State and that consequently, it is on the basis of premises resulting from the order for reference that it is necessary to answer the question posed by the referring court.
Reasoning of the Court of Justice regarding the question posed
Coming back to the case at stake, the rechtbank van Koophandel te Gent (Commercial Court, Ghent) decided to stay the proceedings and to refer the following question to the Court for a preliminary ruling:
‘Is the Law of 1995, which transposes Directive 86/653 into Belgian national law, in accordance with that directive and/or the provisions of the Association Agreement (…) when that law provides that it only applies to commercial agents whose principal place of business is in Belgium, and does not apply when a principal established in Belgium and an agent established in Turkey have explicitly chosen Belgian law?’
According to the Court of Justice, it should therefore be verified whether Directive 86/653 and/or the Association Agreement preclude national legislation transposing the Directive which excludes from its scope of application a commercial agency contract in the context of which the commercial agent is established in Turkey, where it carries out activities under that contract, and the principal is established in that Member State, so that, in such circumstances, the commercial agent cannot rely on rights which that directive guarantees to commercial agents after the termination of such a commercial agency contract.
1) The Court of Justice states that in order to answer the question posed by the referring court, as regards Directive 86/653, it is necessary to determine whether a commercial agent carrying out activities under a commercial agency contract in Turkey, the principal of which is established in a Member State, comes within the scope of application of that directive.
The Court first of all noted that the situation at stake is not expressly referred to in Articles 17 and 18 of Directive 86/653 or in the other provisions thereof. The Court then observed that it is clear from the second and third recitals of Directive 86/653, that the harmonising measures seek to protect commercial agents in their relations with their principals, to eliminate restrictions on the carrying-on of the activities of commercial agents, to make the conditions of competition within the Community uniform, to promote the security of commercial transactions, and to facilitate trade in goods between Member States by harmonising their legal systems within the area of commercial representation. In that context, the Court recalled that Articles 17 and 18 of Directive 86/653 are of crucial importance and are mandatory (Unamar).
The Court also recalled that the purpose of the regime established in Articles 17 to 19 of that directive is to protect, for all commercial agents, freedom of establishment and the operation of undistorted competition in the internal market, so that those provisions must therefore be observed throughout the Community if those objectives of the FEU Treaty are to be attained (Ingmar).
Finally, the Court also observed that it has held that it is essential for the European Union legal order that a principal established in a non-member country, whose commercial agent carries on his activity within the European Union, cannot evade those provisions by the simple expedient of a choice-of-law clause. The purpose served by the provisions in question requires that they be applied where the situation is closely connected with the European Union, in particular where the commercial agent carries on his activity in the territory of a Member State, irrespective of the law by which the parties intended the contract to be governed (Ingmar).
The Court of Justice concluded that where, as in the main proceedings, the commercial agent carries out its activities outside the European Union, the fact that the principal is established in a Member State does not present a sufficiently close link with the European Union for the purposes of the application of the provisions of Directive 86/653, in the light of the objective pursued by the latter, as stated in the Court’s case-law.
According to the Court of Justice, it is not necessary, for the purposes of making the conditions of competition between commercial agents within the European Union uniform, to provide commercial agents who are established and carry out their activities outside the European Union with protection comparable to that of agents who are established and/or carry out their activities within the European Union.
Therefore a commercial agent carrying out activities under a commercial agency contract in Turkey, such as the applicant in the main proceedings, does not come within the scope of application of Directive 86/653, regardless of the fact that the principal is established in a Member State, and therefore should not necessarily benefit from the protection provided by that directive to commercial agents.
The directive therefore does not preclude national legislation such as that at issue in the main proceedings.
2) The Court of Justice then undertook to determine whether the application of Directive 86/653 to commercial agents established in Turkey could follow from the Association Agreement and the annexed Additional Protocol.
The Court states that according to the Association Agreement, it is clear, that the provisions of the Treaty relating to the freedom to provide services, must be extended, so far as possible, to Turkish nationals to eliminate restrictions on the freedom to provide services between the contracting parties.
However, the interpretation given to the provisions of European Union law, including Treaty provisions, concerning the internal market cannot be automatically applied by analogy to the interpretation of an agreement concluded by the European Union with a non-Member State. Thereto it is required to make a comparison between the objective pursued by the Association Agreement and the context of which it forms a part, on the one hand, and those of the European Union law instrument in question, on the other.
The Court of Justice underlines that the Association Agreement and the Additional Protocol are intended essentially to promote the economic development of Turkey and pursue, therefore, a solely economic purpose.
Neither the Association Agreement nor the Additional Protocol establishes any general principle of freedom of movement of persons between Turkey and the European Union. Furthermore, the Association Agreement guarantees the enjoyment of certain rights only within the territory of the host Member State.
By contrast, in the context of EU law, the Court of Justice concludes that the protection of the freedom of establishment and the freedom to provide services, by means of the regime provided for by Directive 86/653 with respect to commercial agents, is based on the objective of establishing an internal market, conceived as an area without internal borders, by removing all obstacles to the establishment of such a market.
Therefore, the differences between the Treaties and the Association Agreement concerning the objective pursued by them preclude the system of protection laid down by Directive 86/653 with respect to commercial agents from being held to extend to commercial agents established in Turkey, in the context of that agreement.
The Additional Protocol finally concerns only Turkish nationals who exercise their freedom of establishment or to supply services in a Member State. Consequently, a commercial agent established in Turkey, who does not supply services in the Member State concerned, such as the applicant in the main proceedings, does not fall within the personal scope of application of that provision.
In those circumstances, it must be concluded that the Association Agreement also does not preclude national legislation such as that at issue in the main proceedings.
Ingrid Meeussen, IDI country expert for agency and distribution in Belgium