OPINION OF ADVOCATE GENERAL
ĆAPETA
delivered on 24 November 2022(1)
Case C‑574/21
QT
v
O2 Czech Republic a.s.
(Request for a preliminary ruling from the Nejvyšší soud (Supreme Court, Czech Republic))
(Reference for a preliminary ruling – Directive 86/653/EEC – Article 17(2)(a) – Self-employed commercial agents – Entitlement to an indemnity after termination of the agency contract – Method of calculation – Concept of ‘the commission lost by the commercial agent’ – One-off commission payments)
I. Introduction
1. Article 17(2)(a) 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 (2) establishes the right of a commercial agent to obtain a sum of money referred to as an indemnity from the principal after the termination of the agency contract.
2. This reference for a preliminary ruling submitted by the Nejvyšší soud (Supreme Court, Czech Republic) raises a question of interpretation of that provision. More precisely, it concerns the interpretation of the concept of ‘the commission lost by the commercial agent’ (which I will refer to as ‘lost commission’) contained therein.
3. The present case also raises some broader issues in connection with the conditions for the indemnity to arise and the method of calculation of the indemnity under Directive 86/653.
II. The facts in the main proceedings, the questions referred for a preliminary ruling and the procedure before the Court
4. QT concluded an agency contract with the legal predecessor of O2 Czech Republic a.s. (‘O2 Czech Republic’) on 1 January 1998. Under that contract, QT and O2 Czech Republic had the status of commercial agent and principal, respectively.
5. The agency contract concerned the offer and sale of telecommunications services provided by O2 Czech Republic in the NMT 450 and GSM systems, the supply and sale of mobile telephones, accessories and other potential products, and customer care.
6. Pursuant to the agency contract, QT was paid a one-off commission for each individual contract that he concluded for O2 Czech Republic. As explained by O2 Czech Republic at the hearing before the Court, if QT negotiated the conclusion of a new contract with the same customer who he had already brought in (for instance, the extension of the subscription), he would receive a one-off commission payment for that new contract. If, however, a new contract was concluded by O2 Czech Republic with the same customer through a different agent, the one-off commission would be paid to that agent. If O2 Czech Republic concluded a new contract with the same customer directly, no commission would be paid.
7. On 31 March 2010, O2 Czech Republic terminated the agency contract.
8. QT brought proceedings before the Obvodní soud pro Prahu 4 (District Court Prague 4, Czech Republic), requesting that O2 Czech Republic pay him CZK 2 023 799 Czech koruna (CZK) (approximately EUR 80 000), plus default interest, based on his right to receive an indemnity under the Czech legislation which transposes Article 17(2)(a) of Directive 86/653.
9. Initially, by judgment of 14 September 2015, the Obvodní soud pro Prahu 4 (District Court Prague 4), the court of first instance, granted QT’s application in part. However, in its ruling of 16 March 2016, the Městský soud v Praze (Prague City Court, Czech Republic), the appeal court, set aside that judgment on the basis of O2 Czech Republic’s appeal, on the grounds of inadequate finding of facts, returning the case to the court of first instance for rehearing.
10. In its second judgment of 30 January 2019, the Obvodní soud pro Prahu 4 (District Court Prague 4) dismissed QT’s application. The court of first instance concluded that QT had failed to demonstrate that O2 Czech Republic derived substantial benefits from customers acquired by QT after the termination of the agency contract. QT lodged an appeal against that judgment.
11. By judgment of 27 November 2019, the Městský soud v Praze (Prague City Court) upheld the judgment of the court of first instance rejecting QT’s application. The appeal court emphasised that the commission for the brokerage of the transactions was one-off and that all such commission payments had been duly made to QT, stating that QT’s arguments based on the commission to which he would have hypothetically become entitled by the conclusion of further transactions, whether with new or existing customers, did not justify the right to an indemnity. According to that court, although QT brought in new customers and developed business with existing customers from which O2 Czech Republic may have derived benefits after termination of the agency contract, O2 Czech Republic had already paid commission to QT for such transactions under the agency contract and thus the payment of an indemnity would not be equitable.
12. QT brought an appeal against the judgment of the Městský soud v Praze (Prague City Court) before the Nejvyšší soud (Supreme Court), the referring court in the present case.
13. According to the order for reference, QT did acquire new customers for O2 Czech Republic in 2006 and 2007, or entered into additional contracts with existing customers, for example, for other products or extending their existing contracts, but, even taking into account the duration of the maximum tariff commitments, which in the years concerned was a maximum of 30 months, they did not extend beyond 31 March 2010, when the agency contract was terminated. In respect of the period between 2008 and 2009, a total of 431 commitments went beyond 31 March 2010, of which 155 were new contracts and 276 were changed commitments. Therefore, QT has proven that he had brought new customers to O2 Czech Republic and also developed business with existing customers. For such activities, QT was duly paid by O2 Czech Republic.
14. The referring court explains that the legislation in the Czech Republic is based on the indemnity regime, having transposed the solution set out in Article 17(2) of Directive 86/653.
15. The referring court also explains, and this was repeated by the Czech Government at the hearing before the Court, that, in its case-law, it has interpreted lost commission as commission to which the agent is entitled on the basis of the transactions that were already concluded before the termination of the agency contract.
16. The referring court points out, however, that the opposite trend can be found in German case-law and literature. There, the opinion prevails that lost commission includes commission for the conclusion of contracts that the agent would otherwise have received, had the commercial agency relationship endured, from future transactions between the principal and the customers who the agent had brought to the principal or with whom the agent significantly developed business.
17. Consequently, the referring court queries how the concept of lost commission in the second indent of Article 17(2)(a) of Directive 86/653 should be construed. Taking the view that the interpretation of that provision is essential to the decision concerning the entitlement of a commercial agent to indemnity in the case at hand, the referring court, as a court of last instance, considered that it was obliged to make a reference in accordance with Article 267 TFEU.
18. In those circumstances, the Nejvyšší soud (Supreme Court) decided to stay the main proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:
‘Must the expression “the commission lost by the commercial agent,” within the meaning of Article 17(2)(a), second indent, of [Directive 86/653], be interpreted to the effect that such commissions include commissions for the conclusion of contracts which a commercial agent would have entered into had the commercial agency [contract] endured, with the customers that he or she brought the principal or with which he or she significantly increased the volume of business?
If so, subject to what conditions does this conclusion apply to “one-off commissions” for the conclusion of a contract?’
19. Written observations were submitted to the Court by QT, O2 Czech Republic, the Czech and German Governments and the European Commission. A hearing was held on 15 September 2022 at which O2 Czech Republic, the Czech and German Governments and the Commission presented oral argument.
III. Legal framework
A. European Union law
20. Article 17 of Directive 86/653 provides, in so far as relevant:
‘1. Member States shall take the measures necessary to ensure that the commercial agent is, after termination of the agency contract, indemnified in accordance with paragraph 2 or compensated for damage in accordance with paragraph 3.
2. (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. Member States may provide for such circumstances also to include the application or otherwise of a restraint of trade clause, within the meaning of Article 20;
(b) The amount of the indemnity may not exceed a figure equivalent to an indemnity for one year calculated from the commercial agent’s average annual remuneration over the preceding five years and if the contract goes back less than five years the indemnity shall be calculated on the average for the period in question;
(c) The grant of such an indemnity shall not prevent the commercial agent from seeking damages.’
B. Czech law
21. Paragraph 669 of zákon č. 513/1991 Sb., obchodní zákoník (Law No 513/1991 on the Commercial Code), in the version applicable to the main proceedings, which transposes Article 17(2)(a) of Directive 86/653, states:
‘(1) A commercial agent shall be entitled to indemnification in the event of the termination of the contract if:
(a) he has brought the principal new customers or significantly developed business with existing customers and the principal continues to derive substantial benefits from business with such customers; and
(b) the payment of this indemnification 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; such circumstances also include the application or otherwise of a restraint of trade clause, within the meaning of Paragraph 672a.’
IV. Analysis
22. As I pointed out in my Opinion in Rigall Arteria Management, (3) Directive 86/653 is an exceptional piece of EU legislation which regulates business-to-business contracts, namely agency contracts concluded between the commercial agent and the principal, who are both acting as independent businesspersons. It harmonises certain aspects of the relationship between commercial agents and principals and, more specifically, basic mutual rights and obligations of the parties (Chapter II), the remuneration of commercial agents (Chapter III), and the conclusion and termination of agency contracts (Chapter IV). Article 17(2)(a) of Directive 86/653 is part of Chapter IV (Articles 13 to 20) thereof.
23. While several references for preliminary rulings have been submitted to the Court concerning the interpretation of the indemnity regime established by Directive 86/653, this is the first time that the Court has been invited to clarify what the concept of lost commission as set out in the second indent of Article 17(2)(a) of that directive actually means. (4)
24. As is apparent from the order for reference, the questions arise from the approach taken by the Czech case-law in respect of the national legislation transposing the second indent of Article 17(2)(a) of Directive 86/653. According to that case-law, lost commission is interpreted as excluding the possibility of a commercial agent receiving an indemnity for commission on hypothetical future transactions between the principal and the customers who the agent brought in or with whom the agent significantly developed business. I will, for the sake of convenience, refer to those customers as ‘the customer base created by the agent’. By its first question, the referring court wishes to ascertain, in essence, whether such an interpretation is acceptable in the light of Directive 86/653 or, on the contrary, whether commission on hypothetical future transactions is included in that concept.
25. If commission on hypothetical future transactions is included in the concept of lost commission, an additional issue arises for the referring court with respect to one-off commission payments as contracted by the parties to the dispute before that court. By its second question, the referring court therefore asks, in essence, whether lost commission can exist if, as in the present case, the agency contract provides that the agent is paid for each transaction negotiated or concluded on behalf of the principal.
26. The two questions referred can be dealt with together. They essentially boil down to the same issue, which relates to the meaning of lost commission in calculating the amount of indemnity for a commercial agent under Article 17(2)(a) of Directive 86/653.
27. Even if the questions explicitly refer to the second indent of Article 17(2)(a) of Directive 86/653, the understanding of the meaning of lost commission requires an interpretation of Article 17(2)(a) of that directive as a whole.
28. With a view to answering those questions, I will begin by addressing the Court’s jurisdiction to give a preliminary ruling in the circumstances of the present case (A) and the admissibility of the request (B). I will then proceed to my substantive assessment (C), by first providing some preliminary observations concerning the nature and rationale of indemnity in Directive 86/653 (C.1) and the distinction between the conditions for the right to an indemnity to arise and the method of calculation of the indemnity in relation to lost commission (C.2), before turning to the examination of the questions referred for a preliminary ruling (C.3). I will finally offer some reflections on the method of calculation of the indemnity which takes into consideration lost commission (C.4).
A. Jurisdiction of the Court
29. According to Article 1(2) of Directive 86/653, that directive applies to commercial agents whose activities involve, in particular, negotiating or concluding ‘the sale or the purchase of goods’. However, as seen in point 5 of this Opinion, it appears that the situation in the main proceedings relates to an agency contract concerned with the sale of goods as well as services. Therefore, the question arises as to whether the Court has jurisdiction to give a preliminary ruling in this case, (5) given that Directive 86/653 has been held not to apply to agency contracts for the sale or the purchase of services. (6)
30. Nevertheless, as indicated by the German Government, it seems that the Court’s jurisdiction to answer the questions referred in the present case can be established on the basis of what has been referred to as the Dzodzi case-law. (7)
31. Indeed, on the basis of that case-law, the Court has repeatedly held that, when national legislation transposing Directive 86/653 adopts a single solution for all types of agency contracts, the Court has jurisdiction to interpret that directive, even if the case arises from a situation that concerns services and not goods. Establishing jurisdiction in such cases is considered to be in the interest of the EU legal order in order to forestall future differences of interpretation. (8)
32. While the Court’s case-law has concerned situations in which the agency contract at issue related only to services, (9) there seems to me to be no reason why it could not apply to a situation in which the agency contract concerns goods and services, as is the case here. (10)
33. Additionally, the Court has held that an interpretation by the Court of provisions of EU law in situations not falling within the scope of those provisions is warranted where such provisions have been made applicable to such situations by national law directly and unconditionally, in order to ensure that those situations and equivalent situations falling within the scope of EU law are treated in the same way. (11)
34. In the present case, it is apparent from the information before the Court that, in transposing Directive 86/653, the Czech legislature has treated agency contracts relating to goods and services in a uniform manner. Thus, it seems that Czech law has made Article 17 of Directive 86/653 directly and unconditionally applicable to the situation in the main proceedings and that it is in the interest of the EU legal order that the Court rule on the request for a preliminary ruling submitted by the referring court.
35. Therefore, I am of the opinion that the Court has jurisdiction to give a preliminary ruling in the present case.
B. Admissibility of the request for a preliminary ruling
36. According to the arguments put forward by O2 Czech Republic, the questions referred in the present case are inadmissible because they are not relevant to the resolution of the dispute in the main proceedings. As O2 Czech Republic asserted in its written and oral observations, since QT was not able to prove his entitlement to the right to an indemnity, the questions relating to the equitable nature of the payment of the indemnity are irrelevant to the decision to be taken in this case.
37. In my view, those arguments should be rejected.
38. It should be recalled that, under established case-law, in the context of the cooperation between the Court and the national courts provided for in Article 267 TFEU, it is solely for the national court before which the dispute has been brought, and which must assume responsibility for the subsequent judicial decision, to determine, in the light of the particular circumstances of the case, both the need for a preliminary ruling in order to enable it to deliver judgment and the relevance of the questions which it submits to the Court. Consequently, where the questions submitted concern the interpretation of EU law, the Court is in principle required to give a ruling. (12)
39. It follows that questions relating to EU law enjoy a presumption of relevance. The Court may refuse to rule on a question referred by a national court for a preliminary ruling only where it is quite obvious that the interpretation of EU law that is sought bears no relation to the actual facts of the main action or its purpose, where the problem is hypothetical, or where the Court does not have before it the factual or legal material necessary to give a useful answer to the questions submitted to it. (13)
40. In the present case, as indicated in points 14 to 17 of this Opinion, the referring court has adequately set out in its request not only the reasons which led it to ask the Court for an interpretation of Directive 86/653, but also the reasons why that interpretation is necessary for the resolution of the dispute in the main proceedings.
41. Moreover, as indicated by the Commission, it is apparent from the order for reference (see point 13 of this Opinion) that the referring court considers that O2 Czech Republic continues to benefit from the customer base created by QT after the termination of the agency contract. Thus, it seems that the referring court considers that QT is entitled to an indemnity. However, the amount of that indemnity is a different issue. As I will discuss further below, lost commission for the purposes of Article 17(2)(a) of Directive 86/653 is part of the calculation of the indemnity, and not a condition for the right to an indemnity to arise (see points 50 to 59 of this Opinion).
42. In those circumstances, it should be considered that the interpretation sought is not manifestly unrelated to the facts or purpose of the main proceedings and that the issues raised are not hypothetical.
43. Therefore, I am of the opinion that the request for a preliminary ruling in the present case is admissible.
C. Substance
1. Nature and rationale of the indemnity in Directive 86/653
44. Article 17(2)(a) of Directive 86/653 is part of the system set out in Articles 17 to 19 of that directive governing the commercial agent’s right to receive an indemnity or compensation upon termination of the agency contract. This system is one of the most complex aspects of Directive 86/653. (14)
45. In the context of Directive 86/653, indemnity and compensation are specific terms to denote, broadly speaking, a lump sum termination payment for the agent, (15) with the indemnity regime drawn from German law and the compensation regime from French law. (16) While the indemnity and compensation regimes share a similar rationale, (17) there are differences between them in philosophies and practice. (18) Article 17 of Directive 86/653 thus embodies a compromise between the Member States, (19) providing them with the option to choose between an indemnity determined according to the criteria set out in Article 17(2) of Directive 86/653, or compensation according to the criteria set out in Article 17(3) thereof. (20)
46. The indemnity provided for in Article 17(2) of Directive 86/653 is generally considered to represent a special claim for the commercial agent’s loss of the goodwill which that agent has procured for the principal. (21) That goodwill is the customer base created by the agent which continues to have value for the principal after the termination of the agency contract.
47. That understanding has long been recognised in certain national legal systems. (22) It was also indicated in the Commission’s report on the application of Article 17 of Directive 86/653: ‘The indemnity represents the continuing benefits to the principal due to the efforts of the agent. The agent, however, will only have received commission during the duration of the contract, which will not typically reflect the value of the goodwill generated for the principal. It is for this reason that the payment of a goodwill indemnity is commercially justified.’ (23)
48. Indeed, the rationale for the indemnity provided for in Directive 86/653 may be considered to be linked to the very nature of the agency relationship, as set out in that directive. By virtue of the agency contract, the self-employed commercial agent and the principal establish a lasting relationship, whereby the agent’s main tasks are, acting on behalf of the principal and not in the agent’s own name, to bring the principal new customers and to increase the principal’s volume of business with existing customers. (24) The principal resorts to the services of the commercial agent in order to benefit from the agent’s strategies, skills and contacts in getting customers to enter into transactions with the principal. (25)
49. Thus, the indemnity is, as Advocate General Poiares Maduro explained in his Opinion in Honyvem Informazioni Commerciali, (26) intended to compensate the agent for his or her good performance in so far as there are economic benefits to the principal that continue to accrue after termination of the agency contract. At the same time, it addresses the risk of opportunistic behaviour by the principal in putting an end to the agency contract once the business relationship between the principal and the customers brought in by the agent had developed, so as to avoid having to pay the agent commission on the transactions that the agent had contributed to bringing about.
2. Conditions and calculation of the indemnity in Directive 86/653
50. By virtue of the wording ‘if and to the extent that’ contained in Article 17(2)(a) of Directive 86/653, that provision has been considered to lay down both the conditions under which an indemnity is to be awarded and the elements required for its calculation. (27)
51. The first indent of Article 17(2)(a) of Directive 86/653 states that a commercial agent is entitled to an indemnity where the agent brought to the principal new customers or significantly increased the volume of business with existing customers and the principal continues to derive substantial benefits from the business with such customers. The second indent of Article 17(2)(a) of Directive 86/653 indicates that the payment of the indemnity must be equitable, having regard to all the circumstances and, in particular, to the commission lost by the agent on the business transacted with such customers.
52. It seems to me that, while Article 17(2)(a) of Directive 86/653 does not clearly distinguish between the conditions for the entitlement to an indemnity to arise and the method of calculating the amount of the indemnity, it contains rules relating to both.
53. The first indent of Article 17(2)(a) of Directive 86/653 is concerned with the conditions for the entitlement to an indemnity to arise. These cumulatively require that: first, the agent has brought the principal new customers or has significantly increased the volume of business with existing customers and, second, the principal continues to derive substantial benefits from the business with such customers. (28)
54. The second indent of Article 17(2)(a) of Directive 86/653 is concerned with calculating the amount of the indemnity to which the agent is entitled, namely that ‘the payment of this indemnity’ is equitable, taking account of all of the circumstances, including lost commission.
55. Lost commission within the meaning of the second indent of Article 17(2)(a) of Directive 86/653 is therefore not a condition for the entitlement to an indemnity, but an element of the method of calculation of that indemnity.
56. The conditions governing the entitlement to an indemnity have been harmonised as a matter of EU law. (29)
57. According to the first indent of Article 17(2)(a) of Directive 86/653, in order to ascertain whether an agent is entitled to an indemnity, the national court must carry out a qualitative (as opposed to quantitative) assessment, taking into account whether the agent brought the principal new customers or significantly developed business with existing customers and whether the principal continues to derive substantial benefits from the business with those customers. In order to conclude that the entitlement to an indemnity has arisen, it is not necessary to calculate the number of new customers the agent has brought or the precise value of the continuing benefits for the principal. Once the national court can be relatively certain that the principal derives substantial benefits from the business brought in by the commercial agent, the agent is entitled to an indemnity.
58. Once the conditions for the entitlement to an indemnity have been met, the analysis proceeds to the calculation of its amount. That amount must be equitable.
59. In respect of the method of calculation of an equitable indemnity, there is some discretion left to the Member States, but that discretion is framed by the requirements established by Article 17 of Directive 86/653. (30) In that respect, lost commission is only one, albeit important, (31) element of this calculation.
60. It is in this light that I will examine the questions referred for a preliminary ruling.
3. Examination of the questions referred
61. The questions submitted to the Court by the referring court are, as explained in points 24 and 25 of this Opinion, the following: (i) whether commission on hypothetical future transactions between the principal and the customer base created by the agent must be taken into account in the determination of lost commission for the purposes of Article 17(2)(a) of Directive 86/653, and (ii) whether one-off commission payments, understood in the sense of the commission stipulated in the agency contract in the present case, could be construed as lost commission in that regard.
62. According to the arguments put forward by O2 Czech Republic and the Czech Government, lost commission under Article 17(2)(a) of Directive 86/653 is not intended to cover future transactions which a commercial agent would have concluded had the agency contract not been terminated, but rather concerns situations in which the agent has not received the full amount of the commission due to him or her for already completed transactions. QT, the German Government and the Commission disagree.
63. As seen in point 20 of this Opinion, Article 17(2)(a) of Directive 86/653 does not define the concept of lost commission, nor does any other provision of that directive.
64. In my view, the concept of lost commission for the purposes of Article 17(2)(a) of Directive 86/653 must be construed as meaning commission on hypothetical future transactions between the principal and the customer base created by the agent.
65. First, such an interpretation is in line with the very rationale for indemnity set out in Directive 86/653. As discussed above (see points 46 to 49 of this Opinion), the indemnity is justified by the fact that the commercial agent will only have received commission during the term of the agency contract, whereas the goodwill that the agent will have generated for the principal often continues after the termination of the agency contract. The indemnity cannot be limited to commission on business already transacted, as it is intended to compensate the agent for the profits that the principal continues to receive after the termination of the agency contract due to the customer base created by the agent. (32)
66. Second, the objectives pursued by Directive 86/653 militate in favour of the interpretation of lost commission in Article 17(2)(a) of that directive as put forward in this Opinion.
67. According to settled case-law, it is clear from its second and third recitals that Directive 86/653 seeks to protect commercial agents in their relations with their principals, 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. (33)
68. In that context, the Court has considered that Articles 17 and 18 of Directive 86/653 are of crucial importance, as they define the level of protection which the EU legislature considered reasonable to grant commercial agents in the course of the creation of the single market. (34)
69. The Court has also made clear that, in the light of the objective of Directive 86/653 to protect commercial agents in their relations with their principals, any interpretation of Article 17 of that directive which may prove to be detrimental to the commercial agent is not permissible. (35)
70. In particular, the Court has held that it is necessary to interpret the wording of Article 17(2) of Directive 86/653 in a manner which contributes to that protection of the commercial agent and which therefore takes full account of the merits of the agent in carrying out the transactions assigned to him or her. (36)
71. In the present case, as indicated by the Commission, the interpretation of the concept of lost commission in Article 17(2) of Directive 86/653 should be subject to a similar logic. Interpreting lost commission to mean hypothetical future transactions would contribute to protecting commercial agents after the termination of the contractual relationship with the principal, taking full account of the tasks carried out by agents for the benefit of the principals. (37)
72. In that regard, as emphasised by the German Government, when an agency contract is terminated, the principal would in many cases continue to benefit from the customer base created by the agent by continuing to carry out transactions with such customers. Therefore, not taking into account commission on hypothetical future transactions would defeat the objective of protecting the commercial agent pursued by that directive.
73. Indeed, it might be noted that, in practice, smaller contracts with customers often evolve into bigger, more lucrative contracts over time. For example, in the case where engineering works take time, first-time contracts typically tend to be small, and the agent is contracted by the principal to get a ‘foot in the door’ with customers on behalf of the principal by virtue of the agent’s strategies, skills and contacts. Restricting lost commission to the business already completed would be liable to deprive the agent of a considerable share of the profits earned by the principal following termination of the agency contract on the basis of the agent’s work.
74. Contrary to the arguments advanced by O2 Czech Republic and the Czech Government, the proposed interpretation of lost commission in Article 17(2)(a) of Directive 86/653 takes economic realities into account and does not destroy the commercial agency market. The specific circumstances to which O2 Czech Republic drew attention at the hearing, such as the particularities of the telecommunications sector and the fluctuations in the market (the changes in tariffs and consumer behaviour and the increase of potential competitors which apparently led to a decrease in the number of contracts during the period of the agency contract at issue) are not ignored. They are in fact taken into consideration as part of the equitable assessment of the indemnity (see points 97 and 98 of this Opinion). (38)
75. Nor does the inclusion of hypothetical future transactions in the determination of lost commission run counter to the aim pursued by Directive 86/653 to ensure legal certainty in the area of commercial representation. (39) The fact that forecasts have to be made as regards hypothetical future transactions is not an unusual part of business strategies. Likewise, as one Advocate General has noted, such forecasts are already carried out by the courts. (40)
76. Finally, other provisions of Directive 86/653 lend support for the proposed interpretation of lost commission in Article 17(2)(a) of that directive.
77. To recall, the first indent of Article 17(2)(a) of Directive 86/653 requires that the commercial agent has brought the principal new customers or has significantly increased the volume of business with existing customers and that the principal continues to derive substantial benefits from the business with such customers.
78. As indicated by the German Government, the assessment of the benefits retained by the principal within the meaning of the first indent of Article 17(2)(a) of Directive 86/653 concerns transactions established or developed by the commercial agent, from which the principal ‘continues to derive substantial benefits’. What is derived as a benefit can, in principle, only be calculated from a hypothetical consideration of the future development of these transactions, which are also referred to in the second indent of Article 17(2)(a) of Directive 86/653. (41) This suggests that lost commission is concomitant with the fact that the principal derives benefits after the termination of the agency contract. (42)
79. Furthermore, contrary to the arguments put forward by the Czech Republic and as indicated by the German Government and the Commission, the proposed interpretation of lost commission in Article 17(2)(a) of Directive 86/653 is consistent with Articles 7 and 8 of that directive.
80. Articles 7 and 8 of Directive 86/653 are contained in Chapter III thereof, concerning remuneration. Article 7 of Directive 86/653 provides that, unless the contract is worded differently, the commercial agent is entitled to commission on transactions concluded during the period covered by the agency contract. Article 8 of that directive indicates that the agent is entitled to commission on certain transactions concluded after the termination of the agency contract in situations where, in essence, the transaction was due to the agent’s efforts before the end of that contract.
81. It seems to me that Article 17(2) of Directive 86/653 should logically cover situations different from those already covered by Articles 7 and 8 of that directive. (43) Thus, Article 17(2) of Directive 86/653 should not apply to situations in which the commercial agent has not received all of the commission due to him or her by the principal, since those situations come under Articles 7 and 8 of that directive.
82. Indeed, the interpretation of lost commission put forward by O2 Czech Republic and the Czech Government as commission on business which has already been transacted would be difficult to distinguish from the commission already due to the agent under Articles 7 and 8 of Directive 86/653. (44) The latter, if not paid, would presumably be addressed by an action based on breach of the agency contract.
83. Therefore, I propose that the Court include commission on hypothetical future transactions in the concept of lost commission, which leads me to the second question. By that question, the referring court asks whether, and under what circumstances, one-off commission payments could be considered to constitute lost commission, if the latter relates to commission on hypothetical future transactions after the termination of the agency contract.
84. In that regard, it is necessary to take into account that this case demonstrates that the concept of one-off commission payments may mean different things. On the one hand, as explained by the German Government, a one-off commission payment means a lump sum remuneration for bringing a new customer to the principal. That sum is independent of the duration and development of the commercial relationship with that same customer. In other words, the agent is paid once per customer. On the other hand, O2 Czech Republic and the Czech Government use the term one-off commission payment to denote the commission of the type contractually agreed between QT and O2 Czech Republic. As explained above (see point 6 of this Opinion), QT received commission for each contract concluded (or modified) with a customer, whether a new or an existing one. The sum was adjusted depending on certain factors, such as the length of the contract concluded, the tariff and the number of services included, which the agent was able to negotiate. Thus, QT was not paid per customer, but per contract. If the same customer who originally signed the contract with the principal signs a new contract through a different agent, it would be that other agent who would be entitled to commission.
85. As indicated by the German Government, one-off commission payments, in the sense in which it uses that term, indeed could not represent lost commission. Indemnity should not be an unreasonable burden imposed on the principal, but addresses the benefits which the principal continues to receive from the customer base created by the agent. If the agent was already paid for such future benefits, which might be the case when the commission is contracted per customer, there is no lost commission for the agent.
86. However, the indemnity does not depend only on lost commission. For that reason, excluding one-off commission payments, as this term is understood in Germany, from the calculation of the indemnity is fully in line with the approach which I put forward in my Opinion in Rigall Arteria Management, (45) in relation to Article 7(1)(b) of Directive 86/653. (46) In that Opinion, I proposed that the entitlement of a commercial agent to commission on repeat transactions should be construed as a non-mandatory rule. (47) That reading of Directive 86/653 thus allows the parties to an agency contract to provide for one-off commission payments as a form of remuneration of the agent. Clearly, if such commission payments are allowed on the basis of Directive 86/653, indemnity cannot depend on whether the agent had the right to receive commission on one-time or repeat transactions. However, the fact that the agent was already paid for the future benefits of the principal should be taken into consideration in calculating an equitable indemnity.
87. Conversely, if one-off commission payments are understood in the sense of those contractually agreed by QT and O2 Czech Republic in the present case, the customer base created by the agent might bring benefits to the principal for which the agent has not yet been remunerated. Thus, had the agency contract not been terminated, the agent could have received commission. There is no certainty that that agent would indeed make it possible that the principal would sign a new contract with the customer who he or she had brought in. However, such a possibility existed. Therefore, such a one-off commission payment may represent the lost commission to be taken into account in calculating the amount of indemnity. Quantification of such lost commission will depend on the estimates of the future value of the customer base created by the agent for the principal, as well as the probability that the agent who brought in the customer can negotiate or conclude a new transaction with that customer (see points 90 to 112 of this Opinion).
88. In any case, as pointed out by the German Government and the Commission, and also confirmed by the Czech Government, an indemnity cannot be automatically excluded because one-off commission payment were contractually agreed, since, as expressly indicated in Article 17(2)(a) of Directive 86/653, indemnity is not based solely on lost commission, but on all the circumstances surrounding the termination of the agency contract. As emphasised by the German Government, if the mere stipulation of one-off commission payments excluded the right to an indemnity, the mandatory nature of that right could be circumvented.
89. Consequently, on the basis of the reasons outlined above, I take the view that the concept of lost commission for the purposes of Article 17(2)(a) of Directive 86/653 means commission on hypothetical future transactions between the principal and the customer base created by the agent. That concept is not affected by the fact that one-off commission payments were made to the agent. It is only if the contractually agreed commission payments were one-off commission payments of a kind that the agent was already remunerated for the future benefits that the principal would continue to receive from the customer base created by the agent, that they would not represent lost commission. That, however, does not mean that the agent is not entitled to the payment of an indemnity, given that lost commission is only one element in determining the equitable nature of that payment.
4. Method of calculation of the indemnity taking into consideration lost commission
90. There remains the issue of how lost commission, understood as the remuneration for future benefits enjoyed by the principal from the customer base created by the agent, is to be taken into consideration in the calculation of an equitable indemnity.
91. According to the case-law, the calculation of the indemnity in Article 17(2) of Directive 86/653 can be broken down into three stages: ‘The aim of the first stage is, first of all, to quantify the benefits accruing to the principal as a result of the volume of business with customers brought by the commercial agent, in accordance with the provisions of the first indent of Article 17(2)(a) of the directive. The aim of the second stage is to check, in accordance with the second indent of that provision, whether the amount established on the basis of the abovementioned criteria is equitable, having regard to all the circumstances of the case and, in particular, to the commission lost by the commercial agent. Finally, at the third stage, the amount of the indemnity is subject to an upper limit provided for in Article 17(2)(b) of the directive, which comes into play only if the amount calculated during stages one and two exceeds it.’ (48)
92. Those three stages do not necessarily mean that, in making the actual calculation of the indemnity, they have to be followed in that order. To my mind, they should be understood as indicating that what, in the end, the calculation of the amount of indemnity essentially boils down to is that, in order to be equitable, the indemnity must reflect both the future benefits retained by the principal and the loss suffered by the commercial agent on account of the termination of the agency contract, which is typically represented by the lost commission of the agent. As pointed out by the German Government, the two amounts – the future benefits retained by the principal and the lost commission of the agent – are most often commensurate. That is why, in practice, the first and second stages as described by the case-law referred to above merge into one.
93. All the elements relevant for the calculation of an equitable indemnity have to be quantified in this exercise. Given that many of those elements can only be estimates (as they relate to the future), the question arises as to how the concrete calculation of the indemnity could be done.
94. In that respect, Directive 86/653 does not contain specific rules, but leaves the choice of the method of calculation to the Member States.
95. In its report on the application of Article 17 of Directive 86/653, (49) the Commission described the acceptable method for calculation of the indemnity, which was based on German practice. That practice was adjusted after the judgment of 26 March 2009, Semen. (50) Nevertheless, it still starts, as explained by the German Government at the hearing, by estimating the number of years in which the principal might be expected to benefit from the customer base created by the agent. Lost commission is then estimated in relation to that period of time. (51)
96. The calculation of lost commission is, initially, based on the past commission actually received by the agent before the termination of the agency contract. It is based on the assumption that the agent would earn the same amount of commission for a certain number of years, which is then corrected by taking into consideration all the elements which point to the conclusion that the agent would not really earn that much or would earn even more in the future. Ultimately, therefore, lost commission would, depending on the circumstances, be greater or lesser than what the agent actually earned in the representative year on the basis of the same customer base created by the agent.
97. More specifically, the calculation starts with the amount of commission that the agent earned in the previous year (or another more representative year). That commission is then reduced for each subsequent year (since the number of years depends on the estimate of how long the principal will benefit from the customer base created by the agent) by the estimated migration rate of customers (understood as meaning customers from the customer base created by the agent who are expected to migrate to a different principal’s goods or services). In this way, the fact that the value of the customer base created by the agent might decrease over time is accounted for. Finally, the amount is corrected in order to take into consideration various circumstances, such as price fluctuations, important changes within the sector at issue and any other relevant factors which could influence the future value of the customer base created by the agent and the corresponding lost commission.
98. Concerns such as those raised by O2 Czech Republic at the hearing (see point 74 of this Opinion) that a large number of customers enter into telecommunications contracts directly (by signing online contracts with the principal) without using agents can be taken into consideration in the calculation. Such concerns can be expressed either in the estimated migration rate or as additional factors that might increase or decrease the value of the customer base created by the agent for the principal or the estimated lost commission that the agent would have earned, had the agency contract not been terminated. Therefore, if the agent has, for example, created a database of customers in respect of the products offered by one principal and it is estimated that a large number of those customers will extend the contract directly without resorting to an agent or will leave in order to sign a contract with another principal, the amount of the past commission might be reasonably reduced when estimating lost commission. If commission was agreed on the basis of each contract concluded, as in the present case, which meant that the next contract concluded with the same customer might be the result of a different agent’s activity, the estimate of the number of such situations (also based on past experience) might be taken into account in calculating lost commission, which may then be reduced.
99. To take as a starting point in the calculation the position that lost commission is commensurate with the future benefits of the principal makes sense because it offers, in my view, a simple and practical solution for the national courts. It starts from a given and easily traceable sum – past commission earned by the agent. It is also in line with the objective of protecting commercial agents in their relations with their principals. From the perspective of agents, lost commission calculated on the basis of past commission is easy to assess, since it is entirely in their hands. It would be extremely difficult for an agent to assess the profitability of the principal, which would not be likely to disclose such information, and, moreover, this is entirely in the hands of the principal, as the agent has no control over the principal’s costs.
100. This method of calculation likewise ensures a sufficient degree of predictability for the principal to decide whether, and at what moment, to terminate the agency contract. The principal also has information about the past commission paid to the agent and may additionally, if a dispute regarding the indemnity arises, provide the court with relevant information about other concerns which should be taken into consideration as part of the adjustment of the initial estimate.
101. After the adjustment of the original calculation of lost commission and the correlative future benefits of the principal, in the last step, the resulting amount needs to be reduced if it exceeds the indemnity ceiling set out in Article 17(2)(b) of Directive 86/653.
102. Before concluding, I will demonstrate this method of calculation on the basis of a hypothetical example, which is inspired by the Czech Government’s arguments at the hearing. A commercial agent and a principal enter into an agency contract concerning the sale of wood. The commercial agent’s tasks are thus to find customers to buy the principal’s wood. Some time after the principal has been introduced to the customers brought by the agent, the agency contract is terminated. The agent has been paid commission on each sale of wood. The amount of the commission depends on the sale price of the wood. Following the termination of the agency contract, the principal benefits from the customer base created by the agent to whom it can continue to sell its wood. Therefore, the conditions for the agent’s entitlement to an indemnity have been met, and the indemnity has to be calculated.
103. In the year preceding the termination of the agency contract (an ordinary year with average temperatures), the agent earned EUR 10 000 in commission from the principal. Most of the customers bought wood for heating. It is estimated that the principal could use the customer base created by the agent for at least another three years. As there were two new entrants to the wood market in the previous year, it is estimated that up to 30% of the customers will migrate to those new entrants.
104. The calculation would therefore be the following:
1st year: EUR 10 000 – 30% = EUR 7 000
2nd year: EUR 7 000 – 30% = EUR 4 900
3rd year: EUR 4 900 – 30% = EUR 3 430
Estimated lost commission = EUR 15 330
105. If other circumstances are identified which might influence the future benefits that the principal derives from the customer base created by the agent or the amount of the lost commission of the agent, these should be taken into consideration.
106. Let us imagine that, because of an expected gas shortage, many people plan to heat their homes using wood. The estimated increase in the demand for wood might result in a doubling of the price. Given that the agent’s commission was calculated on the basis of the sale price of wood in the previous year, the calculation might need to be adjusted so as to start from double the amount of that commission (EUR 20 000 instead of EUR 10 000). In addition, it might be necessary to take into consideration the length of time during which the gas shortage is expected to last. If this is for one year, the price of wood might revert to the previous amounts in the second and third years. In those circumstances, lost commission will be higher than it was in the first scenario (see point 104 of this Opinion).
107. The calculation would therefore be the following:
1st year: EUR 20 000 – 30% = EUR 14 000
2nd year: EUR 7 000 – 30% = EUR 4 900
3rd year: EUR 4 900 – 30% = EUR 3 430
Estimated lost commission = EUR 22 330
108. Let us now imagine that, just before the termination of the agency contract, there was a breakthrough in the research on the application of nuclear fusion, thus creating the expectation of very cheap energy in the short term. As a result, it is expected that most people will no longer use wood for heating. The only persons buying wood from the principal would be those customers who use wood for other purposes, such as for woodwork or decoration. That would significantly decrease the value of the customer base created by the agent, since, even if the agency contract had not been terminated, the agent could not expect to earn considerable commission from selling the principal’s wood anymore. The calculation of the loss of value of the customer base created by the agent for the principal would be commensurate with the decrease of the estimated lost commission. If customers who bought wood for purposes other than heating represented only 2% of the annual commission earned by the agent, the calculation might start from a much lower amount of EUR 200. The estimated migration rate may also be adjusted to 10%, as it is likely that some companies selling wood would leave the market.
109. The calculation would therefore be the following:
1st year: EUR 200 – 10% = EUR 180
2nd year: EUR 180 – 10% = EUR 162
3rd year: EUR 162 – 10% = EUR 145.80
Estimated lost commission = EUR 487.80
110. It should also be pointed out that, if it is estimated that the principal cannot derive any substantial benefits from the customer base created by the agent after the termination of the agency contract (which may well be the reason for its termination), there will not be any need for calculations, as the conditions for indemnity would not have arisen in such a scenario.
111. Furthermore, if, under the agency contract, the agent received a one-off commission payment per customer, so that, for each customer, the agent would earn an amount which was meant to cover any future purchases of wood by that customer and therefore the agent would not be paid any further commission, it is possible to conclude that there is no lost commission. However, if, for instance, the principal was also contributing to the agent’s pension fund, this should be taken into consideration in calculating an equitable indemnity for the agent, even if there is no lost commission. The payment of an indemnity is not based on lost commission, but on the fact that the agent created a customer base and that this customer base represents value for the principal even after the termination of the agency contract.
112. The last step in the calculation requires that the indemnity be adjusted so that it does not exceed the ceiling imposed by Article 17(2)(b) of Directive 86/653, namely a figure equivalent to one year’s remuneration earned by the agent from the principal, which is calculated on the basis of the average preceding five years (or less than five years, if the duration of the contract was shorter). If, on average, in the last five years, the agent from our hypothetical example was earning EUR 12 000 as remuneration, the estimated lost commission would exceed the ceiling in the first and second scenarios (see points 104 and 107 of this Opinion), and the indemnity which would have to be paid to the agent will be lower than the estimated lost commission.
V. Conclusion
113. In the light of the foregoing considerations, I propose that the Court should answer the questions referred by the Nejvyšší soud (Supreme Court, Czech Republic) as follows:
The concept of ‘the commission lost by the commercial agent’ for the purposes of the second indent of Article 17(2)(a) 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 must be interpreted as meaning commission which the commercial agent would have received on future transactions between the principal and the new customers who the agent brought to the principal or existing customers with whom the agent significantly increased the volume of business, had the agency contract not been terminated.
That concept is not affected by the fact that one-off commission payments were made to the agent. It is only if the contractually agreed commission payments were one-off commission payments of a kind that the agent was already remunerated for the future benefits that the principal would continue to receive from the customer base created by the agent, that they would not represent lost commission. That, however, does not mean that the agent is not entitled to the payment of an indemnity, given that lost commission is only one element in determining the equitable nature of that payment.