European Court of Justice: new judgment of October 28, 2010 on the interpretation of art. 18(a) of Council Directive 86/653/EEC.

Jaap VAN TILL | EU | 2010-11-16


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The preliminary ruling was given following questions of the German Bundesgerichtshof in a dispute between Volvo Car Germany GmbH (Volvo Car) and one of its German dealers Autohof Weidensdorf GmbH (AHW). Volvo Car had terminated the dealership agreement with AHW with due observance of the contractual notice of termination of two years. After the effective date of termination, AHW claimed a goodwill indemnity as provided for in § 89b the German Handelsgesetzbuch which, according to case-law of the Bundesgerichtshof, applied by analogy to the dealership agreement in question.

In the main proceedings it was established that only after the end of the contract, Volvo Car became aware that AHW had failed to comply with its contractual obligations under the dealership agreement during the period after notice of the contractual termination had been given. It was also established in the main proceedings that Volvo Car would have been entitled to terminate the dealership contract immediately if it had been aware of AHW’s default before the end of the contract.

Volvo Car submitted that AHW’s claim for payment of an indemnity was excluded because AHW’s default during the running of the notice period would have entitled Volvo Car to terminate with immediate effect.

Art. 18(a) of Directive 86/653/EEC provides that the indemnity to which a commercial agent may become entitled after termination of the agency contract according to Art. 17 of that Directive, shall not be payable where the principal has terminated the agency contract because of default attributable to the commercial agent which would justify immediate termination of the agency contract under national law.

The ECJ holds that the use of the wording ‘because of’ indicates that the Directive requires a direct link between the default attributable to the commercial agent and the principal’s decision to terminate in order to deprive the commercial agent of the indemnity. In relation thereto, the ECJ refers to the history of the Directive which shows that the Commission had initially proposed that the indemnity should not be payable where the principal terminated or ‘could have terminated’ the contract but that this second cause of termination was not retained in the final text of the Directive.

Additionally, the ECJ considered that Art. 18(a) of the Directive must be interpreted restrictively as an exception to the agent’s entitlement to an indemnity.

Taking the above considerations into account, the ECJ ruled that Art. 18(a) of the Directive does not allow a commercial agent being deprived of his indemnity where the principal establishes a default by that agent which occurred after notice of termination was given but before the contract expired and which would have justified immediate termination.

In an ‘obiter dictum’ the ECJ, however, added, that the possibility cannot be ruled out that the agent’s conduct may be taken into account in the assessment made to determine the fairness of an indemnity. Reference was made to the second indent of Art. 17(2)(a) of the Directive which rules that payment of any indemnity must be equitable having regard to all the circumstances.



Jaap van Till, IDI Agency & distribution country Expert for Netherlands




The text of the judgment, together with most important decisions on this subject-matter, can be found in the database of the European decisions, in the EU Section of the IDI website.

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