Game over for early settlements with commercial agents after termination of a commercial agency agreement?

In its judgment of 23 April 2026 (C 205/25) the Court of Justice of the European Union (CJEU) sheds new light on a common practice following termination of commercial agency agreements. When a principal gives notice to terminate the agreement, the principal and the commercial agent often enter into a settlement agreement to settle the financial and practical consequences of the termination. Such settlements typically address, for instance, the (shortened) duration of the notice period or the amount of any compensation in lieu of notice or goodwill indemnity. The question is, however, to what extent are such settlement agreements at termination valid under EU law.

At the European level, Directive 86/653/EEC of 18 December 1986 harmonised the law relating to commercial agency within the EU, with the aim of protecting the commercial agent in his relationship with the principal. In Belgium, the Directive was implemented by the Act of 13 April 1995, the provisions of which have, since the Act of 2 April 2014, been incorporated into Book X, Title 1 of the Belgian Code of Economic Law (“CEL”). 

Upon termination of a commercial agency agreement, the commercial agent is entitled to a notice period. This period amounts to one month during the first year of the agreement. After the first year, the notice period increases by one month for each commenced year, without exceeding six months.

Where no notice period is observed, or where it is insufficient, the commercial agent is entitled to an indemnity in lieu of notice, corresponding to the remuneration that would have been payable during the (remaining) notice period. 

These provisions are mandatory law. The principal and the commercial agent may not agree on shorter notice periods (Article 15(2) of Directive 86/653/EEC – Article X.16, §1, first and second paragraphs CEL). 

As regards post-termination compensation, the commercial agent is entitled to:

• first, a goodwill indemnity (clientele indemnity) where the agent has brought the principal new customers or has significantly increased the volume of business with existing customers, provided that this continues to yield substantial benefits to the principal (Article 17(2)(a) of Directive 86/653/EEC – Article X.18, first paragraph of the Code of Economic Law); 
• second, an additional indemnity – provided that the commercial agent is entitled to the goodwill indemnity – for any actual damage suffered which is not compensated by that goodwill indemnity and the extent of which is proven by the commercial agent (Article X.19 CEL).

The provisions relating to compensation are also mandatory law. Prior to the termination of the commercial agency agreement, the principal and the commercial agent may not derogate from these provisions to the detriment of the commercial agent (Article 19 of Directive 86/653/EEC – Article X.21 CEL). The applicable statutory provisions do not clarify when the commercial agency agreement is deemed to be terminated (and thus from when deviations are permitted).
 

Brief factual summary    What gave rise to the judgment of the CJEU?

In 2016, a Belgian bank decided to terminate the commercial agency agreements with three of its bank agents, observing notice periods that varied depending on the agent concerned. During these ongoing notice periods, the bank and the respective agents entered into a comprehensive settlement agreement aimed at settling the financial consequences of their cooperation. This global settlement notably covered the duration of the notice period and the related indemnity, as well as the goodwill indemnity and any additional indemnities.

Subsequently, however, the agents claimed that they had been placed under undue pressure by the bank to conclude this settlement. Because of this, they sought the annulment of the settlement agreement on the ground that it had been entered into before the effective termination of their commercial agency agreements, namely prior to the expiry of their respective notice periods. According to the agents, this was contrary to the Belgian CEL.

Both at first instance (before the Dutch-speaking Enterprise Court of Brussels) and on appeal (before the Brussels Court of Appeal), the claim for annulment was dismissed as unfounded. The Belgian courts held that the commercial agents:

• had already regained their contractual freedom upon notification of termination;
• were therefore free to renegotiate their rights during the notice period;
• and could validly waive their various entitlements to a specific notice period and compensation (including goodwill indemnity and additional indemnities).

The commercial agents lodged an appeal with the Belgian Court of Cassation, which stated that the resolution of the dispute depends on determining when a commercial agency agreement, within the meaning of Directive 86/653/EEC, must be regarded as having actually terminated.

The Belgian Court of Cassation then referred the following request for a preliminary ruling to the CJEU, namely if the termination of the commercial agency contract occurs on:

1. the actual end of the commercial agency agreement, namely after the expiry of the notice period,
2. or already at the time when the commercial agent becomes aware, or could reasonably have become aware, of the termination, namely at the moment notice of termination is given?

The CJEU gave clear priority to an interpretation that expressly protects the interests of the commercial agent.

According to the CJEU, a commercial agency agreement does not come to an end on the date on which the commercial agent becomes aware, or could reasonably have become aware, of the termination of that agreement, but only on the date on which the notice period expires. The Court bases its reasoning on the following considerations:

• The commercial agent remains bound to carry out the agreement throughout the entire notice period and continues to be economically dependent on the proper fulfilment of the principal’s obligations (in particular remuneration);
• The termination of the agreement does not, in itself, put an end to the agent’s economic dependence or to the structural imbalance between the parties; these only cease once the notice period has expired and the contractual obligations have effectively come to an end;
• The agent is entitled to an equitable indemnity, notably reflecting the loss of commission on the business transacted with customers he has brought in or significantly increased. The Court recognises that an early termination may enable the principal to reduce the amount of such indemnity;
• The Directive expressly prohibits shorter notice periods, confirming the EU legislature’s intention to protect the commercial agent throughout the full notice period. Interpreting termination as occurring earlier (e.g. upon knowledge of the notice) would undermine that protection and run counter to the Directive’s objective.

This judgment entails a number of important practical implications which both principals and commercial agents should take into account from now on:

1. Implementation of a settlement agreement only after expiry of the notice period

The Court expressly confirms that it is not allowed to derogate from the protection afforded to the commercial agent as long as the notice period has not fully expired.

This does not prevent the principal and the commercial agent from entering into negotiations during the notice period. However, any agreement reached between the parties – for example regarding the goodwill indemnity or additional indemnities – will only be capable of taking effect once the notice period has fully expired.

This also raises the question to what extent there is still room for a settlement on indemnity in lieu of notice, given that the parties must in principle always wait until the notice period has expired.

2. Invalidity of settlements concluded prior to expiry of the notice period

Both existing and future settlement agreements concluded before the end of the notice period may now rest on legally uncertain footing.

Commercial agents who feel disadvantaged by an early settlement may be more inclined to challenge it and invoke its nullity – subject, of course, to the applicable limitation periods.

This risk is further increased by the entry into force of Book 5 of the New Civil Code, according to which a party is no longer necessarily required to obtain a prior judicial ruling to invoke the nullity of agreements concluded as from 1 January 2023. In principle, they may invoke such nullity themselves, which further undermines the legal certainty of these early settlements.

3. Increased monitoring during notice period

The protection confirmed by the Court means that, in practice, the full notice period must normally be respected.

While this strengthens the position of the commercial agent, the agent must still fulfil the agreement loyally and in good faith throughout that period.

If the agent seriously fails to carry out their obligations, or if continued professional cooperation becomes impossible, the principal may still resort to terminating the agreement with immediate effect. In such case, the principal is not required to observe a notice period or pay any indemnity in lieu thereof or additional compensation.

In practice, this may trigger principals to monitor more closely how the commercial agent performs the agreement during the notice period, in order to limit exposure to additional rights or compensation.