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A new judgment of Celle Higher Regional Court could lead to higher compensation being awarded to commercial agents and distributors in the future.
When a commercial agent contract is terminated, the commercial agent, who has built up a customer base that can continue to be used by the business, is generally entitled to a claim for compensation under Section 89b German Commercial Code. The scheme is sometimes applied analogously to distributors. At a maximum, the commercial agent may request a maximum of one average annual commission (maximum amount under Section 89b(2) Commercial Code).
The specific calculation of the compensation claim (“gross compensation calculation” pursuant to Section 89b(1) Commercial Code) is to be based on the commissions earned by the commercial agent from transactions with newly acquired customers. On the other hand, commissions from transactions with existing customers whose business was successfully developed by the commercial agent must also be taken into account.
The law states: “The acquisition of new customers is equal to the commercial agent expanding the business relationship with a customer so significantly that such is economically equivalent to the acquisition of a new customer” (Section 89b(1) sentence 2 Commercial Code).
On this basis, a widely used “rule of thumb” has evolved in trial practice: Such a significant expansion is given if sales with a customer increased by at least 100% (adjusted for inflation). If the increase is lower, it is usually denied. In its February 16, 2017 judgment, Celle Higher Regional Court now refused to use this rule of thumb (11 U 88/16).
In the specific case, a commercial agent who sold certain branded products to pharmacies and cosmetic institutes also claimed compensation for three customers with sales increases of between 58% and 76%. Celle Higher Regional Court held that the commercial agent was also entitled to compensation for these three customers based on gross compensation calculation. National jurisdiction, according to which a doubling of revenue is necessary, would not correspond to the Commercial Agent Directive (Directive 86/653/EEC) on which German commercial agent law is based. The Directive only requires a “significant increase” of the volume of business with existing customers. Sales increases exceeding 50% should, however, also be considered as such a significant increase.
Celle Higher Regional Court thus joins the growing number of authors in legal literature, who have been pointing out for quite some time that the wording of Section 89b(1), sentence 2 Commercial Code is not to compliant with the provisions of the Directive and no doubling of revenue was to be required to include the relevant customer when calculating the compensation.
It remains questionable, however, whether it is correct to replace the value of 100% by the value of 50%, or any other threshold value. Should the decision of Celle Higher Regional Court be used as an example in the future, this may lead to successful demands for compensatory payments at the maximum level under Section 89b(2) Commercial Code (average annual commission). The judgment is final, an appeal to the Federal Court of Justice has not been filed.
The specific calculation of the compensation claim (“gross compensation calculation” pursuant to Section 89b(1) Commercial Code) is to be based on the commissions earned by the commercial agent from transactions with newly acquired customers. On the other hand, commissions from transactions with existing customers whose business was successfully developed by the commercial agent must also be taken into account.
The law states: “The acquisition of new customers is equal to the commercial agent expanding the business relationship with a customer so significantly that such is economically equivalent to the acquisition of a new customer” (Section 89b(1) sentence 2 Commercial Code).
On this basis, a widely used “rule of thumb” has evolved in trial practice: Such a significant expansion is given if sales with a customer increased by at least 100% (adjusted for inflation). If the increase is lower, it is usually denied. In its February 16, 2017 judgment, Celle Higher Regional Court now refused to use this rule of thumb (11 U 88/16).
In the specific case, a commercial agent who sold certain branded products to pharmacies and cosmetic institutes also claimed compensation for three customers with sales increases of between 58% and 76%. Celle Higher Regional Court held that the commercial agent was also entitled to compensation for these three customers based on gross compensation calculation. National jurisdiction, according to which a doubling of revenue is necessary, would not correspond to the Commercial Agent Directive (Directive 86/653/EEC) on which German commercial agent law is based. The Directive only requires a “significant increase” of the volume of business with existing customers. Sales increases exceeding 50% should, however, also be considered as such a significant increase.
Celle Higher Regional Court thus joins the growing number of authors in legal literature, who have been pointing out for quite some time that the wording of Section 89b(1), sentence 2 Commercial Code is not to compliant with the provisions of the Directive and no doubling of revenue was to be required to include the relevant customer when calculating the compensation.
It remains questionable, however, whether it is correct to replace the value of 100% by the value of 50%, or any other threshold value. Should the decision of Celle Higher Regional Court be used as an example in the future, this may lead to successful demands for compensatory payments at the maximum level under Section 89b(2) Commercial Code (average annual commission). The judgment is final, an appeal to the Federal Court of Justice has not been filed.
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