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At MAAK Advocaten, we understand the importance of addressing the rights of an agent when it comes to the termination of an agency agreement and the goodwill compensation for commercial agents in the Netherlands. One of these rights involves the agent’s entitlement to client compensation, commonly referred to as goodwill compensation (in Dutch: “klantenvergoeding“). This compensation grants the agent a financial remuneration upon the termination of the agency agreement under Dutch law. It’s crucial to note that this right is governed by European regulations to ensure fair treatment and protection for agents across EU member states. In this blog post, our Dutch commercial agency contract lawyer, will explain the details of goodwill compensation for commercial agents in the Netherlands.
What is the definition of goodwill under Dutch law?
In the context of Dutch agency law, “goodwill” corresponds to the collection of customers that a commercial agent in the Netherlands has cultivated on behalf of their principal. This is commonly known as ‘customer compensation’. Crucially, this form of recompense operates independently of any potential damage compensation to which the trade representative might be eligible.
European Legislation and the Agent’s Right to Compensation
In Europe, the EU member states are bound by the European Agency Directive (86/653/EEC, known as “the Directive.” This Directive sets out general rules for agency agreements that have been incorporated into national legislation in each member state. The European legislature aimed to minimize differences between member states, promoting trade among different countries. Consequently, the Directive establishes a “minimum level” of protection for agents across Europe.
The European Right to Compensation Upon Termination of the Agency Agreement
The Directive includes provisions regarding the compensation to which agents are entitled upon the termination of an agency agreement. In essence, this article states that the agent must receive financial compensation to offset the disadvantages resulting from the termination of the agency agreement.
The agent is entitled to compensation only if:
- They have brought in new clients for the principal or significantly expanded transactions with existing clients, resulting in substantial benefits for the principal.
- The payment of this compensation is fair considering all circumstances, particularly the lost commission resulting from transactions with these clients.
- Regarding the amount of compensation, Article 17 of the Directive states that it should not exceed a figure corresponding to an annual remuneration calculated based on the average remuneration received by the commercial agent over the last five years. If the agreement lasted less than five years, the calculation is based on the average remuneration received during that period.
The Directive also provides for another form of compensation under certain circumstances, namely the right to recover the damages suffered as a result of the termination of the relationship with the principal. This damage primarily arises when:
- The commercial agent does not receive the commissions they would have received under normal performance of the agreement, leading to significant benefits for the principal.
- The commercial agent is unable to cover the costs and expenses they have incurred on the advice of the principal for the execution of the agreement.
- The agent must notify the principal of their claim for these compensations within one year after the termination of the agreement.
It’s important to note that Article 18 stipulates that compensation or recovery under Article 17 is not payable under the following circumstances:
a) The principal terminated the agreement due to circumstances attributable to the commercial agent, as provided by national law, which allows termination without notice.
b) The commercial agent terminated the agreement unless such termination is justified by circumstances attributable to the principal or is justified by the agent’s age, disability, or illness, making it unreasonable to expect them to continue their activities.
c) The commercial agent transferred their rights and obligations under the agency agreement to a third party in accordance with an agreement with the principal.
Parties cannot deviate to the detriment of the agent from these articles in the agency contract, as stated in Article 19 of the Directive.
Goodwill compensation under Dutch law
In the Netherlands, the rights of the agent to compensation upon termination of the agreement are in line with the Directive. Article 7:442 of the Dutch Civil Code states:
Regardless of the right to claim damages, the commercial agent is entitled to compensation, known as client compensation, upon termination of the agency agreement, provided that:
a) They have brought in new clients for the principal or significantly expanded the agreements with existing clients, resulting in substantial benefits for the principal.
b) The payment of this compensation is fair considering all circumstances, particularly the lost commission from the agreements with these clients.
The amount of compensation may not exceed the remuneration received during one year, calculated based on the average of the last five years or, if the agreement lasted less than five years, based on the average for the entire duration.
The right to compensation expires if the commercial agent does not notify the principal of their claim within one year after the termination of the agreement.
Compensation is not payable if the agreement is terminated:
a) By the principal due to circumstances that make the commercial agent liable for damages under Article 439(3) of the Dutch Civil Code.
b) By the commercial agent, unless such termination is justified by circumstances attributable to the principal or is justified by the agent’s age, disability, or illness, making it unreasonable to expect them to continue their activities.
c) By the commercial agent who, in accordance with an agreement with the principal, transfers their rights and obligations under the agency agreement to a third party.
Non-Exclusion of goodwill in Agency Contracts under Dutch law
It is not possible to deviate from Article 442 of the Dutch Civil Code before the termination of the agency agreement. Contractually excluding the right to “goodwill compensation” is therefore not allowed. However, in practice, discussions may arise concerning the liability for and the amount of goodwill/client compensation upon the termination of the agency agreement.
Dutch agency lawyers
At MAAK Advocaten, our team of legal experts specializes in agency agreements related to software and technological products and services. However, we are also well-equipped to provide guidance on agency agreements involving more traditional products or services, offering advice to both principals and agents regarding the content of the agency agreement. Should a legal proceeding be necessary, we can provide the necessary assistance.
If you have any questions or require legal assistance regarding goodwill compensation for commercial agents in the Netherlands, please don’t hesitate to reach out to our knowledgeable and dedicated team at our Dutch law firm. Our Dutch lawyers are committed to providing exceptional legal services and personalized attention to address your unique needs. You can contact us through our website, via email, or by phone. Our friendly and professional staff will be more than happy to assist you and schedule a consultation with one of our expert attorneys in the Netherlands, for example a Dutch litigation attorney or contract lawyer in the Netherlands in Amsterdam. We look forward to the opportunity to help you navigate the complexities of the legal landscape and achieve the best possible outcomes for your case.
The content provided on this legal blog is intended for general informational purposes only and should not be construed as legal advice or a substitute for professional legal counsel. While we strive to ensure the accuracy and timeliness of the information presented, we cannot guarantee its completeness or applicability to your specific circumstances. We encourage you to consult with a qualified attorney for advice regarding your individual legal matters. The content on this blog may be subject to changes or updates without notice, and we disclaim any responsibility for any errors or omissions in the information provided.