Belgium: Court Of Justice Passes Judgment On Belgian Commercial Agency Legislation

On 3 December 2015, the Court of Justice of the European Union ("ECJ") ruled on a request for a preliminary ruling from the Brussels Court of Appeal (the "Court") regarding 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 (the "Directive") (ECJ, 3 December 2015, case C-338/14, Quenon K. SPRL v. Beobank SA (formerly Citibank Belgium SA) and Metlife Insurance SA (formerly Citilife SA)).

Since December 1997, Quenon SPRL ("Quenon") had acted as a commercial agent for Citibank Belgium SA ("Citibank") and as an insurance agent for Citilife SA ("Citilife") under two distinct commercial agency agreements. Quenon's remuneration consisted exclusively of the commissions paid by Citibank on the sale of banking products and by Citilife on the sale of insurance products. In January 2004, Citibank terminated its agency agreement with Quenon and paid both a termination indemnity and a clientele indemnity to Quenon.

Following the termination of the banking agency agreement, Quenon no longer had access to the computer programme that had enabled it to manage the portfolio of Citilife insurance products. Arguing that this made it impossible for it to continue to perform the insurance agency agreement, Quenon brought an action before the Brussels commercial court against both Citibank and Citilife. Quenon sought an order requiring them, jointly or severally, to pay (i) compensation in lieu of notice and a clientele indemnity for the termination of the insurance agency contract; (ii) supplementary damages; and (iii) a commission on the business transacted after the agency contract had been terminated.

Following the dismissal of its action, Quenon lodged an appeal before the Court. In the appeal proceedings, Citibank and Citilife argued that Article 21 of the now abolished Law of 13 April 1995 on commercial agency agreements (Wet van 13 april 1995 betreffende de handelsagentuurovereenkomst/Loi du 13 avril 1995 relative au contrat d'agence commercial – the "Law on Commercial Agency Agreements") is contrary to the Directive. Pursuant to Article 21 of the Law on Commercial Agency Agreements, a terminated agent is entitled to receive additional damages to the extent that the amount of the clientele indemnity (which is limited to a maximum of one year's remuneration) does not fully indemnify the agent for the loss actually incurred, subject to proof of that actual loss. Article X.19 of the current Code of Economic Law (Wetboek van Economisch Recht/Code de droit économique) is a verbatim copy of Article 21 of the Law on Commercial Agency Agreements.

The Court sought clarifications from the ECJ on two points. First, it wanted to know whether the Directive precludes national legislation such as Article 21 of the Law on Commercial Agency Agreements. Second, the Court sought to ascertain whether the Directive makes the award of damages conditional on the demonstration of (i) a fault attributable to the principal which caused the alleged harm and, if so, whether that fault must be different from the unilateral termination of the agency agreement; and (ii) the existence of a loss which is distinct from that covered by the clientele indemnity.

Regarding the first question, the ECJ concluded that the Directive does not preclude national legislation such as Article 21 of the Law on Commercial Agency Agreements, provided that the legislation does not result in the commercial agent being compensated twice for the loss of commission following termination of the commercial agency agreement.

The ECJ reached this conclusion based on both a textual reading and a contextual interpretation of the Directive. The ECJ stressed that, although the Directive's system concerning the protection of the commercial agent after termination of the agreement is mandatory in nature, EU Member States enjoy discretion as to the choice of methods for calculating the clientele indemnity to which the terminated agent is entitled. The ECJ further noted that the Directive does not give any clear guidance as to the circumstances in which a commercial agent may claim additional damages. Accordingly, EU Member States have discretion to determine those circumstances and the applicable procedural rules. Yet, they must ensure that the award of damages does not result in double recovery by combining the indemnity for customers with the compensation for loss resulting, in particular, from the loss of commission following termination of the agreement.

Regarding the second question, the ECJ held that the Directive does not make the award of additional damages conditional upon the demonstration of a fault attributable to the principal. It is, therefore, for EU Member States to determine in their national law whether it is necessary to demonstrate such a fault (of a contractual or a non-contractual nature).

In contrast, the ECJ responded affirmatively to the question whether the damages have to relate to a loss which is distinct from that compensated for by the clientele indemnity. Otherwise, the upper amount of the clientele indemnity set forth by Article 17(2)(b) of the Directive would be circumvented. Pursuant to this provision, the clientele indemnity must not exceed a figure equivalent to an indemnity for one year calculated on the basis of the commercial agent's average annual remuneration over the preceding five years (if the contract goes back less than five years, the indemnity will be calculated on the average for the period in question).

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