Amendment of Statuatory Provision Concerning the Claim for Compensation/Indemnity of Commercial Agents and Appointed Dealers (Sec. 89 b HGB)

The German legislator has amended Sec. 89 b of the German Commercial Code (Handelsgesetzbuch, hereinafter “HGB”). This regulation provides a claim for compensation/indemnity for the commercial agent upon termination of the agency agreement and can be applied analogously in case of termination of certain appointed dealer agreements and franchise agreements. In the wake of a decision of the European Court of Justice of 26 March 2009, file-No. C-348/07, some of the requirements for the claim’s coming into existence were modified.

Taking effect on 5 August 2009, a commercial agent may be entitled to a claim for compensation under Sec. 89 b para. 1 HGB if and as far as

1. substantial advantages accrue to the principal, even after termination of the contractual relationship, from business relations with new customers recruited by the agent, and

2. payment of compensation is equitable taking all the circumstances into account, in particular the commissions the commercial agent would have received from deals with these customers.

Before the change took effect, the element of commission losses due to termination was a requirement of its own and not just part of the test of equitableness, as it is now (cp. No. 2 above). The claim for compensation specifically required that (and was limited by the extent to which) by reason of termination of the commercial agency contract, the agent lost commissions concerning new customers recruited by the agent.

In the past, the compensation claim was actually usually based on the amount of commission the agent would have earned during the immediate years after termination of the agency agreement from deals with customers recruited by the agent. According to consistent practice of the courts it was assumed that the benefits accruing to the principal were generally at least equivalent to the commission saved.

As a consequence of the requirement of commission losses, an agent receiving only one-time commissions could not claim compensation according to Sec. 89 b HGB. This applied, e.g., to most agents procuring newspaper subscriptions.

However, in the decision mentioned above concerning the oil company Tamoil of 26 March 2009 (file-Nr. C-348/07) the European Court of Justice found that the practice of the German courts to generally limit the compensation claim to the amount of the commission lost was contrary to Art. 17 of the Commercial Agents Directive (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). Art. 17 para 2. of the Commercial Agents Directive provides that

(a) The commercial agent shall be entitled to an indemnity if and to the extent that:

– he has brought the principal new customers or has significantly increased the volume of business with existing customers and the principal continues to derive substantial benefits from the business with such customers, and

– the payment of this indemnity is equitable having regard to all the circumstances and, in particular, the commission lost by the commercial agent on the business transacted with such customers. …

It should be pointed out that in fact the German courts’ practice was in compliance with Sec. 89 b HGB. The decision of the European Court of Justice thus actually meant that Sec. 89 b HGB was contrary to Art. 17 of the Commercial Agents Directive. The German legislator quickly adapted Sec. 89 b HGB as set forth above.

Potentially, this amendment could have considerable impact on areas such as subscription (e.g. for newspapers, cable television, phone and internet services), insurances and financial products, where commissions are often paid only once in connection with the conclusion of the deal and follow-up deals giving rise to commission are rare.

However, It remains to be seen which impact the amendment is actually going to have in practice. Commentators agree that it will be possible, as in the past, to refer to the commissions which the agent would have earned in the years after termination from deals with new customers recruited by him as the minimum of the benefits derived by the principal. It is, however, up to the courts to decide how to determine the benefits beyond the commission lost. The courts will also have to determine how to integrate the commissions lost into the test of equitableness, if the principal shows that the commission losses were lower than the benefits accruing to the principal.

As soon as we become aware of court decisions dealing with the amended requirements for a claim under Sec. 89 b HGB, we will report on them on this website.