ECJ – Commercial agents can claim compensation for termination during probationary period

Even if a commercial agency agreement is terminated during the probationary period, the commercial agent may still be entitled to claim compensation or damages. That was the verdict of the ECJ.

After a commercial agency agreement is terminated, the commercial agent is normally entitled to claim compensation. We at the commercial law firm GRP Rainer Rechtsanwälte note that this may not be the case if, for instance, the commercial agent was the one who terminated the agreement or the termination is attributable to wrongful acts committed by the commercial agent. Having said that, termination of the commercial agency agreement during the probationary period is not grounds for the right to claim compensation lapsing. That was the verdict of the Court of Justice of the European Union in a ruling from 19 April 2018 (Az.: C-645/16).

In the instant case, the company and the commercial agent had settled on a twelve-month probationary period in the agreement. Both parties were entitled to terminate the agreement within this timeframe allowing for a certain notice period. Because the commercial agent fell well short of the contractually agreed target, the company issued notice of termination within the probationary period. The commercial agent subsequently asserted a claim for payment of compensation for the loss associated with the termination of the agreement. The point of contention was then whether such a claim can be made even if the contractual relationship is terminated during the probationary period.

Commercial agents“ rights to claim compensation are laid out in an EU directive. The Court of Justice held that the rights provided for in the directive to claim compensation and damages are not meant to serve as a sanction against terminating an agreement but rather as a means for compensating the commercial agent both for services he or she performed which the company continues to benefit from as well as for any costs and expenses he or she incurs. The Court of Justice went on to state that if the conditions set out in the directive are fulfilled, the right to compensation cannot be denied solely on the basis that the agreement was terminated during the probationary period; the right to claim compensation is equally applicable during the probationary period.

The case before the ECJ concerned a legal dispute in France. However, the ruling also has implications for German commercial agency law. The relevant German provisions are closely aligned with the EU directive. As such, it is not possible to circumvent commercial agents“ rights to claim compensation by terminating the agreement during the probationary period.

Lawyers who are experienced in the field of commercial law can serve as professional advisers to businesses and commercial agents, advising on matters ranging from drafting agreements to enforcing claims or fending off those brought by contractual partners.

https://www.grprainer.com/en/legal-advice/commercial-law/commercial-agency-law.html

GRP Rainer LLP www.grprainer.com/en/ is an international firm of lawyers and tax advisors who are specialists in commercial law. The firm counsels commercial and industrial companies and corporations, as well as associations, small- and mid-sized businesses, self-employed freelancers and private individuals worldwide from offices Cologne, Berlin, Bonn, Dusseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London UK.

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