CAPE IP Law wins case before the Court of Justice of the EU on territorial application of Belgian commercial agency law

Since the transposition of the EU Commercial Agency Directive into Belgian law, an agent is quite protected in case of termination of the agency contract. Not only is he entitled to a certain notice period (or compensation in lieu thereof), he can also claim a substantial compensation for clientele. There is a caveat: the agent must be established in Belgium, according to Belgian agency law. But is it allowed to limit the protection offered by Belgian agency law on such a territorial basis?  

Against this setting the Belgian company Petersime NV, world leader in the development of incubators, hatchery equipment and turnkey hatcheries and represented by CAPE IP, terminated its agency agreement with its Turkish agent, Agro. 

The agency agreement between Petersime and Agro contained a choice of law clause designating Belgian law as the applicable law. It was therefore undisputed that Belgian law applied. But the parties disagreed on whether the Turkish agent had right to the protection and compensation under Belgian agency law. 

Petersime argued that the Turkish agent, established in Turkey and doing business (only) in Turkey, could not claim protection and compensation under the Belgian agency law since this law requires that the agent be established in Belgium. The Turkish agent from his side argued this limitation was unlawful in light of the EU Commercial Agency Directive and the Ankara Agreement, and convinced the Commercial Court in Ghent to refer the question to the Court of Justice of the European Union (CJEU). 

On 16 February 2016, the CJEU handed down its decision, ruling that Member States may indeed limit the territorial application of their protective commercial agency provisions in such a way (Case C-507/15). 

The CJEU observed that the Directive’s goal is to protect the interests of commercial agents, hereby creating a level playing field within the European Union, and to promote intra-EU movement of goods. In the present case, the agent was not active on EU territory in any way. There is therefore no need to offer protection to such agents in order to promote competition within the European Union. The CJEU further ruled that the Ankara Agreement entered into by the EU and Turkey did not change this outcome, since it is not the goal of the Ankara Agreement to extend the four European freedoms to territories outside the EU. 

In conclusion: the CJEU ruled that EU law does not preclude an EU Member State from limiting the territorial application of its commercial agency law in such a way that it does not afford protection to an agent established in Turkey carrying out its activities in Turkey.

Photo source: Court of Justice of the European Union