Agent's right to commission on long-term contracts.
If an agent procures long-term contracts, is he entitled to commission if the contracts continue after the agency relationship is terminated?
Where an agent procures long-term contracts, such as long-term supply contracts or subcontracts, the question arises as to whether or not the agent is entitled to commission on the deliveries made in performance of the contract procured following a possible termination of the agency relationship.
To answer this question, it is necessary to take a brief step back and understand in detail when the agent's right to commission arises (on this point see also Agent's commissions for business concluded by the principal after termination of the relationship). Article 1748(3) of the Civil Code provides on this point that:
"The agent is entitled to commission on business concluded after the date of termination of the contract if the proposal was received to the principal or agent before or business is concluded within a reasonable time from the date of termination of the contract and the conclusion is from mainly traceable to his activityIn such cases the commission is due only to the previous agent, unless specific circumstances show that it is equitable to allocate the commission among the intervening agents."
This approach[1] is intended to prevent the principal from running the risk of paying a double commission: one to the outgoing and one to the incoming agent.[2] In the event of termination of the relationship, therefore, the agent will be entitled to the commission:
- if the proposal was received on antecedent upon termination of the relationship;
- if the deal is concluded within a reasonable term from the date of termination of the contract and the conclusion is due to mainly to theactivities of the agent.
While the first hypothesis does not give rise to any particular problems of interpretation, the second, on the other hand, may give rise to several doubts, mainly related to the interpretation of the concept of 'prevalence' and of 'reasonableness[3]".
An interpretative aid can be derived from Art. 6, last paragraph, AEC 30.7.2014[4] (cf. when applying ERM e how the AEC Industry 2014 severance payment is calculated), which imposes an obligation on the agent to report to the principal in detail on negotiations undertaken and not concluded at the time of termination of the relationship; this provision also provides that if, within six months from the date of termination of the relationship, some of those negotiations are successful, the agent will be entitled to the relevant commissions (cf. The agent's obligation to inform the principal).
On the basis of the foregoing, where the agent in the course of the relationship promotes term contracts, the entitlement to commission on deliveries made in performance of the contract procured after the termination of the relationship depends essentially on the nature of the term contract.
In principle, in the event that the term contract is a a supply contract, a subcontracting contract, or a sales contract with divided deliveries, it can be stated that (unless otherwise agreed)[5]the agent is entitled to commission on all deliveries made even after termination of the agency contract, since these are in fact acts of performance of a contract concluded during the course of the relationship.
Conversely, where the contract promoted is a framework contractwhere each supply is to be the subject of a further agreement (order - acceptance), in which case the individual supplies are to be regarded as independent sales contracts,[6] even if concluded in the context of the framework contract, with the consequence that such subsequent sales contracts will not give rise to an entitlement to commission (unless the agent can prove that such business is attributable to its promotion activity and was concluded within a reasonable time).
Continuing with the reasoning, if, on the other hand, the term relationship is signed by the principal following the termination of the relationshipIn order to understand whether the agent may be entitled to commission, it will not be sufficient to ascertain the nature of the relationship of duration, but also to prove that the conclusion of the transaction is attributable to the agent's promotional activity.
A very interesting case is recalled below[7]which was decided by a series of three judgments of the Court of GrossetoA case in point was the following: an agent, following burdensome negotiations lasting several months, had procured for the principal (a company operating in the frozen food sector) a deal with a chain of supermarkets for the indefinite supply of frozen and pre-packaged ready meals. The administration contract was concluded a few months after the termination of the agency relationship.
The agent sued the principal for payment of commissions on supplies made in performance of the supply contract. By judgment No. 52/2012, the Court of Grosseto upheld the agent's claims, holding that:
"the administration contract was formally concluded [...]. just over two months after the termination of the agency contract [...], a term that must be considered, due to its objective brevity, absolutely reasonable.
Although the Court had found that the agent was entitled to commissions, it rejected the plaintiff's claim seeking an order that the principal pay them
"until the end of the administration contract [...] as this would be a pronouncement of sentence 'in the future' related, moreover, to a term that was not identified by the parties in the administration contract, since the same contract was concluded for an indefinite period."
The agent, a few years after the delivery of the first judgement, brought a further action, in which it sought an order that the principal be ordered to pay commissions on supplies made after the expert valuation referred to in the first judgement. The agent based its claim on the principle of Article 2909 of the Civil Code.according to which the finding contained in the final judgment shall be conclusive for all purposes between the parties. The Court again condemned the principal, stating that
"the right to obtain the payment of the commissions that will gradually accrue in relation to the prolonged performance of the supply contract, is unquestionable and has already been ascertained in the irrevocable ruling issued by this Office with the consequent application of the revocatory effect provided for by Article 2909 (on this point, among others, Court of Cass. Sez. Lav. 2001 no. 4304).
Following this ruling, in order to avoid the payment of commissions on future business, the principal proceeded to effectively giving up the business to a company of the same group, also active in the frozen food sector. The agent then appealed again to the Court of Grosseto, arguing that the assignment of the duration contract pursuant to Article 1406 of the Civil Code entailed the transferee's obligation to pay commissions. The Court of Grosseto[8]again supported the plaintiff's argument, stating that:
"since the characteristic feature of the assignment of the contract under Art. 1406 of the Civil Code is that it has as its object the transmission of a unitary set of active and passive legal situations resulting from each party to the contract [...], the transferee shall be obliged to pay to the plaintiff commissions - in the same amount as agreed in the agency contract - on the supplies of frozen food products made to X srl."
* * *
Lastly, it should also be emphasised that the signing of term contracts can be used as a determinant for prove that the conditions required by Article 1751 of the Civil Code are fulfilled.for the agent's right to receive severance pay (cf. Agent's severance pay. How is it calculated if AEC does not apply?). We read in an interesting Supreme Court ruling that:
"The termination indemnity compensates the agent for the asset increase that its activity brings to the principal by developing the goodwill of the business. It follows that this condition must be deemed to exist, and the indemnity is therefore due, where the contracts concluded by the agent are contracts of duration, since the development of goodwill and the continuation of benefits to the principal, even after the termination of the agency relationship, are in re ipsa'..[9]
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[1] Article reformed by Legislative Decree No. 65/1999, by which the legislature transposed the principles of European Directive No. 86/653 and, in particular, Article 8, which provides as follows: "For a commercial transaction concluded after the termination of the agency contract, the commercial agent shall be entitled to commission; (a) if the transaction is mainly due to the result of the work performed by him during the agency contract and if the transaction is concluded within a reasonable period after the termination of the agency contract, or (b) if, in accordance with the conditions set out in Article 7, the order placed by the third party was received by the principal or the commercial agent before the termination of the agency contract. "
[2]Cf. Court of Rimini, 22.9.2004, No. 238, which excluded the agent's right to commissions in the event of extensions of supply offers, given the absence of the former agent's preponderant promotional intervention. On this point see VENEZIA, Il contratto di agenzia, pg. 281, 2015, CEDAM.
[3] Jurisprudence has also considered a term of six months to be reasonable (Court of Cassation Civ. 9.2.2006) and in some cases, such term has even been extended to two years (see Court of Cassation Civ. 16.1.2013 in which the Court held that the two-year term for loyalty cards sold thanks to the agent's promotional activity was reasonable, thus considering fuel sales made after the termination of the relationship attributable to the agent's performance.
[4] Art. 6, last paragraph AEC 2014 Industry: "The agent or representative is entitled to commission on business proposed and concluded even after termination of the contract, if the conclusion is primarily the result of the activity performed by the agent or representative and takes place within a reasonable time after termination of the relationship. To this end, upon termination of the relationship, the agent or representative shall report to the principal in detail on the business negotiations undertaken, but not concluded, due to the termination of the agency agreement.
If, within a period of six months from the date of termination of the relationship, any such negotiations are successful, the agent shall be entitled to the relevant commission, as regulated above. Once that period has elapsed, the conclusion of any order, whether or not included in the agent's report, shall no longer be considered a consequence of the agent's activity and no commission shall be paid. This is without prejudice, however, to any agreements between the parties providing for a different time limit or for the distribution of the commission among the agents who have been present in the area and who have intervened in the promotion and conclusion of the transaction. "
[5] Art. 1748 para. 3 of the Civil Code, on commissions due for business concluded after termination of the contract, is entirely derogable: in favour Saracini-Toffoletto, Il contratto di agenzia. Commentario, 2014, GIUFFRÈ and Bortolotti, op. cit., p. 276; contrary, Trioni, who holds that this rule is not mandatory, given that the third paragraph of Art. 1748 cc, unlike the second and fourth, does not expressly provide for the salvation of contrary agreements.
[6] See on this point BORTOLOTTI, Concessione di Vendita, Franchising e altri contratti di distribuzione, p. 8, 2007, CEDAM.
[7] For more details see Giulia Cecconi, Le provigioni sui contratti di durata, in Agents and sales representatives, 1/2019, PUBLISHING AGE.
[8] Court of Grosseto, Judgment No. 269 of 2018.
[9] Cass. Civ. sez. lav. no. 24776 of 2013.
Agent's severance pay. How is it calculated if AEC does not apply?
In cases where no Collective Bargaining Agreements apply to the agency relationship, understanding whether (and how much) severance pay is due to the agent is not at all easy.
In contrast to AECs, which provide for a precise calculation allowing the parties to quantify the severance payment, the Civil Code only provides a ceiling for the level of indemnity, without giving precise guidelines on the method of calculation
Severance pay was introduced at European level by the Directive 86/653EECthen transposed into our legal system most recently with the reform of Legislative Decree 65/1999, which amended the current text of Article 1751 of the Civil Code, which provides as follows:
"Upon termination of the relationship, the principal is obliged to pay the agent an indemnity if the following conditions are met:
- The agent has procured new customers to the principal or has appreciably developed business with existing customers;
- The principal still receives substantial advantages arising from business with such customers;
- The payment of this allowance is fairtaking into account all the circumstances of the case, in particular the commissions that the agent loses and that result from business with such customers."
The judge must therefore, in the first analysis, find on the basis of the preliminary findings, whether the agent has increased the agent's clientele and/or business and, therefore, determine what amount should be owed to the agent, judging according to equity.
In cases where no Collective Bargaining Agreements apply to the agency relationship, understanding whether (and how much) severance pay is due to the agent is not at all easy.
Contrary to the AEC, which provide for a precise calculation that allows the parties to quantify the severance payment, the Civil Code only provides for a ceiling for the level of indemnity, without providing precise guidelines on the method of calculation
- Read also: Severance Indemnity: Art. 1751 of the Civil Code and AEC compared.
The following is a brief analysis of the criteria set out in the Civil Code.
1. The agent's contribution of customers.
The termination indemnity pursuant to Article 1751 of the Civil Code is undoubtedly intended to reward the principal's activity of promoting and developing customers. For this reason, the following must be considered excluded from the scope of applicability of this rulerecruitment and coordination of agentssince the latter, although relevant and very important from an organisational point of view, is only instrumental and ancillary in nature with respect to customer enhancement.[1]
Following this reasoning, not even the mere increase in turnover by the agent can be considered sufficient to prove the acquisition of new customers or the substantial development of those already existing at the beginning of the relationship:[2] it is not sufficient for the agent to prove (cf. Burden of proof in the agency contract) the increase of its commissions over the years, if it also does not diligently indicate the new customers it has brought in. This is stated in case law:
"the request for payment of the indemnity pursuant to Article 1751 of the Civil Code cannot be granted in the event that the applicant generically acknowledge on appeal of the recurrence of the relevant prerequisites, however failing to deduct precisely the volume of business handled for each individual customeras well as to specify the business concluded, the total value of the contracts, any increase over the business concluded with the same client in the preceding year, omitting altogether to indicate which clients he personally took care of."[3]
And again:
"The agent acting pursuant to Art. 1751 of the Civil Code must first prove that he has brought new customers to the principal, or at least that he has increased the turnover of customers who, prior to the commencement of the agency relationship, were already doing business with the principal."[4]
As for the definition of 'new customer", it should be recalled that in 2016 the European Court of Justice,[5] questioned whether it was possible to recognise as such, legal entities which, prior to the granting of the agency mandate, had already established business relations with the principal, but for products different from those covered by the agency contract. In the present case, the agent had received a mandate to sell spectacle frames of different brands from those that had already been marketed by the principal; the Court was therefore asked whether the sale of such new products to existing customers could fall within the civil law definition[6] of 'new client'. The Court stated that;
"are to be regarded as new customers within the meaning of that provision, even though they already had business relations with the principal with respect to other goods, if the sale of the first goods by the agent has required to enter into specific business relationshipswhich it is for the referring court to ascertain."
2. Advantages for the principal arising from the agent's activity.
The second condition laid down in Article 1751 of the Civil Code is that "the principal still receives substantial benefits from doing business with such customers." When analysing this condition, one must certainly understand to which time period reference must be made to verify the existence or non-existence of advantages. According to the best doctrine[7] the wording of the law is quite clear and refers to the situation existing at the time of the termination of the relationship; case law, on the contrary, is not unambiguous on this point, and there is an opposite orientation, which deems it necessary to verify whether the advantages subsist and continue also in subsequent years and, in this sense, excludes the indemnity if the agent is not able to prove judicially the 'retention' of customers even after the termination of the relationship.[8]
Certainly, the agent cannot be negatively affected by the principal's personal choice to opt for transferring the company to others (for a price undoubtedly determined not only by the trade mark, but also by the goodwill, essentially consisting of the customer portfolio), unless, of course, it is established that the increase in customers was due to factors external to the agent.[9]
On the other hand, the condition must be deemed to be fulfilled if the contracts concluded by the agent are contracts of durationas the development of goodwill and the benefits to the principal, even after termination of the relationship, are in re ipsa.[10]
3. The determination of severance pay in equity.
Once the existence of the first two requirements has been ascertained, the judge will have to quantify the allowance in equity. As mentioned above, for the purposes of determining the quantumthe judge is bound to verify compliance with the requirement of equity prescribed by Art. 1751 of the Civil Code, taking into account all the circumstances of the case and in particular the commissions that the agent loses and that result from business with those customers.
It is interesting to note that, while the law clearly identifies the requirements for the agent to be granted the indemnity, for the quantification in equity, the normative reference is not exhaustive and concerns all "the circumstances of the case', identifying, by way of example only, the reference to commissions that the agent loses and that result from business with customers.[11] In this regard, case law holds that the judge must:
"have regard to all those elements that are suitable for an adequate personalisation of the quantum due to the agent"[12] e "may or may not be considered 'fair'in the sense of also compensating for the special merit of the agent emerging from the [emerging] factual circumstances."[13]
"If it does not consider it fair, in the absence of a specific regulation, it must award the agent the differential necessary to bring it back to fairness. "[14]
It is clear that equity is a principle that is difficult to apply in practice. It follows that the non-application of the AEC to the relationship certainly entails greater uncertainty as to the quantification of the severance payment, since this is ultimately left to the sensitivity of the individual judge.
It is also important to recall that the one referred to in Article 1751 of the Civil Code is a typical case of judicial equity and as such can only be criticised in the court of legitimacy from the point of view of the logic and congruity of the reasoningbut not in its amount.[15]
4. Severance pay calculated on the basis of the criteria set by the Commission.
From the above analysis, it appears that the approach of the European directive, which only provides a ceiling for the level of indemnity, without providing precise guidelines as to the method of calculation, has and continues to create great uncertainty. It is clear, therefore, that a clear and precise method, perhaps developed by national jurisprudence, would lead to greater legal certainty, with benefits for both contracting parties.
This issue was also encountered by the same European Commission in its report of 23/7/1996which, aware of this regulatory limitation, prepared a report aimed on the one hand at analysing how European case law has approached this interpretative issue and on the other hand at providing a solution to the member states.
A solution would have been found in the German model (and in particular §89b of the HGB from which the legislation was inspired), taking into account the fact that since 1953 it has provided for the payment of a surplus value allowance, which has given rise to extensive case law regarding the calculation of the latter.
The Commission report goes into detail to analyse the calculation model developed by German case law, to which reference is made in full. For what it is worth, it is important to emphasise the fact that the system developed by German case law was then used as a model for the drafting of AEC calculations and that, therefore, the same system, although very complex, is not completely alien to us.
The Commission, after having analysed the calculation method in an analytical manner, concludes by noting that the model developed by German case law can nevertheless be used as a model to be applied, as this "facilitate a more uniform interpretation of this article."
Italian jurisprudence has, in any case, very rarely followed this model (perhaps also because it was not pushed by the parties' advocates), which at the moment remains almost completely unknown; in any case, there are a number of judgments on the merits that have shared the Commission's position, which deemed it appropriate to quantify the severance indemnity on the basis of the calculation criteria established by the European Commission in its report of 23/7/1996 on the application of Article 17 of Directive 86/653/EEC. [16]
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[1] Cass. Civ. 2018 No. 25740.
[2] On this point see also Bortolotti, Distribution Contracts, p. 386 ff., 2016, Wolters Kluver.
[3] Court of Milan 26.7.2016.
[4] Court of Bari 12.2.2014.
[5] Judgment of 7.4.2016, Case C-314/14, Marchon v. Karaskiewicz
[6] To be more precise, in the definition of 'new customer', of which Article 17 of the European Directive 1986/653 on commercial agentsby Article 4, Legislative Decree No 303 of 10.9.1991, which amended Article 1751 of the Civil Code and replaced it by Article 5, Legislative Decree No 65 of 15.2.1999.
[7] Bortolotti, Distribution Contracts, p. 388.
[8] See Court of Padua 21.9.2012 where the indemnity was denied for lack of orders following the dissolution of the relationship; to the contrary Cass. Civ. 2013 no. 24776 ".Moreover, the utility for the principal is to be assessed at the time of termination of the relationship, the crystallisation of the results obtained by the agent at that time being of relevance. "
[9] Cass. Civ. 2013 no. 24776.
[10] Cass. Civ. 2013 no. 24776.
[11] See Cass. Civ. 2018 no. 21377, Cass. Civ. 2008 no. 23966.
[12] Cass. Civ. 2016 No. 486.
[13] Cass. Civ. 2014 No. 25904.
[14] Court of Appeal Florence 4.4.2012.
[15] Cass. Civ. 2018 No. 25740.
[16] Court of Pescara of 23.9.2014, with comment by Trapani in Agenti&Rappresentanti di commercio no. 2/2015; Court of Bassano del Grappa of 22.11.2008
How is the indemnity for the termination of a contract calculated according to the AEC Commerce 2009?
Article 13 of the 2009 AEC trade, divides the severance payment into three components (on this point see also calculation of indemnity pursuant to art. 1751 of the civil code., calculation of former AEC 2014 allowances, calculation of ex ANA allowances 2003):
- termination indemnity, set aside by the principal in the ENASARCO fund (FIRR) (Chapter I);
- supplementary customer indemnity paid to the agent or representative even in the absence of an increase in customers and/or turnover (Chapter II);
- merit-based allowance, linked to an increase in customers and/or turnover (Chapter III).
I. FIRR
The FIRR is set aside with ENASARCO by the principal and, upon termination of the relationship, is due to the agent irrespective of any increase in customers and/or business.
The obligation to set aside the FIRR only exists if the AEC apply to the relationship. The AEC are only applicable to the contract if both parties (principal and agent) are members of the contracting trade unions, or, otherwise, the parties have expressly referred to the AEC in the contract, or have provided for their implicit application in the course of the relationship (e.g., where the principal has provided for a spontaneous, constant and uniform application of certain provisions of the AEC).[1] This implies that in the event of non-application of the AEC, the principal is not required to set aside the FIRR, but only to pay social security contributions to Enasarco.[2] (on this point cf. the social security obligation of the Italian agent and the foreign principal).
It is important to note that case law[3] and doctrine,[4] unequivocally hold that the claim for payment of the FIRR must be made against Enasarco and not against the principal, except for any sums not set aside by the latter.
This allowance is calculated annually as follows:
ONE-MAN AGENT
- 4% on the portion of commissions up to € 12,400 per year
- 2% on the portion of commissions between € 12,400 p.a. and € 18,600 p.a.
- 1% on the portion of commissions exceeding € 18,600 per year
MULTI-FIRM AGENT
- 4% on the portion of commissions up to € 6,200 per annum
- 2% on the portion of commissions between € 6,200 p.a. and € 9,300 p.a.
- 1% on the portion of commissions exceeding € 9,300 per year
II. SUPPLEMENTARY ALLOWANCE
It will be recognised at the following rates:
| 3% | on commissions accrued in the first three years of the agency relationship |
| 3,50% | on commissions accrued from the fourth to the sixth completed year |
| 4,00% | on commissions accrued in subsequent years |
This indemnity shall be due in all cases where the relationship has been in force for at least one act and where the resignation of the agent is due to
- permanent and total disability;
- for infirmity and/or illness for which he cannot reasonably be required to continue the relationship;
- attainment of Enasarco and/or Inps old age pension;
- for circumstances attributable to the principal (Art. 1751 of the Civil Code);
- in the event of death. In that case, the indemnities shall be paid to the legal or testamentary heirs.
In any event, in addition to the above cases, since according to majority case law, AECs represent a guaranteed minimum treatment for the agent,[5] such indemnity is granted to the agent upon termination of the relationship, irrespective of proof by the agent that it has developed the principal's business and/or clientele, as is the case with the civil law indemnity under Art. 1751 of the Civil Code (on this point see severance pay in agency contracts).
III. MERITOCRATIC ALLOWANCE
The AEC Commerce 2009 provides for a rather structured calculation to quantify the meritocratic allowance, which will only be paid to the agent if it is higher than the sum of the two allowances analysed above (FIRR + supplementary).
The calculation of the meritocratic allowance is as follows:
- Determination of theincrease in customersconsisting of the difference between the commissions received by the agent at the beginning and at the end of the relationship, bearing in mind that the prognosis period will vary according to the duration of the relationship, according to the following table:
| DURATION OF THE RELATIONSHIP | PERCENTAGE INCREASE IN TURNOVER | PERCENTAGE OF INDEMNITY WITH RESPECT TO THE MAXIMUM VALUE DETERMINED PURSUANT TO ARTICLE 1751 OF THE CIVIL CODE (FROM WHICH INDEMNITY F.I.R.R. AND SUPPLEMENTARY CLIENT INDEMNITY ARE DEDUCTED |
| Up to 12 months (1st year) | 0 to 5% | - |
| 5 to 30% | 25% | |
| 30 to 60& | 30% | |
| 60 to 150% | 40% | |
| Beyond 150% | 100% | |
| 12 to 24 months (2nd year) | Up to 30% | 30% |
| 30 to 60% | 35% | |
| 60 to 150% | 40% | |
| Beyond 150% | 100% | |
| 24 to 36 months (3rd year) | Up to 30% | 35% |
| 30 to 60% | 40% | |
| 60 to 150% | 45% | |
| Beyond 150% | 100% | |
| 36 to 48 months (4th year) | Up to 30% | 40% |
| 30 to 60% | 45% | |
| 60 to 150% | 50% | |
| Beyond 150% | 100% | |
| 48 to 60 months (5th year) | Up to 30% | 45% |
| 30 to 60% | 50% | |
| 60 to 150% | 55% | |
| Beyond 150% | 100% | |
| From 60 months onwards | Up to 30% | 50% |
| 30 to 60% | 55% | |
| 60 to 150% | 60% | |
| Beyond 150% | 100% |
- In order to identify the real value of the increase in turnover provided by the agent, the turnover volume, understood as the volume of sales made by the principal in the area or for the clientele entrusted to the agent, will be taken into account.
- For the determination of the percentage increase, the values of the turnover volume, understood as the volume of sales made by the principal in the area or for the clientele entrusted to the agent, at the beginning of the relationship (initial value) shall be compared with the values of the turnover volume, understood as the volume of sales made by the principal in the area or for the clientele entrusted to the agent, at the end of the relationship (final value), as follows
| Duration of relationship | Initial value | Final value |
| For the first year of the relationship | Average turnover for the first 3 months | Average turnover over the last 3 months |
| For the second year of the relationship | Annual average of turnover volume for the first 2 quarters | Annual average turnover volume of the last 2 quarters |
| For the third year of the relationship | Annual average of turnover volume for the first 3 quarters | Annual average turnover volume of the last 3 quarters |
| From the beginning of the fourth year to the end of the sixth year of the relationship | Annual average of turnover volume for the first 8 quarters | Annual average turnover volume of the last 8 quarters |
| From the beginning of the seventh year to the end of the ninth year of the relationship | Annual average of turnover volume for the first 12 quarters | Annual average of turnover volume over the last 12 quarters |
| From the beginning of the tenth to the end of the twelfth year of the relationship | Annual average of turnover volume for the first 16 quarters | Annual average turnover volume of the last 16 quarters |
| Beyond the 12th year of the relationship | Annual average turnover volume of the first 20 quarters | Annual average turnover volume of the last 20 quarters |
- Finally, the initial figure is made homogeneous with the final figure by applying to it the Istat revaluation coefficient for labour credits.
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[1] See Bortolotti, Distribution Contracts, 2016, Wolter Kluwer, p. 87 ff.
[2] Trib. Rome 14.1.2010.
[3] Trib. Bari 2.5.2012.
[4] Bortolotti, Distribution Contracts, 2016, Wolter Kluwer, p. 365 ff.
[5] See on this point Cass. Civ. 2014 no. 7567. However, it should be noted that the European Court of Justice, in a judgment of 23 March 2006, challenged the legitimacy of the supplementary client indemnity as provided for by the AEC, which allows the agent to receive a termination indemnity in any event, even if the agent has not actually developed the principal's clientele and the latter benefits from it even after the termination of the relationship; in line with this orientation there is a minority direction of the case law on the merits, which has held the AEC inapplicable to our system and has therefore not recognised the agent's entitlement to the rules set out therein as a guaranteed minimum (Tribunale Treviso 29 May 2008. Tribunale Treviso 8 June 2008; Tribunale di Roma 11 July 2008).
The termination indemnity in the agency contract: Art. 1751 of the Civil Code and AEC compared.
As has already been pointed out, severance pay in Italy follows a binary systemon the one hand, the discipline governed by theArticle 1751 of the Civil Code and, on the other hand, the regulation of AECs. (cf. also Collective bargaining. Origins, value and enforceability. And if a contractor is a foreigner, do they apply or not?)
The current version of Article 1751 of the Civil Code, as amended by Legislative Decree 1999 No. 65, implementing Directive 86/853/EEC, provides that:
"upon termination of the relationship, the principal is obliged to pay the agent an indemnity if the following conditions are fulfilled:
- the agent has procured new customers to the principal or significantly developed business with existing customers;
- the principal still receive substantial benefits arising from business with such customers;
- the payment of this allowance is fairtaking into account all the circumstances of the case, in particular the commissions that the agent loses and that result from business with such customers."
The third paragraph of the same article states that theallowance is not due when:
- the principal terminates the contract for a default attributable to the agent, which, because of its seriousness, does not permit the continuation, even temporarily, of the relationship;
- l'agent terminates the contractunless the termination is justified by circumstances attributable to the principal or by circumstances attributable to the agent, such as age, infirmity or illness, for which the agent can no longer reasonably be asked to continue the activity;
- when, pursuant to an agreement with the principal, theagent assigns to a third party the rights and obligations which it has by virtue of the agency contract.
About the amount of the indemnity, pursuant to Article 1751(3) of the Civil Code, it:
"may not exceed a figure equivalent to oneannual allowance calculated on the basis of the annual average of the remuneration received by the agent over the last five years and, if the contract dates back less than five years, on the average of the period in question."
The criterion in Article 1751 of the Civil Code, does not contain any calculation methodbut only a ceiling (i.e. an annuity to be calculated on the basis of the average commission of the last five years) and two conditions to the fulfilment of which the accrual of the indemnity is subject, namely that
- the agent has procured new customers and/or 'intensified' the turnover of existing ones;
- the indemnity is "equitable" in light of "all the circumstances of the case including the commissions that the agent loses as a result of the termination of the contract.
On the other hand, the contractual regulation of AECs establishes a certain and precise method of calculation based on three different items:
- the indemnity for termination of the relationship (the 'FIRR', consisting of an annual provision in the special fund managed by ENASARCO) calculated on the basis of the AEC;
- l'supplementary customer allowancepaid to the agent even in the absence of an increase in clientele, (equal to approx. 4% on the total amount of commissions and other sums accrued);
- l'allowance meritocraticlinked to an increase in customers and/or turnover.
As can be seen, both systems have within them both advantages and disadvantages for the contracting parties.
I advantages for the agent of theindemnity pursuant to Article 1751 c.c. are the fact that the compensation paid by the court is often higher than that provided for in the CEC.
The disadvantages normally lie in the fact that:
- only a maximum is set, but a calculation criterion is absolutely missing;
- the burden of proving the increase/intensification of the clientele and the fairness of the indemnity rests entirely on the agent;
- the indemnity is excluded in all cases where the agent is terminated from the contract without just cause.[1]
As for the allowance calculated according to the AEC i advantages are quite obvious, given that:
- a clear and defined calculation criterion is configured;
- FIRR and client indemnity are due (subject to exceptions) at all times, even in the event of termination by the party;
- no burden of proof is placed on the agent.
As to the disadvantages for the agent, it should be noted that, in fact, the indemnity paid under Article 1751 of the Civil Code is very often higher than that guaranteed by the AEC.
It should be noted that the European Court of Justice, in a ruling of 23 March 2006,[2] ha disputed the legitimacy of the severance payment as regulated by the AEC. Such agreements, according to the Court, may only derogate from the rules laid down in Directive 86/653/EEC if, on analysis ex antethe application of the AEC would result in the agent being treated economically more favourably than under Article 1751 of the Civil Code. Now, since there are no calculation tools that make it possible to predict the amount of the codified indemnity and it can only be known and calculated after the termination of the relationship and since, according to the Court, the assessment as to whether the treatment of the AEC is (always) more favourable than the civil law discipline must be made ex anteit is clear that, following this reasoning, only a calculation system that always guarantees the maximum allowance can be considered in line with the principles dictated by the directive and the ruling of the Court of Justice.[3]
Despite the ruling of the Court of Justice, However, the orientation of the Supreme Court appears to be in the process of consolidation according to which the criteria for quantifying the severance indemnity provided for by collective bargaining must in any event be considered as a minimum treatment which must be guaranteed to the agent, subject to the need for the judge, once he has ascertained the existence or non-existence of the requirements provided for by Art. 1751 of the Civil Code, to carry out a kind of case-by-case assessment in order to evaluate the fairness of the solution resulting from the AEC, with discretionary power, taking into account all the circumstances of the concrete case.[4]
It should be noted, however, that there is a minority orientation of the jurisprudence on the merits, which has held the AEC to be inapplicable to our system and has therefore not recognised the discipline set forth therein as a guaranteed minimum for the agent.[5]
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[1] Art. 1751 (2) (1): "The indemnity shall not be due [...] when the agent terminates the contract, unless the termination is justified by circumstances attributable to the principal or by circumstances attributable to the agent, such as age, infirmity or illness, for which the agent can no longer reasonably be required to continue the activity"
[2] Court of Justice 2006, C-465/04.
[3] Baldi-Venezia, Il contratto di agenzia, 2014, GIUFFRÈ; Bortolotti, L'indennità di risoluzione del rapporto secondo il nuovo Accordo Economico Collettivo Settore industria, 2014, www.newsmercati.it.
[4] Cass. Civ. 2009 no. 12724; Cass. Civ. 2012 no. 8295; Cass. Civ. 2013 no. 18413; Cass. Civ. 2014 no. 7567; Cf. Baldi-Venezia, Il contratto di agenzia, 2014, GIUFFRÈ, "This solution does not appear satisfactory and, above all, does not concretely identify the quantification criteria to be adopted, leaving the judge of merit with a wide margin of discretion, which does not militate in favour of the future identification of precise and uniform criteria to the detriment of a principle of certainty'..
[5] Tribunale Treviso 29 May 2008; Tribunale Treviso 8 June 2008; Tribunale di Roma 11 July 2008.
Conference on the agency contract in the Civic Library.
[:it]Friday 8 June, 3 p.m, at the Verona Public Library conference on the Agency Contract was held, which I had the pleasure of organising in collaboration with Veronalegal. Participating as speakers were thelawyer Valerio Sangiovanni (lawyer in Milan), Dr Maura Mancini (Labour Magistrate at the Court of Brescia), Mslawyer Eve Tessera (French lawyer, registered in Verona) and the undersigned.
The following topics were covered:
- study of a agency contract (lawyer Valerio Sangiovanni)
- the termination indemnity pursuant to Article 1751 of the Civil Code (Dr Maura Mancini)
- the Agency Contract in France (Advocate Eve Tessera)
- the Agency Contract in Germany (yours truly...)
I would like to sincerely thank all the participants of the conference and the speakers who proved to be not only extremely competent, but also very clear and helpful.
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