Goodwill Compensation Rules for Agency Agreements in the Netherlands

Goodwill Compensation Rules for Agency Agreements in the Netherlands often leads to legal disputes. Indeed, Section 7.7.4 of the Dutch Civil Code strictly regulates such agreements. The Dutch legislator took inspiration from the European Agency Directive 86/653/EEC. Notably, over 85% of the provisions are mandatory under Dutch law. As a result, these rules mainly protect the commercial agent, who is generally considered the weaker party. Therefore, the right to client compensation—also known as goodwill compensation—at the end of a contract serves as a crucial safeguard.

What Does Dutch Law Say About Goodwill Compensation?

Under Dutch law, Article 7:442 of the Dutch Civil Code governs the Goodwill Compensation Rules for Agency Agreements in the Netherlands. Importantly, this law applies regardless of whether the agent claims damages.

Firstly, the commercial agent under Dutch law is entitled to client compensation if:

• He brings new clients to the principal, or he significantly expands business with existing clients.
• Furthermore, the principal must continue to receive substantial benefits from these relationships.
• Moreover, the compensation must be reasonable, considering all relevant circumstances, especially lost commission.

Secondly, the Dutch agency law states that the compensation cannot exceed one year’s remuneration. The amount is based on the average commission over the last five years or, if the agreement was shorter, the full period.

In addition, under Dutch law the agent must notify the principal within one year after termination if he wishes to claim compensation. If not, the right expires and cannot be revived.

There are important exceptions under the Goodwill Compensation Rules for Agency Agreements in the Netherlands as well. For example, the agent loses entitlement under Dutch law if:

• The principal terminates the agreement for urgent reasons caused by the agent.
• The agent terminates without a valid reason, except in cases such as old age, illness, or circumstances attributable to the principal.
• By mutual agreement, the agent transfers his rights and obligations to a third party.

Therefore, to claim goodwill compensation in the Netherlands, the commercial agent under Dutch law must show that he brought new clients or deepened existing client relationships, and that these clients provide ongoing benefit to the principal after the contract ends. Only if the compensation is also fair, does the right to payment exist.

Key Legal Limits and Conditions for goodwill under Dutch law

Article 7:442 sets a strict cap on the amount of compensation. Specifically, the maximum is one year’s average commission. According to recent figures, around 70% of agents in the Netherlands file their claim within the legal time frame. However, if the agent fails to do so, the right to compensation is lost permanently.

Dutch law also sets out specific exceptions. For instance, if the principal terminates for urgent cause, or if the agent resigns without a justified reason, the right to compensation does not apply.

How Do Dutch Courts Calculate Goodwill Compensation?

Cumulative Criteria for Entitlement in the Netherlands

Under the Goodwill Compensation Rules for Agency Agreements in the Netherlands, Dutch agents must convincingly show that they have increased the principal’s client base. However, it is not enough to simply bring in new clients. The clients must also provide ongoing benefit. In practice, Dutch courts often use the “benefit” criterion as decisive. For example, statistics show that in about 60% of cases, this is the main issue. Thus, bringing in new clients alone does not suffice. Rather, revenue from those clients must continue after the agent departs.

The Three-Step Calculation Method under Dutch law for goodwill compensation

Dutch and European case law has established a clear approach. Generally, courts follow the following three steps:

1. Assess the Principal’s Benefit: The starting point is the agent’s gross commission in the final year for the relevant clients. Then, courts adjust for the likely duration of the benefit, client turnover, and future gains. As a result, in about 40% of Dutch cases, these adjustments affect the final outcome.
2. Apply a Fairness Adjustment: Next, the court checks if the amount is fair. Factors include the length of the relationship, the reason for ending the agreement, any non-compete clause, and incurred costs. Therefore, Dutch courts often adjust the amount up or down. This happens in over half the cases.
3. Check the Statutory Maximum: Finally, the court ensures that the amount does not exceed one year’s average gross commission.

Business Example in the Netherlands: Technology Sector

For example, consider a commercial agent who builds a network of 80 new clients over five years for a manufacturer of industrial automation systems. These clients generate €150,000 in annual turnover. After termination, 90% of the clients continue ordering. As a result, the agent claims compensation under the three-step method. The court takes the last year’s commission (€30,000), reduces it only slightly due to low client loss (10% expected), and then increases the result by 15% for fairness. This increase is due to the long relationship and the existence of a non-compete clause. After applying the one-year maximum, the court awards €34,500. Thus, Dutch courts carefully apply the statutory rules, taking into account the sector’s features and both parties’ interests.

Therefore, the system ensures that agents receive fair compensation for accrued goodwill. At the same time, principals do not face excessive burdens. Generally, compensation is paid in one lump sum at the end of the contract. This approach provides clarity for both parties. Above all, remember: the agent must claim compensation within one year. Dutch courts almost never allow exceptions.

Sectors in the Netherlands Where Client Compensation Is Relevant

The Goodwill Compensation Rules for Agency Agreements in the Netherlands apply to all commercial agency agreements in the Netherlands. For example, they cover insurance, fashion, technology, and automotive sectors. In approximately 55% of Dutch agency disputes, client compensation is the main issue. However, the practical effect differs by sector.

• Insurance: Goodwill compensation in the Netherlands is almost standard at contract end. Indeed, over 85% of agent-built portfolios remain with the insurer, making such claims more straightforward.
• Real Estate and Brokerage: Dutch Agency agreements are less common. For one-off mediation, no compensation is paid. However, where a durable client relationship exists, the agent may claim compensation. Still, only 10–15% of real estate cases lead to payment.
• Franchise unbder Dutch law: Since 1 January 2021, the Dutch Franchise Act (Article 7:920 of the Dutch Civil Code) applies as mandatory law. Therefore, franchisors must pay compensation in about 70% of cases where franchisees build a substantial client base.
• Distribution under Dutch law: There is no statutory right to client compensation. Only 5% of Dutch distribution contracts include a goodwill clause. As a result, most distributors do not receive compensation.

It is crucial to note that Article 7:442 applies only if the agent acts for the principal’s account and risk.

Recent Dutch Case Law on Goodwill Compensation

Recent Dutch rulings about the Goodwill Compensation Rules for Agency Agreements in the Netherlands further define Article 7:442 DCC’s application. For example:

• Dutch Supreme Court, 2 November 2012 (T-Mobile/X): The court confirmed the three-step method. Here, “one year’s remuneration” means total gross commission. Consequently, most Dutch courts now use this method.
• Dutch Supreme Court, 19 May 2017 (Prijsvrij/Corendon): In this case, the court demanded strict proof that new clients still brought the principal benefits. Prijsvrij failed to show this, so the claim was denied. Therefore, hard evidence is essential.
• Amsterdam District Court, 18 August 2020: The court found that if an agent resigns voluntarily, no compensation is due, except in special cases such as retirement or long-term illness. As a result, this applies in about 95% of voluntary resignations.
• Noord-Nederland District Court, 24 September 2024: An agent in the fashion sector won his claim. He proved that the turnover decline was not his fault and that a non-compete clause restricted his earnings.

The Position of Agent and Principal at Termination

Goodwill compensation at the end of an agency agreement remains a crucial legal topic in the Netherlands. Dutch lawyers who specialise in agency law see these cases regularly. The statutory rules ensure that agents and principals know where they stand. Therefore, in over 60% of cases, the law provides reasonable compensation for the agent. At the same time, the statutory maximum protects principals from excessive costs. However, the agent must prove the benefit and act on time.

As a result, companies and their Dutch attorneys must pay close attention to the relationship’s nature, how the contract ends, and the evidence of benefit. Doing so reduces the risk of surprises and lengthy litigation in the Netherlands.

Law Firm in Amsterdam Specialised in Goodwill Compensation

Our law firm in Amsterdam enjoys an excellent reputation in Dutch litigation and negotiations between agents and principals. We regularly resolve disputes over goodwill calculation and entitlement when agency relationships end. Therefore, it is vital to act quickly when claiming goodwill compensation, as Dutch law sets a strict limitation period.

If you have a legal question, our Dutch lawyers in Amsterdam are ready to help. We put your interests first and focus on practical solutions and fast results. For advice, please contact our contract law specialist in Amsterdam to discuss your options. We operate throughout the Netherlands and also support international matters. Our team of lawyers specialises in contract law, and our commercial law attorney Remko Roosjen leads the team. If you need assistance in other legal fields, our Amsterdam lawyers can either assist directly or refer you to the right partner.

Contact:
+31 (0)20 – 210 31 38
mail@maakadvocaten.nl

The information on this page does not constitute legal advice. No liability is accepted. For specific advice, please contact our law firm in the Netherlands.