Opinion of the Advocate General on the Italian System of Calculation of the Agent’s Indemnity.

Silvia BORTOLOTTI | ITALY | 2005-11-15


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The case

With a request for a preliminary ruling, the Italian Supreme Court (Corte Suprema di Cassazione) asked the EU Court of Justice to decide about the compliance of the Italian system of determination and quantification of the agent’s goodwill indemnity provided by the collective agreements (Accordi Economici Collettivi) with the provisions contained in Article 17 (2) of Council Directive 86/653/EEC on the coordination of the laws of the Member States relating to self-employed commercial agents.

Italy implemented Article 17(2) of the EC Directive in 1991, by amending Article 1751 of the Italian civil code which contains the following provision:

“The agent has right to indemnity if and to the extent that:

  • he has brought new customers or has considerably increased business with the existing customers and the principal continues to derive substantial benefits from the business with such customers and
  • the payment of such indemnity is equitable having regard to all circumstances and in particular the commission lost by the agent on the business with such customers.

The amount of the indemnity cannot exceed a sum equal to a yearly indemnity calculated on the average of the commissions earned in the preceding five years”.

Before the implementation of the directive a different system of calculation of the indemnity was applicable. Particularly, the system of calculation was based on a percentage of the commissions paid during the contract, which amounted to 4 to 5% of the total amount of commissions earned by the agent. This indemnity was due even where the agent had not developed new customers. Moreover part of the amount and namely the FIRR indemnity (which was paid yearly by the principal to Enasarco – the social security institution of the agents – which paid it to the agent at the time of the contract termination) was also due if the contract was terminated for reasons for which the agent was responsible or in case of termination by the agent himself.

The system of calculation provided by the collective agreements has been maintained even after the implementation of the Directive: the majority of the Courts decided that the system of calculation of the collective agreements was valid because it was more favourable to the agent.

The opinion

In the present opinion, the Advocate General suggested to the Court of Justice to consider the system provided by the collective agreements as not consistent with Article 17(2) of the Directive as he found it less favourable to the agent.

Particularly, he stated that the two systems are not comparable since they are completely different from many points of view (reasoning, contents, purposes).

The comparison requested by the Directive does not seem to be a pure and simple comparison between the amounts of the indemnities deriving from the application of the system of indemnity provided for in the collective agreements and the one provided for in Article 17 of the EC Directive.

What the Directive requires, according to the Advocate General, is a substantial comparison between the two systems of indemnity which take into due consideration the relevant contents and purposes and not a simple comparison of the consequences of the application of said two systems of calculation of the indemnity which essentially depends on the market condition at the moment of the termination of the contractual relation.

On these bases, the Advocate General concluded that the system provided by the collective agreements, based on contents and purposes not consistent with Article 17(2) of the Directive, but aiming at completely replace it, has to be deemed in derogation of the EC provisions to the detriment of the commercial agent.

Furthermore, the Advocate General stated that Article 17(2) shall be interpreted in the sense that it not only establishes the conditions of recognition of the agent’s right to indemnity, but also the criteria for calculating such indemnity. Therefore, the courts should determine the amount of the indemnity on the basis of the clientele develop and of the possible advantages for the principal, while the criteria of equity should be considered only where it is necessary to correct such amount. If the Court will follow the opinion delivered by the Advocate General, this will cause a very substantial change for the greatest parts of the Italian agents and principals.

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