Commercial agents in third States with the principal in the European Union

Categories: Business Law
Typology: Case Law

The Court of justice delivered on 16 February 2017 its judgment in case C 507/15, Agro Foreign Trade & Agency Ltd v Petersime NV, which is about commercial agents in third States and the well-known 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. At a time where the UK is about to launch the Brexit procedure, and therefore ultimately become a third State, it may be worth considering this case.

The facts are the following.

Agro is a Turkish company which operates in the importation and distribution of agricultural products sector. Petersime is a Belgian company, which is involved in the development, production and supply of hatcheries and accessories for the poultry market. In 1992, Petersime concluded a commercial agency contract with the predecessor of Agro, which was subsequently replaced, under a contract signed in August 1996, by Agro itself. Pursuant to that contract, Petersime, as principal, assigned to Agro, as commercial agent, the exclusive sales rights of its products in Turkey. The contract, which was initially concluded for a period of 1 year, provided for an automatic extension, every year, for a further 12 months, unless cancelled by either of the parties by registered letter at least 3 months before the end of the 1-year period. Moreover, that contract stated that it was subject to Belgian law and that only the courts of Ghent (Belgium) had jurisdiction in case of disputes. In 2013, Petersime notified Agro of the termination of the commercial agency contract with effect from 30 June 2013. In March 2014, Agro brought legal proceedings before the rechtbank van Koophandel te Gent (Commercial Court, Ghent, Belgium) seeking an order requiring Petersime to pay compensation for termination of the contract and a goodwill indemnity, the repossession of the remaining stock as well as the payment of outstanding claims.

Agro relied on the protection provided for commercial agents by the Law of 1995 and claimed that the provisions of the latter were applicable given that the parties validly chose Belgian law as the law applicable to the contract. By contrast, Petersime contended that only Belgian general law is applicable, on the ground that the Law of 1995 applies only to the extent that the commercial agent operates in Belgium, which is not the case.

The Belgian Court noted that the parties made an explicit choice of the applicable law, in this case Belgian law. That court considered however that that does not imply that the Law of 1995 is applicable, since the territorial scope of that law seems to be limited to commercial agents principally established in Belgium. Article 27 of the Law of 1995 leads to the conclusion that that law is self-limiting, so that it loses its mandatory character where the commercial agent does not have its principal establishment in Belgium, regardless of the fact that the parties may have designated Belgian law in general as the applicable law.

The Court of justice held that Council Directive 86/653 and the Agreement establishing an Association between the European Economic Community and Turkey of 1963 do not preclude national implementing legislation which excludes from its scope of application a commercial agency contract in the context of which the commercial agent is established in Turkey, where it carries out activities under that contract, and the principal is established in that Member State, so that the commercial agent cannot rely on rights which that directive guarantees to commercial agents after the termination of such a commercial agency contract.

(Altalex, 24 April 2017. Article by Emmanuel Guinchard)


Court of Justice of the European Union

First Chamber

Judgment  16 February 2017 (*)

(Reference for a preliminary ruling — Self-employed commercial agents — Directive 86/653/EEC — Coordination of the laws of the Member States — Belgian transposition measure — Commercial agency contract — Principal established in Belgium and agent established in Turkey — Choice of Belgian law clause — Applicable law — EEC-Turkey Association Agreement — Compatibility)

In Case C‑507/15,

REQUEST for a preliminary ruling under Article 267 TFEU from the rechtbank van Koophandel te Gent (Commercial Court, Ghent, Belgium), made by decision of 3 September 2015, received at the Court on 24 September 2015, in the proceedings

Agro Foreign Trade & Agency Ltd

v

Petersime NV,

THE COURT (First Chamber),

composed of R. Silva de Lapuerta (Rapporteur), President of the Chamber, E. Regan, J.-C. Bonichot, C.G. Fernlund and S. Rodin, Judges,

Advocate General: M. Szpunar,

Registrar: M. Ferreira, Principal Administrator,

having regard to the written procedure and further to the hearing on 13 July 2016,

after considering the observations submitted on behalf of:

–        Agro Foreign Trade & Agency Ltd, by A. Hansebout and C. Vermeersch, advocaten,

–        Petersime NV, by V. Pede, S. Demuenynck and J. Vanherpe, advocaten,

–        the Belgian Government, by M. Jacobs and L. Van den Broeck, acting as Agents, by E. De Gryse, avocat, and E. de Duve, advocaat,

–        the European Commission, by F. Ronkes Agerbeek and M. Wilderspin, and by H. Tserepa-Lacombe, acting as Agents,

after hearing the Opinion of the Advocate General at the sitting on 26 October 2016,

gives the following

Judgment

1        This request for a preliminary ruling concerns 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 (OJ 1986 L 382, p. 17), and of the Agreement establishing an Association between the European Economic Community and Turkey, signed in Ankara on 12 September 1963 by the Republic of Turkey, on the one hand, and by the Member States of the EEC and the Community, on the other, and concluded, approved and confirmed on behalf of the Community by Council Decision 64/732/EEC of 23 December 1963 (OJ 1973 C 113, p. 1) (‘the Association Agreement’).

2        The request has been made in proceedings between Agro Foreign Trade & Agency Ltd (‘Agro’), established in Turkey, and Petersime NV, established in Belgium, concerning payment of various forms of compensation owed as a consequence of the termination, by Petersime, of the commercial agency contract between those two companies.

Legal context

 European Union law

 Directive 86/653

3        Recitals 2 and 3 of Directive 86/653 state the following:

‘Whereas the differences in national laws concerning commercial representation substantially affect the conditions of competition and the carrying-on of that activity within the Community and are detrimental both to the protection available to commercial agents vis-à-vis their principals and to the security of commercial transactions; whereas moreover those differences are such as to inhibit substantially the conclusion and operation of commercial representation contracts where principal and commercial agent are established in different Member States;

Whereas trade in goods between Member States should be carried on under conditions which are similar to those of a single market, and this necessitates approximation of the legal systems of the Member States to the extent required for the proper functioning of the common market; whereas in this regard the rules concerning conflict of laws do not, in the matter of commercial representation, remove the inconsistencies referred to above, nor would they even if they were made uniform, and accordingly the proposed harmonisation is necessary notwithstanding the existence of those rules’.

4        Articles 17 and 18 of that directive specify the circumstances in which the commercial agent is entitled to an indemnity or to compensation for the damage he suffers as a result of the termination of his relations with the principal.

5        Under Article 17(1) of that directive:

‘Member States shall take the measures necessary to ensure that the commercial agent is, after termination of the agency contract, indemnified … or compensated for damage …’

 The Association Agreement

6        It is apparent from Article 2(1) of the Association Agreement that it is intended to promote the continuous and balanced strengthening of trade and economic relations between the parties, while taking full account of the need to ensure an accelerated development of the Turkish economy and to improve the level of employment and the living conditions of the Turkish people.

7        To that end, the Association Agreement provides for a preparatory stage enabling the Republic of Turkey to strengthen its economy with aid from the Community, provided for in Article 3, a transitional stage, during which a customs union is to be progressively established and economic policies are to be aligned more closely, provided for in Article 4, and a final stage which is to be based on the customs union and is to entail closer coordination of the economic policies of the Contracting Parties, provided for in Article 5 of that agreement.

8        Article 14 of the Association Agreement, which is in Title II, headed ‘Implementation of the transitional stage’, provides as follows:

‘The Contracting Parties agree to be guided by Articles [51, 52, 54, 56 to 61 TFEU] for the purpose of abolishing restrictions on freedom to provide services between them.’

 The Additional Protocol

9        The Additional Protocol, annexed to the Association Agreement, signed on 23 November 1970 at Brussels and concluded, approved and confirmed on behalf of the Community by Council Regulation (EEC) No 2760/72 of 19 December 1972 (OJ 1977 L 361, p. 60) (‘the Additional Protocol’) which, according to Article 62 thereof, forms an integral part of the Association Agreement, lays down, in Article 1, the conditions, arrangements and timetables for implementing the transitional stage referred to in Article 4 of that agreement.

10      The Additional Protocol includes Title II, headed ‘Movement of persons and services’, Chapter II of which concerns ‘rights of establishment, services and transport’.

11      Article 41(1) of the Additional Protocol, which is in Chapter II of that Title II, is worded as follows:

‘The Contracting Parties shall refrain from introducing between themselves any new restrictions on the freedom of establishment and the freedom to provide services.’

 Belgian law

12      The wet betreffende de handelsagentuurovereenkomst (Law on commercial agency contracts) of 13 April 1995 (Moniteur belge of 2 June 1995, p. 15621) (‘Law of 1995’) seeks to transpose Directive 86/653 into Belgian law.

13      Article 27 of the Law of 1995 is worded as follows:

‘Without prejudice to the application of international conventions to which Belgium is a party, any activity of a commercial agent whose principal place of business is in Belgium shall be governed by Belgian law and shall be subject to the jurisdiction of the Belgian courts.’

 The dispute in the main proceedings and the question referred for a preliminary ruling

14      Agro is a company incorporated under Turkish law, established in Ankara (Turkey), which operates in the importation and distribution of agricultural products sector. Petersime is a company incorporated under Belgian law, established in Olsene (Belgium), which is involved in the development, production and supply of hatcheries and accessories for the poultry market.

15      On 1 July 1992, Petersime concluded a commercial agency contract with the predecessor of Agro, which was subsequently replaced, under a contract signed on 1 August 1996, by Agro itself. Pursuant to that contract, Petersime, as principal, assigned to Agro, as commercial agent, the exclusive sales rights of its products in Turkey. The contract, which was initially concluded for a period of 1 year, provided for an automatic extension, every year, for a further 12 months, unless cancelled by either of the parties by registered letter at least 3 months before the end of the 1-year period. Moreover, that contract stated that it was subject to Belgian law and that only the courts of Ghent (Belgium) had jurisdiction in case of disputes.

16      By letter of 26 March 2013, Petersime notified Agro of the termination of the commercial agency contract with effect from 30 June 2013. On 5 March 2014, Agro brought legal proceedings before the rechtbank van Koophandel te Gent (Commercial Court, Ghent, Belgium) seeking an order requiring Petersime to pay compensation for termination of the contract and a goodwill indemnity, the repossession of the remaining stock as well as the payment of outstanding claims.

17      It is apparent from the order for reference that, in support of its claims, Agro relies on the protection provided for commercial agents by the Law of 1995. In that regard, Agro claims that the provisions of the latter are applicable in the present case, given that the parties validly chose Belgian law as the law applicable to the contract which they concluded. By contrast, Petersime contends that only Belgian general law is applicable, on the ground that the Law of 1995 applies only to the extent that the commercial agent operates in Belgium, which is not the case in the present situation.

18      The referring court notes that the parties made an explicit choice of the applicable law, in this case Belgian law. That court considers however that that does not imply that the Law of 1995 is applicable, since the territorial scope of that law seems to be limited to commercial agents principally established in Belgium. Article 27 of the Law of 1995, as interpreted in Belgian law, leads to the conclusion that that law is self-limiting, so that it loses its mandatory character where the commercial agent does not have its principal establishment in Belgium, regardless of the fact that the parties may have designated Belgian law in general as the applicable law.

19      In those circumstances, the rechtbank van Koophandel te Gent (Commercial Court, Ghent) decided to stay the proceedings and to refer the following question to the Court for a preliminary ruling:

‘Is the Law of 1995, which transposes Directive 86/653 into Belgian national law, in accordance with that directive and/or the provisions of the Association Agreement which has as its express aim the accession of Turkey to the European Union and/or the obligations between Turkey and the European Union to eliminate restrictions with regard to the free movement of services between them, when that law provides that it only applies to commercial agents whose principal place of business is in Belgium, and does not apply when a principal established in Belgium and an agent established in Turkey have explicitly chosen Belgian law?’

 Consideration of the question referred

20      First of all, it should be noted that the observations submitted to the Court reveal a divergence as regards the interpretation of Article 27 of the Law of 1995 and the application of that law, which transposes Directive 86/653, to the situation at issue in the main proceedings.

21      The parties to the main proceedings, like the referring court, consider that, pursuant to Article 27 of the Law of 1995, as interpreted in the Belgian legal system, that law is not applicable to a commercial agency contract such as that at issue in the main proceedings, under which the principal is established in Belgium and the commercial agent is established in Turkey, where it carries out the activity resulting from that contract, so that, in such circumstances, the commercial agent cannot rely on the protection provided by that law in the event that the contract is terminated, even though the parties to the contract at issue in the main proceedings designated Belgian law as the law governing that contract.

22      By contrast, the Belgian Government maintains that Article 27 of the Law of 1995 does not have the self-limiting character which the referring court attributes to it, so that that law applies to a situation such as that at issue in the main proceedings in which a principal established in Belgium and a commercial agent established in Turkey expressly designated Belgian law as the applicable law.

23      In that respect, it should be recalled that, as regards the interpretation of provisions of national law, the Court is in principle required to base its consideration on the description given in the order for reference. It is settled case-law that the Court of Justice does not have jurisdiction to interpret the internal law of a Member State (judgment of 17 March 2011, Naftiliaki Etaireia Thasou and Amaltheia I Naftiki Etaireia, C‑128/10 and C‑129/10, EU:C:2011:163, paragraph 40 and the case-law cited).

24      Consequently, it is on the basis of premises resulting from the order for reference that it is necessary to answer the question posed by the referring court.

25      By its question, the referring court asks, in essence, whether Directive 86/653 and/or the Association Agreement must be interpreted as precluding national legislation transposing that directive into the law of the Member State concerned, which excludes from its scope of application a commercial agency contract in the context of which the commercial agent is established in Turkey, where it carries out activities under that contract, and the principal is established in that Member State, so that, in such circumstances, the commercial agent cannot rely on rights which that directive guarantees to commercial agents after the termination of such a commercial agency contract.

 Directive 86/653

26      In order to answer the question posed by the referring court, as regards Directive 86/653, it is necessary to determine whether a commercial agent carrying out activities under a commercial agency contract in Turkey, the principal of which is established in a Member State, comes within the scope of application of that directive.

27      It should be noted that such a situation is not expressly referred to in Articles 17 and 18 of Directive 86/653 or in the other provisions thereof. However, according to the Court’s settled case-law, in interpreting a provision of EU law, it is necessary to consider not only its wording but also the context in which it occurs and the objectives pursued by the rules of which it is part (see, inter alia, judgment of 20 November 2014, Utopia, C‑40/14, EU:C:2014:2389, paragraph 27 and the case-law cited).

28      In that connection, it is common ground that that directive aims to coordinate the laws of the Member States as regards the legal relationship between the parties to a commercial agency contract (judgment of 23 March 2006, Honyvem Informazioni Commerciali, C‑465/04, EU:C:2006:199, paragraph 18 and the case-law cited).

29      As is clear from the second and third recitals of Directive 86/653, the harmonising measures seek to protect commercial agents in their relations with their principals, to eliminate restrictions on the carrying-on of the activities of commercial agents, to make the conditions of competition within the Community uniform, to promote the security of commercial transactions, and to facilitate trade in goods between Member States by harmonising their legal systems within the area of commercial representation. To those ends, that directive establishes, inter alia, rules governing the conclusion and termination of agency contracts, in Articles 13 to 20 (see, to that effect, judgments of 17 October 2013, Unamar, C‑184/12, EU:C:2013:663, paragraph 37 and the case-law cited, and of 3 December 2015, Quenon K., C‑338/14, EU:C:2015:795, paragraph 23 and the case-law cited).

30      In that context, the Court has already held that Articles 17 and 18 of Directive 86/653 are of crucial importance, as they define the level of protection which the European Union legislature considered reasonable to grant commercial agents in the course of the creation of the single market, and that the regime established by that directive for that purpose is mandatory in nature (see judgment of 17 October 2013, Unamar, C‑184/12, EU:C:2013:663, paragraphs 39 and 40).

31      Moreover, the Court has stated that the purpose of the regime established in Articles 17 to 19 of that directive is to protect, for all commercial agents, freedom of establishment and the operation of undistorted competition in the internal market, so that those provisions must therefore be observed throughout the Community if those objectives of the FEU Treaty are to be attained (judgment of 9 November 2000, Ingmar, C‑381/98, EU:C:2000:605, paragraph 24).

32      Finally, the Court has held that it is essential for the European Union legal order that a principal established in a non-member country, whose commercial agent carries on his activity within the European Union, cannot evade those provisions by the simple expedient of a choice-of-law clause. The purpose served by the provisions in question requires that they be applied where the situation is closely connected with the European Union, in particular where the commercial agent carries on his activity in the territory of a Member State, irrespective of the law by which the parties intended the contract to be governed (judgment of 9 November 2000, Ingmar, C‑381/98, EU:C:2000:605, paragraph 25).

33      Where, as in the main proceedings, the commercial agent carries out its activities outside the European Union, the fact that the principal is established in a Member State does not present a sufficiently close link with the European Union for the purposes of the application of the provisions of Directive 86/653, in the light of the objective pursued by the latter, as stated in the Court’s case-law.

34      It is not necessary, for the purposes of making the conditions of competition between commercial agents within the European Union uniform, to provide commercial agents who are established and carry out their activities outside the European Union with protection comparable to that of agents who are established and/or carry out their activities within the European Union.

35      In those circumstances, a commercial agent carrying out activities under a commercial agency contract in Turkey, such as the applicant in the main proceedings, does come within the scope of application of Directive 86/653, regardless of the fact that the principal is established in a Member State, and therefore should not necessarily benefit from the protection provided by that directive to commercial agents.

36      Consequently, the Member States are not obliged to adopt harmonisation measures, solely under Directive 86/653, concerning commercial agents in situations like those at issue in the main proceedings. That directive therefore does not preclude national legislation such as that at issue in the main proceedings.

 The Association Agreement

37      In so far as the referring court questions the applicability of the system of protection provided for by Directive 86/653 with regard to a commercial agent established in Turkey, the principal of which is established in a Member State, in the light of the obligations of the Republic of Turkey and the European Union with a view to abolishing restrictions on freedom to provide services between them, in the context of the Association Agreement, it is necessary to determine whether the application of Directive 86/653 to commercial agents established in Turkey can follow from the Association Agreement concerning such obligations, namely Article 14 of that agreement and Article 41(1) of the Additional Protocol.

38      As regards Article 14 of the Association Agreement, it is clear, admittedly, from the wording of that provision as well as from the objective of that agreement, that the principles enshrined in Articles Article 45 and 46 TFEU, and in the provisions of the Treaty relating to the freedom to provide services, must be extended, so far as possible, to Turkish nationals to eliminate restrictions on the freedom to provide services between the contracting parties (judgment of 21 October 2003, Abatay and Others, C‑317/01 and C‑369/01, EU:C:2003:572, paragraph 112 and the case-law cited).

39      However, the interpretation given to the provisions of European Union law, including Treaty provisions, concerning the internal market cannot be automatically applied by analogy to the interpretation of an agreement concluded by the European Union with a non-Member State, unless there are express provisions to that effect laid down by the agreement itself (judgment of 24 September 2013, Demirkan, C‑221/11, EU:C:2013:583, paragraph 44 and the case-law cited).

40      In that regard, the Court has already held that the use in Article 14 of the Association Agreement of the verb ‘to be guided by’ indicates that the contracting parties are not obliged to apply the provisions of the Treaty on freedom to provide services or indeed those adopted for the implementation of those provisions but simply to consider them as a source of guidance for the measures to be adopted in order to implement the objectives laid down in that agreement (judgment of 24 September 2013, Demirkan, C‑221/11, EU:C:2013:583, paragraph 45).

41      Moreover, with regard, in particular to the association between the European Union and the Republic of Turkey, the Court has already held that, in deciding whether a provision of European Union law lends itself to application by analogy under that association, a comparison must be made between the objective pursued by the Association Agreement and the context of which it forms a part, on the one hand, and those of the European Union law instrument in question, on the other (judgment of 24 September 2013, Demirkan, C‑221/11, EU:C:2013:583, paragraph 48).

42      It should be noted that the Association Agreement and the Additional Protocol are intended essentially to promote the economic development of Turkey and pursue, therefore, a solely economic purpose (see, to that effect, judgment of 24 September 2013, Demirkan, C‑221/11, EU:C:2013:583, paragraph 50).

43      The development of economic freedoms for the purpose of bringing about freedom of movement for persons of a general nature which may be compared to that afforded to European Union citizens under Article 21 TFEU is not the object of the Association Agreement. Neither that agreement nor the Additional Protocol establishes any general principle of freedom of movement of persons between Turkey and the European Union. Furthermore, the Association Agreement guarantees the enjoyment of certain rights only within the territory of the host Member State (see, to that effect, judgment of 24 September 2013, Demirkan, C‑221/11, EU:C:2013:583, paragraph 53).

44      By contrast, in the context of EU law, the protection of the freedom of establishment and the freedom to provide services, by means of the regime provided for by Directive 86/653 with respect to commercial agents, is based on the objective of establishing an internal market, conceived as an area without internal borders, by removing all obstacles to the establishment of such a market.

45      Therefore, the differences between the Treaties and the Association Agreement concerning the objective pursued by them preclude the system of protection laid down by Directive 86/653 with respect to commercial agents from being held to extend to commercial agents established in Turkey, in the context of that agreement.

46      The fact that the Republic of Turkey transposed that directive into its national law, as is apparent from the order for reference, in no way alters the above conclusion, since such a transposition results not from an obligation imposed by the Association Agreement, but from the will of that third State.

47      As regards Article 41(1) of the Additional Protocol, it is settled case-law that the standstill clauses set out in Article 13 of Decision No 1/80 of the Association Council of 19 September 1980 on the development of the Association, and annexed to the Association Agreement, and in Article 41(1) of the Additional Protocol prohibit generally the introduction of new internal measures which are intended to or have the effect of making the exercise by a Turkish citizen of an economic freedom subject, on the territory of the Member State concerned, to conditions more stringent than those which were applicable at the date of entry into force of that decision or that protocol as regards that Member State (judgment of 12 April 2016, Genc, C‑561/14, EU:C:2016:247, paragraph 33).

48      It follows therefrom that Article 41(1) of the Additional Protocol concerns only Turkish nationals who exercise their freedom of establishment or to supply services in a Member State.

49      Consequently, a commercial agent established in Turkey, who does not supply services in the Member State concerned, such as the applicant in the main proceedings, does not fall within the personal scope of application of that provision.

50      It is therefore not necessary to examine whether the Law of 1995 constitutes a ‘new restriction’ within the meaning of Article 41(1) of the Additional Protocol.

51      In those circumstances, it must be concluded that the Association Agreement also does not preclude national legislation such as that at issue in the main proceedings.

52      In view of the foregoing considerations, the answer to the question referred is that Directive 86/653 and the Association Agreement must be interpreted as not precluding national legislation transposing that directive into the law of the Member State concerned, which excludes from its scope of application a commercial agency contract in the context of which the commercial agent is established in Turkey, where it carries out activities under that contract, and the principal is established in that Member State, so that, in such circumstances, the commercial agent cannot rely on rights which that directive guarantees to commercial agents after the termination of such a commercial agency contract.

 Costs

53      Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.

On those grounds, the Court (First Chamber) hereby rules:

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 and the Agreement establishing an Association between the European Economic Community and Turkey, signed in Ankara on 12 September 1963 by the Republic of Turkey, on the one hand, and by the Member States of the EEC and the Community, on the other, and concluded, approved and confirmed on behalf of the Community by Council Decision 64/732/EEC of 23 December 1963 must be interpreted as not precluding national legislation transposing that directive into the law of the Member State concerned, which excludes from its scope of application a commercial agency contract in the context of which the commercial agent is established in Turkey, where it carries out activities under that contract, and the principal is established in that Member State, so that, in such circumstances, the commercial agent cannot rely on rights which that directive guarantees to commercial agents after the termination of such a commercial agency contract.

[Signatures]

** Language of the case: Dutch.

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