Client indemnity in commercial agency - some recent applications
What is a client indemnity and when is the commercial agent entitled to it? In this e-zine we briefly explain this with the help of some recent case law.
After the termination of the commercial agency contract, the commercial agent is entitled to a client indemnity if he has brought new customers to the principal or if he has significantly expanded the business with the existing customers, insofar as this can still bring substantial benefits to the principal.
Below we answer some key questions based on recent case law:
Is the client indemnity always due?
No. Article X.18 CEL contains a number of exceptions, such as when the commercial agent himself terminates the cooperation, unless this results from a reason attributable to the principal or is due to age, disability or illness of the commercial agent.
In addition, the commercial agent loses his right to a client indemnity if he has not notified the principal of his intention to exercise these rights within one year of the termination of the commercial agency.
When did the principal derive actual benefit from the clientele brought in?
Whether or not the principal has actually benefited from the brought clientele is irrelevant, but the possibility of doing so is relevant (Cass, 9. December 2022, C.21.0469.N/1; Antwerp 30 March 2022, RW 2022-23, no. 21, 823). If the principal was able to enjoy a substantial benefit, the client indemnity is due.
Can one contractually exclude a client indemnity?
Article X.18 CEL is of mandatory law. This means that one cannot contractually exclude it. Consequently, the fact that the commercial agency contract contains a retention of title of the clientele in favor of the commercial agent, if this provision has no effect in practice, cannot exclude a client indemnity (Antwerp 30 March 2022, RW 2022-23, no. 21, 823).
Is including a non-compete clause in the commercial agency agreement a good idea?
If the commercial agency agreement contains a non-compete clause, the principal is deemed, subject to proof to the contrary, to still receive substantial benefits and a client indemnity is due subject to proof to the contrary (Art. X.18, par. 2 CEL). This means that the commercial agent does not have to prove that new customers were brought in and that they brought substantial benefits to the principal. These two elements are presumed by that non-compete clause. This presumption can be rebutted, but this burden of proof is high. Proving that other commercial agents operate in the same country and that significant advertising efforts and product-service improvements are made by the principal without contributing any piece of evidence for this is not sufficient (Antwerp 21 December 2022, DAOR 2023/2, no. 146, 68).
Thus, in practice, it is important to consider whether it is indeed appropriate to include a non-compete clause in commercial agency agreements in view of the consequences in terms of the client indemnity.
Is interest due on the late paid client indemnity?
The client indemnity is increased by the statutory interest rate from the day of the agent's notice of default following the termination of the commercial agency agreement until payment of the indemnity. The Act of 2 August 2002 on combating late payment does not apply to the payment of a client indemnity, as it is not a payment for the provision of a service.
If you should have additional questions about client indemnities or commercial agency in general, you can always contact our specialists at Lydian