SPAIN: Agency agreement – Limitation of the goodwill indemnity in the agreement.

Ignacio ALONSO | SPAIN | 2011-01-17

Ignacio ALONSO

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The clause was as follows: ‘In case the Principal should pay any indemnity [to the Agent], independently of its concept or concepts, the total amount will be of a 10% of the commissions matured by the Agent during the last two years or during all its length if the agreement had lasted less than two years’.

The debate was due to the interpretation of Article 28 of the Agency Act (under certain circumstances goodwill indemnity is due to the Agent in case of termination of the agency agreement) in connection with Article 3.1 of the same Act (principles of Agency Act are mandatory unless they expressly say the contrary) and Article 19 of the Council Directive 86/653/EEC.

Article 19 of the Directive expressly says that ‘the parties may not derogate from Articles 17 and 18 to the detriment of the commercial agent before the agency contract expires’. Such a prohibition has not been literally incorporated to the Spanish Act. The article regulating goodwill indemnity is Article 28 of the Agency Act which foresees the indemnity for cases similar to those mentioned in Article 17.2 of the Directive. The Defendant (Principal) argued, based in the principle that Directives cannot have a direct effect between particulars, that Article 19 was not directly applicable to their relationship and that nothing in the Spanish Act prohibited the previous agreement on the goodwill indemnity.

The Supreme Court, modifying the decisions of the Court of First Instance and the Court of Appeal (Provincial Court), has interpreted article 28 and 3.1 of the Act in a different way. Although in the Spanish Agency Act there is not a provision as article 19 of the Directive, the combination of articles 28 and 3.1 permits to conclude that: (i) clauses in which the agent renounces to the goodwill indemnity will be null and void and (ii) article 3.1 of the Spanish Agency Act contains the prohibition of anticipated pacts concerning goodwill indemnity if these pacts are in detriment of the commercial Agent (it will not be null and void, for instance, a previous pact granting to the Agent a goodwill indemnity higher than the maximum foreseen by the Act). According to this interpretation, the Supreme Court has decided that an indemnity was due to the Agent and whose amount was not limited by the clause in the agreement but had to be paid with deduction of the previously paid amount.



Ignacio Alonso, agency & distribution Country Expert for Spain.



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