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COMPENSATION FOR THE LOSS SUFFERED (How much?)

COMPENSATION FOR THE LOSS SUFFERED (How much?). Maître Philippe Misserey CABINET D’AVOCATS LELOUP POITIERS – PARIS - SEVILLE. 1. THE LAW. before Article L. 134-12, Decree 23/12/1958 said «  indemnité compensatrice de préjudice subi  »,

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COMPENSATION FOR THE LOSS SUFFERED (How much?)

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  1. COMPENSATION FOR THE LOSS SUFFERED(How much?) Maître Philippe Misserey CABINET D’AVOCATS LELOUP POITIERS – PARIS - SEVILLE London, April 4, 2006

  2. 1. THE LAW • before Article L. 134-12, Decree 23/12/1958 said « indemnité compensatrice de préjudice subi », • Article L. 134-12 says : « indemnité compensatrice en réparation du préjudice subi ». 1.1. Nothing in the French Law : London, April 4, 2006

  3. 1.2. French law has chosen Article 17-3 Directive 86/653/CEE : “ 3. The commercial agent shall be entitled to compensation for the damage he suffers as a result of the termination of his relationship with the principal. Such damage shall be deemed to occur particularly when the termination takes place in circumstances: - depriving the commercial agent of the commission which proper performance of the agency contract would have procured him whilst providing the principal with substantial benefits linked to the commercial agent’s activities, - and/or which have not enabled the commercial agent to amortize the costs and expenses that he had incurred for the performance of the agency contract on the principal’s advice.” London, April 4, 2006

  4. 2. THE CUSTOM 2.1. The situation is very simple: • before 1958 ( we have precedents since the end of the 19 th century ), • after Decree 23/12/1958 ( until 1991 ), • since Article L. 134-12 French Code de Commerce, The indemnity or compensation ( same meaning ) is two years of commissions. London, April 4, 2006

  5. 2.2. See report from European Commission(1996-07-23) : “Dans la grande majorité des cas, elle est fixée à un montant représentant deux années de commissions brutes, qui est calculé sur la base de la rémunération moyenne de l’agent au cours des trois années précédentes ou qui correspond à la somme des commissions des deux dernières années. Cette somme est devenue la méthode de calcul traditionnelle, comme le confirment les décisions des tribunaux appliquant la nouvelle loi.” And if you want to check the situation in France and in other European countries, you have the entire report in French ( not available in English ) but dated 1996( document 1 ). London, April 4, 2006

  6. 3. HOW TO CALCULATE THE AMOUNT ? 3.1. Base period is the two or the three last years of the mandate performed : • either 24 months, - or 36 last months x 24 36 London, April 4, 2006

  7. See also the french precedents: it depends on the facts and there are no real criteria to choose one way or the other. According to the statistics : on 134 cases, we found 39 cases with the basis of the two civil years ( for instance , we have a breach on the 15th of march 2006 and the Court takes 2004 + 2005 as basis ) : 37 cases in which the base period taken into account was the last two years ( from date to date ) ( with the same example , the basis is march 26th ,2004 until 26th march 2006 ) and 55 cases with a base period of the three last years divided by 3 and multiplicated by 2; And we have three precedents from the Cour de Cassation: one for each case ! See document 2 London, April 4, 2006

  8. 3.2. The indemnity ( compensation ) is calculated on the basis of acquired (vested ) remunerations. See document 3 : Cour de cassation 5 avril 2005, Lebreton / Butagaz: “ L’indemnité de cessation de contrat … a pour objet de réparer le préjudice subi qui comprend la perte de toutes les rémunérations acquise lors de l’activité … sans qu’il y ait lieu de distinguer selon leur nature …” The indemnity ( compensation ) is payed to compensate the injury suffered which correspond to the loss of the whole of remunerations acquired during the activity whatever their nature. When we read « acquired » it means : they are due even if they are not payed. London, April 4, 2006

  9. 3.3. The indemnity ( compensation ) is calculated on the basis of the whole remunerations : 3.3.1. without distinction depending on the origin of the clientele, See document 4 : Cour d’appel de Paris, 25 février 2004, ABS /Lactalis: “ L’indemnité prévue par l’article L 134-12 du Code de commerce n’implique pas un apport initial ni une création de clientèle par l’agent “ The indemnity foreseen in article L. 134-12 Code Commerce (commercial code) is due whatever the clientele is brought initially or created by the agent. London, April 4, 2006

  10. See document 5 : Cour d’appel d’ Agen 14 janvier 1997 Procanar/ Sud Ouest Diffusion alimentaire: « Cette indemnité doit être calculée en fonction des commissions brutes perçues sans qu’il y ait lieu à réduction tenant compte de l’origine de la clientèle » It doesn’t matter if the clientele has been given ou brought by the principal. London, April 4, 2006

  11. 3.3.2. without distinction depending on the type of remuneration, See document 3 : Cour de cassation 5 avril 2005, Lebreton / Butagaz: L’indemnité comprend «  la perte de toutes les rémunérations acquises… The indemnity correspond to the loss of all remunerations acquired/ vested «  - commissions on sales, - commissions on deliveries, - commissions on merchandising, - commissions payed for logistic activity (stocking, transport, delivery London, April 4, 2006

  12. 3.3.3. without reduction for charges, See document 6 : “Agents commerciaux”, J.M. LELOUP, Delmas 6ème éd° § 1230 à 1232 London, April 4, 2006

  13. 3.3.4. it doesn’t matter if the principal’s activity ends or if the principal doesn’t benefit from a clientele transfer, See document 6 : “Agents commerciaux”, J.M. LELOUP, Delmas 6ème éd° § 1234 à 1236 London, April 4, 2006

  14. 3.3.5. it doesn’t matter if the agent still goes on working with the same customers. See document 4 : Cour d’appel de Paris, 25 février 2004, ABS / Lactalis : “ L’indemnité ayant pour objet la réparation du dommage résultant de privation pour l’avenir du courant d’affaires sur lequel l’agent percevait une commission, l’éventuel exercice d’autres mandats par celui-ci, est sans incidence sur son calcul.” London, April 4, 2006

  15. See document 7 : Cour d’appel de Rennes, 27 septembre 2000: “Le préjudice devant être évalué au jour de la rupture, …, le défaut de justification du chiffre d’affaires réalisé [par l’agent] antérieurement ou postérieurement à la résiliation est indifférent au sort de l’indemnité en cause.” The assessment of the loss is made on the day of the breach of contract. The indemnity is due even if the agent doesn’t justify the turnover he realized. London, April 4, 2006

  16. 3.4. The amount indemnity can’t be limited (it can’t be fixed a limit to the amount of the indemnity ) by the agreement. See document 20 : C Cass 17 juin 2003 London, April 4, 2006

  17. 4. WHY THIS AMOUNT? The indemnity is a compensation for: London, April 4, 2006

  18. 4.1. Loss of the support of the agent’s activity. Breach of the contract means for the agent cessation of activity, - loss of a market share, - loss of remunerations. London, April 4, 2006

  19. See document 8 : Cour de Cassation 9 janvier 2001 BGC Vinocor / Merlet : « Justifie légalement sa décision d’accorder à un agent une indemnité de cessation de contrat égale au montant de deux années de commissions la Cour d’appel qui retient qu’elle répare la perte d’une part de marché et non la clientèle créée ou préexistante … » The indemnity is not payed to compensate the loss of a pre-existent clientele or a clientele which has been created . This indemnity is payed to compensate the loss of a market share. London, April 4, 2006

  20. 4.2. Loss of the patrimonial value. We have in France a strong rule for the benefit of the agent : an agent can sell his contract( “presentation of the clientele”) to a successor : Breach of the contract means that the agent can’t sell it anymore to a successor: the agent is losing this patrimonial value ( the use is to sale with a value of two years commissions ). See document 9 : Cour de cassation, 23 juin 1998, Rossignol / Debono: “ M. Debono était titulaire d’un droit ayant une valeur patrimoniale et, par suite, susceptible de cession.” London, April 4, 2006

  21. See document 4 : Cour d’appel de Paris, 25 février 2004, ABS / Lactalis : “ La cessation du contrat a également pour effet de priver l’agent de la possibilité de la transmission, à titre onéreux, de son mandat à un successeur et que l’indemnité a pour objet de compenser ce droit qui a une valeur patrimoniale.” When the contract ceases, the agent is deprived of the right to assign his mandate to a successor for a valuable consideration. So the indemnity compensates this right which has a patrimonial value. London, April 4, 2006

  22. 4.3. So it doesn’t matter if the agreement was very short : See document 10 : Cour d’Appel de Poitiers 17 février 2004 Wesper/Escolle 10 months = two years « La cessation du contrat, dont l’exécution a duré 10 mois, ouvre droit à l’agent à une indemnité égale à deux années de commissions » When a contrat has been performed during 10 months, its cessation entitles the agent to an indemnity corresponding to 2 years of commissions. London, April 4, 2006

  23. See document 11 : Cour d’appel de Nancy 22 septembre 1999 Groth/Borowski 9 months = two years See document 12 : Cour d’appel d’Angers 18 octobre 1999 Plasticentre / Bonnemaison Three years = two years London, April 4, 2006

  24. 4.4. So it doesn’t matter if the agreement was very long : We have some precedents with two years of commissions even if the agreement lasted many years: 22 years = two years ( Cour d’appel Montpellier 11 juillet 2001 Pintre v Combes ) London, April 4, 2006

  25. 4.5. Two years is not a fixed period. The rule is that it must be related to the economic reality London, April 4, 2006

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